Transfer/Change Mortgage from Father to Children. What are the options?

[JR7227]

What is the name of your state (only U.S. law)?
California

My girlfriend has an issue regarding transferring the mortgage of the house from her dad to the children and their mother.

Here is the background:
My girlfriend's dad recently decided that he wanted to take out his name from their house and dont want to pay his share of mortgage anymore. Her dad had accumulated a handful of debts from credit cards and he fears that creditors might take the house. Her dad is basically bankrupt from gambling.

They got the house around 4-5 years ago and at the time it was worth $360,000. They currently are paying a monthly mortgage of around $2300. The mortgage is split between the father (who pays $1000) and the mom&children (who pays the rest).

The house is under her dad's name while her mom is the cosigner. They were thinking of just buying the house from him. The real estate agent that they got said that they might get an equity of $200k, but their monthly would increase to $4k for 30 years which would be pretty difficult for them to pay.

Now, they want to know if there are any better course of action / better options. Preferably, they want to keep the house with around the same monthly payment while removing her dad's name from the house. Any suggestions?

Thanks!

 

[adjusterjack]

The first bit of advice I can give to your GF's Mom is NEVER believe anything a realtor tells her without verifying it.

The only way Dad gets out from under is if Mom gets her own loan in her own name and buys the house from Dad.

The critical questions are, in order of importance:

1 - Can Mom qualify for a loan by herself?

2 - How much does Dad want?

Assuming they financed the purchase price or close to it, the current balance should be about $340,000.

If Dad was desperate enough to sell for just the loan balance, Mom would have to qualify for a loan of about 340,000 which, at 6% interest, would be about $2000 per month PLUS taxes and insurance (maybe another $200 to $300 per month).

Something else comes to mind.

Important:

Are Mom and Dad still married or are they divorced?

You wrote:

The house is under her dad's name while her mom is the cosigner.

Does that mean that Dad is the only owner on the deed or is Mom and Dad both on the deed?

That's an important question and Mom needs to LOOK AT THE DEED before answering (no guessing).

 

[JR7227]

1 - Can Mom qualify for a loan by herself?
I dont know. But if she cant qualify, her adult kids wants to help with the loan as cosigners.

2 - How much does Dad want?
If you're talking about the equity, Dad wants nothing from the equity.

3- Are Mom and Dad still married or are they divorced?
Married.

4-Who is in the deed?
The way my gf explained to me, Dad is the only one on the deed. But they are married, so he cant sell the house without her approval. I dont know if that second part is correct.

 

[adjusterjack]

1 - Can Mom qualify for a loan by herself?
I dont know. But if she cant qualify, her adult kids wants to help with the loan as cosigners.

OK, as long as they understand how dangerous to them cosigning a loan could be. All they have to do is google the topic to figure that out.

2 - How much does Dad want?
If you're talking about the equity, Dad wants nothing from the equity.

OK. Then Mom would only need to borrow enough to pay off the existing loan and get Dad to deed the house to her when the loan is paid off.

3- Are Mom and Dad still married or are they divorced?
Married.

California is a Community Property state. I think they would need some sort of Post-Nuptial agreement whereby Dad disclaims any future interest in the home's equity in the event of a divorce. That's something they should see a lawyer about.

4-Who is in the deed?
The way my gf explained to me, Dad is the only one on the deed. But they are married, so he cant sell the house without her approval. I dont know if that second part is correct.

I'm not sure that there is any law preventing him from selling his house but, as a practical matter, nobody is likely to buy it without Mom signing off on the deal.