Taking Action

Get Answers Start Your Divorce Stop Your Divorce Divorce Forms Online Support DivorceDesk

Divorce Tools

Online Divorce Online Negotiation Custody Tracker Custody Evaluation QDRO Preparation Divorce Calendar SEE ALL

Info Categories

Contemplating Divorce Children & Divorce Divorce, Dollars & Debt Divorce Laws Divorce Process Divorce Negotiation SEE ALL

State Resources

California Florida Illinois New York Texas SEE ALL

More Information

Articles Checklists Research Center Cases of Interest Dictionary Encyclopedia Encyclopedia (pop-up) Blogs

For Professionals

Generate Clients Free Network Page Submit Articles Case Management Sign In

The Divorce Encyclopedia
Mortgage


Term Definition Mortgage - a written statement by the owner, who is called the mortgagor, to the lender, who is called the mortgagee, giving the lender an interest in the property -- the land and improvements -- to assure repayment of the debt.
Application in Divorce Very few married couples who buy a house can do it without a mortgage. Indeed getting a mortgage is a rite of passage for middle-class Americans.

For a stable couple who plan to stay in one place for two or more years, buying a house is generally a sensible idea. In general, most authorities advise that a couple should not spend more than one-quarter of the combined income on housing, including the mortgage.

Unlike credit card lending, which is unsecured by collateral, mortgage lending is secured by the property -- the house and the land. For this reason, interest rates for mortgages are much lower than interest rates for credit cards. Because a house and land is also a home, most people pay residential mortgages promptly. (Indeed, when someone is in arrears on a mortgage, he or she is probably in debt and behind in his or her payments to other lenders.)

Unlike borrowing money to buy a car, which begins a dramatic depreciation the moment the ignition key is turned for the first time, a house, with reasonable care and maintenance, appreciates, and over time it often becomes the largest marital asset. Seen this way, mortgage borrowing is a sensible form of borrowing because it increases the wealth of the borrower. The tax deductibility of interest expense also greatly increases the so-called "throw weight" of housing dollars; that is, the affordability of a more expensive house.

Generally, when a couple buy a home, the mortgage is in both names, and they have joint and several liability. The date the couple assumes a mortgage is called settlement. At that time, the couple also sign a promissory note and a deed.

When a mortgage is paid in full it is said to be satisfied.

An outstanding mortgage is recorded and is a lien against the property.

At one time, conventional mortgages -- those with a fixed number of identical payments -- were the norm in residential lending. Such vehicles typically provided for a 20-year repayment. In this routine, each payment reduces the unpaid balance of the mortgage by a certain amount. Conventional mortgages are often said to be "front loaded" since in the beginning of the repayment, which is called amortization, the majority of each payment is interest. The principal, therefore, is reduced very slowly at the onset of the loan. This arrangement encouraged people to pay off the mortgage early because after the first half or the mortgage, a larger and larger part of each payment is principal, and the mortgage lost its tax advantage to the borrower. By this time, moreover, the borrower was generally older and in a better financial position.

In the past twenty-five years, a variety of what are sometimes termed "creative" financing mechanisms have gone of the market. One relatively new type of mortgage is the adjustable rate mortgage (ARM). An ARM mortgage is one in which the interest rate is not fixed but tied to some index and periodically adjusted up or down based on the changes in that index. Many ARM mortgages come with introductory low rates in the first three years, then reset themselves at much higher rates. Some experts have expressed concern that many of these ARM mortgages will go into default in the next several years and drive down the entire housing market.

In divorce actions, outstanding mortgages generally must be satisfied before the marital homestead can be sold and the proceeds, if any, divided.

Sometimes in marital settlements one spouse buys out the marital home of the other with a collateralized promissory note. In this arrangement, he or she pays the other a sum for a negotiated length of time at current interest rates. Since the money is a division of property, it is not taxable. The recipient does pay taxes on the interest, not the principal. The note is normally collateralized by the home. Generally, the lender -- the spouse receiving the payment -- is not given title to the property.

Add the Divorce Encyclopedia
to Your Website
!


The Research Center

Give Our Research Center a Try. Gain access to the same research material that lawyers often use to establish and win divorce cases. This material consists of legal journal articles and case explanation/analysis documents on a wide range of topics. If you think your situation is unique, your answers will most likely be here. In order to gain access to this area, you must establish an account, but you can search the documents before deciding.


The Divorce Source Difference

Since February 1st, 1997 (when we initially launched Divorcesource.com) we have helped millions of people contemplating or experiencing divorce. The reason we have been able to reach so many people is because we have made it a priority to listen to our customers. We have built a trust by listening and delivering what the customer needs, rather than what we think they want. This is the Divorce Source difference.


Social

Easily Connect With a Lawyer or Mediator
Have Divorce Professionals from Your Area Contact You!
Enter Your Zip Code:

Custody Scheduling and Tracking

Easily Connect With a Lawyer or Mediator
Have Divorce Professionals from Your Area Contact You!
Enter Your Zip Code:

 

Start Your Divorce File for Divorce

 

Settle Your Divorce Negotiate Your Divorce

 

Track Child Custody Track Custody & Visitation

Negotiate Your Divorce Online
Guarantee Official PayPal Seal Facebook Twitter Versign Secure Site
Limited Offer Women's Rights Manual For Divorce
Cover Price: $55.95
Your Price: $29.95
You Save: $26.00

"The Absolute Best Investment in Your Divorce"

Men's Rights Manual For Divorce
Cover Price: $55.95
Your Price: $29.95
You Save: $26.00

"Uncover Your Options and Unleash Solutions"