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  1. #1
    Join Date
    Aug 2014
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    3

    Question When Can You Assume a Mortgage

    My question involves real estate located in the State of: Ohio

    A person I am acquainted with needs to get off from under her house and business as soon as possible.
    Is it possible to assume her mortgage without refinancing in that state or is that something mortgage contract specific?

    I would like to put together an outline to present to an attorney so that they can draw up a contract.
    If assuming the mortgage is a possibility is a quick deed helpful in this situation or at all applicable?

    This is what I know I need so far (If I am able to assume the mortgage). I also want to make sure that this contract really is fair for both of us. :

    - I will be paying $125,000 for the house with 5% interest over 15 years. (house is currently half paid off)
    - That I will pay the portion owed to the bank each month directly to them and the additional portion directly to her until the mortgage she holds is paid off at which time I will be paying the entire portion directly to her until the sum is paid in full and she will sign over the property to me.
    - That she will not refinance the property or use the property as a source of additional income or loan.
    - That any additional amount paid monthly will be applied to principal and there will be no penalty for paying the property off early.
    - That she will quick deed the property to me at the time payments begin and I will quick deed it back to her if I do not fulfill the payments (if this is allowed)
    - That all items associated with the business are included in the "sale" as well as the clientele and those items are not associated with the business name.
    - That if we are unable to make payments and complete the transaction the ownership will go back to her after "x" amount of missed payments. Not sure
    how long is fair or if this is fair at all.
    - That we will be responsible for property taxes, repairs and so on.
    - That legally she will "close" on the property after it is paid off to give us full and legal possession.

    Any information would be greatly appreciated. If I there are points I am missing please point them out?

    ARH

  2. #2
    Join Date
    Nov 2013
    Posts
    6,212

    Default Re: Assuming a Mortgage in Oh. Contract Points Help

    IMO you are making a really big mistake with this kind of a deal. Paying off someone else's mortgage and then making your own private mortgage payments to the owner and then, when all the payments are made, then she will sign the property over to you. And what will you do if she does not sign the property over to you or she uses it as collateral on a second mortgage? You will have to enforce that contract in court.

    Too much love, trust or something else. You would be much better off obtaining your own financing and buy the property outright and let her remain as a tenant. You can contract to buy the business and its assets.

    Just my 2 cents. Like buying a car and not getting the title.

  3. #3
    Join Date
    Mar 2013
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    16,862

    Default Re: When Can You Assume a Mortgage

    I've seen some really stupid ideas on this website but this one takes the cake.

    However, consider yourself commended for asking the questions before you do the deal.

    Quote Quoting ARHart
    View Post

    A person I am acquainted with needs to get off from under her house and business as soon as possible.
    Is it possible to assume her mortgage without refinancing in that state or is that something mortgage contract specific?
    No.

    Most mortgages these days are not assumable and they have "due on sale" clauses that make the balance payable in full when something like this is attempted.

    You need only read her mortgage contract to figure that out. You do intend to read her mortgage contract, don't you? You'd be a fool not to.

    Quote Quoting ARHart
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    is a quick deed helpful in this situation or at all applicable?
    You've revealed just how clueless you are. There is no such thing as a quick deed. It's called a quitclaim deed and, no, it's not appropriate.

    Quote Quoting ARHart
    View Post

    - I will be paying $125,000 for the house with 5% interest over 15 years. (house is currently half paid off)
    - That I will pay the portion owed to the bank each month directly to them and the additional portion directly to her until the mortgage she holds is paid off at which time I will be paying the entire portion directly to her until the sum is paid in full and she will sign over the property to me.
    - That she will not refinance the property or use the property as a source of additional income or loan.
    - That any additional amount paid monthly will be applied to principal and there will be no penalty for paying the property off early.
    - That she will quick deed the property to me at the time payments begin and I will quick deed it back to her if I do not fulfill the payments (if this is allowed)
    - That all items associated with the business are included in the "sale" as well as the clientele and those items are not associated with the business name.
    - That if we are unable to make payments and complete the transaction the ownership will go back to her after "x" amount of missed payments. Not sure
    how long is fair or if this is fair at all.
    - That we will be responsible for property taxes, repairs and so on.
    - That legally she will "close" on the property after it is paid off to give us full and legal possession.
    I won't comment on each individual point because the whole idea is just plain stupid and you are guaranteed to be back here in 6 months or a year sobbing "what are my rights?"

    I agree emphatically with Budwad. Get your own mortgage and buy the house outright. Buy the business separately. Mixing the house and the business in one deal is a bad idea.

  4. #4
    Join Date
    Aug 2014
    Posts
    3

    Default Re: When Can You Assume a Mortgage

    I understand a vast majority of things but real estate is not one of them and so I am here asking.. and Jack... you are being rude and reducing me publically and that is not called for at all. In the future please be kind enough to have more patience with people that are requesting information concerning your particular field(s) of expertise. To be short; unkind and to ridicule shows that you are truly egotistical and that is one of your personal flaws. There.. that is one of my areas of expertise. See how that feels? It sticks you in the side doesn't it? So.. please be kind to others when they are asking for your help?

    I have asked for a copy of her mortgage contract.
    I agree that keeping the real estate and business separate is a good idea.
    Possibly then a lease to own situation where after 5 years we apply for a regular mortgage.

    Thank you for your help Jack,

    ARH

    - - - Updated - - -

    Thank you for being kind Bud.

    I can not obtain financing and so we came up with this "idea" but I do believe a lease to own situation is what is needed here with a mortgage after 5 years.

