Author Topic: mortgaged property ownership transfer - is it possible?  (Read 5110 times)

The Money Monk

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mortgaged property ownership transfer - is it possible?
« on: May 16, 2014, 01:52:19 PM »
I am looking to buy a rental property, but probably wouldn't be able to get financing for an investment property as I already have a mortgage (and it doesn't really have any equity as it was a 0% down VA loan).

My mortgage payment is low and the investment property would be in the price range that with my savings rate I could afford to make the entire payment (mortgage and insurance and taxes) even if it was never rented out, so risk is not a huge issue.

Currently my concubine is paying 'rent' to live with me. She has excellent credit and makes more than I do and isn't interested in buying an investment property of her own.

If she qualifies for the mortgage and buys the investment property herself (I would pay the down payment), what options are there for transferring the property to me after the sale?

I imagine the bank wouldn't allow her to transfer the loan to somebody who wouldn't have qualified in the first place, but Is there some kind of contract we could draw up that states I am essentially buying the house from her by taking over the payments, or something along those lines?

Or is this sort of thing generally not allowed, or otherwise frowned upon?

Any ideas on how to make this situation work are appreciated.

The Money Monk

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Re: mortgaged property ownership transfer - is it possible?
« Reply #1 on: May 16, 2014, 02:27:32 PM »
I just don't make that much money, and even though I have a decent savings rate I doubt banks would be willing to loan me more with my current debt to income ratio.

But I will likely try first, I just want to have a backup plan.

SDREMNGR

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Re: mortgaged property ownership transfer - is it possible?
« Reply #2 on: May 16, 2014, 06:57:57 PM »
2 issues. 

1. Due on Sale clause.  All loans these days have this clause that says that the loan must be paid in full when a sale of any sort happens, even just a name change.  I am wanting to transfer the office that I own through a company into my personal name.  The bank said it'd be $500 to have them do the paperwork for the transfer.  Most banks allow this for name changes (like transferring into your trust).  Not sure that they'd allow it in your case because your concubine is a separate non-related entity.

2. The damn thing is in her name!  She can decide to go splitzville and tell you to F-off and there's nothing you can do about it.  It's legally in her name as well as the loan.

So the short answer is, unless you trust your savings to her and that she wouldn't screw you over, you shouldn't do it.  And if you do trust her, then you are an idiot and you shouldn't do it.  Believe me, I looked into this sort of thing back when I was in my 20's and thinking the same thing you were. 

However, the best bet may be to purchase it together.  You'd have to give up some ownership, but you could agree upon what percentage, and you'd be able to use her to cosign the loan and use her better credit and earnings. 

mooreprop

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Re: mortgaged property ownership transfer - is it possible?
« Reply #3 on: May 17, 2014, 07:18:30 AM »
First of all, pleeease do not use your money as a down payment for anything that is not in your name.  This could end very badly.  Second, you should be able to get a loan if the property cashflows (and should not buy the property if it does not cashflow).  When I was first starting to purchase rental properties, I did not realize that I could/should include the rent as part of my income.  Include the projected gross rent for each month on your loan application as income.  That way, as long as the loan payment does not exceed 40% of the rent, your ratios should be fine.  If the payment does exceed 40% of the rent, then you should reconsider buying the property anyway.  I hope this helps, and wish you all the best in your foray into real estate investing.  It is a great way to attain great wealth with limited income from your job:)

arebelspy

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Re: mortgaged property ownership transfer - is it possible?
« Reply #4 on: May 17, 2014, 08:19:07 AM »
Is there some kind of contract we could draw up that states I am essentially buying the house from her by taking over the payments, or something along those lines?

Or is this sort of thing generally not allowed, or otherwise frowned upon?

Yes and yes.

It can be done.

Google "subject to mortgage".

It has risks. (The acceleration clause, aka "Due on sale" to the layman is one - Google that.)

They can be mitigated.

Why do you want it under your name?

It's fairly involved, and I don't feel like typing it out, but I'd be happy if you wanted to discuss over the phone sometime, or feel free to post more specific questions once you've read up on the idea.  It'll give you an idea of what to say before you go consult a lawyer on the topic so you have the basic structure in mind.
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The Money Monk

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Re: mortgaged property ownership transfer - is it possible?
« Reply #5 on: May 17, 2014, 10:55:15 AM »
Is there some kind of contract we could draw up that states I am essentially buying the house from her by taking over the payments, or something along those lines?

