Divorce and Mortgage Questions: The Difference Between a Title and a Mortgage

Divorce mortgage questions are an important issue when couples separate.  Divorce is incredibly stressful and that stress shouldn’t be compounded by confusion around separating assets, like a home. Knowing the ins and outs of mortgage deeds, titles, and quitclaim deeds will reduce that confusion ensure that you are protected.

Knowledge is power and that is where mediation can make all the difference.

Mortgage, Title and Quitclaim/Warranty Deeds

First of all, we need to know what these things are. Let’s define the basics first.

Title: A Title is a document that gives proof of legal ownership of a property; in this case, a house. It is the ownership document and the name, or names, on this document indicate who owns the house. It gives the signatory the rights to use that property.

The title represents that the buyer now owns the property and that no one else has a right to claim the property. Generally, when there is a mortgage (loan), the owner does not take the title home. Instead, the lien holder (usually the mortgage company/lender) holds on to the title.

Mortgage: A mortgage is a legal agreement in which a property owner gives someone else (typically a bank or other lender) their property to hold as security until they pay off a debt.

Deed: Deedsare legal documents that transfer a title from one person to another. It is an official, written document that acts as the legal evidence of any sort of property transfer from one party to another. When someone wants to transfer title, they may use a deed to transfer the ownership of their property to another person or entity.  This can be a Quitclaim or a Warranty Deed. They are basically the same but a Warranty Deed is technically warranting a good title, so that is used more often in mediation.

What You Need to Know

Now that we have most of the jargon down, there are some important things to know, like who’s name goes on the title and the mortgage deed. Since the title connotes ownership and property use rights, that should make it clear who would be on the title — anyone who is considered to be one of the homeowners.

On the other hand, those on the mortgage deed are responsible for the mortgage payments. For some Americans, it is financially beneficial to have only one person apply for the mortgage if they have better credit score or other relevant criteria. If you have a situation like that, where one party is on the title but not the mortgage deed, you will want to be sure your interests are protected and a fair agreement is reached.

What Happens in a Divorce

In many cases, the home is the most valuable marital asset and may need to be sold in order to distribute its value. A quitclaim/warranty deed facilitates this. A quitclaim/warranty deed is where one party gives their ownership rights over to their former spouse. If there is a mortgage loan in effect, transferring the name on the deed does NOT automatically remove one spouse from the mortgage.  But, the divorcing couple may look at ways to divide the loan/mortgage.

The party who remains in the home will often choose to refinance the loan themselves or assume the loan in their name alone (provided the lender allows this) usually at the same time the other titleholder accedes ownership with a quitclaim or warranty deed. This way, they divide the assets equitably and one person can stay in the house if they choose to do so.

Alternatively, they may decide to sell the home together and then divide any remaining proceeds.

Let Us Help

Whatever path a couple going through divorce mediation takes regarding the sale or continued possession of the home, it helps to have a competent, compassionate mediator assisting with these decisions. Call us right away to learn more and to see if using a mediator is right for you.