Texas Community property vs Separate property - Homestead

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Latest post Fri, Nov 7 2014 10:44 AM by Drew. 8 replies.
  • Thu, Nov 6 2014 6:15 AM

    • ForestY
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    Texas Community property vs Separate property - Homestead

    My Fiancé and I are presently in the very stressful process of buying a home in Austin, TX.  We are both professionals, me in software and she an attorney, who are able to afford a fairly nice home.  Due to some favorable lending options available to her as an attorney and due to the fact that my credit score is not nearly as good as hers, we have decided to have her be the sole party on the note from the bank.

    My question is as follows.  If I am putting in half of the money for the down payment, and paying half of the mortgage, what claim do I have to the property if we split up before the marriage or divorce at some point down the road.  My limited understanding of community property in Texas is that this property would be seen in the eyes of the law as separate as she is bringing it to the marriage.

     

    Does this property become a community asset through the commingling of funds at the time of purchase?  Does it gain community status through a homestead declaration?  Basically, I am worried that if things do go badly between us, I will not have any right to the money I have in the property.

     

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    Any thoughts here?

  • Thu, Nov 6 2014 7:58 AM In reply to

    Re: Texas Community property vs Separate property - Homestead

    ForestY:
    If I am putting in half of the money for the down payment, and paying half of the mortgage, what claim do I have to the property if we split up before the marriage or divorce at some point down the road.

    I'm not a lawyer and wouldn't want you to rely on what I say, but here are some thoughts:

    It is probably sufficient protection for you (but not her) if you have the deed in both names.  It's possible that the lender might not be OK with that - they may want all owners to sign the mortgage.  You'd want to check that before you actually make an offer on a house.

    If your fiance is the only one "on the hook" to pay the mortgage, putting the deed in both your names might not be the best protection for HER.  If you split before the wedding and stop paying towards the mortgage, she will be left having to pay the full mortgage on a house she only half-owns.  Ditto if you stop paying your share at any later date.

    A better option would be to get married before you buy the house.  Probably you could get legally married without a big ceremony now, and then repeat your vows later at the wedding celebration you are now planning to have.

    You'd want to check this out with a lawyer, but I think that if both the house and the mortgage are acquired during the marriage, they'd both be community property in a divorce (even though the lender can only sue her, not you, for defaulted payments, the divorce court would count both the unpaid mortgage balance and the house's value in the community assets to be split equally).  If I'm wrong about that, then it might be fairest to bite the bullet and put both names on the mortgage as well as the deed.

    A third idea to consider would be for you to sign a mortgage to her.  First she buys the house in her name and signs the mortgage from the bank.  Then after the dust settles and you're ready, you sign a mortgage with your fiance as the lender, for half the amount owed to the bank, and in return at the same time your fiance would sign a new deed putting the house in both your names.  You'd then go and record both those documents in the county property records.  But before you do that you should probably check whether it would violate the terms of her mortgage from the bank, just to make sure.

  • Thu, Nov 6 2014 8:48 AM In reply to

    • Drew
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    Re: Texas Community property vs Separate property - Homestead

    Ouch ..at least as this layman reads RE deals if the property is acquired prior to marriage in just her name then the tables are tilted for it to,be and remain her separate property.

    To,later argue that you hold,some,sort of equitable title may be an expensive uphill and uncertain quest IF things hit any rocks.

    Simply put if you are on the deed jwros you are protected, if you are not on the deed you are at major risk. 

    Now what the lenders may say is a different can of worms ..but I read your post in terms of how to protect your share not how to protect lenders. 



  • Thu, Nov 6 2014 8:59 AM In reply to

    Re: Texas Community property vs Separate property - Homestead

    You need to look at this as if you were getting divorced.  Not only would you have all the normal emotional stuff that goes along with a divorce, you'll be dealing with an adversary who is a lawyer, which means you'll be at a distinct disadvantage.

    With that said, it may be wise at this point to consult with a local attorney about what you are intending to do.  At the time you purchase the property, you'll simply be joint owners (you didn't clearly say, but I assume both names will be on title), and that won't change just because you get married or file a homestead declaration (it could, however, change, if, after the marriage, you deed the property to yourselves as husband and wife/community property).  However, if community property funds will be used to pay the mortgage, then the marital community will acquire an interest in the property.

  • Thu, Nov 6 2014 9:29 AM In reply to

    • Arthur3
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    Re: Texas Community property vs Separate property - Homestead

    ForestY:
     If I am putting in half of the money for the down payment, and paying half of the mortgage, what claim do I have to the property if we split up before the marriage or divorce at some point down the road.  

    Unless your name is on the deed, none! If your not married your just a renter.

     

     

  • Thu, Nov 6 2014 9:51 AM In reply to

    • Kivi
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    Re: Texas Community property vs Separate property - Homestead

    Realistically, you need to be on the deed to have an ownership interest. Lender may insist that you also be on the note.

    If you split up before you get married, you are two unrelated people who have an ownership interest in the property if you are on the deed. You work it out. If you cannot, then you probably go for a partition (court ordered) sale of the property, which can be expensive and messy and you both probably wind up accepting the best low ball offer you can get. The family court will not get involved if you split before the marriage. The house does not become community property solely because both of you contributed your own funds to make the downpayment (or many mortgage payments) before marriage. Whether you homestead the property or not, likely is irrelevant. The family court is only likely to get involved once you are married and, then decide to divorce.

    After the marriage, if you use both of your incomes to pay on the house, it likely does become community property in any divorce. In many states, your part of the downpayment and payments before marriage could be considered a gift to the "marital estate", but you might be able to protect your part of the downpayment (and any mortgage payments that you make before marriage) via a prenuptial agreement.

    I would suggest that you get some state specific advice from the TX family law attorney. (And obviously, she should not be the attorney you consult.)

  • Fri, Nov 7 2014 4:31 AM In reply to

    Re: Texas Community property vs Separate property - Homestead

    You should have a premarital agreement drafted addressing each rights in the property and your contribution.

  • Fri, Nov 7 2014 7:12 AM In reply to

    • DPH
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    Re: Texas Community property vs Separate property - Homestead

    ForestY:
    she an attorney
    ForestY:
    My Fiancé

    Out of curiousity, what does your attorney fiance have to say on this issue?

    ForestY:
    Due to some favorable lending options available to her

    Instead of complicaing matters, why not take the hit finance-wise and purchase the house in the normal fashion, both on the mortgage and both on the deed?  Seems like that would make the most sense.  Do the math on her "favorable" rates versus "together" rates.

     

     

    "Never argue with stupid people, they will drag you down to their level and then beat you with experience."  -  Mark Twain

     

  • Fri, Nov 7 2014 10:44 AM In reply to

    • Drew
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    Re: Texas Community property vs Separate property - Homestead

    A prenup alone might give you poor protection if the marriage fails to,take place and you might unnecessarily be behind other creditors if her  finances take a tumble even if it does take place . A well written agreement hight help a lot but it's not rock solid as to outsiders. 

    Unless you are on the deed for your full share you remain vulnerable to changes in the landscape....

    Or simply do not put a dime into this,adventure ....

    Other posts here will suggest the problems to,unwrap,a deal are worse absent marriage than via marriage ....

    She may know too little about RE issues or too much...either way...you need solid independent input. BEFORE you go,down the road. 



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