Are co-signers entitled to equity?
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Are co-signers entitled to equity?
My fiance bought a home with her parents as co-signers. We are selling the house now and the realtor has said that her mother and father are each entitled to 1/3 of the equity from the home. Neither of
her parents have ever spent a dime on the mortgage, down payment, or anything else related to
the house so it doesnt seem right that they should get any equity. Is this realtor correct? If so what are
my finances options regarding getting all of her equity?
Asked on August 16, 2017 under Real Estate Law, Colorado
Answers:
SJZ, Member, New York Bar / FreeAdvice Contributing Attorney
Answered 6 years ago | Contributor
Co-signers on what?
On the mortgage only? If so, they are not entitled to equity: cosigning a mortgage does not give you an ownership interest in a home, and only owners get a share of equity. Cosigning a mortgage by itself just means that you are potentially responsible for paying the loan.
On the deed/title only, or on the deed/title and also the mortgage? If so, if they are on the deed/title, they are not just co-signers, but also co-owners, and as co-owners, are entitled to a proportionate share of the equity; that said, since a court would (if they ended up in litigation about who gets how much) typically give your fiance more to reflect the mortgage, etc. she paid (courts take the different owners' respective contributions into account in allocating or distributing equity and proceeds), it would be efficient and appropriate for them to voluntarily work out among themselves a division reflecting this. E.g. say the house is worth $300k, had a $30k down payment, and your fiance paid $30k to date of mortgage. In that instance, your fiance would first get $60k back to compensate her for those things she paid, then the three of them would split the remaining $240k three ways, since there are three owners. In this example, the parents get $80k each, or $160k together; your fiance gets $140k.
IF the parents are on the deed/title, there is no way to deprive them of a share of the equity; in buying a house together with them, she made them co-owners. To have 100% of the equity, she needs to be the only one on the title.
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