Anonymous
Posted on: 06th Aug, 2006 08:57 am
We have thought of giving our house to our son and daughter-in-law as wedding present. The house is worth $700,000 and has a mortgage on it worth $210,000 at 5% interest rate. They have agreed to manage the mortgage payments but the loan has a "due on sale clause". I consulted an attorney and he said the lender could call the mortgage due if my house is sold. What should we do? Please advise.
Hi,
Your attorney has rightly mentioned that the lender can call the loan due if the house is sold (because there is a due on sale clause). But if your son and daughter-in-law make the payments in time, then your lender may not enforce the clause.
The lender may allow your son and daughter-in-law to assume the mortgage with an assumption fee and he may also adjust the interest rate to the available market rates. You need to explain him your situation and then request him not to consider the "due on sale clause".
Know more about Due-on-Sale Clause from our resources.
Regards,
Jessica.
Your attorney has rightly mentioned that the lender can call the loan due if the house is sold (because there is a due on sale clause). But if your son and daughter-in-law make the payments in time, then your lender may not enforce the clause.
The lender may allow your son and daughter-in-law to assume the mortgage with an assumption fee and he may also adjust the interest rate to the available market rates. You need to explain him your situation and then request him not to consider the "due on sale clause".
Know more about Due-on-Sale Clause from our resources.
Regards,
Jessica.
Hi Martha,
If your lender asks for the entire loan payment, then the mortgage can be refinanced in your son and daughter-in-law's name.
Thanks.
If your lender asks for the entire loan payment, then the mortgage can be refinanced in your son and daughter-in-law's name.
Thanks.
my grandmother passed last year and left her house to my mother and myself. i am currently in chapter 13 bankruptcy and my mother has just been discharged. i am also her personal representative. i am going to rent the house out and try to pay the mortgage on it. my attorney told me not to put anything in my name. can we continue to rent the house until we are finainally ready to put it in our names?
Hello Mary,
Is your grandmother's name still on the mortgage? If the lender gets to know that the owner has passed away, he might call the debt due immediately.
Is your grandmother's name still on the mortgage? If the lender gets to know that the owner has passed away, he might call the debt due immediately.
Your children could either...
1. Purchase the home and finance it in their names. If so, you could gift the entire amount of equity and they should be able to get a comparable rate. You would be gifting them over 50% equity. When a family member does this it is considered a gift and can be used in place of a down payment. That way they would get a 200k loan at below 50% Loan to value instead of 100% with no money down, like in a normal transaction.
2. Would it be so bad just to live there? The only advantage I can see to owning it would be the tax benefits. Other than that does it matter that they own it, instead of you? I said above they would get a good rate but 5% is really low. They may have to pay 6% or something similar.
Your attorney is correct though, and if you just transfer to them, the lender could call the mortgage due immediately.
1. Purchase the home and finance it in their names. If so, you could gift the entire amount of equity and they should be able to get a comparable rate. You would be gifting them over 50% equity. When a family member does this it is considered a gift and can be used in place of a down payment. That way they would get a 200k loan at below 50% Loan to value instead of 100% with no money down, like in a normal transaction.
2. Would it be so bad just to live there? The only advantage I can see to owning it would be the tax benefits. Other than that does it matter that they own it, instead of you? I said above they would get a good rate but 5% is really low. They may have to pay 6% or something similar.
Your attorney is correct though, and if you just transfer to them, the lender could call the mortgage due immediately.
