Why Using Your Married Child As A Co-Borrower To Refinance Your House Is A Bad Idea


Many parents who may have problems refinancing their house due to low income in retirement or due to low credit score sometimes resort to the idea of having their married child serve as a co-borrower to refinance their house. As part of the refinancing process, the parents usually adds their adult children to the deed of the house then have them apply as a co-borrower in a mortgage. This is a really bad idea especially if there your child’s marriage is in trouble.

This becomes a big problem if your married child ever gets divorced from his or her spouse. Your child’s spouse will have a claim for half the community interest in your house even if your intent was only to use your child’s credit to help you qualify for the refinance.

Although you can argue that adding your married child’s name to the deed of your house was only a gift which should be characterized as your child’s separate property, the fact that your married child’s credit was used to obtain the refinance mortgage loan during the marriage which was then used to pay off your prior mortgage creates a community interest on his 50% share of your house. According to In re Marriage of Branco, a community property loan used to pay off a preexisting separate loan gives the community an interest in the amount of that loan. In re Marriage of Branco, (1996) 47 Cal.App.4th 1621. Thus, the refinance described above allowed for the new loan to pay off the old separate property loan, and for a community interest to arise.

Your married child’s spouse can claim that adding your child’s name to the deed was not a gift but instead property your child acquired during marriage as community property because your child paid for that interest by getting a mortgage as a co-borrower during their marriage. Family Code Section 760 provides that all property, real or personal, wherever situated, acquired by a married person during the marriage while domiciled in this state is community property.

Procedurally, your married child’s spouse will join you as an indispensable party in the divorce case. Once you are joined as a party, you will be served with a summons and complaint for joinder into the action. You then would have to retain your own lawyer to defend you in your married child’s divorce case.

If you can avoid this situation and refrain from adding your married child to the deed and serving as a co-borrower in your refinance. However if refinancing would really make a big difference in your mortgage interest and you are willing to give one half ownership interest in your house to your married child, then you may be able to plan around this situation by having your married child execute a post nuptial agreement with his spouse before you enter into the refinance transaction. Although not bullet proof, it should offer you some protection in case your child gets divorced.

Please note that this article is not legal advice and is not intended as legal advice. The article is intended to provide only general, non-specific legal information. This article is not intended to cover all the issues related to the topic discussed. The specific facts that apply to your matter may make the outcome different than would be anticipated by you. This article does create any attorney client relationship between you and the Law Offices of Kenneth U. Reyes, APLC. This article is not a solicitation.

Attorney Kenneth Ursua Reyes is a Certified Family Law Specialist. He was President of the Philippine American Bar Association. He is a member of both the Family law section and Immigration law section of the Los Angeles County Bar Association. He is a graduate of Southwestern University Law School in Los Angeles and California State University, San Bernardino School of Business Administration. He has extensive former CPA experience prior to law practice. LAW OFFICES OF KENNETH REYES, APLC is located at 3699 Wilshire Blvd., Suite 747, Los Angeles, CA, 90010. Tel. (213) 388-1611 or e-mail kenneth@kenreyeslaw.com. Visit our website at Kenneth@kenreyeslaw.com.