One Spouse on Title but Both on Mortgage in Divorce

Sometimes, both spouses are on the mortgage, but only one spouse’s name is on the title. The outcomes in divorce are different depending whether the spouses reside in an equitable distribution state such as New York or Florida or in a community property state such as Texas and California.

When a married couple divorces, the spouses either agree or the court makes a decision on a property settlement.

Equitable distribution state. In an equitable distribution state, such as New York or Florida, this means that only the spouse on the title owns the property during marriage. In case the spouses do not agree on how to divide their property in divorce, the court may not necessarily divide it equally but equitably in a way that is fair, based on a set of factors such as how much and what each spouse contributed to the marriage and what each spouse will need to move forward with the divorce.

Community property state. In a community property state, such as California or Texas, all property acquired during marriage is presumed to be community property, regardless of whose name is on the title. At divorce, community property is divided equally. So if the house was bought during marriage, it would be sold and the proceeds divided equally. And if the house is separate property (bought before marriage, with separate property funds or given as a gift or inheritance during marriage), then it will go to the spouse whose name is on the title.

When both spouses are co-borrowers on the mortgage, the spouses have the following options in the event of a divorce:

Sell the real property and satisfy the mortgage

The easiest and the most common way to handle real property in a divorce is to sell the property, use the proceeds of that property to pay off the mortgage debt, and split the remaining equity among the spouses. This allows the spouses to start anew with their lives. However, when only one spouse is on the title, that spouse may object to sharing the proceeds with the other spouse.

Refinance the mortgage without selling the real property

Another way to handle real property in a divorce when both spouses’ names are on the mortgage is to remove one spouse’s name on the mortgage with the lender’s consent through refinancing. In this case, however, the spouse who refinances the mortgage must pass the lender’s eligibility requirements. The lender will look into that spouse’s income, debts, assets, and credit score. Based on these factors, the lender may or may not agree to a refinancing of the mortgage, may require the spouse to come up with a larger down payment, or may ask the spouse to have another person co-sign the loan as a guarantor.

One spouse stays on the property, both names are still on the mortgage

When refinancing is not an option, it sometimes happens that one spouse stays on the property (usually with the children, or maybe the one whose name is on the title, etc), but both spouses’ names are still on the mortgage. The spouses may still share the responsibility of paying the mortgage, or just one spouse pays, or one spouse pays more than the other, depending on their agreement or court order.

How does it happen that both spouses’ names are on the mortgage, but only one spouse’s name is on the title

This rare instance sometimes happens when one spouse purchases the property solely but asks the other spouse to co-sign or act as a guarantor. The other spouse who co-signs as guarantor is usually not primarily liable for the mortgage payment and only becomes liable when the primary borrower, the other spouse, fails to pay.

If the other spouse signs, not as a guarantor but, as a co-borrower, this is a disadvantageous situation for the spouse whose name is on the mortgage as a co-borrower, but whose name is not on the title. Here, both spouses are primarily liable and have the shared responsibility to make the mortgage payments. Yet only one spouse owns the real property. This means that spouse who owns the property can sell the house without the other spouse’s consent, signature, or approval.

If you are in this situation, you can rectify it immediately by asking your spouse to execute a quitclaim deed, transferring ownership interest to both of you. If your spouse refuses and your divorce, you may contest your spouse’s ownership interest, despite the title showing only one spouse as the owner, by presenting to the court evidence that you financially contributed to the mortgage payments, down payments, and real property taxes, or home improvements.

To avoid expensive litigation, however, it is advisable that both spouses include their names already on the title.

Title vs. mortgage

The title reflects ownership interest over real property. It is evidenced by a deed conveying ownership from one person to another. This title deed is recorded with the county recorder or city register in order to be effective against third persons. Once the title deed is recorded, the public is put on notice that you are the new owner of the real property.

Unless you buy the real property in cash, you will need a mortgage to purchase it. A mortgage is an agreement between a lender and a borrower, where the lender lends money with interest to the borrower to purchase real property. As security for the loan, the property being purchased is offered as collateral on the mortgage. If the borrower fails to pay, or defaults on, the loan, the mortgage can be foreclosed, allowing the lender to recover the unpaid debt by taking ownership of the mortgaged property and selling it.

This mortgage is also recorded as a lien on the property with the county recorder or city register. The record of the mortgage on the title puts the public into notice that anyone who buys the property purchases it, subject to the mortgage.

When only one spouse’s name is on the mortgage but both are on the title and there is a dispute regarding each spouse’s equity in the property, you need to be represented by a lawyer when negotiating with the other spouse in the event of divorce. If you need to rectify a mistake where both spouses are on the mortgage but only one spouse is on the title, consult with a lawyer to prepare a quitclaim deed which should be recorded in the county register. Should you need assistance, we at the Law Offices of Albert Goodwin are here for you. We have offices in New York City, Brooklyn, NY and Queens, NY. You can call us at 212-233-1233 or send us an email at [email protected].