Married couple, property ownership held "tenants in common", mortgage in my name only

In My Humble Opinion
1

I’m wondering if this will be a problem down the road, if I die first.

My husband and I bought this house 20 years ago, well before we were married. The ownership is as “tenants in common,” which effectively means that we own the property jointly, and the survivor takes full ownership automatically.

The mortgage loan, however, is only in my name, mostly because I had most of the income and good credit, and his credit at that time was not good, and I wanted to get the best rate I could qualify for.

If I were to drop dead tomorrow, assuming he wanted to keep the house rather than selling it, would the mortgage loan have to be re-financed under his name (and with his still-not-great credit score) or would he have the option to take over the mortgage loan as is?

What if he decided to sell, which could take a few months, is there a time frame beyond which the mortgage-holder would make waves?

Bear in mind that this is a legal marriage under current state and federal law, performed about 9 years ago. That’s why I’m specifying “drop dead tomorrow” before the laws can be changed.

2

I find it surprising you could have a mortgage in your name but the ownership held jointly - I don’t think you can do that here (UK), presumably because of the problem you outline! I’m also surprised the mortgage company would agree to provide a mortgage where the owners aren’t all on the mortgage. What does the small print on your mortgage tell you?

3

OP, I know you responded in my thread, but I think you should research “tenants-in-common”. Here in Massachusetts, it’s the exact opposite of what you’re describing - it’s the type of ownership for people who are NOT married, without rights of survivorship, where each has a separate interest in the house.

Forgive me if I’m not recalling correctly, but are you in a SSM? Did you buy the house, then get married later after the SC decision? You may want to look into changing the deed to reflect that you are now married.

4

Same in England (and hence possibly in a lot of other jurisdictions that are historically derived from English law). The tenancy in common has several people each owning a percentage share in the property, with each share being thought of as a separate asset. What the OP is describing (all tenants jointly owning the same indivisible property, and right of survivorship) is called joint tenancy.

5

The standard US term for that is “Joint tenancy with right of survivorship”. TIC is something very different. IIRC you’re in California which is also a community property state.

you really need a local CA expert to make sure your paperwork is as you desire. Lotta ways for this to go sideways. Even more so if same-sex marriage comes under serious legal attack between now & when either of you die.

6

@muldoonthief, thank you for the clarification, and I believe you are right about tenancy in common (now that you point it out, I remember that’s why we did it, because we did not have a legally-recognized relationship at the time).

To further possibly complicate matters, and which I also forgot to mention above, a few years ago we established a living trust and put the house in it, including changing the deed. This may supersede any other changes to the deed that would be necessary to reflect our marriage. I reckon I should check with the city/county on that.

This leaves the mortgage loan still in a possibly anomalous situation. I am frankly afraid to ask them, if I don’t absolutely have to, because I feel confident the bank will, if at all possible, use this as an excuse to re-jigger our loan and raise both the interest rate (which is higher now than the last re-fi) and the payment. I think I will start with our attorney who drew up our trust document and see what he says.

We may have sort of unintentionally slipped one over on the bank. At the time of the original signing of all the papers, the deed was, in error, assigned to me alone. I discovered this soon and corrected it at city hall, to a tenants-in-common joint ownership. But we didn’t say anything to the bank, because we didn’t think of it.

Since the most recent re-fi, several years ago, property tax documents have been going to the bank, as they have been paying the taxes from an escrow account (before that, we paid the taxes directly ourselves). So the bank has seen that the property deed is in the name of a trust. Would they have not noticed that and said or done something, if it mattered to them? Although I imagine that whoever pays the taxes may not be in the loan department, but some clerk somewhere just following procedures.

Yes, you are recalling correctly.

7

Yeah, I’m betting if you read your original mortgage it’s got language that prohibits this kind of thing. You basically sold half your interest, which included their interest as a lienholder, for $1 or however you stated it in the new deed.

So unfortunately, in my uneducated opinion, if you died tomorrow your husband could be left in an ugly legal mess with the bank, who would want to sell the house immediately to repay the remainder of the principal.

8

Well, I have just sent off an email to my lawyer, after looking up some stuff online. The two online sources I found (commercial will-writing software companies) seemed to think that it is not unusual to leave a spouse off a mortgage if their poor credit would raise the interest rate. Also, by now the remaining lien amount is less than half the value of the house, so if my husband can keep up the payments, it seems the bank has no standing to force a sale, But that’s my mostly-uneducated opinion, so I’ll wait to hear what my lawyer says.

