Deed + mortgage loan question

[jgomez5710]

What is the name of your state? CA

Here's my situation. Let's say there are three people involved, A, B, and C.

A and B will get a loan for the house, so that they are cosigners, and also have 50/50 ownership on the deed.

Later, C comes into the picture, and wants to be on the deed. So, what A - 50%, B -25%, and C -25% ownership.

But the mortage wants to still be A and B.

Is this possible?

Thanks for any clarification.

[divgradcurl]

Is this possible?

It depends on the language in your mortgage contract. However, virtually every mortgage has a clause that requires that the mortgage be "paid in full" upon any change in onwership of the property -- and that would include adding "C" to your property.

If you want to add "C" you will almost certainly have to get another mortgage.

[jgomez5710]

Does the situation change if C marries B? I think that although B and A are 50/50 on the deed, and C marries B, then technically, whatever is B is C's.

However, just say the B and C want C to be on the deed, in this situation, can C be 25%, B be 25%, and A - 50%, if they are married or we still would probably have to get another mortgage regardless of B and C's relationship?

[divgradcurl]

Does the situation change if C marries B? I think that although B and A are 50/50 on the deed, and C marries B, then technically, whatever is B is C's.

That's not necessarily true. When two people marry in California (or any other community property state, for that matter), property that they owned seperately prior to the marriage does NOT automatically become community property. If A and B own a home prior to B's marriage to C, C has no claim to the house because B's interest in the home is B's separate property.

However, just say the B and C want C to be on the deed, in this situation, can C be 25%, B be 25%, and A - 50%, if they are married or we still would probably have to get another mortgage regardless of B and C's relationship?

You would still likely have to get another mortgage, because there is a change in ownership. Like I noted above, B's property acquired prior to marriage does NOT become community property unless certain other events occur. Likewise, C does not become liable for B's debt just because they are now married, because the debt is also separate property. If B wants C on the deed, he will need to essentially "gift" half of his interest to C, and that is a change in ownership that will likely trigger the "due on sale" clause in the mortgage.

Look at it from the mortgage company's point of view -- if B were able to give half of his interest away to anyone, then the bank's security in the house drops by 25%, because the mortgage is separate from the deed, and simply adding C to the deed does not make C liable for the debt. This increases the risk for the mortgage company, because if they ever needed to foreclose, C would get her 25% off the top, and there may not be enough left to cover the loan + costs, so it's simply not a good deal for the mortgage company.

[jgomez5710]

Thanks for the info. It may help me avoid a potential mistake.

I just want to make sure I understand what you are saying.

Let's say that A and B take out the mortgage and deed for 50/50.

if then, when C comes into the picture, A, B and C take out a mortgage together (in order to pay off the first one), at that point, can the deed to allocated with A owning 50% of the house, B - 25% and C - 25%?

[divgradcurl]

Originally Posted by jgomez5710

Thanks for the info. It may help me avoid a potential mistake.

I just want to make sure I understand what you are saying.

Let's say that A and B take out the mortgage and deed for 50/50.

if then, when C comes into the picture, A, B and C take out a mortgage together (in order to pay off the first one), at that point, can the deed to allocated with A owning 50% of the house, B - 25% and C - 25%?

Sure, there's no reason you couldn't do that if everyone was otherwise cool with it. You may want to talk with an attorney to figure out how you want to hold title, and there may be some tax consequences involved, but, given the facts you've given, there doesn't appear to be any reason why you couldn't do what you've suggested here.