Two Names on Deed, One on Mortgage – Who Owns the House?

Having shared property with someone is common, especially between spouses. It is also common to have the same bank accounts and even the same debts. However, this is not a universal experience and there may be some instances where both you and your spouse would be better off only including one name on the official document instead of sharing. 

Understanding the significance of when and which documents you include your and your spouse’s names can give you a better understanding of how title deeds and mortgages work in New York. Working with a skilled New York residential real estate attorney can also provide you with valuable insight on how to make sure your property documents are in accordance with the law and ensure that your rights are protected. To schedule a consultation with one of our qualified attorneys, call Avenue Law Firm today at (212) 729-4090.

Mortgage vs. Deed

To get a better understanding of how property ownership works in New York, it is important to first get a grasp of the differences between the mortgage and the deed. While both are legal documents concerned with real estate and can often be used interchangeably, they perform very different purposes. Knowing the difference between these two documents and what they represent can allow you to have better insight into how to protect your rights as well as to learn about the responsibilities and expectations required of you as a homeowner.

Title Deed

The title of the property represents its actual ownership. The ownership of a piece of real estate is often represented by a deed. When a house is purchased, the deed to the property should be transferred to the new owner through a deed conveyance to represent the change in ownership. The change in ownership should also be filed with the county’s Register’s Office. If there is a dispute regarding the ownership of the property, the deed would be the first place to look for confirmation of who the true owner is. People who are not listed on the title deed may have a hard time proving ownership due to the fact that they are not listed on the title.

Types of Multiple Property Ownership in New York 

A property can be owned by one or multiple people. It can also be held by a trust or a business. In New York, there are multiple ways in which a property can be owned by multiple parties.

Tenancy in Common 

In a Tenancy in Common, each owner has a right to sell, transfer, or borrow against their own interest in the whole property. An example can be when a deceased person passes on a piece of real property to more than one beneficiary in their will. If the tenants in common agree, they may be able to divide up their interests in the property and exchange it for a monetary value through filing an action for a “partition”. The court will divide up the interests and can ensure that each tenant in common will receive the value of their interest in the property.

Joint Tenancy

A Joint Tenancy may be somewhat like a Tenancy in Common, however, when an original party’s interest is sold, the ownership type becomes a Tenancy in Common. If one of the parties dies, however, their interest will automatically transfer to the other joint tenant. Joint Tenancy operates on a “right of survivorship”.

New York has 4 requirements for a Joint Tenancy with Rights of Survivorship (JTWROS):

• All owners must have an equal share and stake in the property. When one owner dies, their stake in the property should be distributed evenly among the surviving owners. No owner is allowed to have a bigger share than the others.
• No co-owner can limit any joint owner of their access to the property.
• All owners must be able to show their interest in the property at the same time, with the same legal instrument such as the property’s deed
• The joint tenancy must be established at the same time and no tenants with a right of survivorship can be added on the joint tenancy has been established.

A regular JTWROS may be severed even without the consent of the other property owners. This can be done in two ways:

• By one of the co-owners conveying their joint tenancy interest to a third party, regardless if the third party is required to reconvey the tenancy interest to the severing co-owner
• By one of the co-owners executing a written document (such as a quitclaim deed) of their interest to sever the joint tenancy. The document should include a deed naming the other joint tenant as the grantee of the severing co-owner’s tenancy interest 

Tenancy by the Entirety

A Tenancy by the Entirety is a special kind of Joint Tenancy for married couples. Owners in Tenancy by the Entirety enjoy the benefits of a Joint Tenancy along with the Right of Survivorship. However, the owners cannot file a petition to partition the property or transfer the property without both owners’ – the spouses’ – consent.

Mortgage

A mortgage loan represents a debt to the bank. As it is a secured debt, mortgages require an asset to act as leverage and assurance that the debt would be paid. In the event that the person who owes the mortgage cannot continue paying the bank, the bank can repossess the property. This ability to repossess the asset allows the lender – in this case, the bank – to minimize the risk of loss.

When there are two names on a title deed, it means that there are joint owners of the property and each person owns an equal share of the property. The mortgage does not need to include both names to be valid. Even if the mortgage only lists one spouse, it does not affect the share of the ownership of the property. 

Differences in Name Inclusion on Property Documents

So why do differences exist and why can two names be on a deed but only one name is included on the mortgage? There can be a few reasons why this is the case depending on when the home was bought and how the purchase was financed. Having both spouses’ names on the mortgage may be beneficial but this may not be ideal in some situations.

Interest Rates and Credit Score Impact

In cases where a spouse has a poor credit history, interest rates may become higher if they are included in the mortgage. The couple may opt to only include the spouse with the better credit score on the mortgage to be able to save up money on interest payments in the long run.

When foreclosure is imminent, the spouse whose name is on the mortgage would be the only one impacted. The other spouse would be able to apply for other financing options as their credit score would have not been affected by the foreclosure.

Income Requirements

Most real estate loans have income requirements. If a spouse has an income that does not meet the requirements, perhaps because they have not had an income due to the marriage or do not have a consistent income, it may be wise to leave them out of the mortgage application.

Marriage Dynamics

If the home is not intended to be bought for the use of both spouses, that is, one spouse is buying the house to be used after a pending divorce, it’s more prudent to include only one spouse’s name on the mortgage. If the house was acquired during the marriage, it may be considered marital property. The assistance of an experienced attorney may clarify things regarding how ownership would work in this scenario.

