Immediately Refinance Or Sell A Subject To?
Say I took a house subject to. Could I immediately refinance it to pull out some cash and lower the interest rate on it, or is there a major seasoning issue with this?
Or, could I take it subject to and sell it to a retail buyer right away? I would think there would be a seasoning issue with this as well, especially with the original mortgage not in my name.
No...you can't refinance if the loan is still in the seller's name.
If your intent is to get equity out of the home with new financing, Why don't you just bring new financing to the table when you buy it.
My mom helped my sister get into a new home recently while ny sisters existing house was for sale. Mom bought the new house, with financing in her name. Everyone in the process understood that as soon as my sister sold her home in Washington, that she would be transfering title into her name, and get new financing. That was three months ago. My sister sold her other home, and now are in the process of getting everything out of mom's name. Mom executed a warranty deed which changed ownership just fine, however the new finance company is still insisting on a new title search, new title insurance policy etc.
So closing costs are involved.
My point here is that although we could have done a few things differently, essentially this is the same situation as what you are describing. Mom could have sold the property to my sister just as easily, and it wouldn't have cost that much more.
Just take care of it in the beginning.
Good Luck,
Jeff
Well a situation has now come up where I can take a property subject to. The seller is behind 7k and the auction is coming up at the end of the month. She wants 10k for her equity as well.
Balance is 45k
FMV is 120k
I'd like to just sell it right away, and wanted to know if this would be a big issue in terms of seasoning for the buyer.
I know the buyer couldn't get an FHA loan, but being the newb that I am...I don't know if that makes it hard to sell.
As a mortgage broker I run into situations where someone has deeded their property to a relative but keeps the loan in their name. As long as you can find a lender that does not have a seasoning issue you can technically refi as long as you are on the deed. For example, I just helped a client that was divorced and was not on the mortgage, but was the only one on the deed. Her husband deeded his part to her right after the divorce. Since she was on the deed we could not do it as a purchase, but could do a refi. So basically, if you are on the deed, you can refinance whether or not the current loan is in your name. Otherwise, doing Sub2 would be hard...your buyer would not be able to refi within 2 years because they don't have the current mortgage in their name...the person you bought from still has it in their name. Contact a mortgage broker in your area and they should be able to help you out.
All lenders have different guidelines on financing someone. Some may have seasoning, some may not. There are some lenders that will allow you to refi rate/term if you own the property for less than a year and some will allow cash out after 1 year of ownership.
Just check with your local mortgage brokers and see what programs they have to offer.