Quitclaim with a mortgage

[Matt Looney]

I've got a quick question for all of you fabulous BP folk out there.  I've got a line on a possible rental property that currently has a 90k mortgage on it that the seller really just wants to get out from under.  From what I've researched, after about 16-18k in renovations, the house would be worth $135k-$140k.  The trouble is, the property REALLY needs that renovation done to get a favorable appraisal.  I really don't want the hassle and extra expense that comes with a purchase, so I thought maybe a quitclaim deed.  I know that a quitclaim can transfer some owner interest in a property so someone else, but the mortgage doesn't change.  My question is could I refinance that mortgage under my name once I was on the deed?  I'm new at this more creative type of deal making so I really have no clue and haven't found anywhere that can tell me definitively.  Anyway, any and all information is appreciated.  Hope everyone has a great holiday weekend.

[Jon Holdman]

Well I would not use a quit claim in a case like this.  It doesn't help in any way vs. using a warranty deed. You're just doing a "subject to" purchase.  Do it with a warranty deed and title insurance.  And hope for the best on the lender not calling the loan based on violating the due-on-sale clause.

Once its yours, yes, you can do a refi.

You should plan on holding for at least a year if you want to refi based on a new appraisal.  Maybe you can get someone to do it in six months.  If you want to try to get some of your cash back on the refi, be sure you understand all the rules on cash out refis.  I'd work with a broker up front to be sure you achieve your goal.