Co-Ownership Mortgage (loan, interest rate, heloc, foreclose)

[roberto188]

I just recently built a home with my brother. We have 50-50 ownership, I live in one half he lives in the other. However, our mortgage has both our names on it. Essentially my lawyer screwed up, because I went to take out a loan to start a small business and the banker told me that I only have 50% equity in the home but am liable for 100% of the mortgage. This essentially gives me excess liability. Therefore he calculated I have no real equity to borrow against. How difficult would it be to modify this mortgage to indicate that I am only liable for 50% of the mortgage amount? Is this possible without having to totally rewrite the entire mortgage? Please give me your thoughts. This mortgage is not from a bank but a personal mortgage so it will be easy to make the necessary modification.

[399083453]

It's not possible. Each of you is responsible for 100% of the mortgage. Let's say one of your stops paying, now you're on the hook for 100%. Get it? If you stopped paying the bank can't foreclose on half a house. LOL.

It's possible you could turn the house into a legal condominium, with CCR/bylaws, then each of you could refinance each half and have 100% ownership of your half. This will take some time and money for deed changes, legal work, etc.

[Modification Specialist]

Originally Posted by roberto188

......the banker told me .....

My advice to you is change bankers.....

A loan modification is the change of the monthly payment, interest rate, term or outstanding principal. If you are looking to cash out when there is an existing loan, it can be done either through a Refinance or adding another loan.

• This can be done providing your brother agrees to you using your 50% equity in the property. Taking out a loan with only your name listed. Since his name is on the deed, he has to sign closing documents. If you both agree, you can borrow up to the free equity of the property.

• In your case a Heloc would be best suited for cash for your small business. Heloc loans are similar to a line of credit or a credit card.

• Over the years have worked with borrowers cases involving husband/wife, brother/brother, sister/brother, parents/children on the deed, either one or both on a loan refinancing or taking a 2nd mortgage. Personal homes up to three loans on property. Recently worked a commercial mortgage, with 8 loans on one property.

• You said you in one half he lives in the other, this tells me this is a one household. If there is a solid wall between your brother separating the property into two individual dwellings with separate addresses. It would be an issue of doing only one conventional loan (need more information on your private lender?) Even if this is the case, you have the option of a commercial loan.

• Also noting with different private lenders. I have worked cases where private lenders had specific LTV values on the amount of equity that could be borrowed against. You need to look at your existing loan note (documents). If this is not pertinent for you, it shouldn't be a problem to take out another loan because the private lender remains in first lien holders position.

• Noting having multiple loans will be a subordination issue later, when trying to refinance.

Good Luck

...

[thelopez2]

As far as addressing income, ask you banker if you can consider the payment that he makes as rental income. Is your brother willing to let them put a lien on the property?

[Jkgourmet]

Originally Posted by roberto188

This mortgage is not from a bank but a personal mortgage so it will be easy to make the necessary modification.

This is the important part that I think the other posters missed (although most of that advice was spot on IF the lender was a bank).

I'm guessing mom and dad bought the house for cash, then wrote the kids a loan in the form of a mortgage. That's the "personal mortgage" that the OP is referring to. I would also wonder if it's ever been filed as a lien against the property (probably not).

If I'm correct, it's an easy answer: Ask your brother if he would agree to the modification. If he is, then you both go ask mom and dad. (If I were any of those three, I'd be saying no, you can't put a lien against mom and dad's house.) Maybe mom and dad would convert it to a rental agreement, but again, I doubt it.

[Modification Specialist]

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Jkgourmet....Good Eye.. took as a private lender which is totally different from a personal loan..

OP is asking how difficult would it be to modify this mortgage to indicate liablity for 50%?

If this is a modification on a Mommy-Daddy loan, it's up to Mom and Dad to only hold him 50% responsible if his brother defaults. This is a personal loan - normal loan to value ratio's to have to be applied so the sky's the limit...,

I don't think parents brought the home because he said brothers were the builders. Most likely parents loaned them the money to the built the house. Agree probably it's never been filed as a lien against the property at the court house.

The OP didn't say who's names are on the on the title. If the brother's, need agreement for a loan as described in my previous post. If the parents - taking out another loan and having rental income? This option would not say rental, because lenders only use 75% for the DTI income. Saying this as a contribution, lenders use 100%. Showing more income = lower DTI score = lower rate, better loan.

Short term best option < asking mom/dad for an increase in the credit line (like an increase to a credit-limit on a credit card).......

Long term option to think about > subdividing to show him having 100% ownership. The property is separated by adding a fire wall, separate bedrooms, kitchens, bathrooms and entrances. Each half having it's separate title. Need to check with the county zoning requirements. This is a good way to increase the future value to the property...

....

[Jkgourmet]

best solution? Save up the money to buy the business until you can afford it. And make sure you have emergency reserves, too.