My wife and I are in the process of a mutual no-contest divorce. She moved out in October and stopped contributing to the mortgage. Our divorce proceedings through LegalZoom indicate that I will retain the house and be responsible for the mortgage payment and associated debt. However, as far as Bank of America is concerned, her name is still on the mortgage (30 year, 5% fixed, FHA) and, I assume, is still financially liable in the end.
1) Assuming a 3rd party would eventually buy her share out, how does one calculate the equity she earned while living in the house from Nov 2009 to Oct 2011?
2) Until that happens, I assume it is still a good idea to hold life insurance policies in each other's names as co-owners of the house - correct? We currently hold 100k spousal policies through work.
Because it was purchased so recently (and luckily, post real estate bubble), the house is underwater at the moment, so selling is not an option for either of us. Additionally, I have been informed that she would likely need to file a "quit claim" deed forgoing her legal rights to the house in order to avoid repaying the IRS her share ($4k) of the $8k first-time home-buyer's credit we received in tax year 2009. Taking the original info above into account, from my research, this essentially relieves her of her rights to be on the property but does not excuse her from the financial obligation through the bank. Is this correct?
You should contact a local attorney to review the documents you prepared on legal zoom. If you wrote a property settlement agreement, it should be reviewed before you sign it. There are certain components of a property settlement agreement that must be included in order for it to be effective. They concern your rights and responsibilities for past debts and future debts, and your interests in each other's property.
I cannot comment on the house, without seeing the specific terms of your agreement. However, I do not believe your mortgage company would allow for a quit claim deed. From my experience, most mortgages require satisfaction of debt, before you or she can transfer your interest. It may be willing to release her from her obligation on the mortgage, but I have never seen that happen.
The content of this answer does not constitute legal advice to the original poster or any other person who may read it. Further, this answer does not create an attorney-client relationship between the attorney posting this answer and the original poster, or any other person who may read the answer. If you are in need of legal advice, you should contact an attorney in your area or a legal referral service.
Divorce / Separation Lawyer
Co-owning a home post-divorce usually does not end well. Because you are not refinancing the mortgage, your Wife will probably be unable to purchase a home on her own because this mortgage remains on her credit. Most lawyers will not recommend such a resolution. As for her share, more facts are required. Has the value increased or decreased? Did she contribute to the purchase price. How long was the marriage? You really should consult local counsel.
Legal disclaimer: In accordance with the Avvo community guidelines, this communication does not constitute "legal advice", nor does it form an attorney-client relationship.