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mo4pintn
07-14-2013, 03:03 AM
I need some help with understanding some things about 1st and 2nd mortgages on a home.

I will give a little bit of background so that maybe someone can help me understand so I can better plan for the future.

1. The home we currently live in is in mine and my son's name (through a quick claim deed) but the mortgage is in my in-laws name. They also took out a second mortgage on the home prior to the home being quick claimed over to my husband and I. They have not been able to refinance it or remortgage it since then to roll more debt into it. They started out purchasing the house 30 years ago for $50,000. They have since rolled an additional $100,000 worth of debt into it over the years ($40,000 being in a second mortgage).

2. Questions:

When they die, will we have to refinance the home or continue paying the existing mortgages?

If, we sell the house and it doesn't bring enough to cover both mortgages, will my son and I be responsible for the second mortgage on the home since the home is in our names but the loan was secured before the quick claim?

If we would be held responsible for it, could we quick claim it back to them to free us from the burden?

If we did quick claim it back to them, once they die their will leaves everything to my husband. Will the responsibility then fall onto my husband and myself or will it go away when the house is sold.

I am more concerned about the second mortgage than the first. Should I be?

What options do I have?


Further info: My husband and I are making our final payment on our debts this month and will begin saving money to purchase land free and clear to have for the kids and ourselves to build on. This is totally separate from the house we are currently living in. Here his parents have their own apartment. We have been living here for 18 years and helping his parents with the house payment and utilities. I am unsure if the house would bring what is owed on it.

Thanks for any help.

whitehairedidiot
07-14-2013, 12:36 PM
OH MY. I don't know if I can untangle all of this for you. You might be better off talking to an estate lawyer; or one that deals with real estate.

The problem here, is that as long as your in-laws are living, they are responsible for the mortgages... but you are the owner of the house? Doesn't the bank hold the deed, until the mortgage is paid off? If your name isn't on the deed... legally, I don't believe you're an "owner". This is what you need someone more legally experienced than I to advise you on.

If there is not enough cash in their estate (and yes, there is an estate even if it's $25.00) to pay off the mortgage after the 2nd spouse dies... then, the bank can foreclose. You can TRY to sell the house for enough money to cover both mortgages... and with housing prices on the upswing the chances are getting better -- but you'll have to crunch numbers to find out if they're "better" enough. If the house sells for less - someone is responsible for bringing enough money to closing, to pay off both mortgages: either you or your in-laws, as the buyers will only bring the sale price and their share (if any) of closing costs.

As far as I know, you can't refi the 2nd mortgage by itself. And you can't refi the first -- until the 2nd is gone, unless you're getting a really good deal and have a good relationship with a banker, somewhere. I honestly can't tell you if you have any responsibility at all for those mortgages, until the in-laws pass, and title of the house passes to you all via the estate... but if there was any way to get rid of that $40K debt and then refi to a 10 or 15 year mortgage... y'all would be way further ahead.

I've never heard of someone having a mortgage -- with the deed in someone else's name. I'd think the bank would've objected to this. So perhaps their "quit claim" isn't even legal. I just don't know hon. You need a professional opinion.

Aamylf
07-14-2013, 03:15 PM
Actually, been there done that -- had property with ex husband with mortgage in both our names. Got divorced, signed a quit claim deed and he got the property.

when it went in to foreclosure, guess what? I was foreclosed on, too, even though I had signed the quit claim deed. That is what the county wanted to know who to send the property tax bill to, basically, but because I didn't insist he get a new mortgage, the BANK had us both on the hook.

What does that mean for you? Your in-laws owe the mortgages and, as far as the county is concerned, you own the property. I think if the bank found out, they would not be amused. Your in-laws essentially gave you the house, which is usually not permissible by the covenants of the mortgage. I think you need a property attorney to sit down with all concerned and determine what should be done. Here you could sell the property as owner on record, the sale would pay off the two mortgages and you would get the rest of the money, if you could do it before the bank found out!

J R Adams
07-14-2013, 06:49 PM
I suggest you try this link.

http://homeguides.sfgate.com/can-one-file-quit-claim-deed-refinancing-mortgage-9557.html.

What I read is that banks and morgage companies are not bound by quit claim deeds. Who ever holds the first morgage has first claim on the property if there is a default.

What I read in to your statement is that you or DH's names are not on the morgages. That said, you don't owe anyone anything. IMO

When IL's die the bank will want to be paid as will the holders of the second morgage. If the property goes to foreclosure you can buy it at auction and get a clear title. The only way the second morgage holder gets anything is to out bid you for the property then sell to try to recoup some of their money.

Check all of this out with an attorney in your state to see exactly how this could work for you.

mo4pintn
07-15-2013, 11:00 AM
Thank you guys. I will check into this further. I will check into this further with lawyers. It is a very complicated situation. Thanks again.