Can I Legally Quitclaim Deed My Home to Another Person While I’m Still Paying Off My Mortgage?

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

Quitclaim deeds are among the most misunderstood legal tools in existence. In essence, quitclaim deeds permit property owners to sign the "rights and interests" in the property over to a "grantee." This grantee receives all of the benefits of property ownership without some of the financial drawbacks. However, a quitclaim deed may not hold up to close legal scrutiny in certain situations. Although it can be useful for expediting property transfers between family members or friends, it may not be ideal for transferring ownership rights between two unfamiliar parties. In such cases, a classic title transfer is far superior to a quitclaim deed.

If you're thinking about using a quitclaim deed to transfer the title to your home to another individual or group of individuals, you'll need to keep several things in mind. First, quitclaim deeds transfer ownership rights and interests. When you use a quitclaim deed to transfer such rights and interests, the recipient will receive all of your equity in the home. However, the quitclaim will not transfer the "mortgaged" portion of the home's equity. In other words, your mortgage lender will still own a sizable interest in your home.

What's more, most mortgage contracts stipulate that a home can't be transferred via quitclaim while its mortgage lien remains in force. In fact, virtually all mortgage contracts require existing mortgage obligations to be paid in full before the quitclaim's consummation. In your situation, this may be impossible. After all, you've probably chosen to quitclaim your home's deed for financial reasons.

In order to avoid becoming involved in an unpleasant and potentially problematic financial dispute, you must come to an agreement with your quitclaim grantee about what to do with the outstanding balance on the property's mortgage. It's highly unlikely that your mortgage lender will enforce the "payoff" clause without just cause. In this case, "just cause" would involve a significant mortgage delinquency. As long as the mortgage on the home doesn't fall into delinquency, your lender would have no reason to initiate foreclosure proceedings.

Before you use a quitclaim deed to relinquish the title to your home, draw up a written contract with the grantee. This contract should spell out the means by which the mortgage will be paid each month and outline clear restrictions on the sale or further transfer of the property. In addition, you should notify your mortgage lender of the transfer to ensure that it does not foreclose on the property without your knowledge.

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