How Buyouts Work
A buyout means one spouse keeps the marital home by compensating the other for their share of the equity. First, you determine the home's fair market value (via appraisal). Then subtract the mortgage balance to get the net equity. The buying spouse pays the other their equitable share — typically 50 percent of the net equity, though the exact percentage depends on the overall distribution agreement.
The most common method is refinancing the mortgage in the buying spouse's name alone, with the new loan amount covering both the existing mortgage balance and the buyout payment. The departing spouse is removed from both the mortgage and the deed at closing.
Can You Qualify for the Mortgage Alone?
The biggest hurdle in a buyout is qualifying for the refinanced mortgage on a single income. Lenders will evaluate your debt-to-income ratio, credit score, and employment stability. If you are also receiving alimony or child support, some of that income may count toward qualification if you can demonstrate it will continue for at least three years.
Before committing to a buyout, get pre-approved by a lender. You need to know with certainty that you can qualify for the refinanced amount before negotiating a buyout in your settlement agreement. Your agent can recommend mortgage professionals experienced with divorce refinancing.
Alternatives to Cash Buyout
If refinancing is not feasible, there are alternative buyout structures. The buying spouse can offer the departing spouse other marital assets of equivalent value (retirement accounts, investment accounts, other property). Some agreements use a promissory note with deferred payments. Others structure a deferred sale with the buying spouse retaining exclusive use until a triggering event.
Each alternative has tax and financial implications that should be carefully evaluated with your attorney and financial advisor. The goal is a structure that is fair, enforceable, and financially sustainable for both parties.