If your decree awards the house to one of you, two things have to happen afterward, and it is easy to finish only one. The title has to move, which takes a deed. And the loan has to be dealt with, which takes the lender. Signing a deed does not take anyone off a mortgage. This article explains both steps under Montana and federal law. It is part of our Montana Divorce Guide, and it follows from who gets the house in a divorce.
Title and Loan Are Two Different Things
The deed says who owns the property. The promissory note says who owes the money, and the mortgage or deed of trust ties that debt to the house. A divorce decree is an order between the two spouses. The lender is not a party to it.
The Consumer Financial Protection Bureau puts it this way: a divorce decree may allocate debts to a specific spouse, but a creditor can still collect from anyone whose name appears as a borrower, and taking your name off a home title does not take your name off the mortgage. So a spouse who deeds away the house and stays on the loan has given up the asset and kept the debt.
The Deed
The spouse who is giving up the house signs a deed to the other. In a divorce transfer this may be a quitclaim deed, which passes whatever interest the signer has without promises about the state of the title. The deed is then recorded with the clerk and recorder in the county where the property sits. Which form of deed fits your situation, and how it should be worded, is a question for a real estate lawyer or a title company.
One Montana rule works in the background. If the two of you held the house as joint tenants with a right of survivorship, the divorce itself severs that and turns your interests into a tenancy in common (MCA § 72-2-814(2)(b)). That does not finish the job. Until a deed is recorded, both names remain on the title.
The Realty Transfer Certificate
Montana requires a realty transfer certificate with a deed. A deed "may not be accepted for recordation until the certificate has been received by the county clerk and recorder" (MCA § 15-7-305(2)).
People sometimes hear that divorce transfers are exempt. That is only half right. The statute says the certificate "applies to all transfers," and then lists transfers for which the certificate need not disclose the consideration paid. One of them is "a transfer pursuant to a court decree" (MCA § 15-7-307(6)). So you still file the form. You do not have to state a price. The certificate is not a public record (MCA § 15-7-308(1)).
The certificate also carries a water right ownership update form (MCA § 15-7-305(3)(b)). If the property has water rights, get advice from a professional who handles them. A&M Law does not practice water law.
Dealing With the Mortgage
| Option | What happens | Is the other spouse released? |
|---|---|---|
| Refinance | The spouse keeping the house takes out a new loan in one name and pays off the joint loan. | Yes, because the old loan is paid off. |
| Assumption | The lender agrees to let one spouse take over the existing loan. The lender decides whether to allow it. | Only if the lender also releases the other borrower in writing. |
| Release of liability | The lender agrees in writing to remove one borrower from the existing loan. | Yes, if the lender grants it. |
| Deed only, loan left in both names | Title moves to one spouse. The loan does not change. | No. Both borrowers remain liable to the lender. |
| Sale | The house is sold and the loan is paid from the proceeds. | Yes, once the loan is paid in full. |
Whether a refinance is possible depends on the keeping spouse's income, credit, and the equity in the house, and on interest rates at the time. Those are a lender's decisions, not the court's. It is worth talking to a lender before you sign a settlement that depends on a refinance.
Federal law helps in one narrow way. For a loan secured by residential real property with fewer than five dwelling units, a lender may not exercise a due-on-sale clause upon "a transfer resulting from a decree of a dissolution of marriage, legal separation agreement, or from an incidental property settlement agreement, by which the spouse of the borrower becomes an owner of the property" (12 U.S.C. § 1701j-3(d)(7)). In plain terms, the lender cannot call the loan due just because the house was deeded to a spouse in the divorce. The rule does not release the spouse who moved out, and it does not require the lender to agree to an assumption.
What to Put in the Agreement
Because the court cannot make a lender do anything, the protection has to be written into your settlement agreement. Points to address include:
- a deadline for the refinance or assumption;
- what happens if it does not occur by then, such as listing the house for sale;
- who pays the mortgage, taxes, and insurance in the meantime, and what happens after a missed payment;
- when the deed is signed and when it is delivered or recorded; and
- how and when any equity payment to the other spouse is made.
Terms set out in the decree are enforceable by all remedies available for a judgment, including contempt (MCA § 40-4-201(5)). A decree that only says one spouse "will refinance" with no date gives the court much less to enforce. And until the loan is paid off or released, a late payment by the spouse in the house can show up on both credit reports. Our article on credit and joint accounts after divorce explains how to monitor that.
The Tax Side, Briefly
Under federal law, no gain or loss is recognized on a transfer of property to a spouse, or to a former spouse if the transfer is incident to the divorce. A transfer is incident to the divorce if it occurs within one year after the marriage ends or is related to the end of the marriage (26 U.S.C. § 1041(a), (c)). Montana's property division statute likewise says that dividing marital property in a dissolution is not a sale or exchange for state or federal income tax purposes (MCA § 40-4-202(4)).
There is a catch. The spouse who receives the house takes the same tax basis the couple had (26 U.S.C. § 1041(b)). Any gain is deferred, not erased, and it surfaces when the house is sold. IRS Publication 504 notes that a person who sells a main home may be able to exclude up to $250,000 of gain, with special rules for separated and divorced individuals in Publication 523. A tax professional should run those numbers before you agree to a buyout figure.
For how courts value and award a home in the first place, see property division in Montana.
This page explains Montana law in general as of the 2025 Montana Code Annotated, and federal law in general. It is not legal, tax, or lending advice about your specific case.