Divorce home buyout = paying your ex-spouse their share of home equity to keep the property. **Formula: Buyout Amount = (Home Value - Mortgage Balance) × Spouse Share %**.

In 2025, you can finance via cash-out refinance, new loan, or personal funds.

Most states default to 50/50 equity split unless marital agreement specifies otherwise.

**Step-by-step buyout calculation**:.

**Step 1**: Determine current home value - Get 2-3 appraisals (average = $420,000) - Or use recent comparable sales (CMA from realtor) - Court may require formal appraisal ($400-$600).

**Step 2**: Calculate equity - Home value: $420,000 - Mortgage balance: $270,000 - **Total equity**: $420,000 - $270,000 = $150,000.

**Step 3**: Determine spouse share - 50/50 split (default in community property states): $150,000 × 50% = $75,000 - Or per divorce agreement: $150,000 × 60% = $90,000 (if spouse gets larger share).

**Step 4**: Calculate total buyout cost - Spouse equity share: $75,000 - + Refinance closing costs: $8,400 (2% of $420k) - + Appraisal: $500 - + Title search/insurance: $1,500 - + Attorney fees: $2,000 - **Total cash needed**: $87,400.

**Buyout financing options**:.

**Option 1: Cash-out refinance** (most common) - Refinance existing $270k mortgage - Cash-out $75k for spouse buyout - New loan: $345,000 ($270k old + $75k cash-out) - LTV: $345k ÷ $420k = 82% (within 85% limit) - Pros: Single loan, competitive rates - Cons: Must qualify solo (no spouse income).

**Example**: $420k home, $270k mortgage, refinance at 7% - New loan: $345,000 - Monthly payment: $2,295 (PI only) - Must qualify with DTI <43% solo income.

**Option 2: New purchase loan** (if can't refinance existing) - Spouse quitclaims deed to you - You get new mortgage as if "buying" the home - Loan: $345,000 (covers old mortgage + buyout) - Pros: May get better rate/terms than refi - Cons: Same as refinance, need to qualify solo.

**Option 3: Personal loan or HELOC** - Keep existing mortgage ($270k) - Take separate loan for $75k buyout - Total debt: $270k mortgage + $75k personal loan - Pros: Faster, less paperwork - Cons: Higher rate on personal loan (10-15% vs 7% mortgage), two payments.

**Option 4: Cash payment** (if you have savings) - Pay $75k from savings/investments - Keep existing mortgage - Pros: No new debt, no refinance costs - Cons: Depletes liquid assets.

**Option 5: Sell and split proceeds** (cleanest break) - Sell home for $420k - Pay off $270k mortgage = $150k proceeds - Split $150k equity 50/50 = $75k each - Pros: Both parties get cash, fresh start - Cons: Must find new housing, selling costs 6-8%.

**Equity division scenarios**:.

**Scenario 1** (Equal split, community property state): - Home value: $500,000 - Mortgage: $300,000 - Equity: $200,000 - Each spouse gets: $100,000 - Buyout cost: $100,000 to keep home.

**Scenario 2** (Unequal split, one spouse contributed more down payment): - Home value: $400,000 - Mortgage: $280,000 - Equity: $120,000 - Spouse A down payment credit: $40,000 - Remaining equity: $80,000 split 50/50 = $40k each - Spouse B total: $40k (their half) - Spouse A total: $40k + $40k credit = $80k - **Buyout cost for Spouse B**: $80,000.

**Scenario 3** (Offsetting other assets): - Home equity (your share): $75,000 - Spouse retirement account: $150,000 - Offset deal: You keep house ($75k), spouse keeps retirement ($75k from their $150k) - **Buyout cost**: $0 cash (offset by retirement split).

**Tax implications** (2025):.

**Primary residence exclusion**: - Single filer: Exclude up to $250,000 gain from sale - Must have lived in home 2 of last 5 years - If you keep home and sell later, this exclusion still applies.

**Transfer between spouses** (tax-free): - Transferring home in divorce = no capital gains tax - Occurs under IRC Section 1041 - Receiving spouse takes original cost basis.

**Example**: Bought home for $300k in 2015, now worth $450k - Capital gain: $150,000 - Transfer to you in divorce = $0 tax now - Your new basis: $300k (original) - If you sell later for $500k: Gain = $200k, exclude $250k = $0 tax.

**Refinance qualification requirements** (2025):.

**Income**: Must qualify without ex-spouse income - Example: Combined income $150k → Your solo income $80k - $345k loan at 7% = $2,295/month PI - Need ~$80k income to qualify (DTI 43% max).

**Credit score**: - 620 minimum for conventional - 740+ for best rates - Late payments during divorce = may delay refinance 12+ months.

**Debt-to-income**: - Max 43-50% DTI - Includes new mortgage + car + student loans + credit cards.

**Loan-to-value**: - Max 80-85% LTV for cash-out refinance - Example: $420k home, max loan $357k (85% LTV).

**Timing considerations**:.

**Common mistakes to avoid**:.

❌ Quitclaiming deed before refinance (leaves you liable for mortgage without ownership) ❌ Overestimating home value (market appraisal may be lower) ❌ Forgetting closing costs (add 2-3% to buyout amount) ❌ Not qualifying for solo mortgage (check DTI first) ❌ Keeping home you can't afford (better to sell and split).

