Home Purchase Mortgage Calculators
Mortgage Program Calculators
You have two basic options for taking ownership of the house from your relative. With the first option, your relative can give you the property as a gift in which case you can refinance the property after you take title as you cannot mortgage a property unless you own it. Please note that in this scenario, receiving the property as a gift may be a taxable event for you so we advise you to consult a real estate attorney or accountant to understand any potential tax liability you could incur. Additionally, in most cases when a property with an outstanding mortgage is transferred from one party to another, such as via a gift, the ownership transfer triggers an acceleration clause which means any outstanding mortgage balance is due in full. In your case that means that your relative may be required to pay-off any mortgage balance if she gives you the property as a gift. Finally, if you take ownership of the property via a gift and try to use a cash-out refinance to repay your relative, lenders may limit the amount of proceeds you can take out by refinancing. So you may not be able to pay your relative full value for the property, at least not by refinancing. We provide a thorough overview of a cash-out refinance on FREEandCLEAR.
The second option for taking ownership of the property from your relative is to simply buy the property from her. In this scenario you would obtain a mortgage to buy the home and your relative would receive the proceeds from the sale. You would not be subject to a potential tax liability associated with receiving the property as a gift; however, your relative may be required to pay a capital gains tax on the sale, depending on several factors including the cost basis of the property. Again, we advise you to consult a real estate attorney or accountant to understand the tax implication for your relative. Additionally, you would be required to qualify for the mortgage based on your financial profile, credit score and other borrower qualification factors.
One variation on the option to buy the property from your relative is for her to provide the mortgage to you, which is known as seller financing. In this case your relative would still be required to pay-off her existing mortgage but the mortgage terms or loan qualification requirements could be more favorable to you. Again, there are potential tax consequences for both you and your relative depending on how you structure the sale and the mortgage so consult an attorney or accountant.
Finally, whether it is for purchase mortgage or cash-out refinance, we always recommend that you shop multiple lenders to find the loan with the lowest rates and fees. You can contact lenders in your area by clicking INTEREST RATES