Mortgaged Property is the biggest casualty of a dispute between husband and wife. Normally, i don’t write on controversial subjects. Every month, i receive large no of queries on Mortgaged Property with a dispute between husband and wife. With every passing month, these queries are increasing. Though i am not a lawyer but readers consult how to resolve the dispute on mortgaged property. I don’t want to get into nitty gritty of the case but trust me it is a huge financial loss to both the parties. There can be multiple scenarios, permutation, and combinations. It is not possible to cover all the scenarios in a single post. I will only discuss the general points. Neither i will favor husbands nor wives :). I will try to be factually correct and share practical solutions related to mortgaged property.
Though a property is a single biggest asset for any household. In the case of husband and wife dispute, the mortgaged property becomes orphan due to legal provisions. Another reason is extreme mistrust between husband and wife. Before i proceed, let me clarify that best solution in this scenario is to arrive at a consensus decision. If it is not possible, you can take help of elders or professional help may come handy. You should not take any hasty decisions like stopping EMI payment.
Recently, i came across three different cases of Mortgaged Property. In the first case, the wife and children are staying in the Mortgaged Property. The wife is a housewife and the husband was paying EMI. After the dispute, husband moved out of the property because of an extramarital affair. He stopped payment of EMI. Now the bank has put a notice to auction the property to recover the dues. The wife does not have any place to go. It is quite a sad situation. Normally, if the wife is working then she continues with an EMI payment. The catch is if the property is only in husband’s name then he can sell the property after the home loan is cleared.
In the second case, the property is in the possession of husband’s parents. The wife is paying EMI as she does not want to forgo her share in the property. The husband is willing to forgo entire investment but does not want to give a single penny to wife from the property. In the third case, the wife has thrown her husband out of the property. The property is owned by the wife. Home Loan was availed jointly with her husband. Though the husband paid to the wife for the property in cash but he is not the co-owner. As wife threw husband out therefore husband stopped EMI. As i mentioned in my post, Married Women Property Act that by virtue of marriage, the husband cannot claim right to separate women property. At the same time, it is impossible to prove cash payment. In this case, the property is separate women property but EMI is paid by the husband. All three are complex scenarios and need separate treatment. In order to find a solution, it is important to understand the three biggest hurdles in the case of mortgaged property and corresponding solutions.
Husband and Wife Dispute on Mortgaged Property – 3 Biggest Hurdles
Any mutual or consensus solution, in this case, face following three hurdles as the mistrust level is at its peak. Any resolution should be arrived keeping following hurdles in mind
1. Ownership of Mortgaged Property: It is not possible to change the ownership of mortgaged property. This is the biggest hurdle even if either of the spouse can prepay home loan to clear the title. For example, if the market value of the property is 50 Lac and there is home loan outstanding of 20L. In this case, the husband will think that wife’s share is 25L i.e. 50%. If he pays 20L and clear home loan then he will receive only 25L. In short, net share in property is just 5L therefore why he should repay a home loan. He is willing to forgo this amount to put pressure on the wife. The reverse is also true.
The best solution, in this case, is either of the spouse can clear home loan then arrive at a mutually beneficial decision on mortgaged property. The mortgage should be considered as an equal liability rather liability of either spouse. In a similar situation, i suggested a solution that home loan outstanding should be excluded from a net worth of the property. Therefore, either of the spouses can clear the home loan. The net worth of mortgaged property will reduce to 30L i.e. 50L minus Home Loan outstanding of 20L. Now, they should sell the property jointly and take home 15L each. It is a win-win situation for both :).
Even if the home loan cannot be cleared, they can sell the property and home loan can be cleared by a buyer from the joint pool. The net amount received from the seller can be distributed equally. In the case of greed, both of them may lose the entire money.
2. Home Loan Applicant / Co-applicant: The second hurdle is to change the applicant or co-applicant of home loan. This problem arises when either of the spouses doesn’t want to sell the property. In one of the case, a mutual understanding reached between husband and wife. The husband agreed to pay X amount to the wife as settlement towards mortgaged property. He was willing to take over balance home loan liability. The wife was willing to leave her share in the property against X amount. The solution is very simple if the wife is not a co-owner. Husband can balance transfer to new home loan provider and avail fresh home loan only in his name.The reverse is also true i.e. husband leave his share and wife to pay one-time settlement amount and balance transfer. The consent of both the parties is required to transfer or close a home loan. Therefore, it is important to arrive at settlement first before any action on home loan closure/transfer. In the case of joint ownership, it is a complex situation and in 99% case, to sell the property is the only viable solution.
3. Legal Opinion: In 90% cases, the legal opinion to both the parties play a spoilsport. The lawyer assures that his/her client need not compromise. Trust me all these are false promises. The legal case may take even a decade to decide. In the case of mortgaged property, if the property is declared NPA and further interest/penalties levied can even make its worth a penny in few years. A mutual compromise or middle path is always good for both the parties. Therefore, you should arrive at a mutually beneficial solution without the involvement of lawyers.
Mortgaged Property – Key Issues
The factors that influence the consensus decision are EMI payment, possession of the property, current ownership of the property etc. If an amicable solution is not reached to retain the property then the best solution is to sell the property. A buyer can close the home loan of sellers i.e. Husband and Wife as i suggested that amount received can be divided. I am sorry to suggest this solution and may not be feasible in all situations. It basically sorts all the issues related to the property. Always remember that any property bought by husband after marriage, wife has an equal share in same even if it is in husbands name. In following two cases, there should not be any dispute.
1. Separate Women Property i.e. property acquired by women before marriage or after marriage independently. Husband cannot claim any stake in this property.
2. Property acquired by the husband before marriage. The wife cannot claim any stake in this property.
Another negative impact of loan is on the CIBIL Score of the borrowers. If it is joint property then CIBIL score of both husband and wife will be impacted as both are co-borrowers. Even if the property is in husband’s name, bank definitely includes wife as a loan guarantor to avoid risk in case of a dispute between them. Therefore, it is in the common interest of both the parties to resolve the issue amicably.
Last but not least, any settlement reached on mortgaged property should be signed on an agreement to avoid any future dispute. There are a lot of operational issues involved in such solutions. For example, if one party clear home loan and after that other party refuses to release original property papers from the bank. Both the parties should agree to facilitate and cooperate in the smooth execution of terms and conditions of the agreement. In one of the case, wife submitted written application with the bank not to hand over original documents after the loan is closed as there is a dispute between husband. Though, the prepayment was part of the settlement. The blackmailing, cheating, and fraud are common in such cases.
It is not feasible to cover all the aspects of this topic in a single post but i covered all the important points.
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