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If I Added My Ex to Our Mortgage During Refinancing Is That Now Considered Marital Property?

Questions regarding real estate and divorce are always at the front of people's minds when they are considering a split from their spouse. A real estate purchase is likely to be among the most significant that you make during your life. Not only is there the aspect of finances when it comes to real estate, but you also have the emotional aspects that are relevant to any real estate transaction. If you are getting a divorce and your family home is going to be sold as a part of the divorce, then you have more than just your financial assets in mind during that whole process. 

I think that is one of the most interesting components of a divorce when it comes to real estate. Namely, how the personal and emotional portions real estate transactions relate to the purely financial and economic considerations that are also part of those stages of a case. Our attorneys take a great deal of pride in being able to help our clients by providing advice, perspective and strong advocacy for their interests during a divorce. A key part of providing advice when it comes to real estate in divorces is to provide basic information so the client can make decisions which are best for themselves and their children. 

When you have a huge financial stick in a piece of real estate you need to have factual information to go off of when making decisions within your divorce. We all are exposed to a lot of information from family, friends, the Internet and the myriad of television shows that are related to real estate and the buying and selling of real estate. It would be easy to get caught up in the storm of all these pieces of information and feel that you cannot make a decision based on the differing viewpoints that you are absorbing. 

Couple all the information that you may be getting from competing sources with the current real estate climate, at least residentially, in both Southeast Texas and our nation as a whole. While the economic slowdown and shutdowns associated with the coronavirus certainly were not beneficial for our economy as a whole what they did do is seemingly drive up demand for residential real estate both in our area and across the nation. 

I am not here to provide you with an overview of the real estate market or to speculate as to why residential real estate prices seem to be increasing throughout 2020, but I think it has something to do with pent up demand that eventually boiled over in May and June of 2020 as our economy and society began to open up after the initial shutdowns and quarantines associated with the government’s response to the virus. With that said, people are generally more aware of the climate with residential real estate because prices right now are higher at this point when compared to last year or the year before.

This is the environment that we find ourselves in Right now. To recap, many businesses in the economy as a whole seemed to be opening up now as we approach the fall months. The demand for homes has been steadily increasing since a law in March, April and May and those of you considering divorce are caught in the middle of this discussion In the importance of getting it right the first time when it comes to handling matters related to real estate during your divorce. 

A relevant question to ask yourself would be whether or not your home mortgage has been refinanced since you initially took out the home mortgage. For those of you reading today's blog post that are unaware of what a refinance home mortgage is, it is when You and your spouse choose two obtain a new mortgage loan on your home in order to secure a lower interest rate, more agreeable length of the mortgage or for any other reason. For instance, people will oftentimes refinance their home mortgage in order to pull cash out of the home in order to complete a renovation or for any other reason where cash is necessary. 

A refinanced mortgage is not simply a reworked original mortgage on the home. A refinance mortgage is where you obtain a brand-new loan on the home. The initial mortgage is paid in full and cancelled, and the refinance mortgage takes the place of the original mortgage. Depending on the circumstances that you and your spouse find yourselves in an original mortgage may have and only one of your names while the refinance mortgage bears both of your names. This may have happened if, for instance, only one of you applied for the mortgage the first time around due to issues with credit score or other eligibility problems that would have a curd had both of your names been on the application. 

Now that we have introduced the topic of real estate, property division, and refinance mortgages in the context of a Texas divorce it is time to discuss whether or not a refinanced mortgage changes the characterization of a home as far as being part of a spouse is separate property or joining the community estate. Essentially what I'm asking is could a home that was previously part of your separate property now become community owned due to your spouse’s name being added to a refinance mortgage? 

A word on community property in Texas 

Texas is a Community property state when it comes to property division in your divorce. All property owned at the time of your divorce by you and your spouse is presumed to be Community property. The easiest and most simple rule that I can apply in this setting to Community property as far as an explanation is concerned would be to tell you that property that was purchased during the course of your marriage is presumed to be community owned. In order to establish that a particular property or asset is part of your or your spouse is separate estate, you would need to show that it was purchased prior to your marriage , was gifted during your marriage specifically to you or was inherited by you or your spouse separately from the other person. 

