Dear Mr. Premack: My son has just married, and he and his wife
purchased their first home. They have a sizeable mortgage. Unlike them, my
husband and I who have been married over 30 years now have finished paying
off our house and own it free and clear. We told them that now that they
have a house they need to see a lawyer about Wills but they think the
mortgage means they don’t really own the house until it is paid off like
ours. How do mortgages affect home ownership, and should they have Wills
in case either of them should be in an accident? – H.Z.
people buy a home, they need to borrow the money to pay for the home. The
transaction is between three parties: the seller, the buyer and the
lender. In exchange for full payment of the home’s value, the seller signs
a deed making the buyer the new homeowner. But to get the money to pay the
seller, the buyer had to borrow the money from the lender. The lender
requires the buyer to sign a promissory note and a deed of trust (which is
the legal label for what many people casually call a mortgage).
The promissory note contains the terms of the loan. The deed of trust is a
security instrument which gives the lender authority to foreclose on the
house if the loan is not repaid (or if other conditions are not met, like
keeping the home insured and the taxes paid). Thus, although your son and
his wife have a mortgage they are indeed owners of their home, even though
they agreed to give a lien against the house to secure repayment of the
purchase money loan.
They own their home. You own your home,
albeit free from the mortgage lien burdening their home. You each have a
deed to your home recorded with the county clerk that says you own it.
Almost universally, when a husband and wife own a home in Texas, the deed
makes them joint tenants, and their ownership interest is held as
community property. Almost universally, the deed does not contain any
wording about what should happen if one of the spouse-owners should die.
If you assume that when your spouse dies you simply continue as
owner of the entire home, you may be very wrong. True, there is a Texas
statute that says when one spouse dies the other spouse receives title to
the community property. But that is conditional. It only happens that way
if 1) there are no children from any prior marriage, and 2) if the
surviving spouse jumps through many legal hoops to prove that he/she
should become the legal owner. Nothing is automatic. Title does not
transfer by itself, and the legal proceeding to establish ownership for
the surviving spouse can be slow and expensive.
The legal outcome
is much better when a homeowner has a Will (or a trust, or other legally
binding transfer arrangements). If you own a home, you should have a
legally binding document (usually a Will) that states to whom you want
your share of the house to pass if you die. Period. To be a responsible
adult you simply must address this issue.
The Will is only as
good as the words it contains. Every day you go to work, giving your best
efforts and your precious time. Then you get a paycheck, and you spend a
large part of that paycheck on your house payment. To keep the house, you
must work to earn the money to pay the lender. Your equity in the house
grows as you make the payments. Your house has value, and if you die that
value must be preserved and passed to your selected heir under the wording
in your Will.
Because the wording of your Will matters, you
should always go to a real live qualified Texas lawyer. Do not make a Will
online unless that online service connects you directly with a real live
qualified Texas lawyer. Services like LegalZoom fail in almost every way
(they are cheap because you are getting legal services from a computer
program, not from a lawyer). If your home is important to you, if the time
you spend earning the money to pay for the home is important to you, if
you want to protect your spouse in case of your death, then you need to
see a real live qualified Texas lawyer and make a valid, effective Texas
Will as soon as possible.