Deeds and Refinances in a Divorce

Deeds and Refinances in a Divorce

Posted on April 3rd, 2019

During divorce proceedings, property is typically divided equitably (but not always equally) between two spouses. During the proceedings, both spouses will inform the court about their income and any debts they owe, and the court will be able to decide what property is going to be considered and how that property will be divided.

There are two different types of property included in a divorce. There is marital property, which is any property the couple acquired during their marriage. Separate property is anything that belonged to a single partner prior to the marriage or was  solely gifted to a party from someone other than the spouse. Generally, only marital property can be divided between the two spouses.

There are many times when real property has both a separate property characteristic and a community property component.  This happens when the home was owned by a party prior to marriage, and after marriage community property money was used to pay the mortgage.

It can happen when a party purchases a property in joint tenancy with his separate property down payment, that person may seek to the return of some or all of his down payment.

There are two options to divide these assets. One way is that division is agreed upon by both parties in a settlement agreement, that is later approved by the court. The court will issue an order that specifically details who gets what. The other option is to let the court decide how to address the property will be divided.  Sometimes both parties want the same asset or their is a dispute as to value of the property to be divided.

Although the order directs a couple to transfer assets to the intended owner, the order doesn’t physically transfer the assets to the proper owner. Each party is responsible for doing this.

For real estate assets, a deed to transfer these specific assets is needed. A Quitclaim Deed is used in a divorce to change joint ownership into sole ownership. It can transfer sole ownership to the party who is awarded the property. If one party is going to keep the property, a Quitclaim Deed is used to remove the other’s party’s name from the title.

It’s important to know that a Quitclaim Deed can also affect your mortgage. Here is an example, if you and your spouse jointly own the property, both of you are most likely obligated to the mortgage.

However, if your spouse is being awarded the property, you are probably wondering, “How do I get my name off the mortgage after divorce?”

Three common results to this example are:

  1. One party is awarded the property, and is ordered to pay the mortgage and other expenses associated with the property (e.g., taxes, maintenance, and insurance);
  2. One party is awarded the property, and both parties are ordered to share in the payment of the mortgage and expenses; or
  3. One party is awarded the property, and the other party is ordered to pay the mortgage and expenses.

However, even if the divorce settlement agreement or judgment requires your ex-spouse alone to pay the mortgage, it does not, however, require the mortgage holder to release you from the loan obligation. It’s also important to note that the ownership of the property and the debt owed for that property are two separate issues. The court order will generally require that the loan on the property be refinanced so that the loan is no longer in both parties names which would adversely affect the credit of the spouse who is not retaining the home.

Once you receive the final decision, it’s important that your contact the lender, explain the situation and ask if it’s possible to be released from the mortgage either through an assumption or through a refinance.  

If you would like additional information on Deeds to Property In a Divorce or would like to make an appointment, please call Gloria Petroni at 775.420.4221.