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The monthly amount that you pay on a mortgage for $700,000 covers the principal payment and interest, and your exact payment depends on several variables, including your interest rate. A $700,000, 30-year mortgage with a 6.00% interest rate, for example, costs around $4,200 monthly. However, there may be additional costs that you have to pay throughout the life of the loan, not to mention upfront costs that you must pay when you first close on the home.

The monthly cost of a mortgage depends on the interest rate, the length of the loan, and any additional costs, such as private mortgage insurance (PMI) charged on some loans. Mortgage loan terms are typically from 15 years to 30 years, and the monthly payments for a 15-year loan can be much higher than the payments for a 30-year loan, although, over its lifetime, the 30-year mortgage is typically more costly because interest costs are higher.

Here’s a look at how much a $700,000 mortgage might cost per month for a 15-year or 30-year loan term with various interest rates.

What Is the Total Cost of a $700K Mortgage?

A $700,000 30-year mortgage with a 6.00% interest rate (which, as noted above, costs around $4,200 monthly) has a total cost of $1,510,867. The same loan over 15 years would have a $5,907 monthly payment and a total cost of $1,063,260. These amounts are simply estimates; exact costs will depend on interest, escrow, taxes, and insurance. A rule of thumb when buying a home is to not pay more than 28% of your gross monthly income. So someone whose monthly mortgage payment is $4,200 would need to take home at least $15,000 a month.

💡 Quick Tip: Buying a home shouldn’t be aggravating. SoFi’s online mortgage application is quick and simple, with dedicated Mortgage Loan Officers to guide you through the process.

The Upfront Costs of a $700K Mortgage

When you buy a house and take out a mortgage, in addition to your down payment, you will have to pay closing costs. Closing costs are mostly the administrative expenses for closing the deal. They include mortgage lender fees, titling fees, insurance fees, taxes, and appraisal fees. These costs are typically not covered by your down payment. Here’s a closer look at some upfront costs a buyer will face.

Earnest money Also known as a deposit, this is the money you put down to show the seller you’re serious about buying their place.

Down payment The amount you pay as a down payment will depend on the type of home loan. A conventional loan without private mortgage insurance (PMI) may call for a 20% down payment. On the other hand, you might get a conventional loan with mortgage insurance with a 3% down payment. A down payment for a Federal Housing Administration loan is typically around 3.5%, and Veterans Affairs loans or U.S. Department of Agriculture loans require no down payment.

The more you can afford as a down payment, the less interest you will pay because the lender considers you less risky as a borrower.

Closing costs Your lender will charge you fees for administrative services, such as application, origination, and underwriting fees. And then there are transfer taxes associated with transferring the title from the seller to the buyer.

Recommended: First-Time Homebuyer Guide

The Long-Term Costs of a $700K Mortgage

Your mortgage payments pay down the principal and the interest on your loan. Proportionally, more of your payment will go toward interest rather than the principal at the beginning of the loan term, and at the end of the loan term, more of your payment will go toward paying down the principal.

If you paid less than 20 percent as a down payment, your mortgage lender may also require you to pay private mortgage insurance (PMI) on a monthly basis. However, there are also other long-term costs:

Property taxes These can add up to thousands of dollars a year and can change annually, or as often as your town raises taxes.

Home maintenance One rule of thumb is to set aside 1% of your home’s total value each year for maintenance costs.

HOA, condo, or co-op fees If your home is a condo or part of a homeowners association (HOA) or co-op, you will need to pay a monthly fee. The fee covers services such as grounds maintenance, use of a community center, and snow removal. HOA fees can range anywhere from $100 to $1,000 or more.

Homeowners’ and hazard insurance Some areas are designated “high risk” for natural disasters, such as floods, earthquakes, wildfires, or severe storms. If your home is located in one of these areas, you will need to pay hazard insurance, which costs on average $2,110 per year, though prices vary, based on location and other factors.

Recommended: Home Loan Help Center

Estimated Monthly Payments on a $700K Mortgage

Mortgage loan terms have a big impact on your monthly payment amount. The table below shows the estimated monthly payments for a $700,000 mortgage loan for both a 15-year and a 30-year loan with interest rates varying from 6% to 8%.

How Much Interest Is Accrued on a $700K Mortgage?

