Can I Legally Quitclaim Deed My Home to Another Person I Owe a Mortgage on the Subject Home?

Written by James Hirby | Fact checked by The Law Dictionary staff |  

If your mortgage is in danger of turning into an unsustainable burden on your family's finances, you may be inclined to sign a quitclaim deed that transfers some ownership interest in your home to another party. In most cases, quitclaim deeds are used to transfer property between two individuals within the same family or social circle. In other cases, these instruments may be used to transfer ownership of a home from an individual to a sole proprietorship or corporation. They are almost never used to enforce the terms of a normal home sale.

You may legally transfer partial ownership of your home to a third party via quitclaim deed without notifying your mortgage lender. If you owe a balance on your mortgage, you may not legally sign a quitclaim deed that transfers total ownership of your home. In other words, you must retain a partial interest in the property until you have paid off your mortgage loan in full.

While it may be in your financial interest to transfer your property "in toto" to another individual, you're prevented from doing so by law. A quitclaim deed merely transfers ownership: It doesn't confer any responsibility for the underlying mortgage or outstanding liens against the house. When you sign a quitclaim deed, you retain sole responsibility for these obligations. In other words, your mortgage lender doesn't need to be informed about the partial ownership transfer because it will have no financial relationship with the new owner.

You can't legally transfer the entire property via quitclaim because this would sever your ties to the house and limit your lender's options in the event that you stop making payments on your mortgage. If you no longer own your home, your lender can't seize it to cover your delinquent mortgage.

At the same time, the home's new owner has no legal obligation to cover its mortgage. As such, you must be obligated to retain an interest in your home until you've paid off your mortgage. In the meantime, you're free to work out a financial arrangement with the home's new partial owner that requires them to cover some or all of your monthly mortgage payments.

Ultimately, your mortgage lender is likely to endorse your ownership transfer as long as you continue to pay down your loan. Regardless, you should still report the transfer at your earliest convenience to prevent any potential confusion in the future.

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