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

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  #1  
Old 06-16-2013, 03:53 PM
yyzmom yyzmom is offline
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Default Line of credit and matrimonial house

Hi all,
New to the forum with some pretty basic questions. Here is no 1:
My husband and I always wanted to leave our house for our kids. When he left, I stayed in it with our two kids and he moved into a house in the neighbourhood. In the subsequent two years he has quit his job, tried to start a business (fail) and has now dug himself deeply into debt.
We are undergoing financial mediation right now, to tyr to accomplish two immediate goals:
- to create a monthly budget for the ids that we both contribute to, to share costs
- to split our debt up (a line of credit against our house)
He owes $200K against the house, I owe about $120K.
Here's my question:
If we were to sell, does the bank immediately take the money owing on the line of credit?
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Old 06-16-2013, 04:06 PM
standing on the sidelines standing on the sidelines is offline
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if you are talking about a secured line of credit then in order to sell the house you have to have it free and clear and the line of credit is basically a lien against the house.
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Old 06-16-2013, 04:11 PM
yyzmom yyzmom is offline
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How do we render it free and clear without selling the house? Do we sign a document signing over the amount owed to the bank, then take whatever amount is left over after bank, real estate agent and lawyers have been paid? (Sorry, but this is the first time I have owned a house and I'm not clear on liens and how they work)
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Old 06-16-2013, 04:19 PM
standing on the sidelines standing on the sidelines is offline
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Quote:
Originally Posted by yyzmom View Post
How do we render it free and clear without selling the house? Do we sign a document signing over the amount owed to the bank, then take whatever amount is left over after bank, real estate agent and lawyers have been paid? (Sorry, but this is the first time I have owned a house and I'm not clear on liens and how they work)
the only way to do it I think (im no expert on this either) is you would have to get another line of credit that isnt using the house as security.

What exactly are you trying to do? The 220 your husband owes and the 120 that you owe, are they separate lines of credit? Are both using the house as collateral?
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Old 06-16-2013, 04:19 PM
dinkyface dinkyface is offline
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Quote:
Originally Posted by yyzmom View Post
How do we render it free and clear without selling the house?
You find the money ($300K!) somewhere else, and give it to the bank.

Last edited by dinkyface; 06-16-2013 at 04:22 PM.
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Old 06-16-2013, 04:46 PM
yyzmom yyzmom is offline
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Oh crikey! I highly doubt my husband could find any entity to lend him anything, his credit is so bad.
I thought that the bank would just take whatever is owing to them off the top, when the house is sold.
That makes it very difficult to sell the house, which is a good thing for me, as I'd prefer to stay for another 5-6 years until the kids are grown. I'm in no position to take on another mortgage, but would like to stay and bide my time as the house could appreciate (maybe?) while I pay down my line of credit.
We had a joint line of credit, but we split it when we separated, and he has been running his half up ever since then. I am aware we are both on the line for eachother's amount, but I am in no position to do anything other than pay off my half and hope he pays off his.
My advice to my kids: keep finances totally separate when you get married!
Thanks for your help.
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Old 06-16-2013, 04:53 PM
standing on the sidelines standing on the sidelines is offline
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talking to your bank is the best option. They can offer you the best insight on what you would have to do. They have all the numbers for crunching.

Dont get your hopes up at staying in the house for another 5 to 6 years.
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Old 06-16-2013, 05:25 PM
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If there is enough equity in the home to secure both lines of credit, then there is enough equity to take out a mortgage to pay them off.

The bank will of course insist on being the one to hold the mortgage, and that the money issued go directly to the lines of credit.

You are now owners of a heavily mortgaged property that you then put up for sale just like everyone else.

There is no logical reason for the bank to refuse. You are just exchanging one paper for another, and they get their money.
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Old 06-16-2013, 09:35 PM
yyzmom yyzmom is offline
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Thanks for all the answers to my question. I forgot to mention that the mortgage is paid off on the house, but regardless, we still owe the line of credit.
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Old 06-16-2013, 10:20 PM
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What you really need to do is separate your finances, which sounds like it's going to be nearly impossible to do without selling the house. You need to have sole title to the house, since you're the one living in it, and you need to disentangle your ex's line of credit from it. So now the important questions are, how much is the house worth, and how much mortgage can you afford by yourself?

If you can get a mortgage to cover both your line of credit and your ex's share of the house, do it, then pay him off for his half which he presumably uses to pay off his line of credit (if he's got any sense). Then your financial decisions about what to do in the future are entirely your own.

If you can't get that mortgage, then selling the house is the only way to get rid of all that debt. I can understand trying to keep the house until the children move out, but hoping to give it to them someday is impractical sentiment.
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