Can You Add Others to Title After You Purchase a Home?

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Can You Add Others to Title After You Purchase a Home?

Sometimes there is a need or desire to add a new party to a house title after purchasing a home. If your spouse has terrible credit and you have good credit, adding them as a party to the home loan may cause you to have to get aa higher interest rate, which could cost you thousands of dollars over the years. So, it might be best if you can qualify alone, just to add them to the title after the home is purchased. Adding a name to a house title is also common during family changes, such as when a couple marries and wants both names to be on the title, or an elderly parent wants to add a child to the deed to avoid probate. Regardless of the reason, it’s crucial to follow protocol to ensure it is legally binding.

Deed Types

Adding someone to a deed is pretty simple and requires signing and filing one of three types of deeds and then recording the proper forms with your County Assessor. These are the three types of deeds:

  • A quitclaim deed states that the current owner is relinquishing some or all of her ownership in the property.
  • A grant deed is often used when assigning partial new ownership to someone.
  • A Revocable Transfer on Death (TOD) deed became effective in California in 2016. It allows a person to leave the home to someone upon their death to avoid probate issues without establishing a trust. The TOD protects the existing owner from any potential liens or debts of the new owner, only allowing ownership to transfer after the current owner’s death. The quitclaim and grant deed does not offer this protection.

Proper Filing of the Deed

After choosing the type of deed to use, it’s time to determine how to “take title.” For example, a newly married couple may take title as “John and Janet Doe, as joint tenants,” meaning they own the property equally but would transfer the other’s share upon death to the secondary name on the title. If John wanted to preserve his children’s right to his half of the home, the couple would take title as, “John and Jane Doe, tenants in common,” which would transfer his ownership upon his death based on how it is outlined in his will. Once the type of title is determined, complete the forms using blue or black ink, and follow these steps:

  1. Make sure the deed includes the Assessor’s Parcel Number, legal names of parties (existing and new), the Document Transfer Tax or exemption form, and the legal description of the property.
  2. Sign and notarize the document, paying the notary fee.
  3. Record the deed along with a Preliminary Change of Ownership Report obtained at the assessor’s website or office. If a Tax Affidavit is required, it will need to be completed as well.
  4. Pay the required recording fee.

Lender Consent

If there is still a mortgage on the property, typically, no owner can legally assign any part of the property to another person without first getting lender consent. Lender consent protects the financial interest of the lender, who reserves the right to qualify the new owner based on their creditworthiness. Any new owner has a financial obligation to maintain the mortgage.

Possible Tax Issues

Always speak with a tax advisor about possible tax consequences when adding someone to a house title. Before adding a new owner, the existing owner should consider potential financial burdens a new owner might bring. For example, if parents add a child to the title who owes the IRS back taxes and that child dies, the parents may become responsible for that IRS debt because the house is part of the deceased child’s estate. When in doubt, consult an attorney or tax advisor before executing any title changes. Primary Residential Mortgage is also always happy to answer your questions. Contact us today!