A quitclaim deed is a legal document that is used to transfer ownership and interest in a property from one person (the grantor) to another (the grantee). It is different from a warranty deed in that it does not provide any assurances or guarantees about the status of the property title.
The grantee simply takes possession of whatever interest the grantor had in the property at the time of the transfer, without any guarantees about the property being free from claims or encumbrances. Because of this lack of buyer protection, a quitclaim deed may not be the best choice for someone looking to purchase a property.
The effect of a quitclaim deed on a mortgage will depend on how the parties involved use the deed. If the grantor is the borrower on a mortgage and they transfer the property to the grantee using a quitclaim deed, the grantee will take ownership of the property but they will not assume responsibility for the mortgage.
The grantor will continue to be liable for the mortgage unless they can negotiate a transfer of the mortgage with the lender or pay off the mortgage in full. On the other hand, if the grantee is the borrower on a mortgage and they use a quitclaim deed to transfer the property to the grantor, the grantee will retain responsibility for the mortgage. In this case, the grantor will not be responsible for the mortgage unless they agree to take on the obligation as part of the transfer.
Does The Grantor Have A Mortgage?
Unlike a warranty deed, a quitclaim deed does not offer any assurances about the property title – it simply conveys whatever legal interest the grantor has in the property at the time of the transfer. This means that the grantee has no protection in the event that there are any claims against the property.
Quitclaim deeds are commonly used by family members to transfer property, rather than selling it. In many cases, the properties involved in quitclaim deeds do not have outstanding mortgages, as it would be difficult for the grantor to pay off the mortgage without proceeds from the sale of the property. If there is no mortgage on the property, then the quitclaim deed has no impact on it.
However, if the grantor does have an outstanding mortgage on the property when filing a quitclaim deed, they are still legally responsible for the mortgage even after transferring ownership. This is because a quitclaim deed only transfers ownership and not any debts or claims associated with the property. The grantee will receive the title to the property, but the grantor remains responsible for paying off the mortgage.
How Due-On-Sale Clauses Impact Quitclaim Deeds?
A due-on-sale clause is a provision in a mortgage contract that requires the full payment of the mortgage when the property is sold or transferred. If a property has a due-on-sale clause in the mortgage agreement and the owner uses a quitclaim deed to transfer the property, this can create problems for both the grantor and grantee.
Quitclaim deeds can present challenges for parties involved in a property transfer when the mortgage on the property includes a due-on-sale clause. These clauses, which are included in some mortgage agreements, state that the full balance of the mortgage must be paid upon the sale or conveyance of the property. When a grantor transfers a property through a quitclaim deed and the mortgage has a due-on-sale clause, the grantee may be expected to pay the full mortgage balance or continue making payments according to the agreement.
However, if the grantee refuses to pay in full, stops making payments, or sells the property to someone else, the original grantor may face legal consequences from the mortgage lender. It is important to note that quitclaim deeds do not offer the same legal protection as other types of deeds, and can therefore put both the grantor and grantee at risk in the event of a mortgage default. It is crucial to carefully consider the terms of any mortgage and the potential risks associated with a quitclaim deed before making a decision to transfer a property in this way.
Mortgaging Options After Property Transfer
One option for grantees looking to increase their legal protection when using a quitclaim deed is to receive approval from the mortgage lender to assume the mortgage from the grantor. This allows the grantee to take control of the mortgage and the future of the home, without being dependent on the grantor to continue making payments.
The grantee may also choose to refinance the property, which enables them to pay off the original loan and take out a new one in their own name. Another option is to draw up a legally binding contract that outlines the terms of mortgage payments in this situation.
If the grantor wants to fully relinquish their interest in the property, including any outstanding mortgage, it may be safer to transfer the mortgage to the grantee. This removes the grantor’s name from the mortgage and relieves them of the legal responsibility of making payments.
Failure to transfer the mortgage can put the grantor at risk of penalties if the grantee fails to make payments. For example, if a quitclaim deed is used to transfer the title of a home to an ex-spouse and they miss a few mortgage payments, the grantor could be held responsible if the mortgage was not transferred. By transferring the mortgage, the grantor can protect their credit from the negative impact of missed payments.
How To Qualify For Mortgage Responsibility?
If you are planning to transfer ownership of a property through a quitclaim deed, it is important to carefully consider how this will affect the mortgage on the property. One option is for the grantee, the person receiving the property, to assume responsibility for the mortgage or refinance the property. This can help to protect the grantor, the person transferring the property, from any liability for the mortgage. However, not everyone will qualify for these actions. The grantee must prove to the mortgage lender that they are financially capable of making the necessary payments. If the grantee does not qualify, the grantor may be left with the responsibility for the mortgage. It is important to carefully evaluate the financial situations of both the grantor and grantee and consult with a lender to ensure that the mortgage can be safely and responsibly handled.
Other Types Of Deeds For Better Protection
If you’re concerned about the lack of protection in a quitclaim deed when it comes to mortgage payments, you may want to consider using a different type of deed. A general warranty deed is often a better option as it offers protection for both the grantor and grantee. With a warranty deed, the grantee has a legally binding contract that ensures the property is free of any defects, claims, or encumbrances. This means that the grantee will have full ownership interest in the property, including the mortgage.
Quitclaim deeds are most commonly used between family members or trusted friends, where there is reason to believe that the grantor has a genuine interest in the property. However, if you are not in this type of relationship, a quitclaim deed may expose you to significant risks, especially when it comes to the mortgage. In cases where assets are commingled or you are married, you should be cautious about using a quitclaim deed for property transfer. This is especially true if you are considering divorce, as you may be held responsible for mortgage payments if your ex-spouse is in charge of making them. It’s always a good idea to speak with a realtor for more information about quitclaim deeds and mortgages.