Giving up Home Equity in Divorce

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Subject Author Date Giving up Home Equity in Divorce nish 10-31-2009  Re: Giving up Home Equity in Divorce Alan 10-31-2009  Re: Giving up Home Equity in Divorce nish 11-14-2009  Re: Giving up Home Equity in Divorce Bill Brown 10-31-2009  Re: Giving up Home Equity in Divorce removeps-groups@yahoo.com 10-31-2009  Re: Giving up Home Equity in Divorce Dick Adams 11-17-2009  Re: Giving up Home Equity in Divorce Stuart A. Bronstein 11-17-2009  Re: Giving up Home Equity in Divorce Dick Adams 11-18-2009
Posted by Dick Adams on November 17, 2009, 5:07 am Please log in for more thread options > The husband in a divorce makes the claim that he doesn't want to give up > more than 50% of home equity in a divorce because it will prevent him > from answering that he "owns" his home on credit applications, and he > thinks this will hurt his ability to get credit (possibly to buy another > home in the future). He proposes to split equity in the home 50/50 but > he will cover the monthly mortgage expense. Does anyone see this from > his point of view and can you elaborate? .... There are a few unexplained issues here. All there minor children involved? That is a very big issue because the general rule is that property settlements can noy be revisited, but child support can be revisited. Noting that I am not an attorney, my advice to everyone is to get a 50/50 split of the assets. In this case, rather than paying on the mortgage, he should get 50% of the existing equity at the going interest rate in a second mortgage due upon sale of the house or as a balloon mortgage. I gave this advice to a neighbor and he was very happy with the outcome. Example: Appraisal: $500,000 Current Mortgage: $300,000 Equity: $200,000 50% of Equity: $100,000 Age of Youngest Child: 7 He takes a second mortage for $100,000 @ 5% compounded annually. The term of the mortgage is 11 years, i.e., 18 - 7 = 11. The only tax consequence is that he has to declare the annual interest on his tax return. He gets his equity plus interest at closing. If he opts for a balloon mortgage, I would set the term to be when the youngest child reachs age 22. It is very important the there is a due on sale/due on rental clause. This is not a DIY project. You need the most competent real estate attorney you can find. Dick -- << ------------------------------------------------------- >> << The foregoing was not intended or written to be used, >> << nor can it used, for the purpose of avoiding penalties >> << that may be imposed upon the taxpayer. >> << >> << The Charter and the Guidelines for submitting posts >> << to this newsgroup as well as our anti-spamming policy >> << are at www.asktax.org. >> << Copyright (2007) - All rights reserved. >> << ------------------------------------------------------- >> Posted by Stuart A. Bronstein on November 17, 2009, 9:04 am Please log in for more thread options rdadams@panix.com (Dick Adams) wrote: > Noting that I am not an attorney, my advice to everyone is to > get a 50/50 split of the assets. In this case, rather than > paying on the mortgage, he should get 50% of the existing equity > at the going interest rate in a second mortgage due upon sale of > the house or as a balloon mortgage. I gave this advice to a > neighbor and he was very happy with the outcome. Not being an attorney seems to be an advantage in your case. I can't tell you how many divorces I've seen where one spouse ends up agreeing to buy out the other's interest in their home, and gives a note for the money owed. A note but no mortgage to secure the debt. While not routinely it happens much too often that the debtor spouse (the one who got the house) then files bankruptcy and wipes out the debt to the other spouse, but gets to keep the home. This kind of thing can be prevented by including a mortgage secuing the debt. But too many attorneys don't know the limits of their expertise, just don't know what they're doing, or don't care. -- Stu http://downtoearthlawyer.com -- << ------------------------------------------------------- >> << The foregoing was not intended or written to be used, >> << nor can it used, for the purpose of avoiding penalties >> << that may be imposed upon the taxpayer. >> << >> << The Charter and the Guidelines for submitting posts >> << to this newsgroup as well as our anti-spamming policy >> << are at www.asktax.org. >> << Copyright (2007) - All rights reserved. >> << ------------------------------------------------------- >> Posted by Dick Adams on November 18, 2009, 3:25 pm Please log in for more thread options > rdadams@panix.com (Dick Adams) wrote: >> Noting that I am not an attorney, my advice to everyone is to >> get a 50/50 split of the assets. In this case, rather than >> paying on the mortgage, he should get 50% of the existing equity >> at the going interest rate in a second mortgage due upon sale of >> the house or as a balloon mortgage. I gave this advice to a >> neighbor and he was very happy with the outcome. > Not being an attorney seems to be an advantage in your case. It is always to my advantage because almost all of my legal advice ends with a disclaimer to the effect that you need to discuss this with a competent attorney. However, I usually omit that finding one is your problem. > I can't tell you how many divorces I've seen where one spouse ends up > agreeing to buy out the other's interest in their home, and gives a > note for the money owed. A note but no mortgage to secure the debt. > While not routinely it happens much too often that the debtor spouse > (the one who got the house) then files bankruptcy and wipes out the > debt to the other spouse, but gets to keep the home. > > This kind of thing can be prevented by including a mortgage secuing > the debt. But too many attorneys don't know the limits of their > expertise, just don't know what they're doing, or don't care. Merci beaucoup, mon ami. As a wise man once told me "An unsecured debt over more than $10 is usually uncollectible." And as many of us know from "The School of Hard Knocks", you get treated better before marriage than afterwards, and you get treated like garbage after divorce. Unfortunately my comments are gender independent. Dick -- << ------------------------------------------------------- >> << The foregoing was not intended or written to be used, >> << nor can it used, for the purpose of avoiding penalties >> << that may be imposed upon the taxpayer. >> << >> << The Charter and the Guidelines for submitting posts >> << to this newsgroup as well as our anti-spamming policy >> << are at www.asktax.org. >> << Copyright (2007) - All rights reserved. >> << ------------------------------------------------------- >> Similar Threads Posted Tax Efficient Gifting of Home Equity in Divorce August 30, 2009, 10:48 am investment cost - home equity v.s. margin July 25, 2007, 6:22 pm Re: investment cost - home equity v.s. margin July 31, 2007, 3:37 pm Re: investment cost - home equity v.s. margin August 1, 2007, 4:26 pm How to pro-rate home equity interest deduction February 23, 2009, 11:39 pm Can I buy a foreclosure and repair the house with a Home Equity Loan? 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