Can a Quit Claim Deed Affect Your Mortgage?

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A quitclaim deed is a type of deed that allows one owner of a property to transfer his ownership interest to someone else. The person literally "quits claim" to any ownership of the property. Though a quitclaim deed allows a person to end his ownership in a property, it does not change the terms of any mortgage that's in place.

The Process

A quitclaim deed often comes into play when two or more people own a property jointly and one person wants to relinquish his ownership. Divorcing spouses, for example, may use a quitclaim deed to transfer the ownership interest of one spouse. Quitclaim deeds can also be used to add someone's name to a property, such as when a property owner gets married and wants to add his wife as an owner. Filing a quitclaim deed involves filling out a legal form, having it witnessed and notarized by a notary public and filing it with the local register of deeds.

Effect on Mortgage

Unlike a warranty deed, which "warrants" that a person has a right to sell a property and that the property is free and clear of all liens, a quitclaim deed simply transfers ownership from one party to another. The new owner must accept any liens and encumbrances that come with ownership, including an outstanding mortgage. Likewise, filing a quitclaim deed and relinquishing ownership in a property does not absolve a person of her responsibility to pay back a mortgage debt.

Transferring the Mortgage

The easiest way to transfer mortgage debt after filing a quitclaim deed is allowing the new owner to assume the existing mortgage; however, few mortgages are assumable and those that are often have strict requirements regarding the credit score and income of the person assuming the loan. A more common way to transfer the mortgage is by refinancing, or replacing the existing loan with a new one. In the case of divorcing spouses, the spouse who is remaining in the home would take out a new mortgage in her name only to replace the one that she and her husband held jointly.

Considerations

Though filing a quitclaim deed may seem like a quick and easy way to transfer property rights, it can be more complicated than it sounds. As mentioned earlier, a quitclaim deed does not convey a clean title to the property, meaning that in addition to a mortgage, the property could be the subject of other liens, such as tax liens or mechanic's liens. Also, some mortgages have clauses that require immediate full payment if the title of the property transfers. Those considering using a quitclaim deed would be wise to consult an attorney or real estate professional first for advice.

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