Let's assume that you purchased a home prior to your marriage. That home is where you lived for three years by yourself prior to marrying your wife. Once you all got married the decision was made for your spouse to move in with you into the house, you'd purchased years ago. Of course, when you took out a home loan Way back when you purchased the house it only had your name on it. Your wife hadn't even entered the picture at that point. 

Throughout your married life, the income that you earned from your job went towards paying that 30-year mortgage. Your spouse remained in the home and never entered the workforce in order to maintain the house and help raise your children. Now we are in the present day and you are considering filing for divorce from your wife. A major question that has entered your mind is whether or not the home mortgage, which was refinanced one year ago into your name and your spouse’s name, has somehow changed the characterization of your home. 

We have already discussed how your home has always been your separate property due to your having purchased it prior to the date on which you became married to your spouse. The question we now would have to answer is whether or not, by refinancing the home mortgage into your name and your spouse’s name, the house is now community owned. This is an interesting question And, in some states, may change the conversation as to how the home should be divided in the divorce. The reason for this is that many states, under common law theories of marital property, look to the title or mortgage documents when determining how a home should be split at the time of divorce. In Texas, however such principles are not applied. Allow me to explain in greater detail. 

The default setting in Texas divorce scenarios is not for a court to simply look to title or mortgage documents when determining ownership interests at home, other type of real estate for any property at all. If your case were to make it all the way to a judge, the judge would be most concerned with identifying the date on which ownership of the property who is vested in you and your spouse or either of you separately. For instance, the court will be most interested in seeing when a date of trust, or other title document were dated asked to win the house officially was purchased. The names on these documents is not as relevant as the data. 

The bottom line for our discussion today is that if the date on which the family home was purchased occurs prior to the date of your marriage then the house will be classified as your separate property. It does not matter if a home mortgage was refinanced during the course of' your marriage. that in and of itself does not change the characterization of your home from being separately owned by you. However, as with many things in the law, there may be an exception to this rule that we have just gone over.  

Under the example that we've been discussing today, if the home you purchased prior to your marriage now has your name and your spouse’s name on a refinanced mortgage it could be argued that you have gifted a 50% interest in the home to your spouse. What does this mean? Within your divorce your spouse in their attorney could make settlement offers to you based on A one year and 50% ownership stake in the house. While this amount of money maybe somewhat small compared to the overall equity in the home it could make a difference when negotiating on other community property matters.

For example, if your spouse and her attorney make an argument that she owns a portion of the home given her name appearing on the refinance mortgage she may ask for a certain amount of money or property from your community a state that she in other circumstances would not be entitled to. If she figures that her ownership interest in your home is equal to 10,000 dollars, for example, she may ask for a greater share in your retirement, in money from your bank account or from property in the home in order to make up for the difference. Or, if your home will be sold in the divorce, she may ask for a percentage of the equity once the home is sold. Keep in mind that the home was your separate property that it could not be divided in your divorce as a result. However, she may have been eligible for reimbursement from the community income used to pay the mortgage or update and renovate the home since the beginning of your marriage. 

Question of real estate and real property division in Texas is a contentious one. How you and your spouse divide real estate in your divorce, or choose not to, can impact both of your financial futures for years to come. Community property law factors into this discussion a great deal. Given the importance of community property In Texas divorces and how much real property is impacted by the law on property division it is critical that you know the ins and outs of these subjects in order to confidently proceed into a divorce

Questions about the material in today's blog post? Contact the Law Office of Bryan Fagan  

If you have any questions about the material that we shared in today's blog post please do not hesitate to contact the Law Office of Bryan Fagan. Our licensed family law attorneys offer free of charge consultations in person, over the phone and via video. In order to learn more about your circumstances and the services that our office can provide to you and your family please contact us today. 


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