Refi - mom no income, don't want to co-sign

Bob Milen · 2012-08-12T09:07:30-07:00

Hello all - I have enjoyed the wealth of knowledge associated with this website. I'm in an interesting situation and in need of a creative solution. My father owns a rental unit and a residential property. The rental property was transferred to my brother and I when my father passed away earlier this year. This income property has no debt, generates ~$110k revenue/yr. The residential property which is in my mother's name has $380k debt with an LTV ~ 45-50%. The interest is very high - 6.8% for 23 years left on a 30 yr. I need to refinance however, the only way I can think of would be having my brother and I co-sign. We each have very stable, well paying day jobs. My mother has never worked, she is a housewife. I have no problem co-signing however, this limits my future purchases. I currently live at home and would like to buy something in the next 2-3 yrs. With the $380k debt, it would be difficult to find someone that would lend to me correct? What would you do in my case? refi? or stay with the current mortgage structure but increase payment/faster? Your advice is appreciated.

Lynn McGeein

Real Estate Agent · Virginia Beach, VA · Member since 2012 · 2k+ posts · 1k+ votes

14y

Bob, It seems strange to me that your father would leave you and your brother a free and clear, income producing property but leave your mother saddled with a 380K debt with no way to pay for it, so I'm assuming she has a monthly income or savings that will support the current mortgage? I'm sure you are very aware that co-signing for someone else, even your mother, will greatly reduce your own purchasing power and lock you in for the life of the loan, no way to get out of it short of paying off the debt.

There are many refi programs available right now that don't require income verification to reduce the rate. I'm not sure what kind of loan your mother currently has, but there are many loan modifications or streamline loans available, and she may well fit into one of those without your help. Also, she might feel more comfortable selling, getting out of that 380K debt and having the 50% equity to buy a smaller home free and clear. I would look into all other options before signing my name to a 15 or 30-yr mortgage for someone else's home, even if it was my mother. And she would be the first person to tell me not to co-sign something like that, ever. Now, she'd probably love it if I offered to buy my own home with a nice mother-in-law suite and let her sell and move in with me as an alternative -- might be an idea for you both to plan for in 2-3yrs.

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Bob Milen

OP

New York, NY · Member since 2012 · 3 posts · 0 votes

14y

Lynn,

Thanks for your advice. I guess I forgot to clarify, the building pays for the mortgage with has plenty left over after expenses from both assets. This is why the idea of putting the additional money from the building toward to mortgage makes sense. However, as any landlord knows, there are always unexpected expenses that come up.

I assume that the no show income refi would be under very onerous terms. Can you confirm they are relatively competitive to market rate? Do know any providers that provide this service in NY?

Finally, I have thought about the selling process however, I would never tell my mother she should sell the house because interest rates are low. It might make sense from a finance standpoint but there is a lot of sentimental value attached to the house.

Thanks!

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Bill Gulley

Investor, Entrepreneur, Educator · Springfield, MO · Member since 2009 · 21k+ posts · 12k+ votes

14y

If I leave income producing assets to my sons and have any debt, I expect them to pay that debt from the income I leave. (In my case, they won't have a choice, if there were debt.)

6.XX% is about twice as high as what you might get now, but that is not a high rate at all, lower than the past 28 year average I'm sure.

You could also refi the paid off properties sufficiently to payoff mom's house.

Will your brother sign as well? Why do you think you can't get a loan if you are of age and have a good job? Have you checked?

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Lynn McGeein

Real Estate Agent · Virginia Beach, VA · Member since 2012 · 2k+ posts · 1k+ votes

14y

Bob, It depends on the type of loan she has now, but there are some great refi programs out right now, near same rates as income-qualifying ones, but all seem to have different guidelines. I would call her mortgage company and see if they are offering any special ones that could help reduce the rate to current levels without charging much, but call yourself as the program may not be available for just her if both of them were on the original loan, not sure how that works, and I know that would have upset my mother greatly so probably better if you research it first.

We just refinanced under the new FHA Streamline Refi program that just started in June, no income, no appraisal, only .001 funding fee instead of normal .01, and only requirements for that program were an FHA loan originally that funded before July 2009, has 12 months current payments, no cash out allowed but huge reduction in monthly payment so well worth it for us. There may be programs already in place for her original type of loan that her lender could talk about, or just google it yourself and see if any special refi programs pop up if you know the details of her mortgage.

Just wanted to add our refi rate was 3.75%, so not bad at all for no-income, no appraisal refi program

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Refi - mom no income, don't want to co-sign

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