Subject to, then refinance.

[Tyrell Rutledge]

My brother and sister in law recently purchased a new home here in ok. Their old home is in need of repair with about 75k left on the mortgage. The arv is 120k. Rents around 1k.

Here is my question. They are willing to allow us to assume their mortgage and transfer the title to us.

I want to brrrr this property and do a proper reno. Will I be able to refinance this after a standard seasoning period even with their name on the existing mortgage?

Thank you for your time everbody,

Ty

[Stephanie P.]

Originally posted by @Tyrell Rutledge:

My brother and sister in law recently purchased a new home here in ok. Their old home is in need of repair with about 75k left on the mortgage. The arv is 120k. Rents around 1k.

Here is my question. They are willing to allow us to assume their mortgage and transfer the title to us.

I want to brrrr this property and do a proper reno. Will I be able to refinance this after a standard seasoning period even with their name on the existing mortgage?

Thank you for your time everbody,

Ty

Not to be a wet blanket, but it doesn't appear the numbers are very good for this property.  

• If they owe 75K and the property is worth 120K, you're sitting at 63% loan to value.  
• If the property needs renovation, let's assume 20K max; that puts you at 95K without talking about costs so add 5K for costs and you're sitting at 100K.  Now you're at 83%.  
• Max ltv for a conventional refinance is 75% ltv for limited cash out and 70% for cash out.  
• If you're looking at a property that's valued at 120K (and 120K is your ARV), the max loan amount you can refinance without coming out of pocket is 84K, so if the payoff is 75K and the max loan amount is 84K, that's about a 4K renovation with 5K in closing costs. Not a very big reno.
• On the bright side, 84K at 5.5% on a 30 year fixed is $477.  Taxes and insurance will probably be $150 for a total monthly payment of $627.  If your max rent is $1000, you're making $363 per month. If you can keep your closing costs and renovation costs under 9K, this works. 

Stephanie