Divorce house buyout: what keeping the house costs
Key numbers
- A buyout is his share of the equity, not the value of the house. On a $420,000 house with $200,000 owed, an equal split makes the buyout $110,000, and the new loan $310,000.
- The payment is what decides it. That $310,000 loan at 7% over 30 years is about $1,959 a month in principal and interest, before taxes and insurance.
- A commonly used lending rule of thumb is 28/36: housing costs up to about 28% of gross monthly income, total debts up to about 36%. It is a rule of thumb, not a law and not any one lender’s underwriting.
- Retirement money traded for the house is not worth its face value. A traditional 401(k) is taxed on the way out (source: IRS Topic 558), so compare after tax with the House vs. 401(k) Comparison.
A buyout is the deal where you keep the house and he gets paid for his half of what it is worth. It is the most common way a marital home changes hands in a divorce, and it is also the one where the paperwork looks simple and the consequences are not. Put your numbers in below, then read what the result means.
An appraisal is best, because a buyout is usually priced off an agreed valuation. An online estimate gets you close enough to see the shape of the answer.
Include a home equity loan or second mortgage if there is one. Both come off the equity.
How a buyout is built, in three lines
- Equity. Agreed value of the house, minus the mortgage, minus any second mortgage or home equity line. What is left is the equity.
- The split. Community property states start from an equal division of marital property. Equitable distribution states divide it fairly, which can land either side of half depending on the marriage and the circumstances. See community property states and equitable distribution states.
- The buyout. His share of the equity, which is the mirror of yours. That is the number you have to produce.
Notice what is missing. Nothing in those three lines asks whether you can afford the house. That question arrives later, at a lender’s desk, and it is the one that decides whether the settlement you signed can actually happen.
Three worked examples
Every figure below is produced by the same code the calculator runs. Shared assumptions: an equal split of the equity, a new fixed-rate loan at 7% over 30 years covering the existing balance plus the buyout, and principal and interest only. Property tax, insurance and refinance closing costs are all extra. The rate is an illustration, not a quote, so check today’s rates and run your own.
Rosa, 58: household about $60,000, she earns $38,000 of it
A $260,000 house with $120,000 still owed, so $140,000 of equity and a buyout of $70,000. Funded by a refinance, the new loan is $190,000 and the payment is about $1,201 a month. On her own income that is 38% of gross pay, which is above both lines of the 28/36 rule of thumb. Rosa is not being told no. She is being shown that a modest house with modest equity can still be the thing that eats her month, because the loan went up while the household income went down.
Nadia, 52: household about $110,000, she earns $70,000 of it
A $420,000 house with $200,000 owed gives $220,000 of equity and a buyout of $110,000. Her new loan is $310,000, or $110,000 more than the loan she has now, and the payment is about $1,959 a month. That is 34% of her gross income: past the 28% housing line, inside the 36% total-debt line. This is the common case, and it is the uncomfortable one, because it is affordable right up until something breaks.
Ellen, 55: household about $200,000, she earns $120,000 of it
A $700,000 house with only $150,000 owed carries $550,000 of equity, which makes the buyout $275,000, more than three times Nadia’s. Her new loan is $425,000 and the payment is about $2,686 a month, or 27% of her gross income, which is the comfortable side of the rule of thumb. The big buyout is the easier one here, and that is the point: the number that matters is the payment against the income, not the size of the cheque.
Term changes it more than people expect. The same loan over 15 years instead of 30 is about $3,702 a month, which is 37% of her income. Far more of each payment goes to principal, and the loan is gone before she is 70. Whether that is wisdom or a trap depends entirely on whether the payment leaves room for the rest of her life.
Where the buyout money actually comes from
1. A cash-out refinance, which is the usual answer
You take out a new, larger mortgage in your own name, pay off the old joint loan, and hand the difference to him. It is the standard route because it solves two problems at once: it produces the cash, and it takes his name off the debt. It also costs something on both sides. The new loan carries today’s rate, not the rate you locked years ago, and refinancing has closing costs of its own. Whether you qualify at all is the subject of refinancing after divorce, and it is worth reading before you agree to a buyout in principle.
2. An offset against other assets, where no money moves
Instead of paying him, you give up something of similar value: he keeps more of the retirement accounts, or the brokerage account, or the second car. On paper it is elegant. Nobody borrows anything, nobody writes a cheque.
