When real property is transferred from one owner to another owner, a deed must be executed in order to legally transfer ownership. Typically, a warranty deed is used when property is sold through traditional channels. A quitclaim deed, however, is often used to transfer interest in property between family members, such as during a divorce, when concerns about the title are not an issue. You may quitclaim your interest in a property while you still owe on the mortgage; however, you will still be legally responsible for the debt owed on the property.
Although there are variations on the standard warranty deed, the most common deed used to transfer property is a general warranty deed. As the name implies, a warranty deed warranties, or guarantees, that the person transferring the property actually has a clear title to the property. When a buyer purchases a property through a traditional real estate transaction, she usually receives a warranty deed to the property at closing. Typically, a title company is hired to research the property first to be certain that there are no unknown liens, judgments or encumbrances to the title prior to the buyer taking possession.
A quitclaim deed, unlike a warranty deed, does not make any warranties as to what interest the seller, or person transferring the property, actually has in the property. A quitclaim deed only transfers whatever interest the seller has in the property. If the seller only has a fractional interest in the property, then only that interest is transferred. If there are liens or other encumbrances on the property, such as a mortgage, then those encumbrances continue to exist after the deed is executed.
Although some buyers are able to pay cash for the purchase of property, most rely on financing by taking out a mortgage on the property. A mortgage is simply a loan that is secured by the property itself. When you agree to a mortgage, the lender places a lien on your property for the amount owed on the loan. The lien remains attached to the property until the mortgage loan is paid in full. The deed, or title to a property, and the mortgage note are two separate legal documents.
Many people are under the misconception that signing over the rights to a property by executing a quitclaim deed releases them from liability for the mortgage loan. This is not the case. While you may be able to quitclaim your interest in a property while you still owe money on the mortgage, this does not release you from liability for the mortgage loan. Executing a quitclaim deed simply transfers your legal interest in the property to another person, effectively leaving you with the full liability for the mortgage loan but no legal right to the property that is held as security for the loan.