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What difference does it make whether it's a loan or a gift?

Binghamton, NY |

My parents contributed money towards a down payment on a house that I bought while I was married. My name is the only one on the deed. My mother's name is on the mortgage. I am getting a divorce after just 3 years of marriage. I am selling the house. After the mortgage is paid, will my parents then receive their down payment back, or is that money part of the amount that gets divided between me and my wife? It seems like since it was nonmarital money that my parents should get the money back either way, whether it was a gift to me or a loan to me. Then if ther is any money left, that should be the amount to be divided between my wife and myself.

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Attorney answers 6


Your mother would be entitled to the money if it were a loan. However, the issue would be proving that the amount given to you was, in fact, a loan. If you have a promissory note stating the terms of the loan from your mother to you, that would likely suffice in court.


If it was a loan it has to be paid back to your parents before there is any distribution to you and your ex. You will need to be able to prove that it was a loan. If it was a gift then it becomes a question of fact whether the gift was to you or both of you, and whether it was a marital asset or not. The judge has discretion to award amounts to each spouse based on what he deems to be fair and equitable after hearing evidence and taking various factors into consideration, as we are not a community property state and they do not simply divide assets equally. You need to consult with a divorce attorney.

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If your parents gave you the down payment for the house and you have the papertrail to support that gift, then you will receive a credit for the amount of the gift. You can probably get this information from the closing attorney or your parents should contact the bank and get a copy of the check that they gave you, if it was a check. If your parents gave you a loan, then they are entitled to be paid off the top before you and your wife split the equity. To answer your question, it really does not matter.


If your mothers name is on the mortgage her name would have to be on the deed as well which makes her an owner. (FYI the names on a mortgage have to match the names on the deed in order to properly record a mortgage (lien) on the property) I am assuming your name is on the mortgage and deed as well. Your mother will have to be able to sign the deed transfering title to your buyer. so In essence she holds some strings here.

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Need to review the paperwork that was submitted when you applied for the mortgage. If it was a gift, then there would have been a gift affidavit or letter. Take the paperwork to an experienced divorce lawyer to assist you.

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As Attorney Tannenbaum pointed out, if your mother is on the mortgage she must also be on the deed. If she is on the deed, then she owns a portion of the home (either one-half or one-third, depending on how title is held) so if the home is sold she is already entitled to receive a her share of the proceeds (separate from the gift/loan issue). If you don't already have an attorney, you should get one and he/she can advise you how to handle this.