Transferring ownership of a house while facing foreclosure is almost never a good idea unless a sale or refinance of the property is also taking place. The defaulted mortgage must be paid off in full or at an agreed price in order for the foreclosure to be ended. If the homeowners are simply executing a quitclaim deed in a misguided effort to save the house from foreclosure, they will quickly realize that this does nothing to affect the original mortgage, and will only leave them in a potentially much worse situation.
If title is transferred out of the homeowners' names and the mortgage is not paid off, there is a good chance that the situation will go from bad to worse. They will no longer have control over the property, and the Due on Sale clause may push up the time frame in which they need to pay off the mortgage.
Showing posts with label Real Estate. Show all posts
Showing posts with label Real Estate. Show all posts
Friday
Can a quitclaim deed stop a foreclosure?
Nothing could be further from the truth, however, and simply signing over the deed to the house to a third party will put the owners in a much more vulnerable situation than when their own names were on the title. Using a quitclaim deed or other transfer document will also do nothing to make the bank end its lawsuit to take the home.
Transferring ownership of a house in foreclosure does not relieve the original borrowers of their obligation and responsibility to pay the mortgage that is secured by the property. When they purchased the house, they promised to pay back to the bank a set amount of money at a certain interest rate, and transferring the deed will not change the fact that the house is collateral for the mortgage loan. The owners may be able to transfer ownership of the house at a later date, but their original promise to pay the bank or face the loss of the property will not be altered.
There is also a danger that transferring the title into another party's name will activate a part of the mortgage called the "Due on Sale" clause. This means that, if the homeowners transfer ownership at any time before they have paid off the mortgage in full, the entire remaining amount of the loan will be due immediately. Because most deed documents state the consideration paid for the property, banks view this as a sale of the house, even if it is only for a nominal amount like $10. Such transfers will activate the Due on Sale clause and the homeowners will still have to find a way to pay back the loan, or the house will be foreclosed and auctioned off.
Transferring ownership of a house in foreclosure does not relieve the original borrowers of their obligation and responsibility to pay the mortgage that is secured by the property. When they purchased the house, they promised to pay back to the bank a set amount of money at a certain interest rate, and transferring the deed will not change the fact that the house is collateral for the mortgage loan. The owners may be able to transfer ownership of the house at a later date, but their original promise to pay the bank or face the loss of the property will not be altered.
There is also a danger that transferring the title into another party's name will activate a part of the mortgage called the "Due on Sale" clause. This means that, if the homeowners transfer ownership at any time before they have paid off the mortgage in full, the entire remaining amount of the loan will be due immediately. Because most deed documents state the consideration paid for the property, banks view this as a sale of the house, even if it is only for a nominal amount like $10. Such transfers will activate the Due on Sale clause and the homeowners will still have to find a way to pay back the loan, or the house will be foreclosed and auctioned off.
Can a quitclaim deed transfer mortgage debt?
when you transfer property rights, a quitclaim deed serves your purpose. But you cannot transfer mortgage debt or any financial obligation through the deed. If there is a mortgage on the property you wish to transfer, you'll have to pay off the debt prior to the transfer and make the title free and clear. Otherwise, you'll have to transfer the loan as well.
In order to transfer a mortgage to the grantee, you'll have to convince the latter to refinance the loan in his/her name. And, at the time of refinance closing, you can sign on a quitclaim or grant deed in order to transfer the property to the grantee. Alternatively, you can transfer the title first and then have the grantee refinance the mortgage in his name. But before you do so, get it in writing from the grantee that he'll refinance as soon as you convey the title. Otherwise, you'll (the grantor) be left to pay off the loan entirely without having the property in your name.
Another way by which you can transfer mortgage debt while quitclaiming property is Novation.
