Beware of the Quit Claim Deed in a Divorce

Beware of the Quit Claim Deed in a Divorce

LegalZoom describes the Quit Claim Deed as follows:  “A Quit Claim Deed in a divorce or legal separation gives one party the sole ownership of the property. This allows that party to sell or mortgage the property without the other party’s approval or consent. It also allows that party to execute a will to give the property to anyone he or she desires.”  In a divorce, the Quit Claim Deed is most often used to transfer property from joint ownership (such as a married couple) to sole ownership.

Before signing a Quit Claim Deed, you must understand that signing removes you from any ownership or control of the property, but DOES NOT remove you from any mortgage tied to the property.  That mortgage is a contract between you and the bank, and the court does not have the authority to nullify that contract.  The court can order that one spouse refinance the home, but it cannot force a bank to grant refinancing if that spouse does not meet their lending criteria.

Therefore it is essential that before signing the Quit Claim Deed that the spouse retaining the home has been fully qualified to refinance the house.   Otherwise, you have given up ownership in a property for which you remain financially responsible.

If you are the spouse who intends to keep the home, it’s critical to speak with a lender early in the divorce process.  Many lenders will not consider alimony as part of your income until there is a history of on-time payments.  This can range from 6 months to a couple of years.  The same applies to child support.  Many lenders require that you receive support for a minimum of three years if you intend to use child support as a source of income.  If your child is 16, that income may not qualify if the support is ordered until he/she is an adult (2 years).

The bottom line… speak to your attorney before you sign a Quit Claim Deed.

Here are some helpful resources on this subject

LegalZoom: Understanding the Use of Quit Claim Deeds in Divorce

Divorce Mortgage Advisors:  Should I Sign A Quitclaim Deed During (Or After) Divorce?