Personal Finance

HELOC and "Tenants in Common"

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  • Nov 29th, 2014 5:43 pm
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Deal Addict
Sep 24, 2006
1161 posts
437 upvotes

HELOC and "Tenants in Common"

Hello,

If there are three members (A, B, C) in a "tenants in common" relationship of a paid off house, can members A and B take out a HELOC without C being liable for payment? In other words, if the house is appraised at $300K and A, B take out a $100K HELOC and don't make payments, is C also liable for payment even though Member C was not using and wants nothing to do with the HELOC? Or can a HELOC be setup for only Members A and B in such a way that C is protected against any such actions?

Basically A and B want to take money out of the house without having C worry about paying it back.

Thanks in advance
5 replies
Deal Fanatic
User avatar
Sep 13, 2011
7037 posts
3631 upvotes
Toronto
hank755 wrote: Hello,

If there are three members (A, B, C) in a "tenants in common" relationship of a paid off house, can members A and B take out a HELOC without C being liable for payment? In other words, if the house is appraised at $300K and A, B take out a $100K HELOC and don't make payments, is C also liable for payment even though Member C was not using and wants nothing to do with the HELOC? Or can a HELOC be setup for only Members A and B in such a way that C is protected against any such actions?

Basically A and B want to take money out of the house without having C worry about paying it back.

Thanks in advance
No. If you are on title on the property than you have to be on any mortgage or HELOC taken out on that property. Two of the three can't take out a mortgage without the third being on it.
Paul Meredith
Mortgage Broker, Author - CityCan Financial Corp
(lic. 10532)
Deal Addict
Sep 24, 2006
1161 posts
437 upvotes
Thanks for the info.

Just for clarification, if person C has a 1% share of the property, are they liable only for 1% of the HELOC?
Deal Addict
Dec 21, 2011
3518 posts
689 upvotes
Allenford
C could come off title temporarily - then A & B could apply for and set up the heloc without c and then re-add c back on title after the deal closes. a&b should probably pay the land transfer each time as it is being set up to suit them.
Deal Fanatic
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Sep 9, 2012
6963 posts
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Oakville, ON
hank755 wrote: Thanks for the info.

Just for clarification, if person C has a 1% share of the property, are they liable only for 1% of the HELOC?
The Bank is going to treat it like it is a joint debt - they'll go after C for full amount that they can get.
Deal Guru
User avatar
Feb 2, 2014
11233 posts
3350 upvotes
Toronto
You are correct. Tenants A and B can take a mortgage out on the property and C would not be liable.

I don't think Paul or the other posters are familiar with the term tenants-in-common.
hank755 wrote: Hello,

If there are three members (A, B, C) in a "tenants in common" relationship of a paid off house, can members A and B take out a HELOC without C being liable for payment? In other words, if the house is appraised at $300K and A, B take out a $100K HELOC and don't make payments, is C also liable for payment even though Member C was not using and wants nothing to do with the HELOC? Or can a HELOC be setup for only Members A and B in such a way that C is protected against any such actions?

Basically A and B want to take money out of the house without having C worry about paying it back.

Thanks in advance
Kevin Somnauth, CFA
Principal Broker/Owner - First Toronto Mortgage - MA (Ontario #13176, BC #X301007)
Real Estate Salesperson - Century 21 Innovative

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