mortgage question

Discussion in 'Homesteading Questions' started by ellebeaux, Aug 16, 2005.

  1. ellebeaux

    ellebeaux Well-Known Member

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    I'm trying to save the family home - would it be possible to take out a $100K mortgage on a house that is currently valued at $205K but if it was fixed up would be worth $400K?

    The house is now totally run down and needs a new roof and foundation work. It is rat infested, as well as being full of crap. My father lives there now. He's on a fixed pension and has no assets except the house and poor credit history so he can't get a mortgage. So he has been offered $205K to sell the house. If the house was fixed up, I believe it would be worth more than $400K - the house next door is on the market for $640K. He has an offer on the house right now and is trying to decide what to do.

    I'm wondering that if he deeded me the house, if I could fix it up somehow. I would use part of the money to renovate the house and part of the money I would put in an account to pay the mortgage back for several years.

    I don't have a lot in assets, I just bought my first home but promptly got laid off at work. I'm going back to school for additional training. So I do have time to supervise the renovations.

    This would enable my father to stay in the house if I could make it work - he would give me the house and I would take out the mortgage. He is not able to qualify for a mortgage but I don't know if I will be able to either, given my current financial situation!

    Your input is welcome.
     
  2. BCR

    BCR Well-Known Member

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    If your dad has the deed, why does he need a mortgage? Is it to have money for the repairs?

    You can only get a loan based on the appraisor's value. And then it is based on your credit worthiness as well, and the percentage you want to borrow. Your dad might qualify for a home equity loan. Also, instead of deeding the house to you/you buying it, he could simply retain lifetime rights to live there and sign it over to you. That way any investment you make in repairs would pay you back eventually.

    And with no job, two mortgages won't fly. Are you selling your current house?

    And I don't get this part, "I would use part of the money to renovate the house and part of the money I would put in an account to pay the mortgage back for several years."
    Why would you borrow money, put it int he bank, and then use it to pay the loan off? Just borrow what you need to...period.
     

  3. ellebeaux

    ellebeaux Well-Known Member

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    Yes, I would use the money for repairs.

    My dad is in declining mental health, IMHO, he has let the house totally fall apart. It is rat infested and the basement is flooding from a crack in the foundation. In addition, he has repeatedly had the gas, phone and water cut off due to not paying the bills. Also, he has been unable to pay the property taxes on the house. So he has a very poor credit history. I'm confident that nobody will give him a home equity loan.

    I fully intend on keeping my current home. I am just trying to figure out a way that we, as a family, can keep his house.
     
  4. Helena

    Helena Well-Known Member

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    I don't know ?? Sometimes fixing up the family farm is more work and problems than you realized. Where would your father live during all of this work...would he be able to deal with all of the noise and work ?? Sometimes...One in the hand is worth 2 in the bush...if you know what I mean. Recently my 84 year old father mentioned something about putting just siding on his house. He has lived there now for over 55 years and it does has abestos shingles on the sides of the house. I mentioned to him that the cost of removing them and the cost also of being able to safely dispose of them would probably be a problem never mind the huge dumpster on his lawn and all the commotion that goes with the repair and ...opening a can of worms in his old house. You never know what you run into doing over an old house...I have learned that through experience myself. I'd take the money and buy Dad a smaller place and invest the rest of the $$ for him. Good Luck !!
     
  5. SteveD(TX)

    SteveD(TX) Well-Known Member

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    EXTREMELY hard to get a mortgage without a job and income. But even with a poor credit history, he might be able to get the mortgage if he has enough income to make the payments. You might ask a real estate attorney or mortgage co. about the option of co-ownership and a loan, etc. But you will probably need to get a job first. What I would consider: make sure of the cost of repairs, and try to get an offer closer to the true market value after repairs, less cost of repairs and an allowance of 20% to 30% for profit to the investor.
     
  6. cricket

    cricket Well-Known Member

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    Find a private investor. You have enough equity to get the loan...and you don't put the remainder in a bank.,..you escrow it for payments. You will have to show the actual cost of renovating, draw schedules, etc but you should be able to do that. Also, check into a non-conforming loan. If you have any questions, pm me.
     