The amount of interest accrued on a $700,000 mortgage will depend on the length of the loan and the interest rate. A shorter loan term will mean less accrued interest. For example, for a 15-year loan for $700,000 with a 6.00% interest rate, the interest would amount to around $363,260 over the life of the loan. For a 30-year loan with a 6.00% interest rate, the interest would be more than double at $810,867.

Amortization Breakdown for a $700K Mortgage

An amortization schedule for a mortgage loan tells you when your last payment will be and how much of your monthly payment goes toward paying off the principal and how much goes toward paying off the interest. At the beginning of the loan term, most of your payment will go toward the interest.

Below is the mortgage amortization breakdown for a $700,000 mortgage with a 6.00% interest rate for a 30-year loan.

What Is Required to Get a $700K Mortgage?

Let’s say you want to buy a home for $875,000 with a down payment of 20% or $175,000. To qualify for a 30-year mortgage loan of $700,000 with a 6.00% interest rate, you would need to earn around $180,000 annually. For a 15-year loan, you would need to earn around $253,000 annually.

This calculator shows you how much of a mortgage you can afford based on your gross annual income, your monthly spending, your down payment, and the interest rate.

How Much House Can You Afford Quiz

The Takeaway

When you’re calculating how much a mortgage loan for $700,000 will cost per month, the principal and interest are two of the biggest components. The length of the loan will drastically affect the amount of interest paid over the life of the loan. For example, the interest paid on a 30-year loan versus a 15-year loan with a 6.00% interest rate could be more than double.

Bear in mind also that there are other costs that may be included, such as private mortgage insurance. And don’t forget about closing costs as well.

Looking for an affordable option for a home mortgage loan? SoFi can help: We offer low down payments (as little as 3% - 5%*) with our competitive and flexible home mortgage loans. Plus, applying is extra convenient: It's online, with access to one-on-one help.

FAQ

What will the monthly payments be for a $700K mortgage?

The longer your loan term, the lower your monthly payment on a mortgage loan, but you will pay more interest over the life of the loan. The exact monthly payment for a $700,000 mortgage will depend on the interest rate and the loan term. The payment for a $700,000 30-year mortgage with a 6.00% interest rate is approximately $4,200. For a 15-year loan with the same interest rate, the monthly payment is around $5,900.

How much do I need to earn to afford a $700K mortgage loan?

To buy a home for $875,000 with a down payment of 20% or 175K, and with a 30-year mortgage loan of $700,000 with a 6.00% interest rate, you would need to earn around $180,000 annually. For a 15-year loan, you would need to earn around $253,000 annually.

How much down payment is required for a $700K mortgage loan?

The down payment you will pay will depend on the type of mortgage and the lender. Some lenders accept 3%, while some expect 20%. If your down payment is less than 20%, you might have to add private mortgage insurance (PMI) to your monthly payments.

Photo credit: iStock/Xacto

SoFi Loan Products
SoFi loans are originated by SoFi Bank, N.A., NMLS #696891 (Member FDIC). For additional product-specific legal and licensing information, see SoFi.com/legal. Equal Housing Lender.

SOHL-Q225-046

Finding the perfect home to buy is no small feat: so many online searches, drive-bys, and open houses. Then there’s the time-sucking process of finding the right mortgage. A matchmaker called a mortgage broker can help.

The broker goes fishing for multiple loan offers from different types of lenders in pursuit of the best deal.

How exactly does a mortgage broker work? Keep reading to discover more about mortgage brokers, how to find one, and the pros and cons of working with one.

First, Mortgage Basics

Whether a consumer chooses to work with a mortgage broker or not, it’s best to know what it means to take out a home mortgage.

These are some of the basics.

Loan term: This refers to how long borrowers have in order to repay their loan. A typical term is 15 or 30 years.
There are advantages and disadvantages to choosing a shorter or longer loan term. For shorter terms, the monthly payments are higher but the interest rates are usually lower, and the total cost of the loan is lower.

For longer-term loans, the total cost is higher, and generally the interest rates are higher, too, but monthly payments are lower.

Fixed rate vs. adjustable rate: The chosen interest rate dictates whether the interest rate will change over time or stay consistent, if the monthly principal and interest payment will change, and how much interest will be paid over the life of the loan.

Typically, fixed-rate mortgages have no surprises but carry a higher rate than the initial rate of an adjustable-rate mortgage, or ARM. Fixed interest rates don’t change over time, and the monthly payment amount remains the same.

With an ARM, after an initial period, the interest rate can fluctuate based on the market, which can lead to the monthly principal and interest payments increasing or decreasing over the life of the loan.

