Many people going through a divorce or a bankruptcy seek answers on how to remove their ex from the deed and mortgage of a home, condo, or other property.
First, we need to review the difference between the deed and the mortgage. A deed is a document that entitles a person to a right in the home and to the home. A person may be on a deed as a way to avoid probate. For example, a mother may add a son to the deed so that the property may pass to the son upon the mother’s death. In other cases, a married couple each put their name of the deed to demonstrate that the property is jointly shared by both of them.
A mortgage, on the other hand, is the contract for responsibility to pay the debt owed on the property. The mortgage is the total debt owed and most people make monthly payments on the principal balance, the interest rate, and often the property taxes and homeowners’ insurance (also known collectively as escrow).
If you are listed on the mortgage, this does not necessarily mean you are on the deed. If you are listed on the deed, you may not be on the mortgage. It is important to review both documents individually to see what your name is listed on.
Here is how you can remove an ex from the deed:
- They transfer the property to you
- You transfer the property to them
In most cases, property can be transferred by signing a document called a Quit Claim Deed. You should meet with a real estate attorney who is knowledgeable and experienced in preparing Quit Claim Deeds. The Quit Claim Deed will transfer the property from both of your names into one of your names. Then, the document is filed in your county’s property records and one of you will become the official owner of the property.
Seems simple, right? It could be. However, it could also be problematic if there is equity in the property. If you purchased the property for $200,000, but now the property is worth $275,000, your ex may believe they should receive a portion of the equity in the increased value of the home. In our example, in a Florida divorce if the house was purchased during the marriage, a spouse could be entitled to half of the equity of the home or $37,500 (equity of $75,000 divided by 2). A spouse may not want to transfer the property to you without some compensation.
The other problem could arise if your ex is on the deed and the mortgage. It would not make sense for your ex to sign off on their rights to property, but then still be responsible and liable for owing money on the property they no longer have rights to. Any good lawyer would advise against signing off on the title to the home if the person is still obligated on the mortgage.
Here is how you can remove an ex from the mortgage:
- Pay off the debt
- Refinance the property
- Sell the property
- File Bankruptcy
Pay off the debt – Once you pay off the debt in full, there will be no mortgage. The bank will file a notice of Satisfaction of Mortgage with your county’s property records and this will show there is no longer a mortgage on the property. Once there is no mortgage, you only need to resolve if the other person is on the deed or not (see above).
The likelihood of an ex paying off a mortgage while going through a breakup, finding a new place to live, etc. is often low. This is not a common resolution. However, if you are going through a divorce and you are receiving a lump sum payout (alimony, retirement account distribution, etc), this may be a possibility. Paying off the debt removes the financial liability for both of you on the property.
Refinance the property – A more common option is to refinance the property. The person who is going to keep the property will need to refinance the mortgage and refinance it into their name only. The person who is going to refinance will need to make sure their credit score and credit history are in good shape before trying this option. Additionally, the person keeping the house is going to need to have a solid work history (at least two years at the same place), copies of their tax returns, and proof of their paystubs and income. An organized person with all their financial documents ready to go is a much better candidate for refinance.
Sell the property – While not a popular idea, if you cannot pay off or refinance the mortgage, another realistic option is to sell the property. Selling the property will then allow you to pay off the mortgage and sever all ties between you and your ex. If you are no longer financially tied through a mortgage, you can walk away with a fresh start. When you sell the property, the mortgage gets paid off and the deed will transfer to the new owners. This is an opportunity to address both issues (deed and mortgage) through one transaction.
*Bonus: If the home has equity in it, you and your ex may be able to split whatever is left in order to start a new life and household with some funds.
File Bankruptcy – A bankruptcy should be considered a last resort. If you are considering filing bankruptcy for other reasons (credit card debt, medical bills, loss of income), a bankruptcy may resolve a mortgage issue also. In the figure below, each party is connected to the bank that holds the mortgage on the property. When you file for bankruptcy, you can remove your responsibility on the mortgage if you surrender your rights to the property. You would no longer be a part of this diagram. Bankruptcy allows you to remove yourself from the picture below all together. This also means that the other person would remain solely liable to the bank.
Meeting with an experienced bankruptcy attorney can help you understand the options for your particular situation. There is no substitution for the advice an experienced bankruptcy attorney can provide. Contact Feher Law to set up your complimentary bankruptcy consultation at 727-359-0367 or Kfeher@FeherLaw.com.