Thanks for the chance to help. I am an attorney with over 12 years experience. Hopefully I can help you with your legal question.
The quit claim to you makes it your property, legally
So you can certainly attempt to use that as backing for a loan.
But understand that the value that creditors will give is limited by the existing mortgage.
ALSO, understand that if you pledge this home as collateral, that could cause the current lender to discover the quit claim transfer...which could cause them to call the loan (demand it be paid immediately)
To a potential creditor a home is only worth the equity in the home. So, for example, if the home is worth $100K on the market today (if it would sell for that amount) and there is a mortgage for $80K? Then there is only $20K in equity. But you would not get that in a loan...not today. Since if you pledge this as collateral, the creditor is "second in line" behind the primary mortgage. So if there is a default, in order to collect, they have to foreclose....and then pay off the primary lender and the costs associated with foreclosure
before they can get any of the principal back.
So a good rule of thumb is you need 25% equity before you can start to get a creditor interested in a loan for a home with a mortgage.
So...for that $100K home, you would need to owe less than $75K to start....if the primary loan was $50K, it may be a lender would lend $20K or so...
But that leads to the second problem...
You have to look at the original loan contract
. If it is a conventional FHA mortgage there is most likely a clause in the loan that allows the bank to call the loan if title
If you have this clause, and you try and execute a 2nd? Once that is recorded, the primary lender will have notice and, most likely, will call the loan...will demand payment in full of the loan. IF you can not pay in full? They will sell the home at foreclosure auction to recover their money.
So it may be possible to do this?
But it also is likely not a very good idea