How do you transfer a property with a mortgage to a child? Can I give it to them as a gift or sell it for $1?

By Michael Jensen, Mortgage and Finance Guru

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

Updated July 30, 2021

Transferring ownership of a property to a child, or anyone for that matter, is a relatively straightforward process. You can use a quit claim deed or similar legal process to transfer your ownership interest in a property to another person. The process is the same whether you are gifting the property or selling it for a nominal fee such as $1.

You can transfer the property on your own or work with a real estate attorney to make sure the transaction is executed properly. It is important that the necessary documents are filed with your county recorders office so that the property transfer is legally recorded. At the end of the process, the new property ownership is a matter of public record.

Please note that in most cases, if ownership of a property is transferred without the lender's permission, this triggers an acceleration clause (also known as a due-on-sale clause) in the mortgage that allows the lender to demand that the borrower repay the loan in full.  The acceleration clause, however, does not apply when a property is transferred to a child of a borrower.

Another way to transfer property ownership to a child is to refinance your existing mortgage and add your child to the new mortgage and property title. In this scenario, you and your child are joint owners of the property as well as co-mortgagors. You are still legally responsible for the loan along with your child and the mortgage appears on both of your credit reports.

The table below shows refinance mortgage rates and closing costs for top-rated lenders near you. We recommend that you contact multiple lenders to find the best refinance terms.

The final option for transferring the property is to sell it to your child outright and use the proceeds from the sale to pay off your existing mortgage. In this scenario your child becomes sole owner of the home and sole borrower on the mortgage.

In this case your child needs to qualify for the mortgage to buy the property solely based on their financial profile and credit score, which may be challenging depending on their monthly income and debt expenses. This approach is also not really gifting the property to your child -- they are buying it.

If you do decide to gift the property or sell it for a below market value, I recommend that you contact a real estate attorney or accountant to understand the tax consequences of transferring the property. Depending on the value of the property and other factors you may be required to file tax documents related to the gift.

Sources

"Frequently Asked Questions on Gift Taxes."  IRS.  Internal Revenue Service, January 16 2020.  Web.