Evaluating Financial And Legal Consequences
I Am Getting A Divoce With A Mortgage In My Name Only What Happens
If the home was acquired before the marriage, it may potentially be individual property and not subject to division. If it was obtained during the marriage, however, it will generally always be community property despite whose name the mortgage and deed are in. Both spouses should reach an agreement in the separation agreement.
What Rights Are Conveyed By Deed
Ownership of real property is called title. The deed represents that title, and it carries with it certain rights, among them the rights of possession, control, exclusion, enjoyment and disposition. These are commonly called the bundle of rights.”
When you convey partial title to someone else, you give that person the same bundle of rights that you are entitled to. You would typically use a quitclaim deed or a special warranty deed to add someone to your title, depending on your jurisdiction. These deeds make no warranties or guarantees with respect to title. They merely convey whatever interests you have in the property to the grantee if you have any interest to convey at all.
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Tax Implications Of A Property Transfer
If you add someone to the deed and that person does not pay you for the interest and is not your spouse, you must file a gift tax return. If the value of the interest in your house is worth more than the annual gift tax exclusion, which for the 2017 tax year is $14,000 . To the IRS, adding someone to your deed is equivalent to giving them a gift of a portion of your real estate’s value. Because calculating the value of the gift and its long-term impact can be complicated, you may choose to seek the help of an estate planning or tax attorney.
The Rules Of Adding Someone To A Mortgage Loan
First, adding someone to a mortgage is easy if you’re adding them as a co-borrower when applying for the mortgage. In fact, applying for a home mortgage with a co-borrower can actually increase your chances of being approved while boosting your borrowing power because you’re bringing two incomes into the picture. It gets more complicated if you’re trying to add a co-borrower after you’ve purchased a house. That’s because you can’t technically add a co-borrower to your mortgage without refinancing your mortgage this essentially means going through the closing process again.
The general rule is that you need 20 percentequity when doing a conventional refinance. That drops down to just 5 percent equity for an FHA refinance. Approval isn’t guaranteed just because you’ve already been approved for a mortgage on the home in the past. If you’ve had a decrease in income since your closing, you may not be in a position to get approved.
You have to submit a new mortgage application when you apply for a refinance. Your lender will be looking at your credit score, employment status and debt-to-income ratio. If approved, you may actually be able to save money on interest over the life of your loan if you can refinance at a lower interest rate. In many cases, your monthly payment will be lower after refinancing however, you will still need to pay closing costs and fees for a refinance.
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Alternatives To A Mortgage Buyout
If you cant afford to buy out your partner, or dont want to, then here are some of the available alternatives.
- Sell the property and split the equity after the mortgage is paid off
- Ask a close relative to help with a guarantor mortgage agreeing to pay the mortgage if you cant. Be very careful though this is a legal commitment making them responsible for the payments.
- If the split is amicable, keep the home without changing who owns it and carry on paying the mortgage.
You can find more useful information on marital splits in our section on getting a divorce.
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When Does Adding Someone To The Loan Make Sense
Adding a co-borrower can be beneficial as doing so could bring additional income and assets to the table. The combined income between the two of you may allow you to qualify for a larger loan amount, since you can afford higher monthly mortgage payments together.
Having a co-borrower may also help your ability to get approved for a mortgage in the first place by improving your debt-to-income ratio . Your DTI is all your monthly debt payments divided by your gross monthly income. Learn more about DTI here.
A high DTI is the #1 reason mortgage applications get rejected.1 By combining you and your co-borrowers debt and income, you may be able to reach a low enough DTI to meet lenders borrowing criteria. So if your co-borrower has a higher salary and/or less debt, that may make your blended DTI ratio much lower . Heres an example:
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Seeking A New Mortgage
If you want to add another name to your mortgage, consider a new loan with another lender. For one, a new mortgage lender may offer you and your co-borrowers incentives when you apply for a mortgage loan on your current home. Mortgage lenders are competitive and a new lender may provide lower interest rates and discounts if you take a new mortgage out for your current home. Before getting rid of your old mortgage loan, though, check it for prepayment penalties.
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Can Three People Be On A Mortgage
There is no legal limit to how many people can be on a mortgage, but your lender may have restrictions in place. Remember that everyone on the loan also has to be able to qualify for it to be approved, and some lenders may see a big group of names as a potential risk.
Even if multiple people aren’t on a loan, keep in mind multiple parties can still own a property through joint tenancy or tenancy in common.
Can My Girlfriend Be On The Deed And Not The Mortgage
It’s perfectly legal to co-own a house with someone to whom you’re not married. You can put your name on the deed even if you don’t sign the mortgage, provided the lender agrees. Taking title as unmarried partners or friends, however, is often more complicated than when a married couple buys a house.
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Can I Transfer A Mortgage If Im Self
If youre self-employed, work freelance or as a contractor, then you might worry about transferring your joint mortgage to a solo one, as its trickier to prove that you can afford to take on the payments when you dont have a regular monthly income.
Lenders will usually want to see at least twelve months worth of regular income, which may be trickier if youre self-employed. But you can use other ways to show evidence of your earnings, such as perhaps company dividends or accounts. The best thing to do if youre self-employed and want to transfer your mortgage to a solo one is speak to a specialist mortgage broker. They can advise you on what your options are and will have access to specialist lenders.
Potential Problems With Joint Tenancies
You wonât be able to sell the property, refinance the mortgage, or take out a new mortgage without your childâs consent if you give him partial ownership in a joint tenancy deed. These actions require the consent of all owners.
Worse, your child could legally sell his interest in the property to a third party, perhaps to a stranger, without your consent if you donât word the deed correctly.
