Taking over an existing mortgage - pros/cons please

[Anteater Alum_IHB]

<p>I wanted to get some feedback regarding this scenario. My sister wants me to take over her home as we may be relocating to the area. She bought it several years ago for alot cheaper than what we could buy any home in the area today, resale or new. We haven't discussed whether we will do a formal sale to each other. Not sure if that's necessary? She would continue to reside with us, something we very much want. We would likely figure out % of equity ownership, etc. as it progresses. Here are my questions/concerns:</p>

<p>1. Does the title work get redone to reflect my name and can it be done without an official sale involved?</p>

<p>2. Do I get added to the existing mortgage so I can claim interest write-off?</p>

<p>3. Or, do we have to refinance? I don't believe she is planning to take any equity out.</p>

<p>Thanks for your feedback and expert opinions.</p>

 

[graphrix_IHB]

<p>AA - You can check with the lender or if your sister kept the loan documents the loan could be assumable. But most likely it will not be if it is a conforming fixed rate loan or a more coventional loan. This was a popular selling tactic in the 80s when rates were 20% the seller would have the selling point of assumable loan at 13%.</p>

<p>1. Yes you would have to get a title change if you assume the loan. I would highly recommend you get added to title in anyway that you do possess the property. </p>

<p>2. This will not work because of all the changes the lender would have to do. As far as I know if you live there and pay the mortgage company directly you could take the interest deduction but please check with an accountant. You can be added to title to make it more official and this could be the cheapest route depending on the interest rate your sister has on her loan. </p>

<p>3. This is an option and on the refi you can be on the loan and title. This would probably be the easiest and cleanest way to do it. You could also save some money if you can lower the interest rate or better yet reduce the term of the loan. If you do not reduce the term but she has been there 10 years just get a twenty year loan or if she has been there for 5 years get a 25 year loan. If your sister is going to live there and help pay the mortgage option 2 and 3 are the best choices.</p>

<p>How to figure the equity is up you and your sister and could be a sticky subject. For example if she bought for $300k and it is worth $500k she has $200k in "equity" then is she entitled to that "equity" when you do sell? What if you sold for $515k? Or she decides she needs that equity and the only way to get it is for you to refi and if you couldn't afford it then you would have to sell it. I am not saying that your sister would do this in malicious way but life does change. I think it would be best to sit down with her and discuss what both of your expectations are. Once you both come to an agreement then get it in very detailed writing. Some more details on this would help me give you more advice on this part. I am surprised nirvinerealtor hasn't posted here because she could add some advice on the title change. You may want to send her a whispered comment on another thread to come over here and see what she thinks. Let us know if you have more questions.</p>

 

[nirvinerealtor_IHB]

Anteater,





Ok, I just pretend I am you. This is how I feel or would do. When it comes to BIG MONEY, I would not mingle with family; becasue I value family more than money. These partnerships eventually end up in litigations or in court down the road, the judge order to sell house and split equity. Then a realtor comes in and sell the house with higher fees because of the fightings he/she has to deal with. I personally get assignments to sell to dissolve partnerships like what you are thinking. Not a fun thing for me to do but it's my job. Court orders to sell within timeframe so price is compromised.





I strongly advise you to keep it very CLEAN. The reason, life is all about changing events. What works today could be a tomorrow's nightmare.





Here are a few CLEAN suggestions


a. Pay rent to live in your sister's house.


b. Buy your sister's house free and clear. BUT YOU MUST FEEL THAT THIS HOUSE IS THE BEST HOUSE AND BEST PRICE YOU CAN GET. SO LATER ON YOU DO NOT FEEL SHORT CHANGE AND RESENT YOUR SISTER. Your sister can have the $250K or $500K tax exemption for living in the house 2 of the last 5 years if she sells to you free and clear. Me, I would not even touch this house because I do not want to take any risk with family.





<strong>OK, you are a big risk taker, so here is my comments,</strong>


<strong>1. Does the title work get redone to reflect my name and can it be done without an official sale involved?</strong> Yes, your sister can grant you ownership through joint tenant or tenant-in-common. You have ownership and no liability. Go to any escrow company so they can do the paperwork for you if you are not comfortable with doing the grant deed yourself. Cost is between $75 - $200.





If you make payment for 12 months, you can refi and take your sister's name out of the loan completely. It's going to be a cash-out so it's tricky. Please contact your loan officer to plan this out.





<strong>2. Do I get added to the existing mortgage so I can claim interest write-off?</strong> No, you can not get on the mortgage without refi. If you make mortgage payments and your name is on the deed, you can deduct the interests (make sure there is no double deductions between you and your sister) even if your name is NOT on the loan. Please verify this with your CPA.





<strong>3. Or, do we have to refinance? I don't believe she is planning to take any equity out.</strong> Yes, you can refi now and add your name of the loan; thus on the deed.





<strong>You must have a written contract between you and your sister. I personally would use a real estate attorney to write up a contract. The attorney can spell out all the "what if" situations and resolutions.





Good luck to you.</strong>

 

[mortgage ques_IHB]

I'm buying my home from my brother, but I don't know ANYTHING about mortgage and financing. In addition to paying the monthly house payments and yearly insurance and taxes to him I've paid almost $17,000.00,with the agreement that we wiil go to the bank with this information when I have paid $20,000.00 and I will take over the mortgage. I'm only $3,000.00 away from this goal and I would like to know the steps to take to go about this.

 

[xsocal land merchant_IHB]

<p>NIR is soooooooooooooooooo correct on what she said about keeping it clean and not mixing family and money. Real estae laws overrule side deals and family agreements and don't forget the tax implications. </p>

<p>Awgee may have a view to share about the tax ramifications unless you purchase with a new mortage.</p>

<p>Regards</p>

 

[awgee_IHB]

You can deduct the mortgage interest if your name is on either the deed or the mortgage. And you can deduct the taxes if you pay them.