According to the CDC, the most recent Census data from 2011 states that 45% of marriages in the United States end in divorce. Today, December 2, 2014 the New York Times said that this number is holding steady or going down slightly, but not increasing. As of April 2014, Bloomberg News reported that 65% of Americans own their own homes. When a couple divorces, especially in today’s real estate market where they have little equity or no equity in their home, they may be divorced but the obligation of a home mortgage can live on for far longer than a marriage, destroying your credit in the process.
Deeds and Mortgages. How Do They Differ?
First, let’s talk about the difference between deeds, mortgages, and mortgage notes. If you are on the deed to a home, you have an ownership interest in the property. If you are on the mortgage note, then you are personally liable for the mortgage. If you have signed the mortgage but not the note, you are not financially liable for the mortgage.
How To Get An Ex-Spouses Name Off of A Mortgage
Let’s back up for a second and talk family law. Marital Settlement Agreements (MSA) and Property Settlement Agreements (PSA) are different names for the same document. An MSA sets forth the terms and conditions of a divorce. A Judgment of Divorce is entered in the court and is a brief document. The MSA is then attached to the Judgment of Divorce.
The first thing to do is review your MSA. Is an ex-‐spouse or are you waiving your right to any ownership interest in the home? If so, then there needs to be a deed transfer first to the ex-‐spouse who is retaining an ownership interest.
- Refinance: If you are fortunate to have perfect credit and equity in your home, a refinance would remove an ex-‐spouse’s liability from the mortgage note. Also, the ex-‐spouse would need to transfer their ownership interest in the property to you.
- Mortgage Modification: If you or your ex-‐spouse is unable to refinance, the only way to remove an individual from their liability for a mortgage without bankruptcy is to get a mortgage modification.
BUT: In order to obtain a mortgage modification with only one of the ex-‐ spouse’s names on the new mortgage note, the divorce settlement must state that the spouse not applying for the mortgage modification waives all rights in the marital home. If your MSA says that a spouse is to receive a share ofthe proceeds when the marital home is sold, then the mortgage cannot be modified into one spouse’s name only. In order to modify a mortgage and get an ex “off of the mortgage” there must be documentation stating that the ex-‐spouse waives their interest in the home. If your MSA states otherwise, some post-‐divorce work in the family court is necessary to modify your MSA. If an ex-‐spouse has waived their interest in the property, the mortgage can be modified.
- Bankruptcy: Filing a personal bankruptcy, whether a Chapter 7 or Chapter 13 discharges your liability on a mortgage note.
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