9

So there is a federal law that the bank can’t force a sale under certain circumstances:

Exemption of specified transfers or dispositionsWith respect to a real property loan secured by a lien on residential real property containing less than five dwelling units, including a lien on the stock allocated to a dwelling unit in a cooperative housing corporation, or on a residential manufactured home, a lender may not exercise its option pursuant to a due-on-sale clause upon—

(1)

the creation of a lien or other encumbrance subordinate to the lender’s security instrument which does not relate to a transfer of rights of occupancy in the property;

(2)

the creation of a purchase money security interest for household appliances;

(3)

a transfer by devise, descent, or operation of law on the death of a joint tenant or tenant by the entirety;

(4)

the granting of a leasehold interest of three years or less not containing an option to purchase;

(5)

a transfer to a relative resulting from the death of a borrower;

(6)

a transfer where the spouse or children of the borrower become an owner of the property;

(7)

a transfer resulting from a decree of a dissolution of marriage, legal separation agreement, or from an incidental property settlement agreement, by which the spouse of the borrower becomes an owner of the property;

(8)

a transfer into an inter vivos trust in which the borrower is and remains a beneficiary and which does not relate to a transfer of rights of occupancy in the property; or

(9)

any other transfer or disposition described in regulations prescribed by the Federal Home Loan Bank Board.

3, 5, 6 may/should apply in your case. But if your spouse isn’t already on the mortgage, I don’t think they’re required to let them just continue to pay the mortgage either ? But I see you’re off to your lawyer now, which is a much better idea.

10

But, assuming he could qualify for it, couldn’t he get a mortgage with a new bank and pay the lender off?

As long as the money comes in, they’ll never notice, in my experience.

11

That’s what I’m hoping for, but his income alone won’t do it, he would have to start heavily drawing down on the IRA, which might last another 10 years at that rate. So it seems his best bet is to sell the house, he’ll get a nice windfall, and with that plus the IRA he should be able to live modestly anywhere he wants indefinitely. Way down at 2nd best might be a reverse mortgage so he could stay in the house, but I’m not sold on that as a solution. It would be a sentimental choice rather than a sensible one, in my opinion.

12

Do. Not. Do. This. If you love him, make him promise.

They are scams, and among the things they do is to front-load fees so your $500,000 in equity starts the term at $400,000

What about a life insurance policy, so that he’s covered if something happens to you?

13

In the UK, there would have been insurance to pay off any balance at the demise of either of you.

This kind of insurance, for what is a reducing debt, should not be expensive and it may be worth looking in to.

14

I already got an answer from my lawyer (imagine that!). Basically, we’re fine as is. To quote:

There is a federal law (the “Garn-St. Germain Depository Institutions Act of 1982”) that allows a surviving spouse to assume a deceased spouse’s loan on a primary residence. In light of this, I do not believe a lender would be able to try to call the loan due if you were to pass away. While the best of all worlds is to have the lender formally assign the existing loan to the surviving spouse, many surviving spouses just keep making payments on the existing loan without issue.

I may look into the insurance idea. So it’s not life insurance per se, it only pays off the mortgage? Hmm…

15

I would check on that. Typically “tenants in common” means each person owns 50% of the property and should one of them die, their heir(s) gets their half. In Colorado, what you describe would be “joint tenancy with right of survivorship”.

16

Yes, @muldoonthief corrected me earlier in the thread, and then I remembered and posted that we put the house in our living trust a few years ago. So that part of the OP was incorrect.

For the rest, on the mortgage life insurance front, that is not looking promising. At my age, and with the amount left on our mortgage, it looks like the premiums would be prohibitive. Possibly term life insurance would be a better way to go (Forbes thinks so for lots of people) but I am reluctant to put myself out there as a potential purchaser of life insurance.

17

I’m glad you’ve asked your lawyer. I think with the State of Things in the nation, it’s well worth having a lawyer set up your health and financial documents so you can protect each other even if the courts nullify your marriage.

18

Excellent suggestion and worth every penny. HCPOAs, DNRs, POLSTs, General POAs.

19

Mortgage-specific life insurance is generally a semi-scam sold by the mortgage brokers. Like the dealer-applied undercoat on new cars.

The insurance (or undercoat) itself is real. It’s just that it’s more expensive and more limited than buying an ordinary life insurance policy, and the mortgage broker keeps that “more expensive” as an easily-earned commission. It’s a way for them to prey upon unsophisticated buyers.

And yeah, insuring a mortgage balance in any way makes little economic sense for a retirement-aged person. The premiums quickly become prohibitive. If you were truly worried about how the mortgage gets paid after your death, you’d likely do better to simply take that same dollar amount and pre-pay mortgage principle with it. OTOH, every dollar you dump into mortgage principal is a dollar (plus growth and interest) that your spouse won’t inherit when you die.

20

This is an odd comment - what’s wrong with looking into life insurance? It’s hardly something unusual!

Myself and my wife have life insurance through our jobs, which would pay off the mortgage if either of us passed whilst still working, but I would certainly consider it if my job didn’t cover it.