Recommended: First-Time Homebuyer Guide

What Is a Mortgage Broker?

In short, a mortgage broker is a middleman between the homebuyer and mortgage lenders. While requirements vary by state, typically brokers are trained professionals who must obtain certain licenses.

When you plan to buy a home, it can be smart to research multiple lenders. Doing so allows you to see which lender is offering the best rate and fees for your particular financial situation and down payment.

This can be a time-consuming process that requires submitting multiple documents and applications. A mortgage broker can do all of the work associated with applying for the consumer.

Because mortgage brokers generally have partnerships with multiple lenders, they can help find the best financial fit for their clients while saving them the time it would take to do the work themselves.

Recommended: How to Qualify for a Mortgage: 9 Requirements

Pros of Using a Mortgage Broker

Why use a mortgage broker? It’s not for everyone, but there are some benefits worth considering.

Provides more access. Because of their professional relationships, mortgage brokers usually have more access to different lenders than the average person does — some that many consumers don’t even know exist because they offer home loans only through mortgage brokers.

May find better rates and terms. Mortgage brokers may be able to find lower rates and fees than the average homebuyer could find on their own.

Simplifies the process. As mortgage brokers are experts in their field, they can make the entire process easier to understand. They’ll break down the differences between lenders and help their clients understand mortgage jargon. It’s worth noting that consumers should still educate themselves so that they have a good understanding of the process.

Saves time. Buying a home is time-consuming and can be stressful. A broker will research rates, fees, and minimum credit score requirements so that clients don’t have to.

Cons of Using a Mortgage Broker

There are also some downsides worth considering before pursuing this path.

Cost can vary. Before agreeing to work with a broker, ask how they make their money. In some cases, the lender pays the mortgage broker, and in others, the client pays the broker. If payment is the client’s responsibility, ask if they charge a flat fee or earn a commission.

Lenders usually pay a higher commission than borrowers do. Lenders typically pay between 0.5% and 2.75% of the loan amount. When a client pays a commission, a broker usually charges an origination fee of less than 3% of the loan amount.

The housing market in a particular area can influence what a broker charges.

Conflicts of interest may arise. While at first glance it may seem more beneficial to work with a mortgage broker who is paid by the lender, give this some thought. Is the broker biased toward lenders that pay the commission? Researching brokers before working with them and asking for referrals can help. Do some digging to see if past clients found them to be trustworthy.

Some lenders don’t work with mortgage brokers. Some lenders only work with brokers, and some never work with them. People who hire a mortgage broker may miss out on certain opportunities.

How to Shop for a Mortgage Broker

The search for the right mortgage broker should not be taken lightly. Doing research and considering options are important steps toward making the experience a positive one.

One of the first steps to take toward finding a good mortgage broker is to ask for references from trusted friends, family members, or colleagues who have recently bought homes with the help of a mortgage broker.

To widen the search, there are also websites that host customer reviews of local mortgage brokers. While any broker may have a few negative reviews, look for patterns in the reviews to make sure that negative experiences are the exception, not the norm.

Treat shopping for a mortgage broker like interviewing a candidate for a job. Ask about their certification and experience, commissions, and what the homebuying process would look like in tandem with them.

You may be able to find out if a broker is licensed through the National Mortgage Licensing System & Registry.

Finding a Mortgage Without a Mortgage Broker

People who aren’t interested in working with a mortgage broker can shop for a mortgage on their own from a commercial bank, credit union, or private lender. Would-be homeowners can work with an online lender, which can make applying easy.

Prequalifying, based on self-reported data, will give you an idea of how big a loan you may qualify for — a ballpark figure. (Prequalifying involves a soft credit inquiry, which does not affect a credit score.)

If you’re serious, preapproval is the next step, when lenders verify your employment status, income, credit history, and debt to determine how much you can reasonably afford to borrow. If approved, you’ll receive a conditional commitment in writing for an exact loan amount. (Applying with too many lenders may result in score-lowering hard inquiries, but having many offers in hand provides negotiating leverage with individual lenders.)

The Takeaway

What is a mortgage broker? A go-between for the loan seeker and lenders. There are many pros and cons to consider. A mortgage broker can be just the ticket for some home buyers, but you don’t need to sign on with a broker to obtain a great rate on a home loan.

