Getting Name Off the Title Doesn`t Free You From Making Mortgage Payments

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Let`s look at the most common scenario. A couple gets married and buys a house. Both the husband and the wife sign the mortgage. Both the husband and the wife are legally responsible for the loan. Bonita says that in a divorce the court can order one party to continue to make payments even if that party is no longer living in the house. In some states the court can also order that the deed or title be put in one person`s name, but that still doesn`t change the mortgage contract. Check with an attorney to see how it is in your state. The same two people who signed the loan are still both responsible for making payments.

If, for example, your former spouse got the house and agreed to make the payments on it, and then stops making the payments, you are still responsible for making them even though you might not live there anymore. Your agreement with your former partner doesn`t change your liability and obligation under the contract you initially signed with the mortgage company. That contract is in effect until it is either replaced by a new contract, or paid off. The mortgage company wants its money and will go after you to get it, especially if you make more than your former spouse does.

So, what sort of options do people have? Basically, the creditor has to release you from your obligation. What that normally means is that there has to be a new contract between your former spouse and the lender to refinance. This is fine if your former spouse has enough income to qualify for a loan or if there is enough equity in the house to guarantee that the lender will not lose anything if the person defaults on it. If your former spouse doesn`t have the income or equity, the lender probably will not approve the loan. This leaves you where you started--responsible for the loan.

There is one other thing to point out. Divorces are seldom friendly; revenge and spite are often stronger than common sense. Some people will actually ignore court orders and risk going to jail--just to make life miserable for their former mate.

There are other things that can lead to debates on who owns a house and who is responsible for making the payments on it. Death can do that. If a husband and wife are living together as "joint tenants" and one dies, the other one automatically inherits the property and the debt.

If the house passes to an only child, the matter is also fairly simple. The only child inherits both the house and any debt. It can get complicated, however, if there is more than one child, and they all inherit equally--especially if the house isn`t completely paid for. The children have to decide what they want to do with the house, and make sure that their decision is properly reported on the deed or title of the house. If they don`t, when it`s time to sell the house, there could be problems with the title. If you`ve ever bought a house, you know that if there are problems with the title, everything stops until those problems are resolved.

Sometimes people who aren`t married to each other buy a house. When this happens, they normally have what is referred to as "tenancy in common." Bonita explains that, unlike in a joint tenancy, there is no automatic inheritance or rights of survivorship. If one party dies, that party`s heir inherits, not the person sharing the house. The only way for the surviving tenant to inherit the property is to have it spelled out in advance in a will.

It is also worth noting that when two people buy a house together it doesn`t have to be a 50-50 split. One person can buy and own 60 or 70 percent, or some other amount. If one of them dies, the person`s heir inherits whatever they owned--and owed. For that matter three or more people can buy a house together. If they decide to split up, it can be almost as complicated as a divorce. After all, there is more than one name on the loan papers and more than one person responsible. The only way out is for one party to sell his or her interest in the property. This means the remaining owner will have to try and get the loan refinanced. If the person succeeds, the former owner is free and clear. However, if the lender doesn`t go for it, both people are still responsible.

So if you are thinking about buying a house with a friend, ask yourself many of the same questions you would ask yourself before getting married. Also make sure you talk to a lawyer. After all, if your two names are on a contract, you are both married to that contract. By all means, be sure to protect your share.