What Happens to the Home Loan and Title During a Divorce?

Question from Bill, What Happens to the Home Loan and Title During a Divorce?

Answer from AI:

When a couple is going through a divorce and one spouse is awarded the home, several legal and financial steps need to be taken to ensure the proper transfer of ownership and responsibility for the mortgage. Here’s a general explanation of what might happen in your situation.

Title and Loan Separation

In your case, both you and your wife are on the title of the home, but only your wife is on the loan. Here’s what typically happens:

1. Property Division: During the divorce proceedings, the court will decide who gets the house. If your wife is awarded the house, the title will need to be transferred solely to her name.
2. Title Transfer: To transfer the title, you will likely need to sign a quitclaim deed or another form of deed that relinquishes your ownership interest in the property. This document is then recorded with the county recorder’s office.

Notification to the Loan Company

The title company does not automatically notify the loan company when there is a change in ownership due to a divorce. However, the loan company will eventually need to be informed, especially if your wife is required to refinance the loan.

Loan Company Requirements

The loan company (mortgage lender) has a vested interest in who is responsible for the mortgage. Here’s what might happen:

• Refinancing: The loan company may require your wife to refinance the mortgage in her name alone. This ensures that she is solely responsible for the loan payments and that the lender’s records are updated.
• Assumption of Loan: In some cases, the lender may allow your wife to assume the existing loan. This means she takes over the mortgage without refinancing. However, not all loans are assumable, and this option depends on the lender’s policies.

Legal and Financial Considerations

It’s important to understand the legal and financial implications of these actions:

• Credit Impact: If your wife does not refinance or assume the loan, you may still be financially tied to the mortgage, which could affect your credit score.
• Legal Advice: Given the complexities involved, it’s advisable to consult with a legal professional who can provide personalized advice based on your specific situation.

Steps to Take

Here are some typical steps you might take:

1. Consult with a divorce attorney to understand your rights and obligations.
2. Work with a real estate attorney or title company to handle the title transfer.
3. Contact the mortgage lender to discuss refinancing or loan assumption options.
4. Ensure all legal documents are properly filed and recorded.

Resources

For more information, you can refer to the following resources:

• Consumer Financial Protection Bureau: Quitclaim Deed
• Nolo: Divorce and Your Mortgage

Remember, while this information provides a general overview, it’s crucial to seek personalized legal advice from a qualified attorney to navigate your specific circumstances effectively.