Sub 2 Mortgage Question, Seller's Fears
With the sub2, when the property is put into a trust and the mortgage co and insurance co are notified, does the homeowners name come off the mortgage completely?
I have a seller who would love to do this but they are very worried about their name still being on the mortgage and of course us doing something wrong that would hurt them.
Any help here?
Christian "The Solutions Kid" Beebe
[addsig]
Hi Christian ,
The sellers name will stay on the mortgage until the property is cashed or refi'ed out!
Is this a big concern for them, or can you soften this objection?
BAMZ
That's one thing I don't understand completely, the refi scenario.
How do you go about refi'ing the property into your buyers name? I hear that alot and maybe my understanding of refi is not the best.
What is the typical scenario of cashing out with the property...do you just get the tenant financed to buy the property, etc?
Thanks,
Christian "The Solutions Kid" Beebe
[addsig]
yeah, your buyer is getting a new loan to cash you out. we say refi, but really, they are getting a new loan.
Gotcha...that makes ton more sense.
So if the property you are taking over is FHA loan then that means you can't "refi" it for a year correct with the new seasoning laws?
Chris
[addsig]
Christian,
If you were wanting to keep the property for a rental, you would go ahead and take subject-to, record the deed (now you own the property) and then go to yoru mortgage broker and refinance the property. If that what this buyer wants, you can make that happen. This will then place your name on the mortgage and your name will have already been on the deed.
Roger (rajwarrior,) does this alot!
BAMZ
Now that is an interesting twist and something would make more sense. But again, can you do this if the loans on the property are FHA?
Chris
[addsig]
Chris,
The type of loan that is on the current mortgage should be of no issue if you are refinancing them out. The only road block that you may have is the chain of title. With a good mortgage broker, this will not be a problem either!
BAMZ
Man, I had the same concerns (as an investor as well)....
Ways to "soften" their concerns would be:
-- less $$$ on both you and the seller to close the deal....no refi fees, bank fees, etc., etc.
-- you can close the deal faster (within a few minutes if you so choose, rather than have to wait on the banks and such) with the seller so they can be on their merry way...today! Could this be why John calls it "$Cash Now$" ?
-- if their credit wasn't that good, you will help improve it by making their payments...on time!
-- also, says in John's manual..."so the deed of trust may stay alive..."
Now, if you're in front of the right seller in the first place, you will not have to go through all that convincing.
Know what I mean?
Regards,
Jason
[addsig]
So you get the property deeded over to you using the trust correct?
Then you go to a good mortgage broker, tell them you own a property and want to refi it? Is there anything else you should tell them regarding the chain of title so they do do a complete job?
Does the scenario change if the seller has a HELOC on the property? As of now, the seller has a $80,000 adjustable FHA loan and an adjustable $20,000 HELOC.
Thanks,
Chris
[addsig]
If you take the property subject to and then turn around and refi it in your own name aren't you really just buying it?
What is the point to doing it that way?
~Chantelle
Hi Chantelle,
That is a good question! If you buy it right, it works great! especially if your intent is to hold onto the property for a few years.
Here is an example:
FMV: $100,000
Mortgage: $80,000
If you buy right by taking sub-to at $80,000, you can in theory refi this property with little or no money out of pocket, keep PMI out of the equation, and do this for years and years. At the same time your portfolio of property would amass greatly!
If you tried to buy this property conventionally for $80,000, in order to keep PMI off of it, you would have to come to the table with $16,000 (20%).
How many properties could you buy if you had to put down this kind of money?
Even if you are buying it with the intention to refi and sell on contract, a lot of investors feel more comfortable in taking subject-to (for ease of acquiring), and then putting the property in their name, so that there would be no chance of the DOS called and they will sleep better at night. It truly is a matter of choice, and another method to keep in your back-pack!
Best of Success!
BAMZ