Often, a divorcing couple’s most valuable asset is their marital home. In a divorce, couples are concerned about how to divide the equity in their home, which is the difference between what the home is worth and any loan on the property.
To divide the equity, the house must either be sold or one of the spouses can buy-out the other’s interest. If one spouse is keeping the home, we often build into a settlement agreement a provision requiring that the mortgage (the loan on the house) has to be refinanced in order to take the other spouse’s name off the mortgage.
So, I get the question I referenced above from clients, for example, when in a divorce, one spouse is awarded the family residence and the other is given other property, such as a bank account. The spouse who was awarded the house is then ordered to refinance the house and take their spouse’s name off of the deed.
The spouse who is receiving the house, either intentionally or unintentionally, does not try to refinance the residence. Then, if you are the one who is supposed to have your name taken off of the mortgage and deed, you are left with your name still on the mortgage and deed as an owner of your house.
So, what can you do to remove your name from the deed?
Your spouse’s failure to take your name off of the deed means that you are still liable to the bank for the mortgage. If your spouse neglects to pay the mortgage or even the taxes, your credit can be negatively impacted. Of course, the state could try to come after you for the entire amount of the unpaid taxes. You would then have to fight it out with your ex-spouse to try to get back half of the paid taxes from them.
Filing a quitclaim deed
There are two basic scenarios: one in which your home does not have a mortgage and one where it does.
In the situation where your home has been awarded to your spouse in the divorce and you do not have a mortgage, it is fairly easy to remove your name from the deed. Most likely, your spouse will actively pursue taking your name off of the mortgage. That’s good because then you won’t need to do much.
The easiest way to take your name off of the deed is to sign a quitclaim deed. When you do that, you will give up all of your rights to the marital residence.
Taking Your Spouse Off Your Mortgage
But what if my spouse just refuses to take my name off of the deed and the mortgage?
If there is a loan on the home, you must first understand that there is no way to have your name removed from the mortgage, unless the loan is paid off in full or refinanced. Once again, be certain, the bank will not take your name off of the loan because, in the settlement agreement, you and your spouse have agreed that just one of you will take the home .
Need to Refinance
As such, your spouse must try to refinance your loan. And they must refinance in their name only.
Indeed, the bank has both you and your spouse on the hook for the original loan, which gives it two income sources to secure the payments. Once they release one spouse, they will take on much greater risk if your spouse can’t make the monthly payments.
Certainly, you and your spouse can agree that your spouse will take the house and have it placed in their name only, but that agreement has no impact on the bank. The bank can still go after you or your spouse should you stop making the monthly payments.
In order to refinance, your spouse—and only your spouse— will have to be approved by the lender for the entire amount of the mortgage. When you originally received the approval for your loan, the bank was relying on both of your incomes and credit ratings to approve the original loan on the house. To refinance, the bank will look at only one source of assets, debts, income and credit score—your spouse.
If your spouse has some trouble qualifying for the loan—such as a low credit score or not enough income to make the payments—they may not get approved for the refinance. They should look at some other options. For example, asking a relative to cosign the loan or obtaining a guarantee for the payments or even making a larger down payment on the loan, could put them over the top.
Remember, if they don’t take you off the mortgage, you are still liable to the bank for the loan.
Paying that mortgage on time
If your name is still on the mortgage, however, be very careful to make sure that your ex is paying the monthly payments on the loan. Until you have completely refinanced the mortgage, you and your credit are linked to that loan. Your credit will suffer if your spouse doesn’t make a payment or even makes a late payment.
Your spouse can destroy your credit—either intentionally or unintentionally— by refusing to make loan payments when your name is still on the mortgage.
Also, make sure that your spouse is continuing to pay the taxes on the property and will continue to maintain the house. Failing to do either could cause the house to lose value. Then, should the property be sold someday, you will receive less on the sale.
Won’t take my name off the mortgage
So what should I do if your spouse just refuses to refinance and remove your name from the deed?
When your spouse refuses to cooperate with you and take your name off the deed, you have few options. For your sake, I hope your spouse has the desire to cooperate and take your name off the deed and mortgage. Because that is a relatively simple process.
It’s also helpful if they are at least honest and upfront with you about their inability to refinance. Many divorcing spouses are not.
As we will show below, the best option is to get a court order your spouse to take your name off the deed. Without a court order, one spouse can’t force their ex to sign a quitclaim deed and transfer all of their interest in the home. You just can’t make them do it without a court order.
Take them back to court
Should your spouse just plain refuse to take the necessary steps to refinance or sign the quitclaim deed, you have one alternative: go back to court and request that the judge issue an order to require that your spouse take your name off of the deed. They can remove your name from the deed by simply refinancing, if necessary.
The issue will be whether your spouse has the financial ability to refinance. But that should have been the question that was asked before you agreed to let them take the house in the final settlement.
Again, if they have bad credit or just can’t afford the monthly payments, it will be difficult to get them to refinance.
If they have the ability to refinance, but just refuse, the order from the court should make certain that they go forward and refinance. Unfortunately, you may have to pay attorney’s fees to go to court to do this.
Your spouse decides to sell the home
Many times, the spouse who lives in the home or who was awarded the property in the divorce will decide to sell it.
To do that, the bank would require that the existing mortgage be paid off in full. Of course, your name would then come off of the loan and the deed and the new owner would be on the deed. But if your spouse has not taken your name off of the deed before they try to sell the house, you would have to sign a quitclaim deed to relinquish any ownership rights you may have in the property.
Selling the property may be necessary when your spouse can’t refinance the property. In fact, it may be the only option available should they not be able to refinance.
Because they may need to sell, again, make sure that your ex is paying the mortgage, all taxes and maintenance on the home. If your spouse does not pay those items, your net share of the proceeds of the home sale may be dramatically reduced.
Owning a home has many responsibilities. One of them is keeping your property safe for visitors.
Many people have liability insurance to protect them financially in case someone is injured when they enter onto their property.
If your spouse has control of the home and is paying the bills, make absolutely certain that have purchased liability insurance and that they continue to make the premium payments.
An injured visitor to your home, even if you no longer live there, may sue you for damages if your name is still on the deed. Since you are still an owner, they will sue you as well as your spouse.
A personal injury suit will require that you pay legal fees and eventually cost you a significant sum on potential damages.
Your insurance agent can help you understand this issue and help you purchase an umbrella insurance policy which may provide liability protection.
Getting legal help
You may need legal help to remove a spouse’s name from a deed and a mortgage. You need to make sure that it’s done right.
As you may know, one of the largest assets that most families own is their residence. As a result, it’s very important that this complicated issue is handled correctly.
If your spouse has not taken your name off of the deed and mortgage and they are required to do so, please contact an experienced Orange County divorce attorney to help you make sure that you are protected.