Looking for an affordable option for a home mortgage loan? SoFi can help: We offer low down payments (as little as 3% - 5%*) with our competitive and flexible home mortgage loans. Plus, applying is extra convenient: It's online, with access to one-on-one help.

FAQ

How does a mortgage broker make money?

Mortgage brokers are usually paid a commission by the lender in return for bringing in a customer. In some cases where a homebuyer has poor credit or other financial challenges, a broker may charge a fee that is payable only if the broker is able to find the borrower a loan.

How are a mortgage broker and a mortgage loan originator different?

A mortgage broker can typically work with an array of lenders to find the mortgage that works best for their home-buying client. A mortgage loan originator usually works for a bank or other lender, and so can only offer loans from that lender.

Is a mortgage broker the same as a mortgage underwriter?

A mortgage broker helps a would-be homebuyer find a loan. A mortgage underwriter reviews the homebuyer’s mortgage application and decides whether or not it should be approved and at what interest rate.

About the author

Jacqueline DeMarco

Jacqueline DeMarco is a freelance writer who specializes in financial topics. Her first job out of college was in the financial industry, and it was there she gained a passion for helping others understand tricky financial topics. Read full bio.

SoFi Loan Products
SoFi loans are originated by SoFi Bank, N.A., NMLS #696891 (Member FDIC). For additional product-specific legal and licensing information, see SoFi.com/legal. Equal Housing Lender.

SoFi Mortgages
Terms, conditions, and state restrictions apply. Not all products are available in all states. See SoFi.com/eligibility-criteria for more information.

SOHL-Q225-056

Your house is much more than a home — it’s likely one of the biggest purchases you’ll ever make, with a value that makes up a significant proportion of your (and most people’s) net worth. As such, you’ve probably wondered from time to time what your home is worth.

Determining the answer is not as simple as referring back to your sales agreement or mortgage papers. What you paid for your house when you purchased it merely reflects what your house was worth to you — and the real estate market — at a specific point in time.

In reality, housing values are dynamic, and they fluctuate based on a number of factors. Some things, such as keeping your house in good repair, are within your control. Other external influences, such as the market, mortgage rates, and other considerations, can also affect the value of your home.

Here, we’ll take a close look at how this works, and answer questions like:

•   How much is my house worth?

•   What factors determine my home’s value?

•   How can I increase my home’s value?

First, take our “how much is my house worth” quiz to get an overview of what value your home holds.

Next, delve into the topic more deeply with these insights.

Home Value Estimator Quiz

Estimating the Value of Your House

Knowing how much your house is worth can improve your money mindset by helping you understand where you are financially. There are a number of ways you can determine the estimated value of your house.

•   Online calculators. The easiest and fastest way to answer the question, “How much is my house worth?” is probably to use an online home valuation calculator. These tools provide a ballpark estimate of the value of your home based on your address. Such estimates typically use publicly available information, including average home sale prices in your area, property tax assessment information, market trends, and other data.

•   Market dynamics. Once you have a rough estimate of your property’s worth, you can use other cues about the housing market in your area to gain more insight. This might include such factors as sales and mortgage trends, which can give you a sense of whether your property value is likely to increase, decrease, or remain stable. For instance, during times of rising mortgage interest rates, consumer demand might wane as it becomes more expensive to borrow money.

•   Professional opinions. A professional appraiser or real estate agent can also help you get a more precise estimate of what your house is worth. An appraiser will consider both the local housing market and the unique characteristics of your property when creating your home appraisal.

Real estate agents, meanwhile, will typically conduct a comparative market analysis (also called a comp or CMA). This is an estimate based on actual data from recently sold homes that are most similar to yours.

If you are looking to sell, you may want to consider getting a comparative market analysis from several different real estate agents to help you assess their knowledge of and viewpoint on the local market before you commit to one. Understanding the various criteria real estate agents use to determine listing prices can also help you to get an accurate picture of what your house is worth.

Recommended: What Hurts a Home Appraisal?

A Home’s Worth: 3 Factors to Consider

Every house is unique — but the factors used to determine property value are fairly consistent.

1. Neighborhood: There’s a good reason why “location, location, location” is one of the most popular mantras in real estate. The same home, in the exact same condition, will fetch different prices depending on where it is. Proximity to desirable schools, shopping, public transportation, and other resources and infrastructure can increase the desirability of a neighborhood and thus the value of the home. Safety considerations, such as crime rates, sidewalks, and traffic signals, can also impact house values.
2. House specifications: Attributes such as the size of your lot, square footage, age of your home, number of bedrooms and bathrooms, parking space, and updated mechanical systems are among the criteria buyers will typically consider. Agents may factor these in while developing a comparative marketing analysis.

