Financial concerns are only natural during the Texas divorce process. Recently during one of my consults, a potential client brought up that he was very concerned about getting his soon to be ex-wife off the Mortgage.
This is not the first time I have been asked some variation of this question so I thought I would spend some time answering this question in today's blog post.
Can I get My Name or My soon to be Ex-Spouse off the Mortgage?
The short answer to the question is you may not be able to.
The Mortgage Agreement Survives the Divorce
One of the things clients or potential clients have difficulty understanding is that if they are awarded the house or if their ex-spouse is awarded the house in the divorce it does not immediately take the other spouse off the mortgage.
The reason for this is that the mortgage agreement was made between the mortgage company and you and your spouse. Once the mortgage agreement was signed and processed, the mortgage lender had two people obligated for paying the mortgage.
Just because you and your spouse divorce does not eliminate either your or your spouse obligation to the mortgage lender. In addition, there is generally no incentive for the mortgage lender to let one potential source of paying off the mortgage.
One Solution is to Refinance the Mortgage
What I have worked with my clients on doing in some of my cases is to have the house refinanced. This is one possible solution depending on the financial situation of the parties involved and current mortgage rates.
If you are the one awarded the house you may decide to refinance your mortgage so that you are now the only one responsible for it. Unfortunately, this method requires an approval process. If refinancing is possible this can be a great way to cut ties with your ex-spouse.
If you are the spouse who was not awarded the house, it is in your best interest if your spouse refinances the house. On more than one occasion I have received phone calls because my client’s ex-spouse is not timely making the payments mortgage payments.
It is, therefore, it is a good idea whenever possible to refinance the mortgage. This is one reason why it is important to be represented during a divorce by an experienced family law attorney who understands potential landmines such as the mortgage after a divorce.
In addition, Texas courts cannot force the banks to grant a party release from their responsibility under the mortgage agreement. Many parties to a Texas Divorce end up still liable on the mortgage for a house they no longer own.
Typical Divorce Paperwork Dealing Signed Divorce Process
The typical divorce paperwork signed during a Texas divorce that deals with house and mortgage include:
- Special Warranty Deed and
- Deed of Trust to Secure Assumption
- Divorce Decree
Generally, the divorce decree will award the house one spouse and require the party not getting the house to sign a special warranty deed and the other party to sign a deed of trust to secure assumption.
The party who signs the special warranty deed transfers their interest in the house to the other spouse. Then the other spouse will sign the deed of trust to secure assumption which promises to pay the mortgage.
What if my ex-spouse does not pay the mortgage?
The above paperwork works fine if everyone does what they have promised. However, many times people on purpose or by no fault of their own behave imperfectly. This often involves making some of the mortgage payments late. These late payments turn into negative marks on your credit history as well as your ex-spouse, because their name is still on the mortgage.
And what if your ex-spouse can not pay for the mortgage at all? What if they let the bank foreclose on the property? If that happens then you and your ex-spouse will have a foreclosure on your credit histories.
The Deed of Trust – A Partial Solution to Non Payment of the Mortgage
As we discussed it is not a certainty that the spouse receiving the house will be able to make the payments, a deed of trust to secure assumption is a document that is used as a partial solution to this problem.
That is why family law attorneys representing the spouse not receiving the house often insist that it be executed to protect their client from any future liability on the mortgage. A special warranty deed alone does not affect liability to the mortgage company.
The deed of trust to secure assumption is a document that names the spouse who did not receive the house as the beneficiary.
The deed of trust lays out the terms of the parties’ agreement for enforcement if the spouse receiving the house defaults on the mortgage. If the spouse receiving the house fails to repay the mortgage lender, then the spouse who did not get the house can foreclose on the property just like any other creditor.
A few of the problems with this solution is that it does not save the credit of the spouse who did not receive the house, will probably involve their having to hire an attorney, and go to the additional expense to foreclose on the house.
Maybe you should Sell the House
What some clients have asked me to do when there were concerns about their spouse paying the mortgage was a concern was to have me ask the Judge to order the house sold and the equity split. Depending on the Judge and the facts of the case this may be possible.
My office has successfully argued this position before in court. However, sometimes this is not a solution either. One such occasion we got the Judge to Order the house sold but there was no equity in the house and worse the couple owed more on the house then they could sell it for.
If you have questions regarding what can be done to get your name or your spouse’s name off the mortgage please give us a call to set up a free consultation to explore your options.
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Other Articles you may be interested in:
- How a mortgage is handled in a Texas Divorce
- How Do I Get my name or my soon to be Ex-Spouse's Name off of the Mortgage in a Texas Divorce?
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