**2025 divorce home buyout checklist**:.

✅ Get 2-3 home appraisals ✅ Calculate exact equity (value - mortgage - liens) ✅ Review divorce agreement for equity split % ✅ Check if you qualify for refinance solo (DTI, credit, income) ✅ Get refinance quotes from 3+ lenders ✅ Budget for closing costs (2-3% of home value) ✅ Consult tax advisor on implications ✅ Coordinate quitclaim after loan approval ✅ Update homeowners insurance to solo policy.

You can afford the house if your solo income supports the new mortgage at <43% DTI and you have 620+ credit score. **Affordability test: New Mortgage Payment ÷ Gross Monthly Income <43%**.

Most divorcing spouses cannot qualify because the house was purchased with dual income.

Run the numbers before committing to buyout.

**Affordability calculation example**:.

**Scenario**: $400k home, $250k mortgage, 50/50 equity split.

**Step 1**: Calculate buyout amount - Equity: $400k - $250k = $150k - Buyout: $150k × 50% = $75,000.

**Step 2**: Calculate new loan - Old mortgage: $250,000 - Cash-out (buyout): $75,000 - **New loan**: $325,000.

**Step 3**: Calculate monthly payment (7% rate, 30-year) - P&I: $2,161/month - Property tax: $400/month (1.2% annual) - Insurance: $150/month - **Total PITI**: $2,711/month.

**Step 4**: Calculate required income - With 43% DTI max: $2,711 ÷ 0.43 = **$6,305/month minimum** - **Annual income needed**: $75,660.

**Step 5**: Check if you qualify - Your solo income: $65,000/year = $5,417/month - DTI: $2,711 ÷ $5,417 = 50% DTI - **Result**: Does NOT qualify (>43% limit).

**Options if you don't qualify**:.

**Real-world qualification scenarios**:.

**Scenario A** (CAN afford): - Home value: $350,000 - Mortgage after buyout: $225,000 - Monthly PITI: $1,950 - Your income: $75,000/year ($6,250/month) - DTI: $1,950 ÷ $6,250 = 31% - Other debts: $300 car payment - Total DTI: ($1,950 + $300) ÷ $6,250 = 36% - **Verdict**: ✅ APPROVED (under 43%).

**Scenario B** (CANNOT afford): - Home value: $600,000 - Mortgage after buyout: $450,000 - Monthly PITI: $3,500 - Your income: $90,000/year ($7,500/month) - DTI: $3,500 ÷ $7,500 = 47% - Other debts: $600 (car $400 + student loan $200) - Total DTI: ($3,500 + $600) ÷ $7,500 = 55% - **Verdict**: ❌ DENIED (way over 43%).

**Refinance qualification factors** (2025):.

**Factor 1: Income (most critical)**.

**Acceptable income sources**: - W-2 salary (most stable) - Self-employment (2 years tax returns) - Alimony/child support (must be court-ordered, 3+ years remaining) - Rental income (from other properties, 75% counts) - Social Security/pension.

**NOT accepted**: - Temporary alimony (<3 years left) - Unverified side income - Verbal agreements.

**Factor 2: Credit score**.

**Minimum scores**: - 620: Conventional loan (but higher rate) - 580: FHA loan (3.5% down required) - 740+: Best rates (0.5-0.75% better than 620).

**Divorce impact on credit**: - Joint late payments during divorce: Affects both spouses - Collections/judgments: Must be paid or settled - Recent inquiries: Multiple refi applications OK if within 14 days.

**Improving credit before refinance**: - Pay down credit cards to <10% utilization: +30-50 points - Dispute errors: Free via AnnualCreditReport.com - Wait 12 months after late payments: Score recovers - Don't close old accounts: Reduces credit history length.

**Factor 3: Debt-to-Income (DTI)**.

**DTI formula**: DTI = (Mortgage + Other Monthly Debts) ÷ Gross Monthly Income.

**What counts as debt**: ✅ Car loans/leases ✅ Student loans (even if deferred) ✅ Credit card minimum payments ✅ Personal loans ✅ Alimony/child support YOU pay (not receive) ✅ Other mortgages/rentals.

**Strategies to improve DTI**:.

**Factor 4: Home equity (LTV)**.

**Max LTV for cash-out refinance** (2025): - Conventional: 80-85% LTV - FHA: 80% LTV - VA (if eligible): 100% LTV.

**Example**: $500k home - 80% LTV max: $400k max loan - Current mortgage: $300k - Max cash-out: $400k - $300k = $100k (enough for $100k+ buyouts) - If buyout is $150k: Insufficient equity (need to pay $50k+ cash).

**Factor 5: Employment stability**.

**Lender requirements**: - 2 years same job/field (1 year OK with strong credit) - Avoid job changes during divorce refinance process - Self-employed: 2 years tax returns, income stable or increasing.

**Red flags**: - Recently unemployed - Changed careers entirely - Gaps in employment.

**Timeline for divorce refinance** (typical):.

**Costs breakdown** ($400k home example):.

**When selling makes more sense than keeping**:.

🏡 **Keep the house if**: - You qualify solo (DTI <43%) - Home is affordable long-term - Kids benefit from stability - You have 20%+ equity (no PMI after refinance) - Neighborhood has good schools/job opportunities.

💰 **Sell the house if**: - Can't qualify for refinance - House payment >40% of your income - Expensive repairs needed ($10k+ deferred maintenance) - Want fresh start, no reminders - Can invest equity in better housing/location.

**2025 alternative: Deferred buyout**.

Some divorce agreements allow: - Both spouses remain on mortgage temporarily (6-12 months) - Occupying spouse pays full mortgage - Refinance deadline set in agreement - If refi fails by deadline, house must be sold - Gives time to improve credit/income before qualifying.