Also, the style of your house and the amenities can matter. Does it have a fabulous family room, a spa-style bathroom, skylights, or a pool? That can lift the value.

3. House condition: Well-maintained houses with high curb appeal can typically fetch better prices than run-down fixer-uppers. As such, your home’s condition is probably the most easily controlled aspect of its value.

To evaluate the condition of your home, take stock of any repairs, both major and superficial; any upgrades such as premium kitchen appliances; and any renovations you may have performed.

There are additional factors outside of your control that will affect the value of your home — though these may be less significant if you are not imminently considering selling.

For example, the state of the economy and mortgage rates may dictate others’ appetite for real estate purchases, as well as how much they are willing to spend. At press time, mortgage interest rates had been slowly trending downward for a significant period of time, remaining under a fairly favorable 7.0%.

That trend could change, and rates may begin rising in the case that the Federal Reserve decides it needs to offset inflation’s impact on consumers. This sort of move’s impact on lenders can cause a softening of the housing market, or a lowering of prices, since it’s more expensive to borrow money.

Seasonal fluctuations such as holidays and weather can also affect home purchasing patterns. In addition, spring has often been looked at as the prime selling season, when families hope to find a new home and get settled before the start of the next school year.

Recommended: Should I Sell My House Now or Wait?

Increasing the Value of Your Home

Though there are some factors that may be out of your control (such as inflation and its impact), there are things you can do to increase the value of your home. If you are considering selling soon, staging your house or making small improvements, such as tidying your garden, can go a long way toward appealing to buyers — without a big financial investment.

But if you are considering investing in renovations and upgrades, it is helpful to know which will deliver the greatest returns. An online calculator can compare different projects to determine how various home improvements impact your home’s value. You might be able to finance such improvements with a home equity line of credit (or HELOC).

Recommended: Does Net Worth Include Home Equity?

Why Your Home Value Matters

If you are considering selling your house, “How much is my home worth?” is likely one of the first things you’ll wonder about. But even if a move isn’t something you are considering right now, there are other reasons why it might be important to know the actual value of your home.

•   Relocation plans. For those considering relocating, getting a reliable estimate of how much your house is worth will inform the amount you can afford to spend on your next home. As taxes, real estate agent commissions, and some other fees will be based on the actual sale price of your house, this valuation will also help you to estimate some of your moving costs.

•   Financial planning. Even if you aren’t planning to move, it can be wise to know your house’s value for another reason. As one of the greatest assets in many people’s financial portfolios, your home’s worth can play a helpful role in guiding long-term money planning, including retirement and estate planning.

If these things seem a long way off, there are immediate benefits to being informed about your home’s worth, too.

•   Property taxes. Your property tax bill is based on the market value of your house and may change from year to year, based on your municipality’s estimate of its worth as determined by a government assessor. A reliable estimate of how much your house is worth can help you to identify discrepancies in the assessed value. If you believe there is an error, you can file an appeal in an attempt to get your property tax bill reduced.

•   Homeowners insurance. Having an accurate estimate of the value of your home is also important for obtaining appropriate insurance coverage. If your estimate is too low relative to the actual value of your home, you run the risk of being underinsured in the event of a claim. Too high, and you’re paying for coverage you don’t need.

•   Equity considerations. Your home’s value can also help you to access money to pay for home improvements, a financial emergency, or other needs that may arise. If the current value of your home is more than it was at the time you purchased it, you may be able to tap into that increased value with, say, a HELOC or cash-out mortgage refinance.

Home Improvements and Your Mortgage

Even if you’re not looking to sell, adding value to your home may result in savings in the near term. This can be especially true for those who are paying private mortgage insurance (PMI).

•   Typically, buyers who purchase a home with less than 20% down are required to pay for PMI — a fee that is based on a percentage of your total mortgage.

•   The amount of equity in your home can be determined by subtracting what you owe on your house (or your mortgage principal) from the current total value of your home. If your property value has increased, you have more equity than when you purchased your home.

•   If the increase in your property value brings your equity over the 20% threshold, you can ask your mortgage loan servicer to cancel the PMI. That, in turn, will save you money every month.

