Homeowners must act fast to get out of a sticky home loan situation
By Ilyce R. Glink and Samuel J. Tamkin,
Eighteen years ago, my husband’s aunt bought a house for us to live in. The payments and deed are in her name; however, we make the payments, including insurance and taxes.
We structured the deal this way because we were young, with no credit. Now we are older and we still have no credit, although we do have a child in college.
About 10 years ago, my husband’s aunt met a new boyfriend whom we do not trust. What can we do to make sure that if anything ever happened to her we would take over the payments and deed to the property? We have a 30-year mortgage with her, so there aren’t too many years left. How can I have peace of mind now that no one can take our home? Is there something we can get drawn up that says this is a deal between her and us?
For 18 years, you have known that you live in a house that you call your own, but you do not own it. You should have taken care of this issue years ago for so many reasons.
However, we want to talk about your credit. Eighteen years ago, you say you had no credit and you now say that you still don’t have credit. We wonder if you mean that you don’t have savings as opposed to having no credit. Usually when people say they don’t have credit, they mean their credit is poor or that they can’t borrow money.
If your credit was poor then and is poor now, we wonder if you have had the ability to take care of your finances over the last 18 years. To improve your credit, you don’t need a great deal of money; you just need to pay your bills on time and manage your credit well. That is to say, you don’t want to take on too much credit card debt and you should pay all of your bills when they come due.
If you’ve taken care of paying your bills on time and don’t have too much debt, you should have a pretty good credit score — even if you are unable to borrow money from a bank to refinance the loan on the home.
When your relative purchased the home for you, she took title to the home and obtained financing for the purchase of the home. Her credit has been at risk all this time that you have owned the home. We wonder why you have been unable to refinance the mortgage and take title in your own name. For one, interest rates have gone down significantly over the last 18 years.
You only have 12 years left on the mortgage on the home, and at that time, the loan should be paid off in full. Ideally, from your perspective, you’d want title to the home to be in your name and your husband’s name.
If your husband’s aunt dies or becomes incapacitated, title to the home may be tied up, or, worse, her will might fail to designate that the home is for the two of you. You could be out ownership of the home, or at best you might find yourself involved in a lawsuit to clean up the mess.
You should talk to a real estate attorney as soon as possible to evaluate your options. Transferring title to the home might be rather simple; you might just need your husband’s aunt to sign a deed transferring title to the two of you. In some states, that transfer could be done with a quitclaim deed, while in others it might need to be a warranty deed. Your husband’s aunt also could consider transferring title to the home to a trust, with a provision that the title to the home go to you upon her death. There are a number of alternatives.
You should know that if the aunt marries her boyfriend, he may have certain rights to property owned by his spouse — including the home you live in. Those rights vary from state to state.
The ideal situation would be for the two of you to refinance the current loan and at the same time transfer title of the home to your names. Your husband’s aunt would not have to worry about having a loan on a home she no longer owns and you would have a new low-interest loan on a home you now own.
A word of caution: If you can refinance, avoid a 30-year term on the loan. With interest rates low, you might be able to refinance to a 10-year loan and keep your monthly payments at around what they are now. In a decade or so, you’d own the home free and clear as you plan for retirement or plan on selling the home.
Ilyce R. Glink’s latest book is “Buy, Close, Move In!”
Samuel J. Tamkin is a Chicago-based real estate attorney. If you have questions, you can call Ilyce’s radio show toll-free (800-972-8255) any Sunday from
11 a.m. to 1 p.m. Contact Ilyce and Sam through her Web site, www.thinkglink.com.