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  • Cohabitation Agreement and Debt

    Hi, I'm so thankful to have found this site and am hopeful that someone will be able to help me with some answers.
    Me and my common-law spouse have a cohabitation agreement that was done through lawyers approximately 5 years ago because we were moving into a home that my spouse purchased. At the time my financial situation was such that I could not contribute to the down-payment of the home. We both listed assets and liabilities of which I really did not have either. He had some assets in the form of vehicle/investments and he also had debt in the form of 24,000 all of which were listed on the agreement.
    We have both contributed equally to the monthly mortgage/taxes and monthly expenses to the home, we have separate bank accounts. My question is this, (and I'm trying to be as brief as possible yet still give enough info) since we moved into the home, my spouse has accumulated additional debt in the amount of 30,000 dollars or so which he has put onto a line of credit that is solely in his name. He also currently wishes to purchase a vehicle that he wishes to also place on this line of credit. (I have my own vehicle in my name that I make monthly payments on). He then wants to place ALL of this debt (including the 24,000) onto the mortgage when the mortgage is renewed.

    If we were to separate, are we both responsible for this debt? In our agreement it allows for approximately a 30,000 payout to my spouse for an increase in value of the home because he put the down payment down. I agreed to it at the time, but now am thinking that if he does everything that he wants to do and I am on the hook for this debt, then the cohab agreement should be either abolished or modified.
    Can someone please answer these questions for me.?

  • #2
    Originally posted by trix5603 View Post
    since we moved into the home, my spouse has accumulated additional debt in the amount of 30,000 dollars or so which he has put onto a line of credit that is solely in his name. He also currently wishes to purchase a vehicle that he wishes to also place on this line of credit. (I have my own vehicle in my name that I make monthly payments on). He then wants to place ALL of this debt (including the 24,000) onto the mortgage when the mortgage is renewed.

    If we were to separate, are we both responsible for this debt? In our agreement it allows for approximately a 30,000 payout to my spouse for an increase in value of the home because he put the down payment down. I agreed to it at the time, but now am thinking that if he does everything that he wants to do and I am on the hook for this debt, then the cohab agreement should be either abolished or modified.
    Can someone please answer these questions for me.?

    This is only my opinion bases on what you have stated.

    He put $30 as a down payment on the home which states is basically gets that back when you sell the home. Is this correct?

    He had $24K when you purchased and now $30 k totaling $54K in debt there about at present time. Is this correct?

    The way I see it is he want to roll all single debt into joint debt but as the cohab agreement stands he then stands to gain more money in the end.

    I would have the cohab agreement varied to terminate the clause where it states that he gets an extra $30K from the sale of the home. That will equal out the $30K in debt if and when the home is sold. With regards to the balance of the debt I would also roll my own debt from the car payments you make into the renewal and his $24K if they equal out somehow. I would then add a clause into the cohab agreement that any further debt obtained by either party is not to be secured against the home, unless both parties agreein writing. The line of credit he has for $30K is it a secured loan against the home? If so that Line of credit needs to be closed or needs to have both of you on it. Just my opinion on what I would do.

    Comment


    • #3
      Hi Dovan:
      Here is some clarification. He put 12000 down on the home when he purchased. The additional 30k that was included in the prenup is the "assumption" of increased value at that time of the prenup (which was about 1 year after the purchase of the home). The 24k debt is debt that he had prior to our relationship and the additional 30k he has incurred during our relationship and has applied to a 2nd line of credit. Everything at the moment is in his name. He took out a secured line of credit which is tied to the house which now has 66k, and has a 2nd line of credit which has approx 3500. This line of credit is ours combined, but again in his name only.
      The prenup states that if we split and sell the house, he gets his down payment back plus 30k. I'll have to pull it out but I don't believe it speaks to any debt incurred by us during the time we are together.
      Does that clarify things at all?

      Comment


      • #4
        Originally posted by trix5603 View Post
        Hi Dovan:
        Here is some clarification. He put 12000 down on the home when he purchased. The additional 30k that was included in the prenup is the "assumption" of increased value at that time of the prenup (which was about 1 year after the purchase of the home). The 24k debt is debt that he had prior to our relationship and the additional 30k he has incurred during our relationship and has applied to a 2nd line of credit. Everything at the moment is in his name. He took out a secured line of credit which is tied to the house which now has 66k, and has a 2nd line of credit which has approx 3500. This line of credit is ours combined, but again in his name only.
        The prenup states that if we split and sell the house, he gets his down payment back plus 30k. I'll have to pull it out but I don't believe it speaks to any debt incurred by us during the time we are together.
        Does that clarify things at all?


        So basically when the home sells he get 42K right off the hop after the mortgage is paid off along with any joint debts. So the 30k ...was it a true figure of the homes value from an appraisal done on the home before you moved in to it or a estimate from his tax assessment for the year that the prenup was done? Is the home still only in his name and mortgage in his name only? I am trying to understand where he came up with 30K and what basis was he going by. It makes sense to refini your mortgage at a lower rate don't get me wrong. If you are going to do that it should include debt that either of you have incurred before or during the relationship solely but at the same time there has to be some kind of compromise as I have stated in my previous post. If part of the 30K is actually joint debt but only in his name it would make sense to roll it into the mortgage. I have seen it over and over again in so many cases within the mortgage industry that people get refini done on their mortgage and all their debts get rolled into one payment per month but they still keep those accounts such as a line of credit, credit cards, and so forth open and being the cycle all over again. Before you know it they are in the same boat as they were before. I can see him wanting a return on his investment up to the time that you moved in, but it should also be a fair return I am not saying the 30K is not but there should be a basis in which the figure came from. The 12K for the downpayment could have been savings of his, RRSP contributions that he took out to purchase the home, or a gift either way it was his before the prenup. I went through the same thing recently where as I put the downpayment on a home with my ex and it was not written in stone but said if ever the home was to be sold I would get my downpayment amount back over and above the division of the sale of the home and I was lucky he kept his word. That downpayment was to be part of my inheritance and he knew that. I really think in my opinion t the best thing to do is refini everything at a lower interest rate include all debts owing in the refini and add a clause to the prenup that states there will be no further debt that is held against the home without written consent from both parties. Close out all lines of credit that are hold against the home. The new mortgage will include all debt from both parties and the new mortgage amount. Also if your name is not on the home or the mortgage I would have that changed as well before signing up for any further debt with him ( mortgage)

        Comment


        • #5
          I think the statement about including your debt is a good idea.
          If his down payment is removed from the Claus, it covers the $30K he now wants to roll into the mortgage from his sole debt.
          If he adds the additional debt and if he allows you to roll your debt in I would ask that the pre-nup be revised to ensure that no further debt (solely incurred) is to be secured against the home, this only makes sense as it will eat up any equity very fast.

          Also ensure that the equity then is split equally, assuming that both applied equal debt to the mortgage. He applied a little more ($30k) but the removal of the $30K off the top will compensate for this. I see this as being a fair request on your part. If he does not agree to roll in your debt, I would have the pre-nup changed so that he no longer gets the off the top amount, and that you get an amount equal to the debt rolled in that is over and above his down payment + 1yr equity.

          Comment


          • #6
            Hi, All very good suggestions - thank you.
            I have one more question to ask.....if one of us decided to end the relationship at the present time - what would happen with the debt outside of the mortgage, ie., the lines of credit? Am I responsible for any portion of these or are they solely his responsibility because they are only in his name?

            Comment


            • #7
              What does it matter who's name it is in? What matters is whose debt it is, all things considered.

              Comment

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