What happens if my name is on the deed, but not the mortgage?
When a divorcing couple owns or is buying their home (or other realty), they frequently have a deed and a mortgage, typically with both names on each. Selling the property and dividing up the profits is the simplest route, but it is not always that to which both spouses can agree. While it is both legal and possible to remove one party’s name from the deed by creating a new deed from both to just one, that cannot be done with the mortgage and careful planning after a consultation with an experienced divorce lawyer is absolutely necessary.
The majority of my clients are not homeowners, but the ones who are must be careful in how they decide to resolve what will happen to the house. (Yes, the parties in a low-cost, simple, uncontested, no-fault divorce must be able to amicably settle the division of their real estate – and everything else that they own – or they have an expensive, contested divorce ahead.)
Of the clients who are homeowners, only a tiny portion of them have no mortgage. The most typical case is both spouses being on both the deed and the mortgage. The deed (you’ll see the word “deed” or “indenture” on the first page at the top) recites who owns the realty. The mortgage or loan recites who is obligated to make the payments. Being on the deed only does not require you to pay the mortgage. Being on the mortgage only does not make you an owner.
The paperwork and legal concepts involved in owning and paying for real estate are different from owning and paying for a vehicle. The document that signifies ownership of a vehicle is a title, not a deed. If you owe money on a vehicle loan, you do not have the title to the vehicle, the lender has it. But, if you owe money on a mortgage for real estate, you do have the deed showing you own that realty. You can’t sell your vehicle until you pay off the loan and get the title; however, you actually can sell or transfer ownership of your realty to someone else whether or not your mortgage is paid off. If it is not paid off and the deed is transferred to someone else and they move in, the mortgage still must be paid by someone or the bank will foreclose, evict the new owner and put the property on the market to try to get back the money it loaned.
A divorcing couple’s simplest choice is to sell the house, hopefully make some money, and divide up the net profit in an economically fair manner (which is not necessarily 50-50). The mortgage gets paid off and the two spouses go their respective ways into the future. Often, however, they decide that one spouse will stay in the house and be solely responsible for the mortgage payment. They may agree that the party staying will pay the other a fair sum for his or her share of the equity (the difference between the home’s market value and the mortgage balance). The party staying may have to re-finance the mortgage into his/her sole name so the deed and mortgage will end up in that spouse’s name alone.
But what if refinancing is not financially possible or if the party agreeing to stay in the home refuses to refinance due to the expense and the party leaving is the one who most wants out of the marriage? The deed can be changed by a new deed from both spouses into the sole name of the spouse who is staying while the mortgage stays in both names. This means that the party leaving must trust the other to make the mortgage payment. Many clients want to be divorced badly enough that they take this risk quite frequently. A settlement agreement can be drawn up legally requiring the spouse staying to make the payments and hold the other spouse harmless. Such agreements have allowed my clients who left the house to be able to obtain a new mortgage in the future.
In the relatively rare situation where a spouse in on the mortgage but not on the deed serious complications are possible and must be discussed in advance with an experienced divorce attorney. Depending on what has been decided, the same holds true if a spouse’s name is on the deed but not on the mortgage.
As I trust all of the above shows you, what is going to become of the real estate and mortgage in a divorce is very, very important and can be complicated to resolve. A consultation with an experienced divorce attorney will lay out your choices and their possible ramifications clearly for you.