Getting A Divorce And My Name’s On The Mortgage
Posted in Divorce on May 1, 2018
Married couples often buy a home. Typically, both of their names end up on the deed to the property and the mortgage loan which enabled them to buy the house. Getting divorced without the appropriate legal provisions concerning the real estate can lead to serious problems for either or both parties.
If the couple decides to sell the property and divide up the profits fairly between themselves, it’s the easiest thing to do legally. That can be done before or after the divorce, but legal advice should be sought to minimize one party taking advantage of the other. It is important to remember that Pennsylvania law would divide the profits in an economically fair manner, giving more to the party that needs more to survive financially after the divorce; however, the couple can agree to share the profits as they desire.
At least as often, one party will move out and agree that the other can stay in the house provided that the party moving out receives a fair “buy out” and the remaining party agrees to assume full financial responsibility for the mortgage, taxes, repairs etc. It is quite simple to remove one party from a deed. All that is needed is a new deed from both parties to the one who is staying; however, changing the deed does not remove the name of the party moving out from the mortgage. Removing a name from a mortgage loan (or any other loan for which the real estate was given as security, such as a home equity loan or a second mortgage) is quite different. The lender (the bank, savings, and loan or other types of mortgagees) is extremely unlikely to remove a party from the obligation to pay the loan just for the asking. Think about it. If two people owe you the same $100,000.00, would you let one “off the hook” because he or she asked you to? What if you did that and the remaining party lost his or her income…or died? Lenders have that same concern and would be answerable to their investors if that were to happen. So, where possible, the party staying in the home refinances the loan balance into his or her sole name. Then the party leaving has no duty to pay the mortgage and no ownership interest in the house (once the deed has changed).
Unfortunately, in many instances, the party staying in the home is not able to make the refinance happen….or he or she may not want to refinance. This is where which party wants the divorce more can come into play. The party who wants it more may have to give something up to become divorced. Many clients have said to me that they just want out and the other party can have everything if they would just give them the divorce. I explain their rights and caution them not to blame me for their decision down the road.
Quite often to get the divorce, the party moving out signs off of the deed, stays on the mortgage and trusts the other party to pay the mortgage as the price of his or her marital freedom. The party remaining does have every reason to make the mortgage payments in order to continue living in the house and this arrangement usually works out. But the party that moved out remains legally responsible for that mortgage and that responsibility can interfere with that person getting a loan in the future. Having the lawyer prepare a settlement agreement providing that the remaining party shall make the payments and protect the other party from having to pay has often resulted in that party being able to obtain a loan in the future.
This is a complicated area and I will happily explain it further and answer your questions in person by phone, Monday through Friday, noon to 3 PM, toll-free at 1-800-486-4070.