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Contract for Deed
What Alternatives are There to a Contract for Deed?

What Alternatives are There to a Contract for Deed?

Full question:

I have a mortgage on my current home that still lists myself and my ex-husband on the bank loan. The home was deeded to me in the divorce. I am going to sell the home to my ex-husband, and allow him to pay the difference between the sales price and the loan balance over a period of 18 months. I will retain the deed until he has finished paying me at which time I will deed the house to him. I ordered the Contract for Deed package, but it doesn't seem to take into account these special circumstances. Would there be any other forms that you might recommend?

Category: Contract for Deed
Date: 04/07/2025
State: Texas

Answer:

A contract for deed, or land contract, is often used as an alternative means of financing the purchase price of property. The buyer does not receive an actual deed until payments are made under the terms of the contract for deed agreement. Until the buyer receives a deed, ownership isn't transferred and the property is subject to being foreclosed on if the mortgagee/owner defaults on the mortgage. The responsibility for payment for the property is a separate issue from the ownership of the property.

If there is a mortgage on the property, the contract may violate a due-on-sale clause in the mortgage which the lender may or may not seek to enforce. Most lenders require that the mortgage or deed of trust contain a due on sale clause. This is an acceleration clause in a loan, calling for payment of the entire principal balance in full, triggered by the transfer or sale of a property. Such a clause permits a secured mortgage lender (federal, state or private) to call the entire unpaid loan balance due and payable immediately if the property securing the loan is sold, transferred, traded, gifted or otherwise disposed of without the lender’s prior written consent.

Please see the information at the following links for further discussion:

http://ezinearticles.com/?The-Advantages-of-Buying-With-Owner-Financing&id=1595064
http://www.curtepperson.com/seller.htm
http://www.ehow.com/how_8133_offer-seller-financing.html

Typically, when the seller wishes to retain the deed until payments are final, a contract for deed is used. If you are considering delivering the deed earlier, it is possible that a sales contract and/or a promissory note may be used. Our forms may be modified to accomodate the special circumstances you describe. Your may wish to use our preparation service at the following link:

http://services.uslegal.com/preparation-services-faq/

This content is for informational purposes only and is not legal advice. Legal statutes mentioned reflect the law at the time the content was written and may no longer be current. Always verify the latest version of the law before relying on it.

FAQs

How do I remove my ex-spouse from my mortgage without refinancing?

To remove your ex-spouse from your mortgage without refinancing, you can request a loan modification from your lender. This process typically requires both parties' consent and may involve providing proof of income and creditworthiness. However, lenders are not obligated to approve this request. Another option is to sell the property and pay off the mortgage, which would remove your ex-spouse from the loan. Consult with your lender for specific options available to you.

How much does it cost to remove someone from a mortgage?

The cost to remove someone from a mortgage can vary widely. If you pursue a loan modification, some lenders may charge fees for processing. If refinancing is required, you may incur closing costs, which can range from 2% to 5% of the loan amount. Additionally, if you sell the property, there may be real estate agent fees and other costs associated with the sale. It's best to consult with your lender for a detailed estimate.

What happens if you get divorced but your name is still on the mortgage?

If your name remains on the mortgage after divorce, you are still legally responsible for the debt, even if the property was awarded to your ex-spouse. This means that if your ex fails to make payments, it could negatively impact your credit score. To protect yourself, consider seeking a loan modification to remove your name or ensure that your ex refinances the mortgage in their name alone.

Can I remove my ex-husband from my mortgage without refinancing?

Removing your ex-husband from your mortgage without refinancing is challenging. You may be able to request a loan modification from your lender, but this typically requires his consent and may not always be granted. If both parties agree, selling the property and paying off the mortgage is another option. Always consult your lender for guidance on the best course of action.

Does a divorce decree override a deed?

A divorce decree does not automatically override a deed. While a divorce decree may specify who gets the property, the deed itself must be legally transferred to reflect this change. If the deed is not updated, the original owner remains on the title. To ensure proper ownership, the deed should be updated following the terms of the divorce decree.

Can an ex-wife claim a house after divorce?

In most cases, an ex-wife cannot claim a house after divorce if the property was awarded to the ex-husband in the divorce decree. However, if the decree states that she retains rights to the property or if there are unresolved financial obligations, she may have grounds to claim an interest. It's essential to review the divorce decree and consult with a legal professional for specific advice.