Do Quit Claim Deeds Protect Credit Score Ratings

by M. Hunt

Ask Kate do Quit Claim Deeds protect Credit Score Ratings: Kate, I am preparing a quitclaim deed from myself to my husband on a condominium we both own that is now in a trust. (Our trust.) My question is the following: What are the consequences with the mortgage since we are both in the loan contract?



Continued... We are current on our payments and have never been late.
What would happen to my credit score which is now in the 900's if he were to short sell the property in the future?

It is very unlikely, but I just want to make sure that I am clear with my decision to quitclaim this property to him. Thank you so much, M. Hunt

Kate Answers: Do Quit Claim Deeds Protect Credit Score Ratings

Ask Kate at Get-Your-Best-Mortgage-Rate.com
Quit claim deeds seldom live up to the expectation of homeowners.

Here's why! Quit claim deeds do not change who is responsible for future monthly house payments nor do they protect credit score ratings from future mortgage issues, such as a short sale.

Do Quit Claim Deeds Protect Credit Score Ratings

Quit claim deeds transfer the right to ownership, but do not alter the names on the mortgage documents.

When one homeowner quit claims off the title to the property, they transfer their ownership. (They quit their claim to the real estate.)

But they remain liable for the mortgage.

So to answer your question, yes, more than likely, your credit scores of 900 will be adversely affected by a future short-sale. Why? Even though you record a quit claim deed, you will still remain responsible for the mortgage until it is paid off in full.

Quit Claim Deeds & Due-on-Sale Clauses

As a side note, most institutional lenders include due-on-sale clauses in promissory notes to ensure their mortgages are repaid in full when ownership is transferred, aka the property is sold. Today, it is generally believed when one spouse quit claims to the other, this action will not trigger the due-on-sale provision. But as in all legal matters, you would need to consult an attorney to know if this is specifically true in your case.

Protecting Credit Score Ratings

If a quit claim deed does not relieve you of your liability to the lender, how can you protect your credit score ratings? Refinance your mortgage and to be on the safe side, ask specifically to be removed from the title.

Otherwise, any mortgage payments paid late, short sales, or foreclosures are your joint responsibility and will be reported to credit bureaus. Read about the three major credit reporting agencies here and how you can monitor your credit score ratings.
Do you live in a community property state?
Depending on where a house is located, several states enforce community property laws governing property ownership between spouses. So if a married couple is interested in refinancing a mortgage to remove a spouse, the subject of community property should be discussed upfront with their lender to avoid unpleasant surprises at closing.
In additional, you could ask your lender if, instead of refinancing the mortgage, your spouse could individually assume the mortgage. This is a little know and relatively inexpensive way to avoid a more costly refinance. Call your loan servicer (your mortgage coupon booklet will have the toll free phone number) for details.

You will find much more information on quit claim deeds at Get-Your-Best-Mortgage-Rate. For instance, meet Marcel who discovered his business partner, affected by Hoarder's Disease, had ceased making the mortgage payments at Credit Score Ratings and Quit Claim Deeds

Ask Kate and Add Comments

One more thing. Is this page is helpful? I'd like to hear back from you. Anyone can comment on this page (see link to commenting below my response) or ask Kate a different question.

Best wishes,

Ask Kate

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Quit Claim Deed and Ownership
by: Mayra from Killeen, Texasme

Hi Kate, I've been awarded my house by the court with a deed claim and also by my divorce decree.


But the house is still under his name in the bank.

What should I do to put my house on my name through the bank? I've never been in that loan before.

Hi Mayra, Kate here...

Call the toll-free number on your mortgage statement to reach your loan servicer. Tell them you have been awarded the house in the divorce decree which requires you to put the mortgage in your name.

They may allow you to assume the mortgage since you are now on title. Otherwise you will need to refinance the current loan which can be more costly and time consuming.

Before you call your loan servicer to start the process, click here for a better understanding of title vs mortgage or as I like to say, owning vs owing.

Best wishes, Kate

Quitclaim Deed: Refinancing and Equity
by: Anonymous

My x-spouse is refinancing the house so he can pay me my settlement in the divorce. He wants me so sign a Quitclaim Deed before he refinances. But I don't trust him.

I'm afraid after I sign the Quitclaim Deed which says I give up all rights to the property forever and ever, before I get my settlement that he won't pay me my settlement.

Can he avoid paying me after I sign the Quitclaim Deed?

Hi, Kate here...

I'm not an attorney so can't comment on legalities of splitting up property during a divorce. But what I can tell you is this! Once you sign a quit claim deed (QCD), you have relinquished your ownership of the house. However, the QCD does not relieve you of the mortgage obligation.

Please take a few minutes to read my answer to M. Hunt, earlier on this same page. It has further information that I'm sure you will find helpful.

Best wishes, Kate

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You can also ask Kate about your mortgage at How to Improve Your Credit Rating with Amazing Success.

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