If your child ends up with a tax lien, creditor problems, or in divorce court, the government, creditors, or his ex-spouse can claim your home or at least your childâs ownership share of it in a joint tenancy situation. In that situation, the entity can place a lien on your property and attempt to force its sale to collect on its debt.
Youâll also make a transfer of an asset that will delay Medicaid eligibility if you apply for assistance within five years after creating a joint tenancy deed. Youâve effectively given a portion of your property away, which can affect the timing of eligibility.
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Tenants In Common Vs Joint Tenants
There are 2 main ways that you can jointly own your property. The first is to become joint tenants. In this case, youâll both jointly own the whole property, and if one of you dies, the other will automatically own the whole thing.
The second option is to become tenants in common. In this case, youâd both own a set percentage of the property. If you split up or one of you dies, the other will only get to decide what happens to their own share. This is a good option if you want to protect any equity that you built up before you met your partner, or if you want to pass your share of the property onto someone else if you die .
Before starting the process of adding someone to your mortgage, itâs really important to get some legal advice. A solicitor will be able to talk you through your options and help you decide whatâs right for you. However, hereâs a quick lowdown:
Quitclaim Versus Grant Deed
A quitclaim deed releases ownership, literally “quitting” some or all interest in real property. When a notarized quitclaim deed is recorded with the county, a new title deed is issued. There are no warranties on this deed, though. Warranties are the guarantee that the given ownership interest is accurate and legally binding. Without a proper title search, there is no guarantee.
Grant deeds are used when a deed holder releases interest for remuneration the property is sold. In most sale situations, a review of all title claims should be completed and the mortgage addressed. However, in either scenario, if the deed is filed, the new title holder may have ownership interest while the original deed owner is still responsible for the mortgage.
California established a Transfer on Death deed, that is revocable but avoids probate for the next-of-kin to easily assume the property. This adds a name to the deed upon the death of the primary owner and is only executed after death.
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Can A Family Member Be Added To A Reverse Mortgage
Can a Family Member Be Added to a Reverse Mortgage?
People seem to enjoy making additions of one sort or another. Homeowners might add an extra bedroom to accommodate visiting in-laws. Golfers might add a solo player to complete a foursome. Or magicians might add a routine to improve their act.
Unfortunately, however, you cant add a family member to an existing reverse mortgage. Lets look at some specific questions and scenarios to further illustrate this point.
Replacing Someone On Your Mortgage With Someone Else
If you want to remove someone from your mortgage and replace them with someone else a family member, friend or a new partner you can do this with a transfer of equity. A transfer of equity is when you transfer a joint mortgage to one of the owners, or to a new person.
Transferring half the mortgage to a new name is very helpful for continuing to be able to afford the mortgage repayments. However, lenders will check anyone you want to add to your mortgage. Lenders will do affordability and credit checks on the new person because they will be jointly responsible for the mortgage with you.
Its quite common for parents to add their adult children to their mortgages. Thats because it can help with inheritance tax planning. If youre considering that, always get professional legal advice first to make sure its the best option for you.
If the person that you want to add to the mortgage has a poor credit rating, it could affect how much the lender allows them to borrow. Just like when you take out a mortgage in the first place, lenders will assess the credit issues in terms of how serious they think they are, and how recent they were. Before you start the process of replacing someone with someone else on your mortgage, its good to check what kind of credit history they have. Thats because every lender has different criteria for assessing people applying for a mortgage. If your current lender has strict rules, you might want to consider a specialist lender and remortgage.
Ready To Add Someone To Your Mortgage
If youâre ready and raring to add someone to your mortgage, you know what to do! First things first, get in touch with a conveyancing solicitor to get some legal advice.
Remember, it might not seem important now, but itâs worth thinking about what might happen if things go a bit pear-shaped. A solicitor will be able to advise you on how to make sure you protect yourself so that you can live your life with that all-important peace of mind that youâve sorted out the important stuff!
This article was written by the team at Nuts About Money, and fact-checked by 2 independent reviewers. Youâre in safe hands.
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Can Your Wife Take Your House If It’s Under Your Name
Under California Community Property Law, the short answer is likely YES, even if your spouse was never added to title. This may seem surprising to you, but this result is based on the general premise of California Community Property Law that anything earned by either party during marriage is 100% community property.
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Understanding Promissory Notes And Mortgages
People often use the term “mortgage” to refer to both the promissory note and mortgage. But the note is the document that creates the obligation to repay the loan. The mortgage, on the other hand, gives the lender a way to enforce that promisethat is, the lender may foreclose and use the proceeds from the foreclosure sale to repay the loan.
Following a foreclosure, in a majority of states, the lender can go after the borrower for the deficiency between the foreclosure sale price and the borrower’s total debt. The promissory note establishes a borrower’s liability for the deficiency.
Exceptions To The Rule
There are some cases where you can transfer a loan with a due-on-sale clause. Transfers between family members are often allowed, and your lender can always choose to be more generous. The only way to know for sure is to ask your lender and review your agreement with an attorney.
Even if lenders say its not possible, an attorney can help you figure out if your bank gives you the correct information.
Switching out names on a loan only affects the loan. You’ll still need to transfer the title using a quitclaim deed or any other steps required in your situation.
Federal Deposit Insurance Corporation laws prevent lenders from exercising their option to accelerate payment under certain circumstances. Review with your attorney to see whether you qualify to transfer without an accelerated payment. Several of the most common situations include transferring:
- To a surviving joint tenant when the other one dies
- To a relative after the death of a borrower
- To the spouse or children of a borrower
- As a result of divorce and separation agreements
- Into an inter vivos trust where the borrower is a beneficiary
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