In order to transfer a mortgage to the grantee, you'll have to convince the latter to refinance the loan in his/her name. And, at the time of refinance closing, you can sign on a quitclaim or grant deed in order to transfer the property to the grantee. Alternatively, you can transfer the title first and then have the grantee refinance the mortgage in his name. But before you do so, get it in writing from the grantee that he'll refinance as soon as you convey the title. Otherwise, you'll (the grantor) be left to pay off the loan entirely without having the property in your name.
Another way by which you can transfer mortgage debt while quitclaiming property is Novation.
What is a Quit Claim Deed?
Quitclaim deeds transfer or "quit" any interest in real property. The grantor may not be in title at all, so the grantee cannot assume that the grantor has any real interest to convey. However, if the grantor were, say, married to the owner of the property, signing and recording a quitclaim deed in favor of the spouse would transfer any interest the grantor may have in the property to the spouse.
How do I qualify for a Reverse Mortgage?
To qualify for a reverse mortgage:
You and all other borrowers (maximum of three) must be the titleholder(s) of the property;
You and all other borrowers must be age 62 or older;
Your existing mortgage balance must be paid off at closing. You can choose to pay off the balance with funds from the reverse mortgage or another source;
and Your home must be an eligible property type.
What’s an eligible property type?
1) Single family home
2) Multi-family home (one unit must be your primary residence)
3) Condominium
4) Planned unit development
5) Modular home
6) Manufactured home (available only with Home Equity Conversion Mortgage)
Located in an eligible state (Senior Equity Reverse Mortgage products are not offered in all states). Ineligible properties include a cooperative (co-op) or mobile home.
You and all other borrowers (maximum of three) must be the titleholder(s) of the property;
You and all other borrowers must be age 62 or older;
Your existing mortgage balance must be paid off at closing. You can choose to pay off the balance with funds from the reverse mortgage or another source;
and Your home must be an eligible property type.
What’s an eligible property type?
1) Single family home
2) Multi-family home (one unit must be your primary residence)
3) Condominium
4) Planned unit development
5) Modular home
6) Manufactured home (available only with Home Equity Conversion Mortgage)
Located in an eligible state (Senior Equity Reverse Mortgage products are not offered in all states). Ineligible properties include a cooperative (co-op) or mobile home.
Should I rent or buy a home?
In some cases, renting may be cheaper than buying. For example, renting often requires a smaller monthly cash outflow than a combined mortgage payment that includes principal and interest, insurance and taxes and, possibly, mortgage insurance. As a result, renting may free up your cash flow and allow you to invest in other things.
Also, you earn in your home over the time you own it, which boosts your personal net worth. Renting does not create net worth.
Also, you earn in your home over the time you own it, which boosts your personal net worth. Renting does not create net worth.
Wednesday
How much are property taxes and insurance?
Property taxes are county/city specific and also depend on the construction methods of the home, ie. is the property within the city, close to the fire hydrant and fire station, which perils are covered or not, and whether there is an HOA with its fees as well, plus any special taxing district(s) which may apply.
If you have a specific property in mind, last year's tax bill is online through the assessor's office and it'll tell you the tax rate. Remember that your assessed value will be based on what you pay, not what the old assessed value was.
If the property is for sale, MLS should have some of this data -- and be aware that MLS has what the present owner says the data is whether that is true or not.
Hazard insurance is also difficult to compute because it depends on the structure and location (is it free standing, a condo, brick, wood, near the fire areas, mudslide areas, etc.)
As a rule of thumb, figure on about 25% of mortgage payment.
If you have a specific property in mind, last year's tax bill is online through the assessor's office and it'll tell you the tax rate. Remember that your assessed value will be based on what you pay, not what the old assessed value was.
If the property is for sale, MLS should have some of this data -- and be aware that MLS has what the present owner says the data is whether that is true or not.
Hazard insurance is also difficult to compute because it depends on the structure and location (is it free standing, a condo, brick, wood, near the fire areas, mudslide areas, etc.)
As a rule of thumb, figure on about 25% of mortgage payment.
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