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Financial Issues This forum is for discussing any of the financial issues involved in your divorce.

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Old 03-27-2012, 11:41 AM
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Default Division of the marital home?

I separated from my ex 2 years ago, we drafted a separation agreement with 2 lawyers and a mediator, where in I traded away 30% of my 50% in the marital home as compensation for spousal support.

The separation agreement stipulates that I get a "Second mortgage as guarantee for my 100K (20%)". The home was fully transferred to my ex but she has failed to provide me with that guarantee of my equity. She says she will grant me a second mortgage on the home. I don't understand this, why would I take out a 100k second mort on her home, keep it in a separate bank and pay interest on that 100K till she sells in 12 years when my youngest is 18?
The home is falling into disrepair with an unattended water leak etc. She has also borrowed against the equity in the home. I am concerned for the roof over my children's head, and the potential loss of my 20% equity if things continue along this path.

Primarily I need some input as to how the marital home is normally divided securely when both spouses maintain an interest. A sale is not an option due to disruption to the children. How does this division of the marital home normally occur?

All and any input is welcome.

Thank you in advance.
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Old 03-27-2012, 11:53 AM
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If she's remaining in the home, I believe she has to buy you out and you should get your share of the equity in the home, minus the 30% as you mentioned.

Is this an issue as part of the divorce finalization?

Whatever you do, do not sign anything that says she will pay you the equalization payment upon sale of the house. Because that could be never and it's a huge disadvantage for you if you end up back in court down the road.

Hopefully others have some input as well, I'm not sure I completely understand your situation.

Why did you agree to the clause stipulating the 2nd mortgage as a guarantee of your equity?

Last edited by CCB; 03-27-2012 at 11:56 AM.
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Old 03-27-2012, 12:28 PM
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Quote:
Originally Posted by Gernot View Post
I separated from my ex 2 years ago, we drafted a separation agreement with 2 lawyers and a mediator, where in I traded away 30% of my 50% in the marital home as compensation for spousal support.

The separation agreement stipulates that I get a "Second mortgage as guarantee for my 100K (20%)". The home was fully transferred to my ex but she has failed to provide me with that guarantee of my equity.
You are not on title so the property is not technically yours under the law. If you have a mortgage on the property and are not on title that is a whole different ball of wax. The upkeep of the home should be outlined in the mortgage agreement. If you are not on title why do you have a mortgage against the house? You can do this but, it is hard to understand why you (or your solicitor) would agree to this.

Quote:
Originally Posted by Gernot View Post
She says she will grant me a second mortgage on the home. I don't understand this, why would I take out a 100k second mort on her home, keep it in a separate bank and pay interest on that 100K till she sells in 12 years when my youngest is 18?
You wouldn't. One would question why you even have a mortgage on her property for which you are not on title unless she is paying you for the mortgage. You as a private lender could have provided her with a mortgage but, there would be a pile of paperwork as a lender to do this. The situation sounds odd.

Quote:
Originally Posted by Gernot View Post
The home is falling into disrepair with an unattended water leak etc. She has also borrowed against the equity in the home. I am concerned for the roof over my children's head, and the potential loss of my 20% equity if things continue along this path.
There is an obligation under the mortgage agreement to keep the property from falling apart. As well, the insurance provider too. Whoever the lender is on the property can inspect the property and call the mortgage at any time if the mortgage agreement is being violated and the property is falling into disrepair.

Quote:
Originally Posted by Gernot View Post
Primarily I need some input as to how the marital home is normally divided securely when both spouses maintain an interest. A sale is not an option due to disruption to the children. How does this division of the marital home normally occur?
This usually doesn't happen. Usually the matrimonial home is sold or one party buys the other party out. Financial separation is the key element of equalization generally.
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Old 03-28-2012, 07:15 AM
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Thanks for the reply,

The home was in both our names. Then we separated and title was transferred to my ex. I was under the impression that the courts would be reluctant to force a sale of the home due to disruption to the children. So I agreed.

My lawyer and mediator came up with this "second morguage" idea, they came up with it quickly so I believed it was a common practice. Now I see in reality it is not practical and exposes my investment to forces beyond my control. Not to mention it is technically an interest free 12 year loan to the ex from me!

Does anyone know of any other way the Marital home is divided besides a sale and or buyout?
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Old 03-28-2012, 07:47 AM
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It's an asset.

So it falls under equalization. Depends on what other assets you have that can "make up the difference" at the time of separation.

Sometimes you can trade off interest in the home for an asset of approx. equal value. Say RRSPs, or to keep your pension intact. Maybe you have a number of "toys" that you wish to keep instead.

If THAT doesn't apply (ie. there are insufficient assets to equalize the value of the house)...your choices become:

1. Walk away and forfeit your equity

2. Sell the the home. The net value (sale price less mortgage/fees/etc) is then a cash asset and equalized accordingly.

3. One person keeps the home, and arranges to "buy out" the other person's share.

It almost sounds like the intent was for HER to take out a second mortgage for your 100k..however the wording is very VERY odd.
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Old 03-28-2012, 01:29 PM
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Agreed with the above comments about it looking like nonsense. If you are not on title, then I don't think any bank will give you a mortgage for that property (they need you to own the property as collateral).

I assume this option was suggested because she does not qualify for additional lending from a bank?

How about just barging ahead with the interpretation that you will grant her a second mortgage, i.e. you will lend her the money (NOT INTEREST FREE), at competitive 2nd mortgage rates (but not lower than 1st mtg rates). Make up a legal contract for the mortgage, including payment schedule, prepayment options, insurance requirements, maintenance requirements (with inspection rights), callability conditions (i.e. any conditions that would give you the right to demand full repayment). Also - not sure of the legal process - but register a lien on the house title to record officially that the house is collateral for the 2nd mortgage.

Not ideal, since it still leaves you open to her failure to pay, or failure to maintain the property. And you are 2nd in line (to the bank) as a lender in case she defaults on her mortgage.

Last edited by dinkyface; 03-28-2012 at 01:34 PM.
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