  7. ellebeaux

    ellebeaux Well-Known Member

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    Oh, I just can't decide. Part of it is definitely my pride. Our family has owned the house for 80 years and it is killing my father that he has to sell it. Part of it is greed - it is the major asset in the family and if I could fix it up, we could actually inherit it someday.

    I have been trying to get my father to do something about this house for 4 years, since my grandmother died. But he refused to sell it and it has completely deteriorated in that time. A family friend has offered to buy it and fix it up to sell. I just don't see why there can't be a way that we can fix it up and sell it. Then I could take the money and buy my father something a lot smaller than a 6 BR 3.1 BA house.

    My other brother has a duplex that my dad could stay in while the house is fixed up. However, my brother is reluctant to let my dad live there permanently and I can't really do anything about that.

    This is really hurting me and I can't decide whether to just walk away or to help my dad. He will waste the money from the sell of the house within a year. Then he will have no assets and no place to live. But I don't want to abandon him.
     
  8. Pony

    Pony Well-Known Member Supporter

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    If he has sufficient equity in the home, you should be able to get a loan for 80% of that. (Some places are offering more, but IMO that's stretching things WAY beyond the pale.)

    If he doesn't have the equity, or if there are just too many things that need fixing, it may be best to get what you can and walk away from it.

    But I'm hoping for you that you can find funding. I've made some money a couple times over the years by fixing up houses that "need some TLC."

    Good luck!

    Pony!
     
  9. ellebeaux

    ellebeaux Well-Known Member

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    Thanks for the encouragement, Pony,

    I think, though I'm not sure, that the house is still in the estate of my grandmother. My dad is a lawyer and executor of the estate so I think that he has been sitting on settling it.

    There is no mortgage or other loan on the house so I would think that we could qualify for a decent size home equity loan. The point of sale inspection indicated that about $10-15,000 needed to be held in escrow for the necessary repairs of the basement foundation and a new roof. In addition, I would like to paint and recarpet, fix a toilet that runs constantly, remove the pests, and install some new airtight windows and doors. His gas bill was over $400 a month last winter! So I figure $30-50K in repairs would fix it up nicely. But maybe I'm being naive. I'd also like to get all the junk of 80 years out of the house. Get it down to the bare walls and give it a thourough cleaning. It's really a gorgeous house but it is definitely a 'fixer-upper'!

    I'm calling some friends who work at banks to see if they can help me figure this out.
     
  10. Pony

    Pony Well-Known Member Supporter

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    Golly, that's not naive -- that seems VERY do-able.

    Go for it. It would be a sin to let the house go for so little, and a darned shame to lose a decent place that's been in the family for so long.

    As Churchill said, "Never, never, never, never give up!!"

    Pony!
     
  11. mtman

    mtman Well-Known Member

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    where is it located in va.
     
  12. ellebeaux

    ellebeaux Well-Known Member

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    It's in Ohio, actually. But since I am unemployed and the teacher training program that I'm starting in the fall is mostly online, I can travel up there once a month to supervise the repairs.

    You guys are making me think that this IS a possibility. It would be a big responsibility, but I could handle it. The worst thing that would happen is that we foreclose on the house, right? My dad would still have his pension and I would still have my house.

    It just seems like a sensible thing to do but my dad has refused to think of it until now. We brought it up with him several years ago but he always said he could take care of it himself and that he would rather die than sell the house or give it to his children. So it's a very emotionally charged issue.
     
  13. Torch

    Torch Well-Known Member

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    Your dad needs to live in a home that he can afford and one that is easier to maintain and won't cost so much in property taxes and utilities. In my opinion he should either sell it now or you should get it fixed up and then sell it.

    It is just a house, let it go. In the end I think that both you and your father would be happier by taking the load off of him.

    Good luck and God bless.
     
  14. BCR

    BCR Well-Known Member

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    Ok. Is it just you and your brother? Will your brother inherit the property equally with you? Think carefully before investing your money/time into something you will then have to split.

    Your dad might qualify for a reverse mortgage, but then you wouldn't inherit it really--the bank would.

