Keeping the Home in a Divorce: How a Buyout Really Works
Mortgage rates under 3.5% were a once-in-a-generation gift. Because of those low loans—and family ties or school stability—one partner often wants to stay put and “buy out” the other. Here’s what that actually means and the pitfalls to address before you sign a settlement.
What does a “buyout” involve?
In a buyout, the spouse who keeps the home provides value to the other spouse equal to one-half of the home’s equity. That value can come from:
Cash, commonly raised by refinancing the mortgage, or
Other marital assets traded to match the departing spouse’s share.
Why buyouts are tougher than they look
The house may be most of your net worth. For many (especially younger) couples, there aren’t enough other assets to swap.
House-rich, cash-poor risk. Trading away investment or cash assets to keep the property can leave the staying spouse short on emergency funds and retirement savings.
Trading assets ≠ removing a name from the loan. Swapping investments or cash does not take the departing spouse off the existing mortgage; they remain liable unless the loan itself changes.
Assumptions are limited—and no cash out. Some (not all) lenders allow a loan assumption to keep the current rate and remove the other spouse, but you can’t pull cash in an assumption.
Refi qualification is on the keeper alone. To refinance, the staying spouse must qualify based on their own income, credit, and debt. Spousal support (alimony) counts only if it meets specific mortgage guidelines (documentation, duration, and receipt history).
Do the homework before the decree
These financing details should be sorted before the settlement is finalized. Too often, a decree awards the home to one spouse, and only afterward does everyone discover the staying spouse doesn’t qualify for a refinance—or, worse, stops making payments. The result: the non-occupying spouse is still on the hook for a mortgage they can’t control and may no longer qualify for a new loan themselves. It’s a preventable mess.
Engaging a Certified Divorce Financial Analyst® (CDFA®) early—alongside your attorney and lender—helps you model equity splits, confirm refinancing or assumption options, and structure a settlement that’s actually workable.
FMD Wealth Advisors can coordinate with your legal team to evaluate buyout scenarios, lender requirements, and long-term cash-flow impacts—so the choice to keep (or sell) the home supports your life and your balance sheet. Schedule your Free - Discovery Call here.
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