What Does a Quit Claim Deed Really Do?
In Iowa, a quit claim deed is usually part of a dissolution of marriage for the primary residence. Usually, a refinance of the property is necessary in exchange for the other spouse to release their claim on the property.
However, what if you weren't married but you were on the mortgage? If you qualified together to purchase the property, will one person be able to afford to refinance on their own? The answer may be, not always.
When you sign the quit claim deed and there is not a recorded document requiring the person that is remaining in the home to refinance the mortgage, it can mean possible trouble down the road.
Here is the example. A potential buyer called me today. He is looking to purchase a home in a few months. In our conversation, he brings up that he is still on the mortgage for a house out of state, but he signed the quit claim deed to her, so everything should be okay. No, that isn't necessarily how it works. Because you see, she has not refinanced the house so that you are no longer on the mortgage. She is making the payments, but the lender is going to consider that as part of your debts. Ultimately, you are still responsible for that mortgage with her. And signing the quit claim deed may have removed your rights to the property or to force a refinance or a sale.
Be careful when you agree to sign away your rights. An attorney is necessary for these types of decisions and you want to protect your credit and your future by making sure that you are able to move forward. The buyer will be calling his attorney to find out what needs to happen to get the mortgage out of his name. I hope that the attorney is able to give him good news.
Keep smiling!
Karen
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