need help on divorce contract

[markfromark]

so my wife and I decided that I keep the house and when I sell it she will get a certain amount of money.

E.G.

 

equity today 300k

 

sell the house in 5 years and she will get 150k

 

BUT

 

what if the value of the house goes down?

 

should I phrase it likes this:

 

if equity >= 300k in 5 years then pay = 150k

else pay = equity / 2

 

what if I never want to sell? should we put a clause that says in that case she gets nothing? what if I die?

 

anyone did it in a similar way?

 

I could just refinance now and pay her out but that would cost much more in the long run.

 

So far we are very friendly and she does not need the money. I think I want to remove her name from the deed and get a contract that regulates all those issues.

[Beec]

You can phrase the agreement to be such that the equity of the hosue will be calculated at any time, but if she is going to risk having the value drop, shouldn't she benefit from it going up too? I think you set a time and the equity on that date determines the value she gets.

 

Instead of you refinancing, you can have her accept a second mortgage on the house, for a set amount, and get her off the deed. She gets a mortgage which she can record and that will secure her interest. The second mortgage won't trump the first mortgage, but it will let you pay her on whatever terms you can agree. Then when and if you want to refinaince, you get money to pay her off as part of the financing, and clsoe both prior mortgages.

[NJRon]

I agree with Beec here. I really wouldn't worry about the value of the house going *down*. most likely, the very worst that could happen would be that it stayed the same... i assume it's insured for it's full value.

 

$300k equity is a *lot* of equity. I trust that it is true equity you are talking about and the total value of the house.

 

The best thing to do would be to take a second mortgage out in the amount of $150,000, which you can easily secure with the equity in your home... it would still be below 80% (assuming it's not a million dollar home) and pay her off.

 

Then you are free to sell or not as you please.

 

In my experience, the fewer ties you have the better. Try to cut as many off now as you can.

 

Note: You wouldn't get just a second mortgage. In order to get her off the deed, you will need to refinance. so... that's not to be confused with a second mortgage.

[markfromark]

interesting, I could not just get her off the deed? Can't I just tell the mortgage company to take her name off? I thought this should be easy to do.

 

I'd prefer to pay her out as well but if I take a second mortgage and she is still on the first then she is still the owner?

 

So the only way to make a clean cut is by refinancing?

[Beec]

interesting, I could not just get her off the deed? Can't I just tell the mortgage company to take her name off? I thought this should be easy to do.

 

No, she has to execute a deed granting her interests in the property to you. It sould be something as simple as a quitclaim deed, which basically says, her interest in the title in now yours, with nothing else. Then you record the deed with whichever government office applies.

[NJRon]

Well.. you need to get clean title... getting her name off the mortgage is worthless. In fact.. if you get her name off the title and *not* the mortgage, she is still responsible for the mortgage even though she has no claim to the house.

 

It is a *really* good idea to go to a real estate attorney right now because it's a *bit* more complicated than you are thinking it is.

[NJRon]

Overall, I think the consensus is that you can (with the help of an attorney.. and it shouldn't cost you more than a few hundred bucks) get her off the title/deed. You can then work with the financing to ensure that it is clean and you can pay her out, either by refinancing, or taking a second mortgage.

[VictoriaInTexas]

I don't know what state you live in; but in some states you can file a "Tenacy in Common". It basically means that if one party passes away the house (property) will revert to the ownership of the other. Basically just as if you had never divorced. The difference is that you live there, don't have to sell the house, but if you should kick the proverbial bucket, ownership is hers.

 

And that's not mentioning anything about a new wife, children or any other intended heir. In fact, I believe with a tenacy in common, even if you leave your half of the house to your child, the tenacy in common is effective first and she still gets 100% ownership upon your departure.

 

Get the book "Divorce and Money" it will help clear a lot of things up for you.

[NJRon]

you know... whatever state you are in.. even if it's not really a state.. like Puerto Rico... go to a Real Estate Attorney... they give much better advice than you will get here.

[avman]

You should really determine the value of the house now and settle on an amount. That will avoid any complications later when you actually sell. Of course, if you never want to sell I doubt she would wait forever for the money.

 

Why not buy her out and take out a second mortgage that would pay her the 150k now? Then you can avoid all the messy issues years down the line, take the tax deduction for the interest that you pay, etc.

 

In order to get her off the deed, you will need to refinance. so... that's not to be confused with a second mortgage.

 

This isn't quite right. The mortgage has absolutely nothing to do with the title to the house. In order to get her off the title she would need to sign a "quit claim" deed. This removes her from any interest in the property itself. The mortgage is totally another matter. And it's more a problem for her then it is for you.

 

If for instance she signs a quit claim but you leave the mortgage the same and then you default on the mortgage, the mortgagor will come after her as a joint obligator to the loan. The mortgagor doesn't care who is on the title. They only care who is named on the loan.

[NJRon]

Avman always has a way of expressing things better