Or is this sort of thing generally not allowed, or otherwise frowned upon?

Yes and yes.

It can be done.

Google "subject to mortgage".

It has risks. (The acceleration clause, aka "Due on sale" to the layman is one - Google that.)

They can be mitigated.

Why do you want it under your name?

It's fairly involved, and I don't feel like typing it out, but I'd be happy if you wanted to discuss over the phone sometime, or feel free to post more specific questions once you've read up on the idea.  It'll give you an idea of what to say before you go consult a lawyer on the topic so you have the basic structure in mind.

Thanks for the info.

I am actually trying to get her to just buy a small investment property herself, but she is a financial-commitment-phobe.

She has no debts but like 3k on a car loan that she could pay off now but its at like 2% or something, and she is just not interested, but there a bunch of sweet places around here, like triplexes for $80K and stuff.

So since she is not interested I at least wanted to take advantage of the opportunities myself.

more info: For all practical intents and purposes we are married, but I think marriage in its current form is pointless.
We have been together almost 10 years, and cohabitating for like 7. So while there is always risks, I think we should be considered in the same boat as married couples as far as that goes.

I will most likely try to get a loan myself based on the rental income as some have suggested, since the amounts we are talking about for the properties I'm looking at are not that high (no more than 100K, usually significantly less)




SDREMNGR

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Re: mortgaged property ownership transfer - is it possible?
« Reply #6 on: May 17, 2014, 11:40:27 AM »
Just as an aside, "practically married" is very very different from "married."  People who say that marriage is just a piece of paper.... I say to them, "THEN JUST GET MARRIED!"  It is a huge legal and financial and emotional commitment.  Whether you choose to do it or not is up to you and whether you think it's worth it or not is also up to you, but long term cohabiting people who think it's that same as marriage are mistaken.  That piece of paper is worth (or can cost you) a lot.

Also, in all seriousness, I don't know what state you live in, but look into common law marriage laws for your state.  If you do end up buying property together, the common law marriage statute may affect what happens to that property if you guys split up.
« Last Edit: May 17, 2014, 11:42:31 AM by SDREMNGR »

The Money Monk

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Re: mortgaged property ownership transfer - is it possible?
« Reply #7 on: May 17, 2014, 12:42:10 PM »
Just as an aside, "practically married" is very very different from "married."  People who say that marriage is just a piece of paper.... I say to them, "THEN JUST GET MARRIED!"  It is a huge legal and financial and emotional commitment.  Whether you choose to do it or not is up to you and whether you think it's worth it or not is also up to you, but long term cohabiting people who think it's that same as marriage are mistaken.  That piece of paper is worth (or can cost you) a lot.


Not to derail the topic, but that's all mostly hogwash.

First of all, I never said it was just a piece of paper. It;s a government-regulated relationship contract that can't be enacted the way you want (even signed pre-nups get disregarded all the time).

 My relationships are not something I'm interested in having the government issue me a 'license" for. fuck that.

I already have the commitment, and I don't have to go to the courthouse to prove it to you or anyone else.

And as for all the supposed tax benefits, yeah real romantic, I think I'll pass.

I Also never said a long-term cohabitating monogamous couple is the same as marriage. It isn't, and that's why I'm not getting married. it SHOULD be the same. What exactly should be different about it?

The only people for whom that 'piece of paper' is 'worth a lot' are: women who want a big ceremony, people after tax breaks, or people who need external validation for their otherwise identical relationship to feel 'real'
« Last Edit: May 17, 2014, 12:45:20 PM by The Money Monk »

Gin1984

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Re: mortgaged property ownership transfer - is it possible?
« Reply #8 on: May 17, 2014, 01:26:17 PM »
Just as an aside, "practically married" is very very different from "married."  People who say that marriage is just a piece of paper.... I say to them, "THEN JUST GET MARRIED!"  It is a huge legal and financial and emotional commitment.  Whether you choose to do it or not is up to you and whether you think it's worth it or not is also up to you, but long term cohabiting people who think it's that same as marriage are mistaken.  That piece of paper is worth (or can cost you) a lot.


