How do we get this guy off the mortgage, quickly and painlessly?

Question

I'm just getting started and am planning on buying a MF in the near future. I just met a potential money partner who own a 4br she lives at. She put her ex on the title and the loan is in his name. She has substantial equity and wants to invest with me but her ex (common law marriage) wants 250k to take his name off. She's thinking of giving it to him out of desperation but doesn't want to since all the mortgage was paid out of her pocket. She's thinking of trying to assume the loan but I told her I'd try to see if there is a better way to move forward. Any advice? Thanks!

Jared Polk · Answer

Thanks for your insights, Ken! She has 807 credit, income, and no debt so I don't foresee an issue with the assumption but who knows? She's planning to wait until she's pre approved for the assumption before taking his name off the loan. Would you recommend doing it any differently? I appreciate your time.

Jared Polk · Answer

He has just agreed to take his name off the deed and she's just waiting on the paperwork to assume the loan. Due to his behavior in the past, she's not taking his word that he'll do his part and is insisting he take his name off the deed, first. That will take away any ownership of the property and then she can settle with him after. Lucky for him, she has integrity and is planning on still giving him a substantial sum after his name is off the deed, since at that point he'd be standing on air.

Ken M. · Answer

Your comment: "the loan is in his name". The lender isn't going to release him from the loan until the loan is paid off or unless she qualifies for the assumption. She has to have strong credit and income and qualify for this to work. It will take longer than you might think and it may be denied.

If he signs away his interest in the property without the loan being paid off or being properly assumed, the lender can call the loan due.  Assumption is very different than doing a Subject To. Either way, since the property is used as a guarantee for the loan, the loan attaches to the property. If she is unsuccessful assuming the loan and getting him released and then he goes off of the property anyway, they then can call the loan due and take the property to foreclosure sale.

Be careful.

Jared Polk · Answer

She is already in the process of assuming the loan at that rate however she will have to pay out of pocket for him to walk away. I need to run the numbers to see which option would be cheaper (cash out refi or pay cash) for the money needed to get him off the deed.

Jared Polk · Answer

Hey Jacob, Thanks for the response, but if she did cashout refi, she would have to pay the higher interest rate. She is only at 3,75% right now.

Jacob Sherman · Answer

Would have to go through a court process if want to negotiate a different amount

Jared Polk · Answer

Hey Chris,

If she was to buy it then he'd get even more money, although I guess maybe her cost would be far lower to finance with low down payment. Even at a 6% interest. Is that what you're suggesting?

Jared Polk · Answer

Bill,

Thanks and yes he is likely capable of pushing for a sale but so far, seems to just want some quick cash.