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Not sure if this is the right forum for this question...
This is not for me, but I'm curious about it. My "friend" bought a house with someone else and will "buy them out" or whatever they can do in a few years. Let's say the house was purchased for $200k. In a few years the house will be worth $250k (just for example).
Would a new mortgage have to be obtained to do this? The first person will probably not have enough money to pay cash for the second person to leave. Will they just have to 'refinance' the whole house by themselves at that point with cash out to pay the second person?
One more question: How does one determine the amount the second person who is leaving, gets? Everything is 50/50. When they purchased the house, it was with the understanding that this will happen.
if the person doesn't have cash to repay back the partners down payment + appreciation and inflation, then refinancing(by themselves) is an option, IF you can get enough cash-out.
figuring out 50/50 is just that, you get back what you came in with and you leave with 50% of the appreciation + (inflation, most inexperienced people don't use inflation tho). also, this is assuming that each are putting in 50% for each payment, utilities etc.
It is best to refinance anyway. Otherwise, the person who is being bought out forfeits their rights to the house, but still is financially responsible.
It is best to refinance anyway. Otherwise, the person who is being bought out forfeits their rights to the house, but still is financially responsible.
There is no other way around this? I understand what you mean but would think a contract of some sort can be signed to "forfeit" his responsiblity as well. In a divorce, does the house always get refinanced or does one spouse sign a "release" or whatever it may be called to get out both financially and physically? I'm just guessing at this point.
Brokerdave, wow, never even thought about inflation. My initial thought was "That's built into the "appreciation", but now I'm thinking the initial investment/downpayment needs to be paid back with interest, right? Not really understanding that. Wouldn't it all fall into the "appreciation" category?
Thanks for the replies.
One more... How does one determine price at that point? Appraiser separate from the bank's appraiser, right? Seems like banks lowball the numbers. At least from what I've seen.
There is no other way around this? I understand what you mean but would think a contract of some sort can be signed to "forfeit" his responsiblity as well. In a divorce, does the house always get refinanced or does one spouse sign a "release" or whatever it may be called to get out both financially and physically? I'm just guessing at this point.
Refinance is usually the only way. You can sign a quit claim deed to get off the title, but if you want to get out of the responsibility of paying the loan you have to talk to the bank.
In some cases the bank will do a cheaper, faster, simpler refinance. They will look into the qualifications of the person that is staying and see if they can qualify for the home alone. If that is the case, they might for a small fee modify the loan to let the other person off.
The person can't just sign something saying they want out of a mortgage and its done. You signed a contract to pay back the money and you are liable for it until the lender agrees to let you out or you pay it back.
Quote:
Originally Posted by NewJersey?
One more... How does one determine price at that point? Appraiser separate from the bank's appraiser, right? Seems like banks lowball the numbers. At least from what I've seen.
And just 2 years ago people were always saying that appraisals were inflated. Its funny how perception clouds this so much. Every "expects" a certain value for their home and doesn't like it when the market says otherwise. An honest appraiser whether hired by the bank, buyer, owner or anyone else will give a fair market value. It can be off by 2-3% but it should be close.
My question would piggy back on Lacerta's first comment: I bought a house with my partner and gave her 50%, but after a year she lost her job and for the last 2 years she has been unemployed I have soley paid the mortgage,taxes and bills. I have been wanting to buy her out but did not have the full understanding of the term "Buy Out" till now.
My question is can I sue her for not keeping her 50% of financial responsability? or some how work that into the "buy out"?
The case in California anyway, In the case of a Divorce or disolution of marriage, where one of the parties will keep the home. The two parties can decide on a price, the home can be re appraised, or kept together and sold at a later date. So lets say that the parties are divorcing and one party will buy out the other. The home will be reassesed and if their is money the party staying on can take a loan on the equity and pay off the other party. Most likely though the value of the home has declined though, at least during the time frame of the original post in 2008. I have friends who divorced and one party bought out the other party. They kept the home and that was it.
My ex partner and i bought a home eight years ago but I've been the only one paying all expenses. We have been separated for a year now and I've continued to pay the bills. How can i go about taking her name off the mortgage?
My ex partner and i bought a home eight years ago but I've been the only one paying all expenses. We have been separated for a year now and I've continued to pay the bills. How can i go about taking her name off the mortgage?
You can't take her name off the mortgage - the bank has to do that -- you would basically be refinancing the house in your name alone. But - only if you can afford to do that.
Also - if she had any monetary stake in the home (did she put any money into the purchase of the home, did she make mortgage payments while she was there, etc..) - you may have to buy her out as described above.
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