Hi,
There are a lot of facts missing here, so I won’t be able to provide you with a specific answer.
In general, when there is property purchased prior to marriage, it is considered the buying person’s separate property. When community funds (i.e. money earned during marriage, regardless of which spouse earns it) are used to pay down the loan balance, the community is entitled to two things: 1) reimbursement for all money that went to the acquisition of the home (in other words, not mortgage interest, property taxes, or insurance); and 2) a share of the appreciation in the property from the date of marriage until the date the equity is divided. This means that any increase in value (appreciation) must also be apportioned between the separate property and the community property estates based on what was contributed/paid. This is called a “Moore/Marsden” calculation.
To perform a Moore/Marsden calculation, you need to answer the following questions:
- what was the original purchase price;
- what was the original mortgage and down payment;
- what was the property worth at the date of marriage;
- what was owed to the lender at that time;
- what was the property worth at the date of separation;
- what was owed at that time;
- what is the property worth on the date of the equity is to be divided (we often refer to this generically as “time of trial”); and
- what is the principal pay-off at that time?
The actual formula is as follows:
- Purchase Price
- Amount of Down Payment
- Amount of payments on loan principal made with separate funds
- Fair Market value at date of marriage
- Amount of payments on loan principal made with community funds
- Fair market value at time of division
- Subtract line 1 from line 4
- Subtract line 4 from line 6
- Divide line 5 by line 1
- Multiply line 8 by line 9
- Subtract line 10 from line 8
- Add lines 2, 3, 7, and 11
- Add lines 5 and 10