Divorce in Illinois is the legal process through which those who have previously shared a life together separate their legal and financial circumstances. Property division is typically one of the most challenging components of an Illinois divorce.
Spouses often have a hard time agreeing on the most appropriate way of dividing their assets and financial obligations. The law in Illinois requires an equitable or fair distribution of marital property. The home where a couple lives together could be one of their most valuable shared assets. The down payment they made, sweat equity accrued by improving the home and regular payments toward the principal mortgage balance may lead to valuable home equity.
How can spouses share home equity with one another when they divorce?
By refinancing
One of the simplest strategies for divvying up home equity in a divorce is to refinance the property. The spouse keeping the home can refinance the mortgage and may withdraw some of the equity to compensate the spouse who gives up their ownership interest. People may need to go over their finances carefully to ensure that they can qualify for a mortgage and afford the monthly payments after reducing their equity by withdrawing some for the benefit of the spouse.
By selling the property
Maybe the couple lived at the home for less than a year, meaning they have minimal equity. Maybe neither spouse wants to remain in the home after the divorce because of the memories attached to the property. Some couples determine that fastest way to divide their home equity is to sell the house where they live together and split the proceeds.
By using other property
There are scenarios in which one spouse intends to stay at the marital home, but they cannot withdraw equity to pay off their spouse immediately. In such scenarios, using other marital assets to balance out the property division settlements can be a realistic solution. Retirement savings, investment accounts, vehicles and businesses can potentially help offset the home equity retained by one spouse if they stay in the home after the divorce. Spouses can come up with whatever creative solution they deem necessary to fairly divide their home equity in a divorce. Married couples may also rely on a judge to reach property division determinations after reviewing the marital estate.
Understanding the most common solutions for home equity can be beneficial for those trying to negotiate a settlement or preparing for Illinois divorce litigation. So long as the final outcome is fair or equitable, there are many different ways to address high-value assets like the marital home in an Illinois divorce.