The Takeaway

Understanding how much your house is worth is an important fact. Your house is a major investment, and knowing its current value can help you in a variety of ways, whether or not you are planning on selling it. Even if you are staying put, knowing its worth could help you make sure your insurance is keeping pace with its price, open the door to a home equity loan, or perhaps lower an assessment.

If you’re ready to find out your property’s value, SoFi’s money tracker app can help. Our property tracking tool can help you learn your home’s worth. It can help you know when more insurance is needed, how much renovations would cost and financing options, and what you might be able to save by refinancing your loan.

Looking for an affordable option for a home mortgage loan? SoFi can help: We offer low down payments (as little as 3% - 5%*) with our competitive and flexible home mortgage loans. Plus, applying is extra convenient: It's online, with access to one-on-one help.

SoFi Mortgages
Terms, conditions, and state restrictions apply. Not all products are available in all states. See SoFi.com/eligibility-criteria for more information.

SoFi Loan Products
SoFi loans are originated by SoFi Bank, N.A., NMLS #696891 (Member FDIC). For additional product-specific legal and licensing information, see SoFi.com/legal. Equal Housing Lender.

SOHL-Q225-016

Getting divorced can cause both emotional and financial upheaval for everyone involved. One of the most important issues you and your soon-to-be former spouse may have to confront is how to divide retirement assets.

Understanding the key issues around divorce and retirement can make it easier to sort out your accounts, decide how to split them, and make sure your financial future is protected as you bring your marriage to a close.

Taking Note of Your Retirement Accounts

The average cost of divorce can range from several hundred dollars to $11,000 and up, so it’s important to know what’s at stake financially. Managing retirement accounts in divorce starts with understanding what assets you have.

There are several possibilities for saving money toward retirement, and different rules apply when dividing each. Here’s a look at what types of retirement accounts you may hold and will need to consider in your divorce.

401(k)

A 401(k) plan is a defined contribution plan offered by an employer that allows you to save money for retirement on a tax-advantaged basis. (SoFi does not offer 401(k) plans at this time but does offer a range of Individual Retirement Accounts (IRAs). Your employer may also make matching contributions to the 401(k) plan on your behalf. According to the latest Census Bureau report, 34.6% of Americans have a 401(k) or a similar workplace plan, such as a 403(b) or Thrift Savings Plan.

IRA

Individual retirement accounts, or IRAs, also allow you to set aside money for retirement while enjoying some tax benefits. The difference is that these accounts are typically not offered by employers, and they have their own limits and requirements. There are several IRA options, including:

•   Traditional IRAs, which are made with pre-tax dollars and allow for tax-deductible contributions, depending on your income (among other factors).

•   Roth IRAs, which are made with after-tax dollars and allow for tax-free withdrawals in retirement.

•   SEP IRAs, which follow traditional IRA tax rules and are designed for self-employed individuals.

•   SIMPLE IRAs, which also follow traditional IRA tax rules and are designed for small business owners.

Each type of IRA has different rules regarding who can contribute, how much you can contribute annually, and the tax treatment of contributions and withdrawals.

Pension Plan

A pension plan is a type of defined benefit plan. The amount you can withdraw from in retirement is determined largely by the number of years you worked for your employer and your highest earnings. It’s different from a 401(k), in which the amount you can withdraw from depends on how much you (and your employer) contribute to the account during your working years.

How Are Retirement Accounts Split in a Divorce?

How retirement accounts are split in divorce can depend on several factors, including what type of accounts are being divided, how those assets are classified, and divorce laws regarding property division in your state. There are two key issues that must be determined first:

•   Whether the retirement accounts are marital property or separate property

•   Whether community property or equitable distribution rules apply

Legal Requirements for Dividing Assets

Marital property is property that’s owned by both spouses. An example of a tangible marital property asset is a home the two of you lived in together. Separate property is property that belongs to just one spouse.

In community property states, spouses have an equal share in assets accrued during the marriage. Equitable distribution states allow for an equitable — though not necessarily equal — split of assets in divorce.

You don’t have to follow state guidelines if you and your spouse can come to an agreement yourselves about how divorce assets should be divided. However, if you can’t agree, then you’ll be subject to the property division laws for your state.

If retirement assets are to be divided in divorce, there are certain steps that have to be taken to ensure the division is legal. With a workplace plan, you’ll need to obtain a Qualified Domestic Relations Order (QDRO). This is a court order that specifies how much each spouse should receive when dividing a 401(k) or similar workplace plan in divorce.

