Marriage, Mortgages, and Millennials

Prior generations aspired to get married, buy a home, and have children. In that order.

The millennial generation has changed that order. Both inside and outside the context of a divorce, this decision carries with it a variety of legal ramifications.

Millennials Cohabitating

The millennial generation is now between the ages of twenty-three and thirty-eight. They encompass the largest generation living today and the largest in the history of the United States[1]. While the older part of the generation is still reeling from the Great Recession and housing crisis [2], the tail end has only recently entered the workforce, and like their older millennial cohorts, are facing financial struggles. Weighted down by high amounts of student loan debt, and facing a challenging job market saturated with baby boomers eluding retirement, millennials are more unsure about their future and are more likely to delay marriage.

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Faced with skyrocketing home prices, low inventory, and unsteady mortgage rates, millennial couples (married or not) are scrapping together funds to buy a home and need to know that their investment is sound and their interests are protected.

The Scenario

Michelle (32) and Patrick (34) were in a relationship for eight years before getting married. Patrick proposed to Michelle on Christmas Day in 2012, but the couple decided to have a long engagement to save up for their wedding. In January 2013, Patrick purchased the home of their dreams, secured a mortgage, and put both in his name. The couple bought the house with the idea that this would be a long term investment for them both and that purchasing before marriage was a good financial investment for them both.

In March 2013, they moved in and a year later were married. Prior to marriage, they each paid half of the mortgage and bills from their own personal accounts. After the wedding, they paid the bills from a joint bank account. In May 2019, Patrick filed for divorce.

What, if any, rights do Michelle and Patrick have to the home?

Texas Law

Reimbursement Claims

Under Texas law, the house is Patrick’s separate property because he purchased it before the marriage and he is the only one on the deed. Because the house is Patrick’s separate property, a court cannot award it to Michelle in the divorce.

With respect to the payments of the mortgage before marriage, each party paid half of the mortgage. In the eyes of the law, Michelle gifted Patrick that money and she has no legal right to seek reimbursement for her payment of the mortgage prior to marriage.

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With respect to the payment of the mortgage after divorce, under Section 3.402 of the Texas Family Code, Michelle may ask the court for a reimbursement. She can claim that after she and Patrick were married, marital funds paid for the house. Now that Patrick gets to keep the house, she may claim that his separate property estate benefited from the marital funds that paid for the house.

Under the Texas Code, Michelle may only be entitled to a reimbursement of half of the marital funds that were allocated to the principal balance on the mortgage. To be clear, she would not be entitled to the full amount, and would not be entitled to any amount that paid the interest on the loan. A judge has full discretion about whether or not Michelle will prevail.

Cohabitation Agreements

One way that Michelle and Patrick could have better confirmed and protected their premarital purchase was to have entered into a non-marital conjugal cohabitation agreement under Texas Family Code 1.108. In the agreement, they could have stated that, in the event of a breakup, Michelle would be reimbursed for the full amount of money she paid towards the mortgage during the period of time engagement. They could have agreed to the terms: when, where, and how she would be paid. Unfortunately, Michelle, like many other millennials, never entered into such an agreement. Essentially, after the divorce she has to start over and may not be able to buy a home in the foreseeable future. Cohabitation agreements may be custom tailored to protect the interests of unmarried millennial couples ready to make investments towards their future.

 

[1] https://www.cnbc.com/2018/07/09/these-are-the-reasons-why-millions-of-millennials-cant-buy-houses.html

[2] https://www.pewsocialtrends.org/2013/02/21/young-adults-after-the-recession-fewer-homes-fewer-cars-less-debt/

This post was written by Angelica Rolong Cormier.

Angelica Rolong Cormier

“I work with clients to develop efficient, effective, and realistic family law solutions.”  — Angelica Rolong Cormier