Not to derail the topic, but that's all mostly hogwash.

First of all, I never said it was just a piece of paper. It;s a government-regulated relationship contract that can't be enacted the way you want (even signed pre-nups get disregarded all the time).

 My relationships are not something I'm interested in having the government issue me a 'license" for. fuck that.

I already have the commitment, and I don't have to go to the courthouse to prove it to you or anyone else.

And as for all the supposed tax benefits, yeah real romantic, I think I'll pass.

I Also never said a long-term cohabitating monogamous couple is the same as marriage. It isn't, and that's why I'm not getting married. it SHOULD be the same. What exactly should be different about it?

The only people for whom that 'piece of paper' is 'worth a lot' are: women who want a big ceremony, people after tax breaks, or people who need external validation for their otherwise identical relationship to feel 'real'
There are over 1000 benefits that come from marriage, actually.  One of which is in regards to medical access.

The Money Monk

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Re: mortgaged property ownership transfer - is it possible?
« Reply #9 on: May 17, 2014, 01:38:41 PM »
Just as an aside, "practically married" is very very different from "married."  People who say that marriage is just a piece of paper.... I say to them, "THEN JUST GET MARRIED!"  It is a huge legal and financial and emotional commitment.  Whether you choose to do it or not is up to you and whether you think it's worth it or not is also up to you, but long term cohabiting people who think it's that same as marriage are mistaken.  That piece of paper is worth (or can cost you) a lot.


Not to derail the topic, but that's all mostly hogwash.

First of all, I never said it was just a piece of paper. It;s a government-regulated relationship contract that can't be enacted the way you want (even signed pre-nups get disregarded all the time).

 My relationships are not something I'm interested in having the government issue me a 'license" for. fuck that.

I already have the commitment, and I don't have to go to the courthouse to prove it to you or anyone else.

And as for all the supposed tax benefits, yeah real romantic, I think I'll pass.

I Also never said a long-term cohabitating monogamous couple is the same as marriage. It isn't, and that's why I'm not getting married. it SHOULD be the same. What exactly should be different about it?

The only people for whom that 'piece of paper' is 'worth a lot' are: women who want a big ceremony, people after tax breaks, or people who need external validation for their otherwise identical relationship to feel 'real'
There are over 1000 benefits that come from marriage, actually.  One of which is in regards to medical access.

And I think that it is ridiculous that couples have to submit to the government's current idea of a marriage contract to get those benefits.

Lets put it this way: with respect to this thread, just pretend I am in a committed gay relationship in a state where we can't get married and structure your advice accordingly.

I'm obviously not going to convince anybody of my point of view when it comes to marriage, and I'm not interested in trying. I am just interested in the real estate question posed in the original post.


arebelspy

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Re: mortgaged property ownership transfer - is it possible?
« Reply #10 on: May 17, 2014, 04:42:57 PM »
MOD NOTE: Please keep to the topic.  Start your own "cohabitating vs marriage" thread if you want to discuss that.

Cheers.
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waltworks

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Re: mortgaged property ownership transfer - is it possible?
« Reply #11 on: May 18, 2014, 08:28:35 AM »
I think you should save some money so you don't have to do weird crap to pull it off. If you haven't/can't save up a reasonable DP, maybe this isn't your thing.  Yes, you can theoretically carry both properties - but that does not mean there is no risk.

As an aside, complaining about the gov't up in your business when you've got a 0% VA loan? Priceless.

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The Money Monk

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Re: mortgaged property ownership transfer - is it possible?
« Reply #12 on: May 18, 2014, 10:56:44 PM »
I think you should save some money so you don't have to do weird crap to pull it off. If you haven't/can't save up a reasonable DP, maybe this isn't your thing.  Yes, you can theoretically carry both properties - but that does not mean there is no risk.

As an aside, complaining about the gov't up in your business when you've got a 0% VA loan? Priceless.

-W

Down payment isn't an issue, I would be paying a down payment either way. The banks around here seem stingy about issuing loans for investment properties.