Differences in the inclusion of each spouse’s name on the title deed can also vary but it’s important to remember that ownership of the property is based on the inclusion of your name on the title deed. Some reasons why name inclusion on the title deed can differ in New York include the following:

• The property was bought by one of the spouses before the marriage
• Avoiding one spouse’s creditors who can file a claim against the spouse with poor credit to take the property as collateral
• If you have a previous marriage and want to leave the property to family members from your previous marriage, including only your name on the title deed would make it easier to transfer the property 

Adding, Removing, and Transferring Property Interest

New York allows for a distinction between property owned before and during a marriage. When one spouse has property acquired before the marriage, ownership does not automatically become mutual upon marriage. Even after a divorce, only property that is considered marital property and mutually owned would be divided and distributed between spouses. However, there are ways in which a spouse can transfer some ownership interest in their solely owned property to their spouse during the marriage.

Adding your spouse to the title deed can be done to give them a share in the ownership of the property. This can be done through a quitclaim deed which gives your spouse property interest. Quitclaim deeds can also be useful in the following cases:

• Giving a spouse ownership interest or making them a co-owner of the property after the marriage
• Giving a spouse sole ownership of a property after a divorce
• Transferring ownership of a property to a family member, such as an adult child
• Transferring ownership of a property to a trust

A quitclaim deed only serves as proof that a person “quits” any claim they have on a property. Filing a quitclaim deed does not mean that the person who is given the original owner’s property interest would have sole ownership. It only means that they would be acquiring any existing interest or ownership share the original owner has on the property. For property co-owned by two or more persons, each person can only quit their claim on the percentage of ownership they have and it will not affect their co-owners’ share.

This also applies to any taxes on property transferred such as capital gains tax. Discussing who will be responsible for paying these taxes is important to avoid any complications.

It is important to note that quitclaim deeds are only useful for specific purposes. When buying a property, it is strongly recommended to undergo the proper conveyance procedures and ensure that the purchase agreement includes everyone intended to be the property owner. 

Mortgage After Divorce

A quitclaim deed also does not affect any liability on mortgages on the property. In the case of couples divorcing, if both spouses have their names on the deed and the mortgage, even if one spouse has quit their ownership claim on the property, they may still be responsible for the mortgage. A separation agreement may be helpful in ironing out any issues regarding who will be responsible for the mortgage. If one spouse gets the marital home after the divorce, they can refinance it and get a mortgage that is under their own name. This can help the spouse who did not get the home in the divorce to be able to move on with their life without the financial obligation.

If the couple is unable to come into a consensus regarding who will pay the mortgage and continue to have both their names on it even after the divorce, it can present a serious problem. If one spouse is not able to fulfill their obligation, it may be up to the other spouse to complete payments on the loan even if they are not living on the property. If the property ends up in foreclosure due to nonpayment of the debt, both spouses can suffer damages to their credit scores. Regardless of whose names are included on the deed, it is important to continue paying the mortgage to avoid the loss of the property through foreclosure.

Removing a Spouse From a Mortgage

Mortgages are an agreement between the borrower/s and the lender. It can be difficult to remove a spouse’s name on a mortgage without the lender agreeing, especially when it can mean that the lender is being deprived of one means to collect on the debt. Removing a spouse on a mortgage can only be done with the lender’s consent or through refinancing the home. 

Adding a spouse to a mortgage can also only be done through refinancing. This can be considerably complicated due to the fact that the spouse would need to be approved. 

If Your Name Is in the Mortgage but Not the Deed

If your name is not included in the title deed of the home but is included in the mortgage, this can mean that you do not have an ownership stake in the property while also being obligated to make payments to the mortgage. In this scenario, you have all the liability of having a mortgage named after you while none of the benefits of having an ownership stake in the property. 

Having only one name on the deed can also present an issue in terms of inheritance. If the spouse whose name on the deed passes away, it can present a succession issue on who will be able to get the property. In most cases, when both spouses are co-owners of the property as in a Joint Tenancy by the Entirety, a spouse automatically gets ownership of the property upon the other spouse’s death.

When there is only one name on the deed and the person dies, the property’s ownership will transfer depending on who the rightful beneficiary is as included in the person’s will or according to New York’s intestacy laws. This can mean that the deceased person’s spouse may not inherit the home.

For a mortgage, when the spouse on the mortgage dies, paying the outstanding debt will be done through their estate. The deceased person’s estate would have to continue paying the debt or risk the foreclosure of the home. The bank can also put a claim on other assets in the estate to ensure payment of the loan. To avoid this, the surviving spouse may enter a negotiation with the bank to refinance the mortgage under their own name.

Getting Professional Assistance For Your Real Estate Needs

Overall, discussing the matter of property ownership and the mortgage with your spouse, especially when you are not sure whether or not both of your names are on the title deed of your home is best done sooner rather than later. Ensuring that your property documents are in order can help you have a sense of security and prevent costly mistakes down the line.

Consult an experienced New York City real estate attorney to make sure your property documents reflect your real estate goals. An attorney can walk you through the potential complications and any issues you may encounter and provide the most applicable solutions. At Avenue Law Firm, our capable Manhattan attorneys have handled numerous real estate transactions in New York. Our attorneys provide tailored assistance that keeps our clients’ best interests in mind. Contact us today at (212) 729-4090 to schedule a consultation with one of our attorneys.

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