I purchased a house in Tucson with a military buddy after we both separated 4 years ago.
Now, Tucson prices have since trended downward like everywhere else. My buddy and I have come to an agreement that I would walk away from the house, and he would become the sole owner as I will be moving out of the state shortly.
My question is how do I get my name off the mortgage without refinancing or my buddy assuming the loan??
Both would cost between 1.5-4 k. More than he and I would like to dole out.
Unsatisfactory options that we have come up with so far are:
Quit claim deed me off the title, I stay on the CitiMortgage loan and cross my fingers that he never defaults (His credit is in the 700s). Also, obviously the credit agencies will still report me as having a large liability, even though Im not paying for it. Would this hurt my chances of purchasing another house in the future?
Keep me on the title, and I stay on the Citimortgage loan. And agree that he will be solely responsible for payments, and I will have no interest in the property (unless he were to default) At least this way I would have part control of the house should he miss a payment.
Please let me know if there is anything else that I have not considered. I Appreciate any and all advice.
If both of you are on title on the loan and on the property, why not just call the lender’s info. line and ask them?
It must happen all the time in divorces. One spouse leaves and one keeps paying the mortgage.
If you have a good payment record they should allow the one person to keep paying. Then deed yourself off; see if the title company that you dealt with on the purchase can help you with this and record it.
Let’s hope one of the attorney readers adds to this.
Getting yourself off the title does not get your name off the mortgage loan. You will still remain liable on the loan. If your buddy gets into trouble and the property goes to foreclosure, the foreclosure will appear on your credit report too.
Suggest you remain on title until your buddy can refinance in his own name, and then quit claim to him at settlement.
And how will me being on the loan and showing up on my credit reports effect my ability to obtain a loan? I mean it would not be a true liability as I would not be contributing anything to payments Will this become a problem when I go to buy another house?
This is not really going to help you in your situation, but as an illustration of my feeling about going into business with friends or family. You trust friends and family so you don’t make up partnership documents spelling out roles and responsibilities. The less you trust a potential partner the more chance of success because you wouldn’t be doing it unless you both had specific benefit to the partnership. Because you don’t know or trust him you must use the appropriate legal documents etc. I have a test that must be passed before I do business with you. I never do business with anybody that I can’t sue. I can’t sue my relatives because then I could never go to Christmas or Thanksgiving. I can’t sue my friends because then I can’t go to the Independence day party etc.
I invest along with a couple of my friends. What we do is I buy a house, fix it up and rent it out. He buys a house he fixes it up and rents it out. We talk to each other while we are doing this. Just last week he was having an inspection on one of his houses in a day and was working on finishing up the painting. I grabbed a six pack and my airless paint sprayer and went over there and helped him paint. I am not in his deal and he is not in mine. We just talk to keep the relationship open and bounce ideas off of each other, but we do not do business together.
It is better than being partners because I buy 10 houses and he buys 10 houses we both own 10 houses. If I buy 10 houses with him, I really only own half of 10 houses or like 5 houses. It doesn’t make much since to me.
Yeah, I could have used that advice 4 years ago! I was young, dumb and had a fair amount of money saved up from the service…
Anyway, would I be able to explain away this mortgage to a lender since Im not actually making any payments on it? Say, 12 months down the line, could I present the lender with evidence that I am not the one making the payments, but they are being made faithfully?
You may not need to. If you have the income to qualify for a new mortgage, it won’t matter that you already have a mortgage on your credit record.
You can even rent out your half of the house and use the rental income to pay for your share of the mortgage payment and repair expenses.
Why can’t or why won’t your buddy refinance the property into his own name and essentially “buy” you out? His not wanting to pay to refinance is not a good enough reason to put your credit in jeopardy if things so sour. If your buddy won’t refinance, your best protection is to stay on title.
I can tell you from unfortunate personal experience that the bank holding the mortgage doesn’t give a crap if you’re on the title or not. Upon my divorce, my ex (usually referred to with a more “colorful” name I won’t use here) was given 90 days to refinance our house in her name or sell the house. Well, that time came and passed. She did nothing. Guess her and her loser unemployed live-in flavor of the week boyfriend couldn’t seem to qualify for a mortgage. I had to drag her back into court to force her to sell the house. Really the only thing she ended up with from court the first time would have been the equity in the house. When the judge forced her to sell on my terms (sale price of mortgage payoff plus Realtor fees), she lost that too. In the mean time, she’d quit making payments on the place. and was 120 days behind. After me having graciously supporting that pathetic household for about 2.5 years while fighting for custody of my kids, I simply didn’t have it in me to pay for a mortgage for them anymore. Moral of the story is that even though I had a court judgement saying I wasn’t responsible for that mortgage anymore, the bank didn’t care a bit about it and I have a 120 day late mark on my credit and was about two weeks from foreclosure.
Besides your cedit score the banks will consider your debt to income ratio when you apply for a new mortgage. Not too many ordinary working folks can qualify for 2 mortgages. So it is possible that having your credit report show that you are obligated for one mortgage already will prevent you from qualifying for an additional mortgage.
There aren’t many mortgages that are assumable, but if you were in the military, you might possibly have one of them. Check with the mortgage holder and see if your friend can assume the mortgage.
Your other good option is to have your friend re-finance and cash you out.
Do not take your name off the property unless your name is taken off the mortgage. You can probably have the mortgage holder send you statements (or set it up to check on line) so that you can see that the payments are being made.
I suggest that you tell the friend that he can assume or refinance, or you stay on the title and you’ll take your cut when it finally sells.
He’ll be making the payments, but if you own half the house, he owes your rent, so that the house payment money is partially yours, too.
One last option is to sell it, pay off the mortgage and your friend can buy another house on his own.
Nearly all conventional mortgages are assumable if the borrower qualifies. Good suggestion to have the buddy use his VA entitlement to refinance the mortgage loan into his own name. Provided the property will appraise at least as high as the mortgage loan amount, maybe a 100% refinance could be done with a VA loan. On the other hand, if the existing loan is already a VA loan, the buddy is already on title and on the note. He does not have any VA entitlement left to apply toward a substitution of liability.