Mortgage Assumption vs. Refinancing

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Icon Mini Profile theresaannlee





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Post Posted: Tue Aug 11, 2009 10:14 pm    Post subject: Mortgage Assumption vs. Refinancing
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My ex and I have been divorced 2 1/2 years. In that time he has not refinanced to remove my name from the mortgage despite court orders. He is now upside down and is having difficulty refinancing. He is looking into assumption, would that remove me from all liability and debt if he is possibly looking at foreclosure? Also, can he use his parents home (with their permission) as collateral to refinance the mortgage? This is difficult b/c I am listed for a total of three mortgages (his first and second, and my own house) to the tune of $480,000. I couldn't qualify for a used Yugo at this point...

Thanks for your help,
TAL
Icon Mini Profile jenkin7
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Post Posted: Wed Aug 12, 2009 12:11 am    Post subject:
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Hi theresaannlee,

If your name is still on the loan, your credit will get affected if the house goes into foreclosure. A refinance would have been the best way to remove you from the loan. But since the house is upside down, a refinance is not possible. He can however assume the loan to release you from the liability. But he needs to show good credit and income in order to do so. He cannot use his parents' home as collateral to refinance the existing mortgage.
Icon Mini Profile gmakerley
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Post Posted: Wed Aug 12, 2009 9:11 am    Post subject:
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not sure why you'd want to qualify for a used yugo, but....
i don't know how an assumption would work - if the lender is awake, they'll recognize that this is not a viable situation for an assumption. i don't see how he can assume a loan that is his already, anyway.

jenkin is right in that his parents' home cannot be combined with the existing home to refinance. can they help him out if they wish? sure they can, but no lenders would lump the homes together.

this is a difficult situation for you, but also for him...given that he ought to have refinanced this earlier, it's now almost too late to take care of it. i'm afraid i don't have any solutions at this time, unless his parents are open to providing a loan.

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Miketheironworker

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Post Posted: Sun Jan 24, 2010 4:17 pm    Post subject: HUH?
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George, are you really a loan consultant? You might want to consider a career change. Your comment about the assumption is somewhat bizarre. The idea behind an assumption is that you would apply to carry an existing mortgage and have the other person on the mortgage removed. Yes, you can assume a mortgage with your name on it in order to have a spouse removed. You will still have a problem with that process because of the lack of equity required to secure the loan. His only option, if they won't work with him, will be to walk away.
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Post Posted: Sun Jan 24, 2010 6:43 pm    Post subject:
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Mike, If the house is upside down, a lender wont allow an assumption will they? Especially if it means removing some of the current security. what about a loan mod in the mean time - this might help to keep the repayments down and prevent a foreclosure at least.
Icon Mini Profile jerry
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Post Posted: Tue Jan 26, 2010 2:25 am    Post subject:
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Hi theresaannlee,

An assumption is a good option to add someone to the mortgage and remove an existing borrower from the loan. However, if the house is upside down, the lender will not allow a simple assumption. Since there is no equity in the property, a refinance is not a possibility. However, as long as your ex stays current on the mortgage, your credit will not be affected.

If he is having trouble in making mortgage payments and the property is in danger of being foreclosed, he can request for a loan modification. This can reduce the amount of the monthly mortgage payments and can help your ex avoid foreclosure. If the house is saved from foreclosure, your credit will not be affected adversely.

Thanks,

Jerry
Icon Mini Profile gmakerley
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Post Posted: Tue Jan 26, 2010 9:56 am    Post subject:
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thanks for bringing your ironworking expertise to the mortgage industry, mike. how i survived all these years without you, i can't even begin to calculate.

just for chuckles, i googled "definition of assumption of mortgage." in none of the results did i find a reference to an existing borrower (1 of 2) assuming a mortgage solely. no matter how the loan is structured, a borrower is always liable until such time as a different borrower comes along. a borrower who is liable on a loan cannot truly assume the debt of a second borrower who would be removed therefrom, as the borrower you're mentioning is already fully obligated to make payments.

maybe i'll become an iron worker, too. i guess i need only a modicum of financial "expertise" (pretend-style) to fit in.

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