    You can't stop your dad from 1) destroying it again by abuse/lack of care after you fix it up 2) spending his money unwisely. Make sure your plans aren't based on him changing. You might be able to convince him to get his money into an investment he can't get to, but I doubt he'd fall for that. Also, if he hasn't settled the deed/death of your grandmother....that has to come first.

    My dad lived two hours away and I was in school at the time he was in declining health and we had to clean out and prep the large family home for sale. It is not easy trying to arrange things from a distance. And no matter how much love is there, it can be exhausting and thankless. With a father who is difficult....well, I can't imagine it going smoothly.
     
  15. ellebeaux

    ellebeaux Well-Known Member

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    Thanks, Torch. That is another idea I thought of: to fix it up and then sell it. That way, we could get a lot more money for it and he could get a decent little house. He wants to spend a bunch of the money from the sale of the house now so I don't think he will have enough to buy another house where he wants to live. So he is thinking of buying a boat and living on the Intracoastal (Inter?) in Florida and going on a six month road trip to Sedona, Arizona to look at the energy vortexes. Part of me just wants to let him live his life and do what he wants and part of me wants to make sure he has a secure future. And part of me is greedy and doesn't want to deal with the hassle. So I'm just very confused.
     
  16. Gary in ohio

    Gary in ohio Well-Known Member Supporter

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    If the house is currently worth 200 and you only asking for 100k then yes they would do it.


    [/quote]
    I'm wondering that if he deeded me the house, if I could fix it up somehow. I would use part of the money to renovate the house and part of the money I would put in an account to pay the mortgage back for several years.
    [/quote]
    I am not sure why you borrow money to put in an account? Just borrow what you need for the repairs. Any money your putting into account would generate less interest than the interest changed on the money.
    Just get a home equity loan for some amount and fix up the home.

    [/QUOTE]

    Whoever signs the loan papers will need to have the ability to pay back the loan, if your not working thats going to be a hard sell.
     
  17. ellebeaux

    ellebeaux Well-Known Member

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    Boy, BCR, you said it all! I can't believe I'm sharing all this family info with a bunch of strangers on the Internet. But I just need other people's opinions who can be objective about it.
     
  18. homebirtha

    homebirtha Well-Known Member

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  19. ellebeaux

    ellebeaux Well-Known Member

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    Okay, I just got off the phone with my Dad. He's decided to go through with it and sell the house. He was very appreciative but he feels he has made peace with the whole situation and it's time to move on.

    So I feel good, great even, that I tried to help him out. He's grateful. He has a new ladyfriend and they are going to eventually move in together and she is helping out with the whole situation as far as advising him on what to do.

    I feel a lot better about the whole situation. I'm just going to let it go and let him live as he wants. And continue on with my dreams!

    I really appreciate every one's input this morning. It is so difficult for me to maintain any semblance of objectivity about him. Your thoughts have really helped!

    Beaux
     
  20. rambler

    rambler Well-Known Member Supporter

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    You will have a difficult time getting conventional financing.

    Sounds like you have good equity, so that will be cool.

    However, who owns the property, who will be making the payments, and what income source will these payments come from? The bank will want to know, and you have very little to offer here. If it is your dad's house they will want him making payments, not a 3rd party.

    If you are given the house, that has tax issues you need to understand - you lose a _lot_ of capitol gains whenever you sell. As well your sibling(s) enter into the picture here. Can cause a great deal of $$$$ & family issues. Think long & hard on that. If you sign the loan you take the risk, what will your sibling expect to get out of it at the end of the deal for no risk on their part?

    If you can come up with a payment plan, income to devote to making payments, and clearly get ownership issues solved, certainly you can do this. Probably have to look for other lenders than a cookie-cutter bank place.

    You need to determine what you want when you are done: Where will your dad be, how will you & your sibling(s) share costs or income, will you be keeping the house or will you be selling it, will your dad stay there & ruin all the renovations, etc. What is the end goal here?

    I would not take on $100,000 for family pride & no plan of what that will get you in 5 years time. You need a solid plan that everyone understands.

    Supervising building on a weekend now & then from several states away is difficult. This will be much more harder work than you think.

    All is doable tho, if you can get a solid plan of what you wish to acghieve in 5 years, where you (and the others involved) want to be.

    --->Paul