IRAs do not require a QDRO. You would, however, still need to put in writing who gets what when dividing IRAs in divorce. That information is typically included in the final divorce settlement agreement, which a judge must sign off on.

Protecting Your 401(k) in a Divorce

The simplest option for how to protect your 401(k) in a divorce may be to offer your spouse assets of equivalent value. For example, if you’ve saved $500,000 in your 401(k) and you jointly own a home that’s worth $250,000, you might agree to let them keep the home as part of the divorce settlement.

If they’re not open to the idea of a trade-off, you may have to split the assets through a QDRO. That could make a temporary dent in your savings, but you might be able to make it up over time if you continue to make new contributions.

You could skip the QDRO and withdraw money from your 401(k) to fulfill your obligations to your spouse under the terms of the divorce settlement. However, doing so could trigger a 10% early withdrawal penalty if you’re under age 59 ½, along with ordinary income tax on the distribution.

Protecting Your IRA in a Divorce

Traditional and Roth IRAs are subject to property division rules like other retirement accounts in divorce. Depending on where you live and what laws apply, you might have to split your IRA 50/50 with your spouse.

Again, you might be able to protect your IRA by asking them to accept other assets instead. Whether they’re willing to agree to that might depend on the nature of those assets, their value, and their own retirement savings.

If you’re splitting an IRA with a spouse, the good news is that you can avoid tax consequences if the transaction is processed as a transfer incident to divorce. Essentially, that would allow you to transfer money out of the IRA to your spouse, who would then be able to deposit it into their own IRA.

Divorce and Pensions

Pension plans are less common than 401(k) plans, but there are employers that continue to offer them. Generally, pension plan assets are treated as marital property for divorce purposes. That means your spouse would likely be entitled to receive some of your benefits even though the marriage has ended. State laws will determine how much your spouse is eligible to collect from your pension plan.

Protecting Your Pension in a Divorce

The best method for protecting a pension in divorce may be understanding how your pension works. The type of payout option you elect, for instance, can determine what benefits your spouse is eligible to receive from the plan. It’s also important to consider whether it makes sense to choose a lump-sum or annuity payment when withdrawing those assets.

If your spouse is receptive, you might suggest a swap of other assets for your pension benefits. When in doubt about how your pension works or how to protect pensions in a divorce, it may be best to talk to a divorce attorney or financial advisor.

Opening a New Retirement Account

Splitting retirement accounts in a divorce can be stressful. It’s important to know what your rights and obligations are going into the process. If you’re leaving a marriage with less money in retirement, it’s a good idea to know what options you have for getting back on track. That can include opening a new retirement account.

Prepare for your retirement with an individual retirement account (IRA). It’s easy to get started when you open a traditional or Roth IRA with SoFi. Whether you prefer a hands-on self-directed IRA through SoFi Securities or an automated robo IRA with SoFi Wealth, you can build a portfolio to help support your long-term goals while gaining access to tax-advantaged savings strategies.

FAQ

How long do you have to be married to get part of your spouse’s retirement?

To get spousal retirement benefits from Social Security, you have to be married for at least one continuous year prior to applying. However, the one-year rule does not apply if you are the parent of your spouse’s child.

Divorced spouses must have been married at least 10 years to claim spousal benefits.

Is it better to divorce before or after retirement?

Neither situation is better than the other — it is really up to each individual and their specific situation. However, divorcing before retirement may give some individuals more financial flexibility. For example, if you’re employed, you could work on earning income and building retirement savings. You can also control how those retirement assets are invested.

Divorcing after retirement may be helpful if it allows an individual to better gauge how much money they’ll need in retirement to pay for their lifestyle. That way, they can make informed decisions about how to split marital assets.

Who pays taxes on a 401(k) in a divorce?

As long as you have a Qualified Domestic Relations Order (QDRO) and your soon-to-be ex-spouse is named as an alternate payee on the 401(k) account, you as the plan holder would not owe taxes. If the alternate payee rolls their share of the 401(k) into another retirement account, they would not owe taxes until they begin taking withdrawals from it.

About the author

Rebecca Lake

Rebecca Lake has been a finance writer for nearly a decade, specializing in personal finance, investing, and small business. She is a contributor at Forbes Advisor, SmartAsset, Investopedia, The Balance, MyBankTracker, MoneyRates and CreditCards.com. Read full bio.