I know it's some money in this situation.... I need help though.

10 Replies

My situation: My mother owns a home that has a relatively low balance left (15k or so). She has decided to remarry and has left the house to me however the mortgage is not assumable. My goal is to update the home, refinance and use it as either a rental/Airbnb. We are getting several offers to buy the home cash sale. I would like to know if there is anyway I could get the home ownership changed without initiating the due on sale clause? If not, what are my options for turning this property into an asset?

Hey Jerry,

If she is willing to "give" it to you and you cannot assume the loan, here are a few options:

* Personal Loan
Since the balance is so small, you could take out a personal loan and purchase it from your mom. There are services/small banks out there that will allow you to stretch the payments out over a few years which will not be a problem for $15k. If you are able to AirBnb it out, you may have that $15k paid off in less than a year. 

* Lease Option
You could work out a deal with your Mom where you lease the property from her for a specified period of time, say 2-3 years with an option to buy at the end of that term. During that time you are paying her monthly rent on the property which can be enough to cover the mortgage. On the flip side you can airbnb it and save that capital for the final purchase down the line. 

* Wrap Around Mortgage
You could work with your Mom to create a mortgage on the property that is larger than the currently mortgage amount, say $20k. This will allow her to cover her mortgage payments plus a little more while you pay down the $20k debt. 

* Get a Mortgage on The Home
You could just simply go out and get a mortgage on the house. I am not sure how much it is worth, but if it is significantly more than $15k, you can take out a larger mortgage and put some money in your pocket via the spread between $15k and 75% LTV. Having that additional money can serve as reserves on the property or will help get you into your next one.

My recommendation, take out a personal loan and buy the home from your Mom for $15k. It such a small amount you should be able to get it back via rents or airbnb relatively quickly. Make sure whatever you do, you have some reserves in the bank and do not take on this house with $1,000 in the bank. If you have no money right now, I would recommend traditionally purchasing it from your Mom, put a small mortgage on it and get some cash back from the mortgage to keep on hand for reserves.

Good luck on your journey and do not let this opportunity pass!

@Jerry Davis All of the above options are great and probably easier but another option is have your mom put it in a land trust and name you the beneficiary. This will protect from the due on sale clause if it is a fannie/Freddie loan

You may be able to add your name to the deed.  But you should just get a loan, probably not a mortgage as the amount owed is too low for that and have your mom formally deed it to you.

@brandon 

@Brandon Rush Thanks for the advice! The home is right at 20k but comps in the area have sold for 145k to 160k. I assume I would need to have someone look at the property to tell me what all would need to be updated in order to bring the home to market value? Is that done by a home inspector? 

@Scott Mac Very valid point. I am not under any financial pressure that is encouraging this decision. I just recognize this as an opportunity to create an asset for myself. I will continue to pay down the mortgage as I take the steps to qualify for the most appropriate loan. I also need to get the necessary updates appraised. Thank you for responding.

Originally posted by @Jerry Davis :

@brandon 

@Brandon Rush Thanks for the advice! The home is right at 20k but comps in the area have sold for 145k to 160k. I assume I would need to have someone look at the property to tell me what all would need to be updated in order to bring the home to market value? Is that done by a home inspector? 

You could use a contractor. You could look up comparable properties that have sold and get quotes from contractors on what it would take to bring your property up to those same standards. Definitely try to find contractors through referrals vs searching Google. An inspection may not be a bad idea to to make sure your bases are covered for major issues such as foundation, roof, mechanicals and etc.