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Can quitclaim deed transfer mortgage debt?

Author: Jessica Bennet
Community Mentor
Ask Jessica
Posted on: 10th May, 2006 11:19am

Quitclaim deed is a legal document using which you can convey your share of property-interest to another person. The deed indicates that the title is conveyed from the grantor (transferor) to the grantee (transferee). But it does not guarantee that the grantor holds the legal rights of ownership. The deed also does not imply that the title is free of liens. The quitclaim deed merely states that there has been a transfer of interest from one individual to another.

Thus, when you transfer property rights, a quitclaim deed serves your purpose. But you cannot transfer mortgage debt or any financial obligation through the deed. If there is a mortgage on the property you wish to transfer, you'll have to pay off the debt prior to the transfer and make the title free and clear. Otherwise, you'll have to transfer the loan as well.

In order to transfer a mortgage to the grantee, you'll have to convince the latter to refinance the loan in his/her name. And, at the time of refinance closing, you can sign on a quitclaim or grant deed in order to transfer the property to the grantee. Alternatively, you can transfer the title first and then have the grantee refinance the mortgage in his name. But before you do so, get it in writing from the grantee that he'll refinance as soon as you convey the title. Otherwise, you'll (the grantor) be left to pay off the loan entirely without having the property in your name.

Another way by which you can transfer mortgage debt while quitclaiming property is Novation. To know How novation works , refer to a forum discussion on this topic.

Posted on: 10th May, 2006 11:19 am
a friend of ours is having financial difficulties and is behind in his house payments, he is wanting to do a quit claim deed transfer to us and we would take over the house payments to bring it up to date and finish paying for it. are there legal complications in doing this since he still owes money? should we go to the bank instead?
Hi,

Welcome to MortgageFit Forums.

This is a good question that you have asked before actually going for it. Actually a quit claim deed transfers only the interest of the owner to the grantee and has nothing to do with the mortgage.

The mortgage will be still in your friend's name only. There can be problems for your friend as any real estate transfer with a mortgage on it can make the mortgage due immediately.

So, the lender or the financial institution should be informed clearly before such a transfer. If you want the mortgage in your name, it has to be refinanced in your name.

So, it's better if you and your friend inform the bank first and take their suggestions. A real estate attorney can help you in this matter.

God bless you.

For MortagageFit,
Samantha
Posted on: 10th May, 2006 11:49 am
Hi,

I am assuming that you will take the responsibility of making the payments for the house and against that you want to have ownership of the property.

Now, a quit claim deed transfers only the interest of the grantor in the house and makes no guarantee that there are no debts on the property or the property is free of any claims.

So, it always better to consult an attorney before transferring any property through a quit claim deed to know the consequences of the transfer.

Steve
Posted on: 10th May, 2006 12:05 pm
should we get new financing for the mortgage before there is a quick claim?
as the new owners.or can we if the deed is not in our names yet.
Posted on: 18th May, 2006 10:07 am
Hi Vicki,

You need to have your name on the deed before you apply for a mortgage. The lenders will look for a clear ownership of the asset against which you are going to take the mortgage.

You can talk to your lender and consult with him on how he wants you to proceed.

James
Posted on: 18th May, 2006 10:37 am
My husband and I are soon to be divorced, and he wants to buy me out of the house with a quit claim deed, because the property is not selling right now. He has agreed that if the property sells for more than he is buying me out, he will split the profits. If something happens to him in the next two years, does the property automatically go to his children and is that agreement null and void?
Posted on: 22nd May, 2006 04:08 am
Hi,

Your husband can only sell off the property if he has ownership rights. Also, he cannot buy you out of the house with a quit claim deed. He will have to prepare a fresh deed instead of quit claim if he wants to transfer the title to property.

thanks
Posted on: 22nd May, 2006 04:28 am
Hi,

Welcome to our forums.

Your husband can take over the property through quit claim deed. But it does not mention who the legal owners are. So, it is better if he executes a title deed or warranty or grant deed with both of your signatures. Such deeds imply who the actual owners are currently and mentions that they have transferred property to some other person. The deed needs to be recorded at the Office of the Registrar of Deeds.

Regarding the children inheriting the property, it will depend upon how the court distributes the ownership rights after divorce. This will also depend on whether your husband makes a will stating that his children will take over the property if anything happens to him in the next 2 years.

For more details on quit claim deed, please visit this "Transferring the property-interest through Quit Claim Deed".

Thanks,

Caron.
Posted on: 22nd May, 2006 04:39 am
Hi,

"If something happens to him in the next two years, does the property automatically go to his children and is that agreement null and void?"

If anything happens to your husband in the next 2 years, then the agreement becomes null and void.

If there is any co-owner of the property, then the property gets transferred to him. Otherwise, it automatically goes to his children.

Thanks
Posted on: 22nd May, 2006 05:13 am
me and the ex-wife have been divorced for over a year she is trying to convence me to do a quick claim deed and not get any lawyers involved in property settlments how should i handle this i'm sure the house has almost doubled in value and is worth twice the money we payed for it.
Posted on: 05th Sep, 2006 07:59 pm
Hi Wellcuz,

I think you should consult a lawyer. After all the lawyer is the person who will be preparing the quit claim deed for you. Also, for property settlements, it is always better to consult persons involved in the legal processes.

I think you should take help from a lawyer dealing in matters of the estate and there is no need to tell your ex-wife that you have consulted a lawyer.

Thanks,

Caron.
Posted on: 05th Sep, 2006 08:16 pm
Posted on: 11th Oct, 2006 04:15 pm
hi owen,

if your mother-in-law quit claims the house in your name then the lender can call the mortgage due. if the current rates are lower then you can go for refinance right now. otherwise after the house is quit claimed in your name you can consult the lender about a possible novation in which mortgage payment obligation will get transferred in your name.

also if the house is quit claimed to you as per laws it is treated as a gift and what you pay for it is not fixed.

thanks
james
Posted on: 11th Oct, 2006 04:28 pm
Hi,

In addition to what James said, I would like to add that if the lender agrees then Owen can also ask about assumption of his mother-in-law's mortgage.

Owen kindly have a look at the article on assumption to know more about how you can assume the mortgage liability from your mother-in-law.

Colin
Posted on: 11th Oct, 2006 04:42 pm
So, you guys are simply saying that after the quit deed it is up to the lender, and I should be ready to purchase the property if all fails.
Posted on: 11th Oct, 2006 07:07 pm
Hi Owen,

I don't think that buying the house is necessary. There are two ways to handle this situation. First of all, if you ask your mother-in-law to quit claim the property to you, she can do so but she should inform the lender about it as the latter has an interest in the property (as he has offered the loan against the house). But the quit claim does not transfer the mortgage. So, your mother-in-law has to transfer the loan in your name through Novation. Then you can start paying for the loan and refinance when its suitable for you.

Secondly, if you don't wish to go into the above process, you can ask your mother-in-law refinance the loan in your name and transfer the property-title to you at the day of the loan closing. You may use a quit claim deed to get the title transferred in your name. And, whether you will have to pay a large sum will depend on the type of refinance loan taken, the interest rate and fees charged.

Know all about How to Refinance if you are interested to choose this option.

Thanks,

Caron.
Posted on: 11th Oct, 2006 09:13 pm
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