Before we get too deep, it is important to remember when a couple gets divorced, regardless of what the divorce decree says, both spouses remain legally responsible for paying the creditor if you were both originally on the loan. Your credit score could be affected if your ex does not make timely payments at any time in the future. Note your credit score could drop as much as 100 points if you miss one 30-day late payment on the mortgage.
Also, it is imperative to remember that creditors can come after you if your ex defaults on the payments. This is even if you and the court agree that your ex will take over mortgage payments. In order to keep the home, you or your spouse will need to qualify for a mortgage buyout.
Need to know: A deed, either a Special or General Warranty Deed, does not remove you or your ex-spouse from the mortgage or the Deed of Trust. Only the mortgage company can remove a person from the mortgage.
What is a deed and What are deeds used for?
A deed is a written document that conveys legal and equitable title to real property-the legal term is a “fee simple” interest, meaning the highest level of ownership. “An absolute or ‘fee simple estate is one entitling the owner to the benefits of that estate during his life and descending to his heirs, devisees, and legal representatives on his death.
When you first purchased your home, you likely signed 3 documents signed: a Deed of Trust (Mortgage Deed), a Promissory Note (an IOU to the bank), and a Warranty Deed (from the seller).
The Deed of Trust (mortgage)
Texas does not use mortgages. Instead, Texas uses Deeds of Trust. The document is referred to as a Deed of Trust because there is a Trustee named for the property. Even though there is a Trustee named, the Trustee does not do anything unless there is a default or a failure to comply with the promissory note or deed of trust.
The Loan or Promissory Note is the promise to pay for the property. It Is like an IOU
The major parts within a promissory note are:
Amount of loan given to the borrower, Maturity date, Interest rate, Penalty for late payment.
The Warranty Deed
Warranty Deeds are the basic staple of real estate property transfers in Texas. These deeds are commonly used to transfer ownership of a house or other real estate between a Seller and a Buyer.
If you are going through a divorce, you need to understand your rights to your community property. Do you know if the property you own is Community Property or separate property?
GENERAL WARRANTY DEED
Deeds that provide both express and implied warranties are known as general warranty deeds. Buyers prefer this deed because it expressly warrants the entire chain of title and requires the grantor to defend against title defects, even if the defects existed prior to the grantor's ownership. Some grantors, however, may feel uncomfortable making such broad warranties, especially for title defects that existed prior to their ownership.
The General Warranty Deed provides unlimited express and implied warranties for all time. It guarantees an “unbroken chain” of title for at least the last 25 years.
In addition, the seller guarantees that the property is free of undisclosed encumbrances. Furthermore, there are no pending legal actions or other title issues.
SPECIAL WARRANTY DEED
Grantors who do not feel comfortable granting a general warranty deed can use a special warranty deed. Unlike a general warranty deed, a special warranty deed only warrants that title is free and clear from any other claims for the duration of the grantor's ownership. No protection is offered for claims arising prior to the grantor's ownership.
It is important to know that a Warranty Deed is not a warranty of property condition, but rather a warranty of title. As a result, the seller is promising that there are no liens on the property. The seller does not guarantee the foundation, plumbing, roof, and other items of the property are in good condition. The deed must contain a special clause if the seller wants to sell the property AS IS.
The use of a Special Warranty Deed is recommended only if the parties know, such as in a divorce situation, and if a title company has conducted a title search to verify the seller owns the property.
QUITCLAIMS
According to Texas law, the last major deed isn't really a deed at all. Quitclaims don't actually convey anything. This is more of a release-the signer relinquishes all claims to title to the transferee. In most cases, however, quitclaims are given little to no credence since the grantor may not even own the property.
When a property is conveyed through a quitclaim deed, the person receiving the property does not claim to convey a clear title. By signing the deed, the owner releases any interest in the property they own to the named beneficiary.
As title insurance plays a major role in modern real estate transactions, it is always best to use deeds that satisfy title insurance companies. In Texas, a deed without a warranty accomplishes this. A deed without warranty is similar to a quitclaim deed in that the seller is not liable for any title defects. In contrast to quitclaim deeds, deeds without warranties actually transfer property, not just release it.
Thinking about buying out your spouse from the mortgage during the divorce? It is important to know that you must be preapproved first!
You can use our divorce buyout calculator to see out my equity in the home and how much you can give if you do choose to buy out your spouse.
If you are going through a Divorce, contact us today to talk about Mortgage and title issues, because if you go to mediation and decide to give away the home, even a judge cannot overturn this decision!
How do you remove your spouse from the deed during a divorce?
Watch our video about Do Not sign the Special warranty Deed YET!
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