The tax warning that belongs on every offset. Retirement money and home equity are quoted in the same units and are not the same money. Money in a traditional 401(k) has never been taxed, and it is includible in income when it comes out (IRS Topic 558). Home equity has already been taxed, but you can only reach it by selling, which costs money, or by borrowing, which costs interest. Trading $200,000 of equity against $200,000 of pre-tax 401(k) is not an even trade in either direction until both sides are adjusted. Run it through the House vs. 401(k) Comparison, and read the after-tax comparison in full before you sign anything that swaps one for the other. A 401(k) or pension also needs a specific court order to be divided at all, which is what a QDRO is.
3. Cash, which almost never happens
Paying a six-figure buyout out of savings is rare, and where it does happen it usually empties the emergency fund of the person who just became a one-income household. If this is the plan, the honest test is what is left afterwards, not whether the payment clears. The Retirement Runway Calculator answers that question.
The trap: gains and losses between now and signing
A buyout is priced off a value on a date. Divorces take months, and house prices move in the meantime. Whoever benefits from that movement is decided by which date and which valuation the agreement names, and if the agreement does not name one, that is the fight you will have later.
The size of the swing is easy to underestimate, because it lands on the equity rather than on the price. If Nadia’s house is valued at $420,000 the buyout is $110,000. If the same house is valued 5% higher, at $441,000, the equity rises to $241,000 and the buyout rises to $120,500. A 5% move in the price moved the cheque she has to write by $10,500, which is close to 10%, because the mortgage does not move with the market. Leverage cuts in both directions, and a falling market does the same thing in reverse.
So pin it down. Name the valuation and its date in writing. Agree in advance what happens if the refinance takes longer than expected and the appraisal goes stale. Agree who pays for a second appraisal if you disagree, and what happens if the two come back far apart. Agree whether the equity is reduced for the costs of a future sale, because that is a negotiated term and not a rule. None of this is exciting, and all of it is cheaper to settle now than to argue about in month nine. Your attorney drafts it. Our job is only to make sure you know the question exists.
Frequently asked questions
How is a house buyout amount calculated?
Take the agreed value of the house, subtract everything owed against it, and you have the equity. Split the equity by the share the two of you agree on, or that a court sets, and the other person’s share is the buyout. On a $420,000 house with $200,000 owed, the equity is $220,000, so an equal split makes the buyout $110,000. The arithmetic is simple. The two numbers going in, the value and the split, are the negotiation.
Do I have to refinance to buy out my ex-husband?
Not always, but usually. A refinance is the normal way to turn equity into the cash that pays him, and it is also the only common way to take his name off the loan. The alternatives are offsetting the buyout against other assets so no money changes hands, assuming the existing loan where the loan type allows it, or paying cash, which is rare.
Can I use retirement money to fund the buyout?
It happens often, usually as an offset rather than a withdrawal: he keeps more of the retirement accounts and you keep the house. Just do not treat the two as equal at face value. Money in a traditional 401(k) has never been taxed, so income tax comes off when it comes out, and home equity is only reachable by selling or borrowing. Compare the sides after tax before you agree.
What house value gets used for the buyout?
Whatever the two of you agree on, or what a court decides. In practice that means an appraisal, sometimes two, and a date attached to it. Prices move, so a value from eight months ago is not the value today. Put the valuation date in writing along with the number.
Does the buyout price come down for future selling costs?
Sometimes. Some agreements reduce the equity by the cost of a future sale, on the reasoning that the person keeping the house will pay agent fees and closing costs one day and the person leaving will not. Others use gross equity. It is a negotiated term rather than a rule, and on a large house it is worth real money.
What if I cannot qualify for the new mortgage?
Then the buyout does not happen as written, and it is far better to learn that before you sign than six months after. A lender can tell you now what you would qualify for on your own income. If the answer is no, the realistic options are a longer window before the refinance, an assumption where the loan allows it, a smaller settlement burden elsewhere, or selling.
Sources: IRS Topic 558, additional tax on early distributions from retirement plans · IRS Topic 701, sale of your home · IRS, Retirement topics: QDRO. All fetched and checked September 2026. The 28/36 figures are a commonly used lending rule of thumb, not a legal standard and not any single lender’s underwriting rule. Payments use the standard fixed-rate amortization formula and are illustrations, not quotes. Property division rules vary by state. This page explains how the money works and is not legal, tax, or lending advice for your situation.
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