    Thank you again,
    ARH

  5. #5
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    Mar 2013
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    16,862

    Default Re: When Can You Assume a Mortgage

    Quote Quoting ARHart
    View Post
    I understand a vast majority of things but real estate is not one of them and so I am here asking.. and Jack... you are being rude and reducing me publically and that is not called for at all. In the future please be kind enough to have more patience with people that are requesting information concerning your particular field(s) of expertise. To be short; unkind and to ridicule shows that you are truly egotistical and that is one of your personal flaws. There.. that is one of my areas of expertise. See how that feels? It sticks you in the side doesn't it?
    Doesn't bother me a bit. I've been on these legal websites for 13 years and I've read hundreds, maybe thousands, of tales of woe from people who have done just what you are contemplating and their financial lives have gone in the toilet.

    Sometimes it takes a 2x4 upside the head to knock some sense into people.

    Quote Quoting ARHart
    View Post

    I have asked for a copy of her mortgage contract.
    I agree that keeping the real estate and business separate is a good idea.
    Possibly then a lease to own situation where after 5 years we apply for a regular mortgage.

    I can not obtain financing and so we came up with this "idea" but I do believe a lease to own situation is what is needed here with a mortgage after 5 years.
    I don't know what your relationship is with this woman that compels you to bail her out of her financial problems but the best advice that I can give is that she file bankruptcy, learn from her mistakes, and start over.

    If her house is "half paid for" why doesn't she just sell it on the real estate market to somebody who can qualify for a mortgage? Then she can use the proceeds to keep her business afloat or wind it down.

    What you're proposing makes no financial sense at all and has the very real risk of losing every nickel you put into it.

  6. #6
    Join Date
    Nov 2013
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    Default Re: When Can You Assume a Mortgage

    OP, you say that you will pay $125,000 for the house. Does that include both the bank payments (principal and interest) and your private mortgage (also principal and interest)? What is owed on the bank mortgage and what is the property worth?

    She can sell you the property for what is owed to the bank, transfer the property to you and then you can make any deal you like for any future living arrangements. But the property will be in your name. And then you can contract for the business and pay her whatever you agree to. Nobody cares if she sells the property below market as long as the mortgage lien is paid off.

  7. #7
    Join Date
    Aug 2014
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    3

    Default Re: When Can You Assume a Mortgage

    This mortgage is FHA and was initiated before December 1st 1986. I spoke to an attorney, retained him, and he instructed me that there is no credit check involved. We can assume the mortgage legally with no credit check. I would need to have him draft a letter to the mortgage company stating we are assuming the mortgage and that is that but our conversation was cut short and I didn't have a chance to ask him about if ownership would actually be recorded into our names or remain in hers.

    Bud.. yes that would include both bank payments. Monthly payments are a bit over $550 a month. The property has not been assessed for a while but she is stating it should be "worth" about 100k. Of course we are getting an assessment and inspection if we move forward. She has agreed to allow us to make the 25k "down payment" and work it into the regular monthly payments.

    ARH

  8. #8
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    Nov 2013
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    Default Re: When Can You Assume a Mortgage

    Quote Quoting ARHart
    View Post
    This mortgage is FHA and was initiated before December 1st 1986. I spoke to an attorney, retained him, and he instructed me that there is no credit check involved. We can assume the mortgage legally with no credit check. I would need to have him draft a letter to the mortgage company stating we are assuming the mortgage and that is that but our conversation was cut short and I didn't have a chance to ask him about if ownership would actually be recorded into our names or remain in hers.

    Bud.. yes that would include both bank payments. Monthly payments are a bit over $550 a month. The property has not been assessed for a while but she is stating it should be "worth" about 100k. Of course we are getting an assessment and inspection if we move forward. She has agreed to allow us to make the 25k "down payment" and work it into the regular monthly payments.

    ARH
    I can be very dense sometimes trying to understand what a poster posts. You have a property worth $100,000 with $50,000 of equity. And you want to pay $125,000 for it? Is that $25,000 for the business?

    Whether you can assume the mortgage or not, you will not be the owner of the property unless there is a sale. Now only you can know why you are hell bent on this deal but the advise you got here is good advise. It's a bad deal for you.

    You have an attorney so follow his advise. Just be aware that not all attorneys do what is in the best interest of the client. They will do what you ask them to do.

    I have nothing more to add.

  9. #9
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    Aug 2014
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    226

    Default Re: When Can You Assume a Mortgage

    Quote Quoting ARHart
    View Post
    This mortgage is FHA and was initiated before December 1st 1986. I spoke to an attorney, retained him, and he instructed me that there is no credit check involved. We can assume the mortgage legally with no credit check.
    That is complete nonsense. There is always a credit check when you assume a mortgage. Moreover, the note holder will not speak to you, only to her about the possibility of an assumption. Then once she initiates the procedure, they will ask for your information and run your credit.

    If you can't qualify for financing on your own, you will not qualify to assume a mortgage.


    Quote Quoting ARHart
    View Post
    I would need to have him draft a letter to the mortgage company stating we are assuming the mortgage
    you don't get to dictate that to the note owner. They control whether or not to release your friend from liability on the note and allow you to assume the mortgage.


    Quote Quoting ARHart
    View Post
    if ownership would actually be recorded into our names or remain in hers.
    that is up to her. If she agrees to deed the house to you then ownership would transfer to you. Recording protects you against her selling the house to someone else who would be considered a good faith purchaser for value. For instance, if she deeds the house to you and you don't record it, she is the owner of record and if she sells the house to someone else and they don't know of your deed b/c you didn't record it, they will own the house and you will have no recourse against them, only against her and she doesn't sound solvent.

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