Real estate Q&A: How do I transfer mortgages on properties my ex-wife owns after our divorce?
As part of my recent divorce settlement, I signed deeds to my ex-wife for two rental properties. However, the mortgages are still in my name, making me legally responsible for the properties. What is the easiest way to transfer ownership legally and place the properties in her name? — Paul
You already transferred ownership of the two properties to your ex-wife when you signed the deeds. Unfortunately, you are still on the hook for the mortgage loans.
You are in the unenviable position of owing money for properties you no longer own. Your ex-wife is now the owner, but if she does not make the monthly mortgage payment, the lender will try to collect from you.
When you take out a mortgage loan, you are signing two contracts. The first is the “promissory note,” and it is your agreement to repay the money you borrowed. This document is the “loan.”
The other form is the “mortgage,” which places a lien on your property, allowing the lender to foreclose and sell the property, with the proceeds from the sale going toward your debt.
If you fail to make your monthly payments or break one of the other terms of this arrangement, such as not keeping insurance on the property or paying the property tax, your lender can sue you individually, foreclose the property, or both.
However, because you no longer own these properties, you do not get the rent payments, and if your ex-wife decides to use the money for something else, the properties may eventually be foreclosed, but you still will be on the hook for the loans. This will damage your credit and leave you responsible for any deficiency between the amount owed on the loan and the property’s value.
Your mortgage lender was not part of your divorce and does not have to transfer the loan to your ex-wife just because she now owns the properties. While you can ask it to do so, it is very unlikely since the bank is better off having both the properties and your good credit as collateral to make sure it gets paid back.
Your situation is why many divorcing couples sell their investment properties if the spouse receiving the property cannot take out a new loan in just their name. Depending on what your divorce judgment says on this issue, you may need to go back to the court to add appropriate protections.
Gary M. Singer is a Florida attorney and board-certified as an expert in real estate law by the Florida Bar. He practices real estate, business litigation and contract law from his office in Sunrise, Fla. He is the chairman of the Real Estate Section of the Broward County Bar Association and is a co-host of the weekly radio show Legal News and Review. He frequently consults on general real estate matters and trends in Florida with various companies across the nation. Send him questions online at www.sunsentinel.com/askpro or follow him on Twitter @ Garysingerlaw.