What Kind of Deed for a Paid-Off Mortgage?

When you purchase property, you are granted title to the property, and a deed is issued and recorded by your county's recorder of deeds. Until you pay off your mortgage, your lender holds title and the deed to the property. Once you pay it off you are granted the title and deed. The deed you are issued depends on the history of the property you purchased. "A warranty deed," according to Bankrate.com writer Holden Lewis, "is used in most sales of property."

Purpose of a Deed

The purpose of a deed is to convey, or grant, ownership of land to a particular person or entity. There are several types of deeds and the differences are important. The protection provided by the deed varies by type. The most common deed is the warranty deed. It affords the most protection from claims to your property by previous owners or their heirs.

Warranty Deed

Warranty deeds not only convey the property title to the buyer, but they also guarantee -- or warrant -- that the grantor has the legal right to sell the property. Though a simple deed transfers the title to you and does state that you own the property, it does not guarantee anything about the history or state of the property. A warranty deed, on the other hand, guarantees that the property is free from defects, there are no liens against it, it isn't being used as collateral and there is no one who can claim a better title to the property. If a conflict arises, you are guaranteed compensation.

Special Warranty Deed

A special warranty deed is like a warranty deed, but it only covers the time period when the grantor owned the property. It makes no promises about what went on with the property before he bought it. This means that, although the grantor has free claim to the title, he doesn't guarantee that you will. For example, if a prior owner of a house signed a quit claim deed, he could come back and challenge your ownership. If he won, you would lose the house because the grantor only guaranteed a clear title going back to when he bought it. You are not guaranteed compensation and you could lose everything you put into the property. This couldn't happen with a warranty deed.

Quit Claim Deed

A quit claim deed transfers a person's interest in the property. It does not guarantee title or possession. If there is a quit claim deed in the history of your property, buy carefully. Research the property to find out what happened with the quit claim. It could be something as innocent as an aging parent putting a son or daughter on the title. If you are only granted a special warranty deed or a simple deed with a quit claim in the property's history, be careful. You have no guarantees about a clear title and are guaranteed no compensation should you lose your house.

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