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Loan Assumption? Refinance? Buy Out?

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meluv2shop12

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Post Posted: Mon Feb 14, 2011 11:43 pm    Post subject: Loan Assumption? Refinance? Buy Out?
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My sister and I purchased a house about 5 years ago close to the peak of real estate. I have since gotten married as the value of the house that we bought continued to drop.

Purchase Price: $325K
Loan Amount: $260K
Present Value of the House (according to Zillow.com): $250K

Now my sister wants out, while I don't mind staying...
If we put the house in the market, it may take forever to sell and we may end up owing - assuming Zillow.com estimated house value is accurate.

My question is: What is the best, least expensive way for me to buy my sister out?

Loan Assumption?
Refinance?

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Icon Mini Profile sara
sara
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Post Posted: Tue Feb 15, 2011 2:16 am    Post subject:
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Hi meluv,

Depending upon the present value of the property, you can offer a certain amount of money to your sister in order to buy her out. You and your sister can decide the amount of money you need to pay her. As far as the mortgage is concerned, you cannot refinance it as there is no equity in the property. In such a situation, you can contact the lender and apply for a loan assumption.

Take care.
meluv2shop12

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Post Posted: Tue Feb 15, 2011 12:54 pm    Post subject:
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Thanks for the feedback Sara!

Perhaps I should also let you know that one of our options was actually to put the house in the market but we decided against it as we did not want to pay the bank the difference between what the house sells for and the loan balance (based on Zillow.com - the present value is $250K - we still owe $260K). We did not want to short sale the property either because I heard that it would negatively affect both our credits (is this true?)...

Having said that, I was just curious, if the present value of the property is less than what is still owed, why would I need to pay my sister in addition to relieving her of any liability on the property?
Icon Mini Profile jameshogg
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Location: Nevada
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Post Posted: Wed Feb 16, 2011 12:50 am    Post subject:
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Hi meluv,

If both the names are on the mortgage, then a short sale will lower the credit scores of both the borrowers by 80-100 points. Your sister is one of the owners of the property. She can claim her share though there is no equity in the property. However, if your sister does not want any money from the property, then she can simply sign over the documents to you.

Thanks
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