DEAR BOB: Is it possible to add someone to the title to a property but not to the mortgage loan obligation? If so, after that buyer dies, does the surviving owner get to buy out the deceased’s share of the property? –Paula T.
DEAR PAULA: From the tone of your letter, it sounds like you want to sell someone an interest in your property. Yes, that can be done without their taking on the mortgage payment obligation.
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However, when a co-owner dies, his or her share of the property is usually left to an heir named in his or her will. Other than holding title as joint tenants with right of survivorship, there is no titleholding method allowing the surviving co-owner to buy out the deceased’s share of the property.
If you want a special buy-out agreement upon the death of a co-owner, the best way to accomplish that is with a partnership agreement. You can include just about anything you and the other owner want in the partnership contract. For details, please consult a local real estate attorney.
LAND-CONTRACT SALE PROBLEMS
DEAR BOB: We have been buying our home on a land-contract sale for about four years. Somehow, our seller got a $50,000 home equity loan on the house and now owes more than was his original mortgage balance. What can we do about this? –Meg W.
DEAR MEG: Now you know why I do not recommend installment land contract sales (often called a contract for deed), especially for home purchases.
A land contract sale means the seller retains title to the property until the buyer makes all or an agreed number of payments to the seller before obtaining the deed. The land contract buyer pays the seller each month and the seller then keeps making the payments on any existing mortgage, including that home equity loan.
Unless your land contract with the seller prohibited him from further encumbering the property, there isn’t anything you can do until you make your final land contract payment and become entitled to receive the title.
At that time, if the seller doesn’t have enough cash to pay off all encumbrances against the property, he might not be able to deliver marketable title to you. For more details, please consult a local real estate attorney.
WHY YOU CAN’T OUTLIVE A REVERSE MORTGAGE
DEAR BOB: I enjoyed your recent article about how senior citizen reverse mortgages work. But I have two questions: (1) how are the monthly payments to the homeowner calculated by the reverse-mortgage company, and (2) what happens when the homeowner outlives the market value of his house? If that happens, does he continue to live in the house and receive monthly payments although the result will be a loss to the lender? –Dale S.
DEAR DALE: Each of the three nationwide reverse-mortgage lenders, FHA, Fannie Mae, and Financial Freedom Plan, has a different formula to calculate payments to the homeowner. The age of the youngest borrower (you must be at least 62), the adjustable interest rate at the time of obtaining the reverse mortgage, and the home’s market value are used.
To compare how much you can receive from each plan, on the Internet go to www.FinancialFreedom.com and enter your age and estimated home value.
The older you are, the more money you can receive (because of a lower life expectancy). As a general rule, FHA is best for homes worth below $400,000, and Financial Freedom Plan is usually best for more expensive homes because it has no maximum limit.
If you outlive your life expectancy, the reverse-mortgage lender must keep paying you each month even if the total principal and accrued interest exceed your home’s market value.
Averaged over thousands of reverse mortgages, that rarely happens. More details are in my new special report, “Everything You Need to Know About the Pros and Cons of Reverse Mortgages for Senior Citizen Homeowners,” available for $5 from Robert Bruss, 251 Park Road, Burlingame, Calif., 94010, or by credit card at 1-800-736-1736 or instant Internet delivery at www.BobBruss.com. Questions for this column are welcome at either address.
(For more information on Bob Bruss publications, visit his
Real Estate Center).
