Bank Loan taken under another family member's name

[escri]

This is my mother's situation:

Her husband (my father) has borrowed a large sum of money (approximately 400k) using her name to pay for a property he purchased, ONLY my father is paying off the loan however the money is still borrowed under my mother's name. They have divorced after. My mother also does not have any ownership or equity to the property.

How would this affect my mother? She's not paying off the bank loan herself but I've heard that this may affect her ability to make bank loans in the future, and that if accidents like a fire were to happen to the proper my father purchased my mother could be held liable to it and having to pay for it?

Thanks in advance.

 

[Nighthelyn]

Dear escri,

I only have property law background, not family law.

Has the divorce been finalised? Because it is unusual for two people to be divorced and your mum still having her name on title. The normal practice is for the property by agreement transfer to your father’s name. I have seen this arrangement because the father cannot refinance but usually it is a temporary agreed solution and later the property will still be transferred. Is there some kind of special family law arrangement?

The problems with your mother being the named owner of the property is that, unless and even if there is some form of special family law arrangement, she is ultimately liable for everything regarding the property. With the loan she is liable if your dad stops paying for the mortgage, your mother could be pursued for the remainder of the debt with the bank. If your father stopped maintaining property insurance, and the property is damaged, it is unclear how the property will be repaired (and may be a breach of the loan agreement with the bank which usually requires insurance maintenance). Yes if she wants to borrow the fact she has a property in her name and serving in a debt will be a significant factor. If a tenant in the property e.g. broke his leg due to the state of the property the tenant may sue your mother the named owner of the property (unless as above there is some special arrangement to indemnify or spread liability, but such arrangements have limit).

On the flip side, your father unless and even with some special family law arrangement is bearing some risk. E.g. your mother assuming she is the person named in the loan agreement and named owner of the property, she could sell the property.

I feel that you do not have the full picture and your mother may need to get legal advice. If she like, I have heard of similar cases and queries brought to attention with some free legal help services - perhaps your mother should consider giving them a call. Financial Rights Legal Centre 1800 844 949

Good luck!
-Nighthelyn