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How to take over mortgage on property you do not own

How do you legally take over the mortgage on a property you do not own? My spouse was given a home by her mother but her mother is still on the mortgage and we want to take over the loan.

Michael Jensen, Mortgage and Finance Guru
, Mortgage and Finance Guru

Your situation is somewhat tricky but below I outline the steps you can take to achieve your goal of putting the mortgage in you and your spouse's names.

There are a few points you should be aware of that should help you understand my recommendation below. First, you cannot get a mortgage as a co-borrower on a property that you do not own or at least have a partial ownership interest in. Second, when property title transfers from one owner to another owner, lenders usually require the new owner to have six months of ownership history before the new owner(s) can qualify for a mortgage on the property. Third, almost all mortgages are non-assumable which means your partner's mother cannot transfer the mortgage to you or her daughter without lender's approval. Finally, when you transfer ownership title on a property that has a mortgage against it, the property transfer can trigger an alienation clause in the mortgage note. An alienation clause allows the lender to require the borrower to pay-off the outstanding mortgage balance in full. I recognize this is a lot of information to digest but it will help you understand my recommendation below.

1) Step 1: acquire ownership interest in the property through a quit claim deed. Because you cannot get a mortgage on a property you do not own, you need to acquire an ownership interest in the property. The easiest way to accomplish that is through a quit claim deed. A quit claim deed is a legal document that is filed with a county government that conveys ownership title in a property. In your case, you and your spouse should file a quit claim deed that gives you an undivided one half interest (1/2) in the property. After the quit claim deed is recorded by the county recorder's office, you and your spouse will each own half of the property. It may be helpful to work with a real estate attorney to file the quit claim deed (especially if you and your spouse will not own the property 50% / 50%) although you may also be able to do it on your own by working with your county recorder's office.

2) Step 2: set-up a joint bank account with your spouse and her mother and make six months of payments on the existing mortgage out of that bank account. Making mortgage payments from a joint bank account with all three of your names on it accomplishes a couple of important things. First, it allows you to establish payment and ownership history as a property owner which will position you to qualify for a mortgage after six months.  Lenders usually require a new property owner to have six months of ownership history before the new owner can apply to refinance the mortgage on the property. Second, we recommend that you make the monthly mortgage payments by check so that you can use the cancelled checks as verification of payment by you, your spouse and your spouse's mother as a credit report will only show your spouse's mother making the payments. Third, because your spouse's mother's name is on the bank account from which the payments are being made, it reduces the risk that the current lender exercises the alienation clause in the mortgage and requires the mortgage balance to be paid in full. Even if you and your spouse provide the money for the payments, using a bank account with her mother's name on it should help you avoid potential issues with the current lender.

3) Step 3: after six months, refinance the existing mortgage on the property. With six month of property ownership history you should be in a position to qualify to refinance the existing mortgage on the property. After you and your spouse refinance the loan, if you apply for the mortgage as co-borrowers the new mortgage will be in both of your names and both of you will be obligated to repay new mortgage. Additionally, your spouse's mother will no longer be legally responsible for the mortgage on the property. As an added benefit, your credit score could improve as long as you have minimal new debt and no late payments during the six month period before you apply for the refinance.  An improved credit score could make it easier for you to qualify for the refinance and enable you to obtain a lower interest rate.

As you approach the end of the six month period, we recommend that you contact multiple lenders to understand how they would handle your unique situation. You can review lenders in your area by clicking INTEREST RATES We advise you to contact at least four lenders as mortgage qualification guidelines can vary. Plus, comparing lenders is the best way to save money on your mortgage.

I hope that you found this response helpful. Please note that I am not an attorney and cannot provide legal advice so you may want to consult a real estate attorney as well. From a mortgage standpoint, however, I believe the steps I outlined above should help you accomplish your goals.

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About the author

Michael Jensen, Mortgage and Finance Guru

Michael is the co-founder of FREEandCLEAR. Michael possesses extensive knowledge about mortgages and finance and has been writing about mortgages for nearly a decade. His work has been featured in leading national and industry publications. More about Michael

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