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Quick Answer:

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.

Many clients who have left the marital residence are willing to give up their interest in that realty entirely but are concerned about their credit and/or being sued for payment if the ex fails to make the payments on time…or at all. That failure to pay, on time or not all, would at the very least, damage your credit and if foreclosure would occur, your credit would be terminally damaged.

These same clients must ask themselves, “Do I want to stay married and keep my name on the realty’s deed just so I have some control and could force the sale of the house or do I want more to get divorced and trust and hope that the ex will pay the mortgage?” Virtually every one of them roll the dice and decide they would rather be divorced. After all, it is in the ex’s best interests to pay the mortgage in order to continue living there and, if paying the mortgage becomes impossible, the ex should simply sell the realty.

Over the decades, many clients have gone with that decision and I have had only several contact me about it, so it seems safe to assume that it worked out for nearly everyone. Keep in mind that even if you have an agreement as part of your divorce wherein, among other things, your ex promises to make the payments, do so on time and hold you harmless should he be late or miss a payment, the agreement is binding only between you and your ex. The mortgage lender is not a party to such an agreement so, should it happen that you are contacted to pay the mortgage because the ex has not, you cannot refuse to pay by pointing out that your ex is bound by the divorce decree agreement to pay and hold you harmless. The agreement is absolutely meaningless to the lender. (That said, incidentally, non-payment possibilities aside, I have seen time and again where a client who has such an agreement is able to get a new mortgage because they had it done and clients who passed on an agreement could not get a new mortgage or even a vehicle loan. Lenders’ incomes are based on making loans and, apparently, based upon my experience, they look for any excuse to make a new loan even if a risk is involved.)

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.