Posted on: 27th Oct, 2006 02:13pm
If you buy property prior to marriage with a down payment from your own funds, but make payments with community funds during marriage, then your spouse will have community interest in the property. Community funds imply your spouse's money and yours as spent towards loan payment. The community interest is known as Moore Marsden interest, which is calculated using a formula known as Moore Marsden Rule.
The Moore Marsden Rule also applies to cases involving separate commercial property and where parties refinance a separate residential mortgage during marriage. However, the Rule is applicable only in case of states where the community property division exists.
The Moore Marsden Rule also applies to cases involving separate commercial property and where parties refinance a separate residential mortgage during marriage. However, the Rule is applicable only in case of states where the community property division exists.
How to calculate Community property interest
Applying Moore Marsden Rule, the community property interest is calculated as:
CP = PPCP + (CP% x MApp)
Where,
CP: Community property interest
PPCP: Payments towards Principal from community property
CP%: Community property percentage = PPCP / Purchase Price
MApp: Appreciation during marriage
SP = DP + PPSP + Pre-MApp + (SP% x MApp)
Where, SP: Separate property
DP: Down payment on property
PPSP: Payments towards Principal from separate property
Pre-MApp: Pre-marriage appreciation
SP%: Separate property percentage = 100% - (PPCP / Purchase Price)
Let's take an example:
Kim purchased a $300,000 house in 1992 prior to her marriage. She made a down payment of $50,000 and borrowed $250,000. Kim paid down $20,000 in principal by 1997 when she married Dick. The fair market value of the house at the time of marriage in 1997 was $400,000.
During their marriage Kim and Dick paid 30,000 towards the principal from community property. When Kim and Dick separated in 2005, the fair market value of their home was $600,000.
Now, applying the formula given by Moore Marsden Rule,
Community property percentage (CP%) = $30,000/$300,000 = 10%
Separate property percentage for Kim = 100% - 10% = 90%
Community property interest = PPCP + (CP% x MApp)
= $30,000 + (10% x $200,000)
= $30,000 + $20,000
= $50,000
Since community interest is divided into half, therefore both Kim and Dick will get = ($50,000/2) = $25,000 each.
Kim's separate property interest = DP + PPSP + Pre-MApp + (SP% x MApp)
= $50,000 + $20,000 + $100,000 + (90% x 200,000)
= $170,000 + $180,000
= $350,000
On separation and divorce, Dick gets: $25,000 as community interest
And, Kim's community and separate property interests = $350,000 + $25,000 = $375,000
Principal balance of loan to be paid off by Kim = $250,000 - ($20,000 + $30,000) = $200,000
So, when a couple divorces in a community property state, the court will award half of community interest to each spouse and 100$ separate property to the spouse who bought the property with separate funds.
CP = PPCP + (CP% x MApp)
Where,
CP: Community property interest
PPCP: Payments towards Principal from community property
CP%: Community property percentage = PPCP / Purchase Price
MApp: Appreciation during marriage
SP = DP + PPSP + Pre-MApp + (SP% x MApp)
Where, SP: Separate property
DP: Down payment on property
PPSP: Payments towards Principal from separate property
Pre-MApp: Pre-marriage appreciation
SP%: Separate property percentage = 100% - (PPCP / Purchase Price)
Let's take an example:
Kim purchased a $300,000 house in 1992 prior to her marriage. She made a down payment of $50,000 and borrowed $250,000. Kim paid down $20,000 in principal by 1997 when she married Dick. The fair market value of the house at the time of marriage in 1997 was $400,000.
During their marriage Kim and Dick paid 30,000 towards the principal from community property. When Kim and Dick separated in 2005, the fair market value of their home was $600,000.
Now, applying the formula given by Moore Marsden Rule,
Community property percentage (CP%) = $30,000/$300,000 = 10%
Separate property percentage for Kim = 100% - 10% = 90%
Community property interest = PPCP + (CP% x MApp)
= $30,000 + (10% x $200,000)
= $30,000 + $20,000
= $50,000
Since community interest is divided into half, therefore both Kim and Dick will get = ($50,000/2) = $25,000 each.
Kim's separate property interest = DP + PPSP + Pre-MApp + (SP% x MApp)
= $50,000 + $20,000 + $100,000 + (90% x 200,000)
= $170,000 + $180,000
= $350,000
On separation and divorce, Dick gets: $25,000 as community interest
And, Kim's community and separate property interests = $350,000 + $25,000 = $375,000
Principal balance of loan to be paid off by Kim = $250,000 - ($20,000 + $30,000) = $200,000
So, when a couple divorces in a community property state, the court will award half of community interest to each spouse and 100$ separate property to the spouse who bought the property with separate funds.
kindly anyone provide some information on how the Moore/Marsden interest is calculated.
My husband bought the house before we were married and then married 5 months later. We have been living in the house for 6 years. My name was not on the deed at the time but I do think it was at one time before refinancing but is not currently on it. My lawyer used the moore/marsden calculation and it appears i will only be getting 6% allocation of equity. Does this seem right?
