What really happens when you transfer title? Many homeowners are under the impression that executing a grant deed to convey title to a third party will erase his name as well from his mortgage.

Wrong! When you transfer title, that just means, the transferee becomes the rightful owner of the property. The mortgage, however, stays with the person who took out the loan. That would be you. As far as your lender is concerned, the promissory note has your name as the borrower, regardless of who is currently on title. Therefore, anytime your friend, who has taken over your mortgage payment, fails to make payment, your lender will run after you, not your friend.

If your objective is to be relieved of your mortgage and just move on, transferring title will not solve your problem. In fact, it could potentially deter you from starting over and rebuilding your credit. The only way to a clean start would be to get rid of both ownership and mortgage. If your property is underwater, and you have explored all options to save your home, you should look into selling your home, most likely a short sale. Selling your home to a third party will not only relieve you of ownership; it will also pay off your mortgage. Then you can move on.