What is the easiest way for my brother to transfer title and mortgage of a house in Maplewood, NJ to me minimizing my out of pocket costs
he cannot transfer a mortgage. he doesn’t own it, the bank does. he cannot transfer what he does not own.
There are alienation clauses on mortgages, that might not allow the mortgage to be transferred, or atleast, out of your brother’s name. But there are methods to achieve what you are asking, I’m familiar with below.
One way is to do a gift of equity purchase/finance on the home that would allow a transfer of the property without any out of pocket costs.
In the end, it will really depend upon the actual amount of money that your brother would like to net, and what the property can appraise for… but here’s an idea.
Using round numbers, here’s the breakdown:
100,000 Contract Price (also appraised value)
80,000 Net to your brother (this is what he gets)
6,000 Closing Costs (up to 6% for 80% LTV) spend as you wish
86,000 total loan amount
The difference between the 80,000 and 100,000 or 20% is known as the gift of equity to the family member.
This is a broad brush-stoke explanation of the GoE process and the numbers behind it. There are a little ins and outs, but a good mortgage person will be able to help you with the process.
The closing costs will be adjusted to your actual closing costs, essentially, you don’t want to have to come out of pocket. If you brother wants the extra 20K, do a second mortgage on the balance or workout a payment with him till you get a 2nd.
This is commonly what’s done here in FL, with many seniors essentially giving their homes to there children via this method.
but this will not get your brother off of the mortgage.
my brother wants his name off the mortgage and he does not want any money. I want to buy the house from him so will need a new mortgage. But is there a way to avoid coming with large downpayment and closing costs using some kind of interfamily transfer
Sometimes the lender will let you assume the loan with just a small assumption fee…otherwise, you will need to refinance to get him completely off the mortgage.
Keith
Last year I purchased a sfr from a family member for WAY below fmv and I was able to get a loan for 100% of purchase price and even got cash back at closing. The bank looked at the appraised value of the house not the purchase price.
Justin
What I’m referring to is a NEW mortgage done for a purchase (that’s how this tranfer works)… mcwagner is right, your brother would not be removed from a current mortgage, that’s why you need a new mortgage.
It’s set up as a purchase with new financing, satisfying the previous mortgage and changing ownership to you (your bro would be removed from title).
There are costs involved, mortgage and title, but the costs can be financed.
Justinm, on your previous 100% financing… is there MI, or did you need a 2nd mortgage (like 80-20)? If not, they probably structured the financing as a Gift of Equity purchase.
Here’s a link with a little more about GoE programs:
http://www.actionmtg.net/Purchase%20-%20Buying%20a%20Home%20from%20a%20Family%20Member.htm
If you are not looking to take any cash out (or below 70% LTV normal credit scores and the like), you can probably achieve the same effect (same mortgage rates) by doing a refinance, and doing some quitclaim deeding…
At higher LTV’s a purchase/R&T refinance tend to be a cheaper mortgages compared to cash-out refinances.