Hi Stella,
Did your lawyer work out the equity in community property based on the formula:
CP = PPCP + (CP% x MApp)
Where,
CP = community property
PPCP = principal payments from community property
CP% = percentage of community property = PPCP / Purchase Price
MApp = property appreciation during marriage
To know more on the calculation that your lawyer may have used, please refer to:
http://www.mortgagefit.com/know-how/mooremarsdenrule.html
Did your lawyer work out the equity in community property based on the formula:
CP = PPCP + (CP% x MApp)
Where,
CP = community property
PPCP = principal payments from community property
CP% = percentage of community property = PPCP / Purchase Price
MApp = property appreciation during marriage
To know more on the calculation that your lawyer may have used, please refer to:
http://www.mortgagefit.com/know-how/mooremarsdenrule.html
Yes, that formula was used. Is it possible there is some loop hole here? It doesn't seem fair. I lived, maintained and made payments toward the mortagage only to receive 6%
Before marrying I had purchased a home. The title and loan was in my name the whole 14 years of marriage. I can prove that I made all the payments and paid utlities out of my seperate checking account. Is he entitled to any equity in the home?
Hi Darlene,
Welcome to the forum.
As you have bought the home before your marriage and made all the payments your husband does not have any right on the property.
Best of luck,
Larry
Welcome to the forum.
As you have bought the home before your marriage and made all the payments your husband does not have any right on the property.
Best of luck,
Larry
Darlene,
A similar has been answered at http://www.mortgagefit.com/equity/entitled-afterdivorce.html . Please have a look.
A similar has been answered at http://www.mortgagefit.com/equity/entitled-afterdivorce.html . Please have a look.
Welcome jengee.
It will depend on the deed how it was prepared and the amount of equity on the property. Are you selling the property? You should talk with an attorney. If you sell the property then you should get your share of the home equity but if the sale proceeds don't cover the loan amount then you will be responsible to pay off the lender.
It will depend on the deed how it was prepared and the amount of equity on the property. Are you selling the property? You should talk with an attorney. If you sell the property then you should get your share of the home equity but if the sale proceeds don't cover the loan amount then you will be responsible to pay off the lender.
We live in california. Prior to our marriage, my wife owned a house. After 20 years the house has considerable capital gains. Does the capital gains become community property?
Welcome Bob.
As your wife owns the property before the marriage the property will not be considered as community property. So if there is any loss for this property she will responsible for it. Likewise she will be responsible for the capital also.
Let me know if you have further queries.
As your wife owns the property before the marriage the property will not be considered as community property. So if there is any loss for this property she will responsible for it. Likewise she will be responsible for the capital also.
Let me know if you have further queries.
I purchased my home in 1981 for $175 and did $40 in improvements. In 1987 I married. In January of 2000 we took out a loan for $100,000 and in February my husband told me he was leaving but did not moved out until October 2000. I continued to make all the payments on the house and was required to pay alimony. We have still not divorced.
My question is, if the house was valued at $525,000 in October 2000 and was sold for $860,000 in June 2007 is my husband entitled to any of the increase in value between the date he moved out and the date the property was sold?
My question is, if the house was valued at $525,000 in October 2000 and was sold for $860,000 in June 2007 is my husband entitled to any of the increase in value between the date he moved out and the date the property was sold?
Welcome Ayla.
Is your husband also on the deed? If he is on the deed then he will be entitled to the capital gain after selling the property. But if he is not added on the deed then he will get it. Because you have bought the property before your marriage and it will not be considered as a community property.
Let me know if you have any further queries.
Is your husband also on the deed? If he is on the deed then he will be entitled to the capital gain after selling the property. But if he is not added on the deed then he will get it. Because you have bought the property before your marriage and it will not be considered as a community property.
Let me know if you have any further queries.
I put down 230k on a home. The home was purchased for 407k now after a dismal market. It is worth 450k max (it was 760k) we refinanced serveral times mostly to pay off cc debt but 50 k went for a pool. Well now we are getting divorced and owe 420k after realestate fees I do not see much left. I think if I kept the house shouldnt I be able to keep it scot free with no liabilities to her in fact I think she would be responsible for the eq line of credit for 50k (at least 25 of it) How does this law affect that ?
Thanks
Thanks
Hi Paulyb,
Did your spouse have her name on the loan when you refinanced several times? did she take out the Heloc solely in her name?
Did your spouse have her name on the loan when you refinanced several times? did she take out the Heloc solely in her name?
Pls explain how the Moore/Marsden rule apply to my situation. In 1992 before my marriage I bought time share - paid for by my own funds but I included my boyfriend's name on deed with the agreement of him paying half. Three years later we marry but he never paid his portion now that we are divorcing his lawyer is insisting that he entitled to half of time share.
Thanks.
Thanks.