A down payment is an amount of money you used for the purchase of expensive items such as a house or car. This is the initial upfront portion of the total amount due and it is usually given in cash at the time of finalizing the transaction. The loan you sign for is the amount required to make the full payment of the asset. The loan you sign for will include interest payments.
One of the most frequent questions asked by our clients involved in a divorce action is “Am I entitled to reimbursements for down payments made on our house? I used funds that I acquired before marriage to make the down payment on the family home and now my soon-to-be ex wants half.”
The spouse who contributed the premarital funds for the purchase of an asset will be reimbursed in a divorce action, provided they can prove – generally by tracing via financial records – that they used separate funds to acquire the asset. A common scenario is when premarital funds (funds owned before the marriage, or acquired during the marriage by gift or inheritance) are used for the down payment on the family home.
California Family Code 2640(b)
Under this Family Code, contributions made by one spouse on or after January 1, 1984 will be reimbursed (again, to the extent that the contributing spouse can trace) unless the contributing spouse has made a written waiver of their right to reimbursement – a transmutation. The amount reimbursed is the amount contributed, without interest. This applies not only to a down payment, but also to payments for improvements, and payments on the principle (but not interest payments, or payments for taxes or insurance) on a loan that financed the purchase or improvements. The reimbursement is capped at the amount of the equity in the property at the time of divorce.
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