Divorce and rentals, options?

Question

Hey BP!  My name is on the mortgage but both of ours is on title, of two rental properties.  She doesn't want to split them (I keep one, she keeps one).  Neither of us want to sell them.  She likely won't qualify for a mortgage.  Any ideas?  We're in California.  Thank you!

Eamonn McElroy · Answer

I assume you'd like to be off the mortgage of any house you no longer own, so she either qualifies with or without a co-signer, uses her share of liquid cash to pay off the mortgage (if applicable), or one or both of the properties are sold.

This is where your divorce attorney and tax advisor come in.  Everything is open to negotiation, and everything has a tax ramification.  California adds a wrinkle as it is a community property state.

Your tax advisor should be advising you regarding the tax ramifications of potential actions and interfacing with your attorney, and your wife's independent counsel should be doing the same for her.

Even something as simple as filing status (MFJ vs MFS) has ramifications that extend beyond the finalization of the divorce...

Best of luck.

Harjeet Bhatti · Answer

@Dennis Chiem Do you have CDLP involved in this situation he/she can guide you? CDLP can guide you how she can refinance on her name.

Michael Plaks · Answer

Yes. Marriage counseling. :)

Option B: See if your current mortgage is assumable. If so, she can simply step into your shoes (unless you keep all your shoes by the decree).

Option C: Consult a CA-licensed attorney about a possibility of transferring the properties into a land trust and then make her a beneficiary.

Both options B and C may still leave you open to financial responsibility for the mortgage if something goes wrong. Of course nothing ever goes wrong after a divorce, but it's an attorney's area, and I'm not one.

Basit Siddiqi · Answer

@Dennis Chiem

@Eamonn McElroy gave you some solid advice. You want to talk to professionals regarding this. The decision you make will effect you for years to come. Providing professionals with information such as your goals, income levels, loan qualifications will have an impact on the advice the professionals will provide.

Divorce and rentals, options?

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