Also, in what world does qualifying for a VA loan (which is a job benefit from 10 years of military service and a deployment) mean I should be ok with everything else the government does?


duanemark

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Re: mortgaged property ownership transfer - is it possible?
« Reply #13 on: May 19, 2014, 12:34:29 AM »
Don't take this as legal advice, but I don't believe you can assume the loan.  The lender makes a calculated risk analysis based on your partner's financials.  Even if she quit claims the property to you, she's still on the hook for the loan.  If you defaulted and the lender foreclosed, she would be affected.

You'd have to formally assume the loan with the lender, and they would analyze your financials.  I don't believe this will work.  I would not do this if I were your partner.

Poorman

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Re: mortgaged property ownership transfer - is it possible?
« Reply #14 on: May 20, 2014, 11:03:17 AM »
What you are asking about is subject-to financing like arebelspy said.  It's the not same as assuming the loan.  Basically, the seller is deeding the property to you, subject to your continued payments on the loan.  If you stop paying, the property reverts back to the seller and you lose everything you put into it.  This is a strategy that a lot of investors use that can't qualify for traditional financing on deals.  From the tone of his post, it sounds like arebelspy has maybe done some deals this way.  Although it violates the due-on-sale clause of the mortgage contract, most mortgage servicers aren't going to care as long as the payments continue to come in on time.  I have some high-level contacts at various mortgage servicers and I know for a fact they don't pro-actively look for this type of transaction.  They are too buried with defaulted loans to worry about ownership changes on loans that are current on their payments, and it's not something most servicers would devote any resources to.  The only wrinkle I see in your situation is that if anything ever goes wrong in your relationship, your girlfriend could notify the bank and force you to sell the property.

The comment berating your VA loan was out of line.  Apparently you aren't supposed to have a say in our government after having sacrificed on behalf of it.  The advice to "save some money so you don't have to do weird crap to pull it off" was also priceless since you had already stated that you had a down payment.
« Last Edit: May 20, 2014, 11:04:50 AM by Poorman »

The Money Monk

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Re: mortgaged property ownership transfer - is it possible?
« Reply #15 on: May 20, 2014, 11:14:48 AM »
What you are asking about is subject-to financing like arebelspy said.  It's the not same as assuming the loan.  Basically, the seller is deeding the property to you, subject to your continued payments on the loan.  If you stop paying, the property reverts back to the seller and you lose everything you put into it.  This is a strategy that a lot of investors use that can't qualify for traditional financing on deals.  From the tone of his post, it sounds like arebelspy has maybe done some deals this way.  Although it violates the due-on-sale clause of the mortgage contract, most mortgage servicers aren't going to care as long as the payments continue to come in on time.  I have some high-level contacts at various mortgage servicers and I know for a fact they don't pro-actively look for this type of transaction.  They are too buried with defaulted loans to worry about ownership changes on loans that are current on their payments, and it's not something most servicers would devote any resources to.  The only wrinkle I see in your situation is that if anything ever goes wrong in your relationship, your girlfriend could notify the bank and force you to sell the property.

The comment berating your VA loan was out of line.  Apparently you aren't supposed to have a say in our government after having sacrificed on behalf of it.  The advice to "save some money so you don't have to do weird crap to pull it off" was also priceless since you had already stated that you had a down payment.

Thanks I appreciate it. All in all it looks like it would be possible, but probably not worth the hoop-jumping. I'll most likely see if they will give me personal financing, and if not just continue to save a larger and larger down payment until they do, while simultaneously trying to convince my partner to buy one of these places on her own and let me do the property management.

So thanks again to you, arebelspy, and the others who had meaningful advice to give.

To the haters,


waltworks

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Re: mortgaged property ownership transfer - is it possible?
« Reply #16 on: May 20, 2014, 12:16:16 PM »
Yes, I think I owe an apology. I didn't read carefully and the gov't comment was pretty out of line. I'd love to say I have an excuse besides "it's the internet let's argue" but I don't.

MM, I'm a jerk. I hope things work out and you get a sweet cashflowing rental... wish that existed around me!

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The Money Monk

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Re: mortgaged property ownership transfer - is it possible?
« Reply #17 on: May 20, 2014, 12:22:16 PM »
Yes, I think I owe an apology. I didn't read carefully and the gov't comment was pretty out of line. I'd love to say I have an excuse besides "it's the internet let's argue" but I don't.

MM, I'm a jerk. I hope things work out and you get a sweet cashflowing rental... wish that existed around me!

-W

No worries man, thanks