The Marital Home: The Difference Between a Mortgage Deed and Property Title
Guest Blog by Rozalyn Franklin, Real Estate Divorce Professional with RMF Real Estate
Divorce is a critical time, you will need to curb your fears and erase any misconceptions. This can be accomplished by doing your due diligence and research.
The family home in most cases is a divorcing couple’s most valuable joint asset and many times needs to be sold in order to equally distribute its value between the two spouses.
The Difference Between a Mortgage Deed and a Property Title
Mortgages are legal agreements by which a bank or other creditor lends money at interest in exchange for taking title of the debtor’s property, with the condition that the conveyance of title becomes void upon the payment of the debt.
In property law, a title is a bundle of rights in a piece of property in which a party may own either a legal interest or equitable interest. The rights in the bundle may be separated and held by different parties. It may also refer to a formal document, such as a deed, that serves as evidence of ownership.
Many divorced couples find themselves arguing over the family home, usually before speaking with anyone. When this is done, they find themselves making decisions out of stress and emotion. Divorce is a stressful and highly emotional time, in short, major decisions should not be made from emotions.
Subsequently, some divorcing couples utilize a quitclaim deed, which transfers ownership from one spouse to another, most importantly it does not transfer financial responsibility. One spouse may transfer title of the family home to the other and consider him or herself free from the financial responsibility of the mortgage payments, but this is not the case. The loan payments are the responsibility of the parties on the mortgage. To change the names on the mortgage, one spouse must obtain financing with which to buy out the other.
Most importantly before being awarded the family home and having one spouse sign over their title rights, both parties should obtain a true value. It is highly recommended that you obtain a detailed market analysis from a divorce real estate professional before signing over title rights or agreeing to take ownership.
In addition, taking ownership in the title is needed when one spouse is awarded the family home, but buying the other spouse out and having the mortgage in the title parties name is what is needed for full ownership. Subsequently, this removes all financial ties of the other spouse from the property.
In conclusion, keeping the family home may require you to buy out the other spouse for you to obtain true ownership. Therefore, knowing how much is owed on the mortgage and what the true market value is at the time of divorce will determine what is needed to buy out the other party’s interest. That is where a divorce professional real estate agent can really help.
Above all, obtaining ownership without knowing value can be damaging. You could lose in marital assets, or worse put yourself in financial turmoil years after the divorce is over, possibly losing the house to foreclosure due to not knowing all that is owed on the property.
RMF Real Estate is a separate entity from the Financial Knot®.
The Financial Knot® is another business name for Independent Advisor Alliance, LLC. All financial planning advice is offered through Independent Advisor Alliance, LLC, a registered investment advisor.
