Before we were married, my spouse and I purchased a home in a community property state (California) as tenants-in-common, with both of our names on the mortgage (so we each owned 50% of the property and 50% of the debt before we married). To date, I've paid 100% of the mortgage payments using my salary. In the event of a divorce, would a portion of those mortgage payments be reimbursable from my wife back to me because I was paying for her separate debt with my separate assets (before our marriage) and our community assets (during our marriage)? Would I be right to calculate that 50% of my mortgage payments prior to our marriage would be reimbursable (representing 100% of her half) and 25% of my mortgage payments during our marriage would be reimbursable (representing 50% of her half)?
If so, if we were to refinance now, would future mortgage payments I make going forward no longer be considered 25% reimbursable because the new mortgage would be considered community debt? And would the reimbursability of my prior historical mortgage payments be impacted by it?
1 Answer from Attorneys
As to your first question the answer is, "no." You have the reimbursement structure backward. Reimbursement is for separate property used to pay a community debt, not the other way around. Theoretically you could claim reimbursement for 50% of the payments made before marriage, but in the absence of a tenants in common agreement or prenuptial agreement, it would be a "he said, she said" as to whether those payments were a gift, and/or balanced by expenditures she made. The most likely outcome if it were disputed is you would be entitled to 50% of the principle paid, but not the interest. Since that was early in the loan, when each payment goes mostly to interest and only a little to principle, that amount is not likely much.
You are correct as to the impact of a refinance. However, that would not change anything from what is happening now, which is community property (your income) being used to pay separate debt (her 1/2 of the mortgage). Once you are married, only separate property used to satisfy community or separate debt is reimbursable in divorce. (Where that most commonly arises is when post-separation income is used to continue making payments on community debt before the divorce is final).