Breakup leads to buyout, questions about mortgage
Tribune Content Agency Q: Ipurchasedmy
home with a partner without being married to him. My partner and I have split up; however, he is willing to quitclaim the property over tome in exchange for cash and mutual property. We have an attorney who will do the deed and contract for this agreement.
I amnow worried that the bank may try and make me redo the loan, which I will not qualify for because I amself-employed. I have an excellent credit score and I pay all my bills before they are due. My ex knows that this mortgage will get paid. Will the bank just leave things the way they are if they are getting paid on the mortgage note? A:
Usually lenders won’t come after a borrower under your circumstances. From a practical point of view, the lender wants its loan to be paid on time over its term. The loan documents give the lender the right to call the loan, which means the lender can require the loan to be repaid in full upon the sale or transfer of the property. So if we step back a second, you are one of the two borrowers and will buy out the other borrower. Once you do that, you will still be on the loan and on the title to the home, but your co-borrower will no longer own the home.
If you default on making your payments on the loan, the lender can still foreclose on the home to satisfy the amount you owe on the loan and can still sue you and your partner for any amount still owed after the home is sold. Given these circumstances, we’d find it hard to see why a lender would want to call the loan. But if the lender did, you ask, could it?
In the strictest sense of the loan documents, the lender should be able to call the loan given a transfer or sale of the half interest in the home to you. You indicated that you and your co-borrower were not married, but then the question becomes whether you had a legal living arrangement.
Under federal law, your lender can’t force you to repay the loan under certain situations that most commonly involve death or other life changing situations. The Garn-St. Germain Act prohibits lenders from calling a loan in situations where the loan secures the primary residence of the borrower and that borrower dies and the home passes to a spouse, children or other relative. Also, in the case of divorce or a legal separation or property settlement agreement, the lender may not call the loan.
If you were not married and did not have another living arrangement that could be construed as a legal partnership, the bank could call the loan. We’re not aware of any lender trying to call a loan in a situation where a couple is together, but not married. There are more and more situations where people decide to live together without getting married and then break up. If each lender called a loan in that situation, we could see another huge caseload of loans going into foreclosure. We doubt that would happen.
We can’t tell you for sure that the lender would or wouldn’t call your loan, but we have a sense that most lenders out there wouldn’t call the loan so long as the monthly payments are made on time and the new insurance certificate for the coverage on the home still showed one of the original borrowers on the loan.
You have an attorney who’s helping you out and knows the particulars of your situation, so you should pose your question to her.
Ilyce Glink is the creator of an 18-part webinar and ebook series called “The Intentional Investor: How to be wildly successful in real estate,” as well as the author of many books on real estate. She also offers information on her YouTube channel. (youtube.com/user/ExpertRealEstateTips).
Contact Ilyce and Sam through her website, ThinkGlink.com.
© 2016 Ilyce R. Glink and Samuel J. Tamkin. Distributed by Tribune Content Agency, LLC.