When a borrower fails to make mortgage payments as agreed upon in the loan contract, the mortgage lender will seek to obtain ownership of a property through a legal process called a foreclosure. Technically, California uses trust deeds, rather than mortgages, meaning the foreclosure is known as a “trustee's sale.”
Can you sue? Sure, but it might be tough to win. If you have some sort of written agreement that both would pay that would help. You could also argue that if they did not pay for half the house being on the deed could imply an agreement to pay for half the house through the mortgage.
The answer is, whoever signed the mortgage. If both partners are signed on, they are both responsible. Any arrangement or percentage the two partners agree on is fine, but the mortgage must be paid.
No, you cannot remove someone from the mortgage without refinancing.
Yes, removing a name from a mortgage typically incurs costs. Refinancing usually requires closing costs of 2-5% of the loan balance, while a loan assumption may cost around 1% plus processing fees. Loan modification costs vary by lender.
If Your Spouse Isn't Paying the Mortgage
The bottom line is that your soon-to-be ex remains just as financially responsible for your shared mortgage as he or she was before (even if only you are living there while your divorce is pending).
You can remove yourself from the mortgage loan in two ways: release and refinance. If you talk to the mortgage company and present them with your divorce decree and a quitclaim deed, many lenders will remove you and leave the loan in your ex's name only.
No, a person is not "automatically" entitled to half the equity in real estate just because they purchased the property with another person. The amount of each owner's fair share of the equity may need to be determined by a judge if the two people can't agree on the amounts.
Obtain lender approval
If your lender wants to, they have the power to remove someone's name from the mortgage without needing to refinance.
You can take legal action against them for breaching the agreement you both made or seek a court order to force the sale of the property. It's important to consult with a lawyer to understand your legal rights and options and to make the best decisions for your situation.
Essentially, you might think suing someone with no money is futile, but that's not the case. The law protects your rights and allows you to seek compensation if someone causes you harm or loss, regardless of their financial status.
If a mortgage service lender is not responding to your inquiries or if it claims that no errors exist despite the evidence, it's time to speak with a real estate attorney. Real estate attorneys understand how lenders operate and the laws and regulations that they must adhere to.
If only one spouse signed the mortgage and the promissory note, they would be the only person responsible for the associated debt after a divorce. The other spouse would be free from collections efforts by the lender if a foreclosure results in a deficiency judgment.
Refinancing the House for a Buyout
Usually, the buying spouse applies for a new mortgage loan in that spouse's name alone. The buying spouse takes out a big enough loan to pay off the previous loan and pay the selling spouse what's owed for the buyout (also called a "cashout refinance").
Marital assets and debts are shared 50/50 between a married couple in California unless they agree on a different arrangement.
In community property states, the home and its equity are typically split 50/50 between the spouses. In equitable distribution states, property acquired during the marriage is divided based on what is considered fair rather than being split equally.
For a community property in California, it depends upon when and how their spouse acquired the property. The law asserts that all property purchased during the marriage, with income that was earned during the marriage, is community property.
Mortgage Payments During Divorce
With both names on the title and deed, you are both responsible for the debt. If someone's name is on the deed and mortgage, they also have the right to live in the house, even if they're not contributing to the mortgage.
Refinancing after a divorce isn't required. Many couples decide that neither of them can afford the home and choose to sell it. Their lender might also allow the partner keeping the house to assume the mortgage, relieving the other partner from obligation.
If you took out a mortgage to buy a house while married, that debt is community property. You're both responsible for it. If you bought a car with money that only you earned while married, the car is community property even though the money used to pay for it was earned by you and not your spouse.
One of the most common ways to get your name off the mortgage after divorce is to have your ex-spouse refinance the mortgage. This means, essentially, taking out a new mortgage and using those funds to pay off the old mortgage balance.
Because community property is split equally in a California divorce, the spouse who's buying out the house will need to pay the other spouse 50% of the equity (or $200,000 in the above example), plus any reimbursements for the other spouse's separate property contributions.
You may be dissolving your marriage contract, but if you have a joint mortgage you're both still responsible for payments. If one person stops paying the mortgage during a divorce, it can impact your credit and ability to secure a mortgage later.