Equity Home Loans

Who pays second mortgage debt in a divorce?

Don't bash me for my methods, but just give your thoughts in the current situation. Ex and I had a super easy divorce where I said, "I'll move out, you keep paying the mortgage on the house and we'll decide later if you refinance or sell it." Well, we have a 2nd mortgage line of credit for all our debt consolidation and home improvements. I have been paying half this 2nd mortgage cuz it was debt we both gathered. But if I gave her the whole house and it's 1st mortgage payment, shouldn't she also be paying the 2nd mortgage? The 2nd mortgage came from equity which I earned half of. Now I'm giving up that equity so isn't that her resposibility now? For example on a refi. 1st mortgage we owe 200k. House worth 280k. 2nd mortgage balance 80k. She refi's the 1st mortgage, I get 40k in equity. She refi's 2nd mortgage and even if we split the 80k, I just give her back the 40k I earned from equity so I'm even. Is my logic correct here? I should be 100% free of any of the mortgages? That's exactly what I was asking about. If she refinances, logic is that it'll be for the whole amount (1st and 2nd mortgages) and I'd not fit in anywhere. Some think I'm still responsible for 1/2 the HELOC because I helped create that debt it was put towards. But it's from equity in the home so if I give up my equity portion, I also give up my 1/2 of the HELOC resposibility, right?

Public Comments

1. This is the time where you hire your attorney to do the math for you. Not sure if your logic is sound but more importantly, I am not sure you are doing the smartest thing for you in giving up all of your rights to the house Not sure how long you lived there or if you would be able to sell th house now in today's market.... another thing to consider is where you live....a judge could very well make one of you alimony depending on the length of time you two were together.Also if the two of you verbally agree on who is going to pay and who is not , that is all nice and fine but you HELOC might not be so fast in releasing you (or her) from your obligation to pay it This is something that you need to keep in mind especially if one income makes her ineligible to carry the note
2. if there's a 2nd mortgage of 80k and a 1st of 200k, there is no equity - you took the equity out when you received the cash from the 2nd mortgage - what did you do with that 80k? you're not entitled to anything and as long as your name is on the mortgages, you're stuck with the liability. You should either sell the house and split the equity if there is any or if ex wants to stay, she should refi in her name-if she can afford it and you sign your share of the house over to her for 1/2 of any equity (probably none according to your calculations)
3. I think your logic is correct if the present value of the home is at or above these figures. But I suggest she refinance the first and second mortgage together.
4. I have been in the mortgage business for 10 years, and divorces are always messy, no matter how easy going it is. Here is what you need to do to protect yourself and your credit: 1. Make sure it is in the divorce decree. 2. Make sure it specifies your soon to be ex MUST refinance BOTH mortgages, though in this market it will be harder than it was 1 year ago, due to the changing market environment. 3. Make sure she takes you off title. 4. Remember that she may not be able to give you exactly 40K in equity, because there are settlement charges - I would assume 10K on the high side to be realistic - if you do a conventional loan with a nice low rate, and she would be paying PMI, too. If she goes for a no closing cost loan, the rate would be higher (they absorb the costs into the rate) but you get mroe cash out. There are also loans up to 100% loan to value with no PMI. My suggestion is to contact whoever you do your banking with, as they may be able to offer you the best deal, and hopefully you are not in what banks terms as a declining market (eg Florida, Detroit, or the Northeast), because you may not get 100% of the value of the home, they reserve the right to only finance 95% or 90% depending on their guidelines. Assuming your soon to be exes credit scores are above a 680, and you have little to no debt, it should be pretty easy to do. Hope this helps.