Why Home Equity Isn’t the Same as Cash

“She’s just going to refinance and pay him his half.”

I’ve heard that sentence more times than I can count—and in theory, it sounds simple. But in real life? It’s often anything but.

In one recent case, a woman was just two weeks away from closing when she found out she didn’t qualify for the refinance. The deal fell apart. The court had to get involved again. And her credit took a hit.

One of the biggest myths in divorce? That home equity equals cash.

As a real estate agent who works closely with divorcing clients, I see firsthand how easy it is to assume equity is just another number you can divide and walk away from. But equity is not liquid. You can’t just pull it out of a house without going through the right process—and if that process isn’t part of the planning early on, it can cause real financial (and emotional) stress later.

The Misconception: “We’ll Just Split the Equity”

In mediation or court, it’s common to hear:

• “She’ll keep the house and buy him out.”

• “He’ll get the equity and she’ll take the retirement account.”

• “We’ll just divide it 50/50.”

But here’s the thing: equity is not actual money until it’s converted into cash. And turning equity into cash—especially during a divorce—requires planning, timelines, and a clear understanding of lending guidelines.

The Reality: Tapping Into Equity Isn’t Always Simple

To access home equity, one spouse usually needs to refinance, sell the home, or arrange a structured buyout. None of these happen with a snap of your fingers. You need:

• Sufficient income to qualify for a new mortgage (without your ex)

• Enough credit and financial stability to secure a cash-out refinance

• Time—especially if you’re relying on support income that doesn’t yet meet lender requirements

I’ve seen settlements that look fine on paper completely fall apart because no one thought to ask, “Can they even qualify for this?”

A Quick Example

In one case, a woman was awarded the home and given 90 days to refinance and pay her ex $150,000 in equity. But her income wasn’t quite enough to qualify for the loan, and her spousal support wouldn’t count toward her application for another six months.

The result? A delayed buyout. Financial penalties. And another trip to court.

Why This Matters for Divorce Professionals (and Their Clients)

If equity division isn’t backed by real numbers and lending insight, it can lead to:

• Delays in buyouts or refinances

• Credit damage if one spouse is still on the mortgage

• Higher costs from missed deadlines

• Settlements that need to be reopened

This stuff isn’t just inconvenient—it’s preventable with the right planning upfront.

Enter: Divorce Mortgage Planning

This is where partnering with a Certified Divorce Lending Professional (CDLP®) can make all the difference. They help connect the dots between divorce law, mortgage lending, and real property.

With a Divorce Mortgage Planning report, you can:

• Verify whether refinancing or a buyout is truly feasible

• Understand how (and when) support income can be used to qualify

• Build realistic timelines around title, lending, and income issues

• Identify red flags before they turn into roadblocks

What Does a Divorce Mortgage Planning Report Include?

• Property & title review

• Buyout and refinance calculations

• Qualification strategies based on post-divorce income

• A clear path forward that can be shared with attorneys, mediators, or the court

It’s not about overcomplicating things—it’s about creating a plan that actually works in the real world.

7 Questions to Ask Before “Splitting the Equity”:

1. Has the person keeping the home been pre-qualified based on their post-divorce income?

2. Will support income be usable in time for a refinance?

3. What’s the current loan balance and true available equity?

4. Is a refinance even possible at today’s rates?

5. Will one spouse still be legally tied to the mortgage after the divorce?

6. Are there title issues that could delay closing?

7. Has a CDLP® reviewed the case?

Final Thought

Equity can be a powerful asset—but only if it’s treated like one.

Handled strategically, it can help one party stay in the home, fund a fresh start for the other, or support a fair financial outcome for both. But if it’s treated like liquid cash without a plan? It can cause setbacks, surprises, and real hardship.

If you or your attorney are navigating the real estate side of a divorce, let’s talk early. I work with trusted divorce lending professionals who can help create a clear path forward—so you don’t just hope the numbers work. You know they do.

Let's talk. I'm always here to help.

Megan