What is a Quitclaim Deed and Why Is It Important When Refinancing?

Buying and selling a home can be a long process for many people. Everything from finding the perfect home to going through the mortgage underwriting process can take weeks or even months.

But what if you just need a quick home title transfer because the home is being passed down from a family member? This is where a quitclaim deed comes into the picture.

Keep reading as we dive into what a quitclaim deed is, why you might want to use one, and some of its pros and cons.

What is a quitclaim deed?

A quitclaim deed is a legal document that allows you to transfer the title of a home to another person without changing anything else on the title besides the name. This allows you to avoid going through the sales process.

However, there are no seller guarantees with a quitclaim deed. This means the legal protections for the person receiving the title are very limited.

Quitclaim deeds vs. warranty deeds: What’s the difference?

Most people use warranty deeds for real estate transactions. The reason is that they provide buyers with more legal protections.

For example, if an outstanding property tax debt on the home weren’t disclosed, a warranty deed would protect the buyer from being responsible for this debt. Quitclaim deeds, on the other hand, are used when you’re transferring the title “as is.”

When should you use a quitclaim deed to transfer property?

Even though quitclaim deeds are not used in most real estate transactions, they have their place. Here are some of the common times when a quitclaim deed is used.

• Adding a spouse’s name to the deed: If you owned a home before getting married, you may want to add your spouse’s name to the title. You may also want to add a spouse’s name to the title if you bought the house without them due to issues with their credit. In both of these situations, a quitclaim deed can be useful. 
• Transferring property between family members: It is common to transfer real estate from parents to children. If the home is paid off, parents can help their children avoid mortgage debt. When this is done, a quitclaim deed can be used.
• Removing a spouse after a divorce: During a divorce, it’s common for one spouse to receive the house when assets are divided. In this case, the other person will want their name removed from the home’s title. This can be done quickly with a quitclaim deed.
• Fixing errors in the title: If your title has a misspelled name or another error, you can use a quitclaim deed to make the necessary updates quickly. 
• Removing a name from the mortgage and deed: If you plan to refinance your mortgage, but the co-borrower has less than ideal credit, you may want to remove them to apply for the mortgage alone. This could help you receive a better interest rate, reducing your monthly payment.

How to create a quitclaim deed?

If you plan to use a quitclaim deed, here are the steps you’ll need to follow.

1. Obtain a quitclaim deed form: You first need to locate the form from your state and county. Often, you can find this online; however, you can also contact your county clerk to request a form.
2. Fill out the quitclaim deed form: Once you have the correct form, you must complete it. You’ll need to know your assessor’s parcel number to do this. This can be found on the deed, property tax, or valuation notice. You’ll enter your full legal name as the grantor and the full legal name of the person you’re transferring the title to as the grantee. Finally, you’ll need to enter the details regarding the title transfer.
3. Have the quitclaim deed notarized: Once the form has been filled out, you’ll need to take it someplace to have it notarized.
4. File the quitclaim form with the county clerk: The final step when filing a quitclaim deed is to file it with your county clerk’s office.

Quitclaim deed tax implication

Using a quitclaim deed makes it easier to give away assets while you’re still alive. Doing so reduces the size of your estate, minimizing the estate taxes your beneficiaries will be required to pay.

Pros and cons of a quitclaim deed

Before deciding to use a quitclaim deed to transfer the title to your home, weighing the pros and cons is important.

Pros

• Quick process
• The transfer would be considered a gift, which is going to reduce estate taxes
• Allows you to transfer a home or property to family members without going through the probate process.

Cons

• Doesn’t provide the grantee with any legal protections.
• Quitclaim deed rules can fluctuate between states.

The Bottom Line

There are several different circumstances when using a quitclaim deed can be a beneficial way to transfer the title on a home. Not only will they help transfer property when planning your estate, but they can also help quickly add or remove a person from the title for a marriage or divorce.

Remember that using a quitclaim deed offers little legal protection so you’ll want to consider that before moving forward.