Mortgage  Question?
How do you transfer ownership interest in a property?

How do you transfer your ownership interest in a property?

Harry Jensen
, Trusted Mortgage Expert with 45+ Years of Experience
Edited by Michael Jensen

As long as the owner holds legal title to the property, he or she can transfer 100% or a fractional ownership interest in the property without the consent of a third party. From a technical standpoint, you do not “sign over“ the existing property deed to the new owner but rather issue a new deed, which is the legal document that outlines the new ownership structure.

Transferring all or part of your ownership interest in a property is usually done by executing a grant deed or a quitclaim deed. The document you are required to use depends on the state and county you are located in and the terms of your specific transaction.

The grant deed and quitclaim deed outline the terms of the ownership transfer including the percentage of ownership being transferred, the party(ies) transferring the interest -- also called the grantor --- and the party(ies) receiving the ownership interest in the property -- also called the grantee.

If a property has multiple owners, then all owners are required to sign the grant or quitclaim deed to affect the property transfer. Additionally, if multiple parties are receiving an ownership interest in the property, then all recipients are required to sign the deed. For example, if parents want to transfer a property to their children, both of the parents and all of the children receiving the property are required to execute the document.

The transfer of property ownership is governed primarily by state and local regulations. If you want to transfer your ownership interest in a property, we recommend that you work with a qualified real estate attorney or settlement agent, such as an escrow company, to guide you through the process.

A licensed attorney or local escrow company should be familiar with the required documents and local procedures to follow to implement the property transfer. Additionally, for the transaction to be official, it must be recorded by your county recorder’s office. When the property transfer is complete, it is a matter of public record. Please note that you may be required to pay county recording fees and potentially transfer tax fees depending on local regulations and policies.

It is important to highlight that most mortgages contain an acceleration clause, also known as an alienation clause, that requires the borrower to immediately repay the outstanding loan balance in full when 100% ownership of a property is transferred. If you do not have sufficient funds to payoff the mortgage when the clause is triggered, the lender may foreclose on the property.

If you intend to transfer 100% ownership interest in a property that has a mortgage be sure to review the loan documents to understand if an acceleration clause applies to your situation. Depending on how the property transfer is structured, you may be required to payoff the principal loan balance with your personal funds or by refinancing the mortgage. This is another example of a situation when a real estate attorney can be helpful to help you determine the best course of action.

One way to avoid triggering the acceleration clause when you transfer ownership of a property is for the existing property owner(s) to retain a fractional ownership interest and remain on the property title. In this case, because 100% ownership of the property is not transferred, the alienation clause should not be an issue and the lender should continue to accept payment from the existing owners, even though their ownership interest changed.

In closing, the best advice we can give if you are considering transferring your ownership interest in a property is to work with a real estate attorney or escrow company that has extensive experience advising on transfers.  This approach helps to ensure that the transaction is structured correctly for the benefit of all parties involved.

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About the author
Harry Jensen, Mortgage Expert

Harry is the co-founder of FREEandCLEAR. He is a mortgage expert with over 45 years of industry experience. Over his career, Harry has closed thousands of loans for satisfied borrowers and now offers his advice and insights on FREEandCLEAR.  Harry is a licensed mortgage professional (NMLS #236752). More about Harry

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