When a client owns real estate (land, with or without a home or building on it), several interesting and very important and relatively complicated issues can arise when ones name is on the deed but not on the mortgage. And those issues must be discussed and resolved, typically before the divorce is granted, but you should find out about them before you begin. If the real estate issues cannot be fixed up in a manner satisfactory to the client, I have to make sure that the client understands them and what could happen when the divorce becomes final with those issues remaining.
Let’s start with the issue mentioned in the title to this article, you are on the deed but not the mortgage. Remember this: regardless of whose name is or is not on the mortgage, if someone does not pay the mortgage, the mortgage holder (the bank, saving & loan, or another lender) can foreclose and take ownership of the realty regardless of whose names are on the deed. That much you may always count on. In this first situation, if you are staying in the realty, your spouse’s name, with your spouse’s cooperation, can be removed from the deed (or your name can be added to the deed and your spouse’s removed); however, even though your name is not on the mortgage, it must be paid by someone if you wish to continue residing there. You and your spouse can execute an agreement whereby you or your spouse or you both (in an agreed percentage each) will pay the mortgage. Just keep in mind that if the agreement requires your ex to pay all or part of the mortgage and your spouse does not do so, foreclosure proceedings may begin and the mortgage company does not care about your agreement with your ex. If no one pays, the house goes. You will have the right to sue your ex due to your ex’s failure to pay per the agreement. That could take years and, if your ex has no money, you should win the lawsuit, but you will collect nothing…and we do not have debtors’ prisons anymore.
Related to the above, if the realty ends up with just your name on its deed and one or both of your names are on the loan but your ex refuses to agree to pay the mortgage and you are not able to do so, the only way you could avoid foreclosure would be to promptly sell the home and hope that the sale will bring in enough cash to pay off the mortgage. If it does not, whoever’s name(s) remain on the loan will be responsible to pay what is left. If you both are on the loan, the lender may sue you both or either one of you. It would be a “joint and several” debt. So, for example, you could not give the lender your half and tell them to go after your ex for the other half. You could sue your ex for any amount over your half which you paid. That is called “indemnification” and could be another lawsuit you could win but still collect nothing.
Messy and complicated stuff, is it not? Here I will take a minute to distinguish mortgages and deeds from vehicles and vehicle loans. Clients are frequently surprised when I tell them we can create a new deed removing one spouse or the other even when there is a mortgage because they think the situation is the same as having a vehicle with a loan…and they know they cannot change the vehicle title unless the loan is paid off (or re-financed). Real estate ownership with a mortgage is different. You own the realty and can transfer it. The mortgage holder does not care if you do that as long as someone pays the mortgage every month. If not, they will foreclose, evicting whoever is in the realty regardless of who is on the deed.
It is important to distinguish between deeds (also called “indentures”) and mortgages and other loans, such as home equity loans (which are, in effect, just additional mortgages). Deeds give ownership rights while mortgages do not give ownership rights, just the obligation to pay (along with anyone else on the loan with you). That’s right. If your name is on the mortgage but not on the deed, you owe, but you do not own. However, if your name is not on a deed but your spouse is, if the realty was used as the marital residence, you do have a financial interest in that realty under Pennsylvania’s divorce law. Consider that and ask me about it before you just walk away because you think that you have no claim, especially if you are on the loan but not on the deed.
One thing that ought to be clear to you now is that real estate, deeds, and mortgages are fairly complex parts of the divorce process and you need to know and understand about them before you begin your divorce action.