Real estate deeds and financing- two very separate transactions

There is a difference between real estate being deeded to you and your spouse and the mortgage or loan that you get to pay for your property. When you buy your home, the seller signs a deed granting you and your spouse title to the property. The deed is then filed with the county recorder.

The mortgage loan that you obtain to finance your home is a separate transaction. Your mortgage lender loans you the money to pay for your home. The home is used as security (collateral) to protect the mortgage lender in the event you stop making payments on the home (default).

I have had a number of clients seeking a dissolution or divorce, who come to my office reporting to me that the house has been taken care of. One party has refinanced the house and the home loan is now in that person’s name alone. Upon further review however, title to the property (the deed) remains in the name of both parties.

This can be a risky proposition. One party now holds 100% of the debt for the house but only has a perhaps 50% interest in the real estate. The non-debt holder can obtain new loans using the house as collateral or even file bankruptcy. The debt-holder can risk losing the home while maintaining 100% responsibility for the refinanced debt.

The division of marital assets and debts can be difficult. Consult with an attorney prior to making any decisions which can lead to vulnerabilities and additional legal issues down the road.

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