Posted on December 16, 2023

Reduction In Mortgage Principal In An Illinois Divorce

People break up. One person usually moves out. When the parties own a house, however, the mortgage for that house still gets paid (or at least it should). Those mortgage payments steadily decrease the amount of the mortgage and increase the equity in the house. Who gets credit for this increase in equity that occurs when mortgage payments are made during the pendency of an Illinois divorce.

There is no on-point statute or Illinois case law for the issue of mortgage principal reduction during the divorce, but there is a lot of discussion that courts can make such an order should the court find an order giving credit for mortgage principal reduction to be equitable.

In the case of In re Marriage of Frederick, 578 NE 2d 612 – Ill: Appellate Court, 2nd Dist. 1991, the trial court gave credit to one spouse for reducing principal in advance of the finalization of the divorce. No discussion in the appellate decision.

Contrary to that, In re Marriage of Lee, 398 NE 2d 126 – Ill: Appellate Court, 1st Dist. 1979 had facts where “any payments made by the wife toward the principal balance of the mortgage are credited to both the husband and the wife.” Again, a trial decision that is undiscussed at the appellate level.

These pre-dissolution mortgage principal payment credits are just facts that were affirmed and are not controlling authority. Who knows if they were even considered by the appellate court?

There are Illinois appellate cases that allow and encourages a credit for principal payments…but only for mortgage principal payments made after the divorce when one party was awarded the house and the other party paid the mortgage as part of support or if one party indemnified the other party while they took over the mortgage payments.

“[I]t was not unreasonable for the court to provide for reimbursement to Doris of all reductions in principal of the mortgage. As the mortgage payment, which includes principal, interest, costs and taxes, is made by Doris each month, the value of the marital home will be preserved and increased. It is, therefore, reasonable for Doris to recoup the costs of preserving Martin’s interest in that marital asset.” In re Marriage of McNeeley, 453 NE 2d 748 – Ill: Appellate Court, 1st Dist. 1983

A party can be “required to make all of the mortgage payments and pay the real estate taxes; we do not feel it is therefore inequitable that under the trial court’s order [that principal paying party] will also receive a credit for her principal payments when the house is sold.” Schuppe v. Schuppe, 387 NE 2d 346 – Ill: Appellate Court, 2nd Dist. 1979

In re Marriage of LaSusa, 400 NE 2d 21 – Ill: Appellate Court, 1st Dist. 1979, upheld that “respondent to pay the principal on the mortgage” as part of support. The original trial order specified that respondent would “pay the principal on the mortgage, for which he would receive a credit against the proceeds of the sale.”

While not discussed by the appellate court decision, in the trial court the “husband was ordered to continue the mortgage payments, receiving credit on the reduction of principal therefrom.” Blazina v. Blazina, 356 NE 2d 164 – Ill: Appellate Court, 2nd Dist. 1976

The mortgage principal payments in McNeely, Schuppe, LaSusa and Blazina were made AFTER the divorce when one party was awarded the property. Those payments and the equity they created were definitely non-marital and, therefore, should not be divided. This makes a lot of sense for those cases where a house is ordered to be sold but one party will pay the mortgage in the interim.

Payments on a mortgage during a divorce create equity that is still marital property, “[a]s a general rule under the statute, property acquired by either spouse after the marriage, but prior to a judgment of dissolution, is presumed to be marital property regardless of how title is actually held.” In re Marriage of Foster, 17 NE 3d 781 – Ill: Appellate Court, 1st Dist., 6th Div. 2014

An Illinois divorce court “shall divide the marital property without regard to marital misconduct in just proportions considering all relevant factors, including:

(1) each party’s contribution to the acquisition, preservation, or increase or decrease in value of the marital or non-marital property” 750 ILCS 5/503(d)(1)

Any “contribution” considered by a court can be weighed by whether it was made before or after the filing for divorce.

An Illinois divorce court can consider “whether the contribution is after the commencement of a proceeding for dissolution of marriage or declaration of invalidity of marriage” 750 ILCS 5/503(d)(1)(iii)

This distinction between contributions pre-filing and post-filing are not entirely necessary. The individual contributions of one party can be considered on their own, “A disproportionate award of marital property has been upheld where one party made substantial contributions during the marriage and the other party made few contributions.” In re Marriage of Guntren, 489 NE 2d 1120 – Ill: Appellate Court, 4th Dist. 1986

In the end, Illinois divorce courts divided up all marital assets including equity in a property encumbered by a mortgage equitably. An equitable division of assets means there is not a presumption of an equal split of assets and everything is considered as a whole.

“The Act does not require an equal division of marital property, but an equitable division” In re Marriage of Jones, 543 NE 2d 119 – Ill: Appellate Court, 1st Dist. 1989

“[A] trial court is to consider maintenance, insurance, assets, debts, and other factors, not in isolation, but rather equitably and as a whole.” In re Marriage of Ellinger, 378 Ill. App. 3d 497, 501 (Ill. App. Ct. 2008)

There are some additional considerations that can be made regarding mortgage payments and home equity that may bolster an argument either way.

In the case of In re Marriage of Sokolowski, 597 NE 2d 675 – Ill: Appellate Court, 1st Dist., 2nd Div. 1992, mortgage prepayments from non-marital funds were gifts to the marital estate and thus became marital property. So, how could mortgage payments from marital funds be otherwise?

Equity in real estate is governed by the statute of frauds which requires everything regarding real estate to be in writing. If not agreed in writing, there is no credit for reduction in principal in a divorce. In re Marriage of Arkin, 438 NE 2d 957 – Ill: Appellate Court, 2nd Dist. 1982

Divorce litigants are not just spouses, they are co-owners. “[I]t has frequently been held that a cotenant, who pays more than his share of a debt, principal or interest, secured by a mortgage on the commonly owned property, is entitled to reimbursement by contribution from his cotenants to the extent to which he paid their share of the indebtedness.” Olson v. Olson, 213 NE 2d 95 – Ill: Appellate Court, 2nd Dist. 1965

An Increase In The Value Of A House During An Illinois Divorce

While home equity methodically increases with each mortgage payment, most home equity accrues from the natural increase in the home’s price based on the housing market.

As discussed above, an Illinois divorce court can consider, “each party’s contribution to the acquisition, preservation, or increase or decrease in value of the marital or non-marital property” 750 ILCS 5/503(d)(1)

The increase in value of the potential sales price of a house is very unlikely to be the result of a single member of the marriage either before the divorce or during the divorce.

A property’s “appreciated in value over a…period is not of consequence where the increase was due solely to inflationary factors.” In re Marriage of Komnick, 417 NE 2d 1305 – Ill: Supreme Court 1981

An Illinois divorce court should “order that this appreciation be equitably apportioned in its final judgment.” In re Marriage of Hagshenas, 600 NE 2d 437 – Ill: Appellate Court, 2nd Dist. 1992

While the reduction of principal may feel like a detail…there is a lot of money in the details of an Illinois divorce. If you would like to discuss the details of your Illinois divorce, contact my Chicago, Illinois family law firm today to speak with an experienced Illinois divorce attorney.

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Russell Knight

Russell D. Knight has been practicing family law as a Chicago divorce lawyer since 2006. Russell D. Knight amicably resolves tough cases while remaining a strong advocate for his client’s interests.

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