-As a homeowner, you may find yourself in a situation where you must execute a quitclaim deed. Usually, this may be due to endless reasons, including changes in ownership, divorce, or other personal circumstances.
However, a crucial question often arises. What happens when you execute a quitclaim deed while legally bound to the existing mortgage? This scenario introduces a web of legal implications and potential consequences that require careful consideration.
For a first-timer, the process can be truly overwhelming and confusing. The good news is that if you prepare yourself for what comes ahead, you will succeed.
So, here are more details worth noting about the complexities surrounding this issue, alongside a guide on how to make an informed decision.
Transfer of Ownership
When you sign a quitclaim deed but stay on the mortgage, the Transfer of Ownership happens, and you give up your rights to the property. Even though you don’t own it anymore, you still have to pay the mortgage. The person who gets the property becomes the new owner. They can live there, sell it, or do what they want with it, but you’re not in charge anymore.
No Relief from Mortgage Obligation
When you sign a quitclaim deed but remain on the mortgage, there’s No Relief from Mortgage Obligation. This means you still have to pay the loan, even though you don’t own the property anymore. The bank or lender will expect you to make your monthly payments. So, even if you give up ownership, the financial responsibility stays with you.
Joint Liability with New Owner
One of the consequences of signing a quitclaim deed while still on the mortgage is a joint liability with the new owner. This means both of you are responsible for the mortgage. If the new owner can’t pay, the lender can come after you for the money. It’s like being partners in the loan, even though you’re not partners in owning the property anymore.
Impact on Credit Score
If the new owner listed on the deed fails to make timely payments, it could negatively affect your credit score, as you are still legally responsible for the mortgage. This can make it difficult for you to obtain credit in the future, with long-term consequences on your financial standing.
Release of Personal Interest in the Property
By signing a quitclaim deed while remaining on the mortgage, you release any personal interest you may have in the property. This means you give up your rights to live in or use the property, even if you are still legally responsible for the mortgage. This could potentially impact your living situation or ability to access the property—making it crucial to fully understand this consequence before going through with the process.
Executing a quitclaim deed while still on a mortgage requires more than just signing the paper. You must understand everything involved in the process, including the consequences. Otherwise, if you understand everything and want a quitclaim deed form , Forms.legal provides free samples that you can use towards a successful property transfer.