MORTGAGE FAQS #1: Does a Quit Claim Deed Get You Off The Mortgage?

Common Mortgage Myths & Their Impact with Divorce

by Bill Cook 

In this series entitled, WHAT ABOUT THE MARITAL HOME MORTGAGE?, Bill Cook dispels common myths.

Myth #1:

You are no longer liable for the mortgage on the marital home per the divorce decree if you agree to quit claim your interest in the property to the other spouse and per the divorce decree they agree to pay the mortgage payment, taxes and insurance in the future.

Reality #1:

If both individuals have signed the promissory note for the mortgage loan, a divorce decree does NOT supersede the liability originally made between the joint borrowers and the original mortgage lender.  The divorce decree also does not legally relieve the party who provided the quit claim from any responsibilities if the former shared mortgage loan goes into delinquency or foreclosure.  Any future delinquencies will usually still continue to report on their credit report.

 Because the mortgage loan is still a legal liability, and the party is not relieved by the lender, most future lenders will continue to hold that mortgage loan payment against the party who quit claimed their interest unless they can document the quit claim deed was required per the Divorce Decree AND the joint mortgage has been paid on time for the previous 12 months.  Keep in mind that a recent single delinquency could derail a new mortgage loan. 

Recommendation:

If the marital home is not sold, it is highly recommended to have the home refinanced by the spouse who will be keeping the home.  This will allow the future obligation and credit reporting to only be on the individual with the new mortgage loan.  The party quit claiming their interest will be able to obtain financing of a new home without delay or with a possible negative impact in the distant future if the former marital home loan every goes into delinquency.  A mortgage professional should be brought into the divorce process to confirm that one of the individuals can be in a position to refinance upon divorce and if so, when.

Many thanks for this first article in a series of four on mortgage matters from by Bill Cook!

PLEASE NOTE: The view and recommendations expressed in this article are those of the author and do not necessarily represent the views of Banfield Couling Law & Mediation, PLLC or its staff.  This blog is not intended to constitute legal, financial or tax advice.  We do not recommend making important decisions of the type addressed in this article without specific legal or professional financial advice in advance.  We at Banfield Couling Law and Mediation PLLC are here to help navigate your legal matter at any stage of your divorce.