Taking Over Payments - Home Equity Line of Credit - $0 Down

[Michael Hayes]

BP family what's going on? I have a question on how to structure a deal. I received a call from a motivated seller who is looking to just "let her house go". ARV of the house is $55k, but she has a home equity line of credit of $61k making payments right at $200 a month. No mortgage. I visited the house today and it is in A1 shape. I could literally move a tenant in as soon as I takeover with no repairs needed. The house would rent for $700/mo leaving me with very nice cash flow. Not interested in flipping and want to hold long term, so not worried about the balance.

How exactly is this deal structured though? Would it be different taking over a HELOC as opposed to taking over payments on a mortgage? If the title transfers to my company, but we leave the HELOC in her name and just make the payments, is there a way to make sure she can no longer use the line to make purchases etc.? Never structured one of these before, so looking for as much info as possible from someone who may be experienced. She is sending her HELOC information to my sister/agents email to take a look at the details on Monday. If everything checks out, I would be looking to take over ASAP.

[Ned Carey]

@Michael Hayes

Just for clarity a HELOC is a mortgage. Some important questions you haven't answered. Perhaps they will be answered when you see the HELOC docs. What is the interest rate? Is it adjustable and how often? How long will the HELOC stay in place? Are her $200 payments just covering interest now, or is she paying down some principal?

I suspect when you get these answers you will see this is not anywhere near as good as you might think.

When I had a HELOC, I could draw from it for 10 years. Whatever amount was left due after 10 years had to be paid over the next 10 years.

In your scenario, assuming 4% interest, if you had to pay off that $61K in 5 years your payment would jump to about $1,123. If  you had 10 years to pay it off if would still be about $617.

I am by no  means the guy to ask about subject to. However I do know one strategy people have used is to get power of attorney for the mortgage. With that power of attorney you may be able to remove her ability to take more money out. If confessed judgements are legal in your state you may get here to sign one giving you power to get a judgment against her if she does take money out.