How do you transfer your house under another family member’s name in order to refinance it?

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My sister owns a house. (I helped her with the down payment, but my name’s not on it). The house is in Arizona, but she lives in New York. She’s stuck in a CRAPPY ‘interest-only loan’, and our mortgage is underwater. Now they said that she can’t re-finance it because it’s an investment property, and the person must live in the house to refinance it).

Me and my fiance are looking for a place to live now. So we were thinking of moving into her house, and then refinancing it.

So would she have to ‘sell us’ the house? Gift it to us? can she just add one of our names to it?

thanks for your help guys!

  1. Reply
    Steve D
    May 3, 2011 at 1:29 am

    She is going to have to sell it to you and use the proceeds to pay off the interest-only loan she has. The problem you are going to have is the fact that the mortgage is underwater, which means that you won’t be able to finance the entire purchase and will have to come up with the difference in cash.

    Her bank is not going to allow her to add your names to the deed since that dilutes their collateral interest in the house.

    This is all based on the assumption that you provided only help with the down payment and your name is not only not on the deed, but also not on the mortgage.

  2. Reply
    May 3, 2011 at 1:30 am

    you do understand as soon as the title deed changes hands, the mortgage is probably due in full?

    If you want to buy her home, mortgage and pay it off, you’ll probably need some serious cash if it is that far underwater

  3. Reply
    Beverly S
    May 3, 2011 at 2:06 am

    She can’t take her name off of it unless it’s paid in full. She can’t gift it to you when the bank still owns it. She could add you to it but that doesn’t add you to the loan, just the deed, You probably need to buy it from her & get your own loan for it, but you may have trouble qualifying with two house payments.

  4. Reply
    May 3, 2011 at 2:42 am

    If she sells you the house, the mortgage comes due and she has to pay what’s left on it. Which is more than the value of the house. Unless you plan to pay off the mortgage by buying it from her at above-market price, this won’t work.

    If she gifts it, the mortgage is still due. And you MAY have to pay gift tax on the market value of the house.

    She can add you to the deed, but this won’t help since the mortgage company wants to have the owner living in the house. You cannot easily add someone to a mortgage without a refi. And you already know that a refi isn’t going to work.

    In the end, someone is going to need to pay off the mortgage. Since it’s more than the value of the house, I’m guessing that won’t happen.

    What she can try is to find another lender that’s willing to do the refi. Unlikely in today’s market for that to happen. But worth a try.

    Otherwise, the only thing is for HER to move into the house.

  5. Reply
    My Take on It
    May 3, 2011 at 2:46 am

    You would have to buy the house outright from her, but, it sounds like that won’t happen if she is underwater in her mortgage. Unless she has some cash on hand to bring to closing. You cannot do a short sale in this instance, because the buyer has to be at arms length meaning no relatives.

    You may want to do a lease option or just rent it from her. She wouldn’t be wise to add your name to the title without you two being on the loan.

  6. Reply
    May 3, 2011 at 2:48 am

    She can’t gift it to you, cause she doesn’t own it; the bank owns it. She is only the proud owner of a nice interest-only loan. She’d have to sell it to you, which means you and your husband must qualify to purchase the home, AND to get her out of this mess she’s in, you’d have to offer a price that will cover her full loan. This could cause a problem with your mortgage, since the appraisal will be below what she owes. You can’t refinance her loan yourselves.

  7. Reply
    May 3, 2011 at 3:23 am

    You got a couple different issues here, and some bad information too.

    First, your sister owns the property, not the lender. The lender has a lien. When the property is transferred, the mortgage will have to be paid off as part of the transfer, and the lien will be released.

    Whether or not an interest only loan is crappy depends on the situation. For most people, it’s the wrong loan. There are some circumstances that are great for I/Os, but not for the average person.

    “Your mortgage is underwater.” Now, does that mean the loan on your sister’s house is underwater or do you and your fiance own a different house? If you have a loan on another house and you’re underwater on it, how are you going to get a mortgage to pay off the loan for the house you want to acquire? Somebody has to pay off your sister’s loan before you can be the owner. If your sister’s loan is underwater, that’s why she can’t refinance it. She would owe more than the value of the house. Investment property can be refinanced so if she’s isn’t underwater, there’s probably some other reason you aren’t aware of that prohibits the refi. Maybe she needs to try a different lender. Not all lenders deal with investment property the same way.

    You can move into her house with her permission, after all it’s rental property. Selling it to you is a possibility (if you aren’t abandoning another mortgage…if you are doing that, no lender will give you another loan for a long long long time) and she can give you a gift of equity. If she gives you the house, the loan has to be paid. If she sells you the house, you would get a new mortgage in your name and that pays off the loan.

    Can you get a mortgage? That’s a big question here and I’m not clear on the details. I have a very literal mind, so when you say you’re not on the warranty deed and then say our mortgage is underwater, you confuse me. I have to assume you have another house. She’s stuck and our mortgage makes it sound like two different things.

    No you can’t just be added to the mortgage. There’s a chance you could be added to the warranty deed but not be responsible for the mortgage. If I was your sister, I wouldn’t like that. Without seeing the loan docs I don’t know; it would be rare, but possible. Your sister could call the title company that prepared them and ask if granting part of her interest in the property to you would excelerate her loan, i.e. make it due. They probably can’t talk to you about it.

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