My parents took out a mortgage loan for my husband and I.?
It is for 80,000 condo. They are obviously not going to live there. The condo is going to be under their name. We are paying the down payment and monthly mortgage. Are there any legal consequences?
- curtisports2Lv 72 years agoFavorite Answer
For you, no. For them, quite possibly. If the mortgage agreement requires owner-occupied, they are in breach of the agreement and if the lender finds out, the lender can call the loan immediately due and payable. If they obtained a mortgage as an investment property and are paying the higher interest rate that comes with one of these mortgages, then they are fine.
There may be other consequences for you. The property is in their name. What protection do you have, for the down payment you invested, and the payments and the taxes you are paying for? Are you paying the payments directly and the taxes directly, or are you giving them the money and they pay?
Because you are not on the deed - I recommend that you be added to the deed to protect your investment - you cannot take any tax deductions for mortgage interest and property taxes. Only the owner can. But, if you make those payments directly, they can't take tax deductions for interest and taxes either. Not only must you own the property, you must pay the mortgage and taxes yourself. It's why landlord collect rent and pay their bills, not have tenants pay their bills for them - even though that's exactly what the tenant is doing.
- SlickterpLv 72 years ago
Yes, that you don;t actually own the place, they do.
- SlumlordLv 72 years ago
They own the place and can kick you out if they want to but assumedly won't do this. They also get the tax benefit and benefit it it appreciates in value. If, however, you didn't pay the mortgage they would be on the hook to pay it themselves or its their credit that would get hurt.
- babyboomer1001Lv 72 years ago
Not that I can think of, unless something happens and you can't pay anymore, and they can't pay either in which case, the lender will foreclose.Source(s): Certified Paralegal, with 25+ years' experience & with Real Estate law experience.
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- AmyLv 72 years ago
That's a terrible system.
Your parents will own the condo. You and your husband will have zero rights to it. You are effectively renting it from your parents, and when you move out you will have nothing to show for all you've paid.
Even if their intention is to gift the deed to you when the mortgage is paid, that would incur taxes.
Meanwhile, if you ever fail to pay the mortgage, it will ruin your parents' credit, without them even knowing about it.
A better option for you, though it still exposes your parents to risk, would be for you to take out the mortgage, and have your parent(s) cosign.
If they have the money to pay for the condo outright, another option is for you to write up a formal loan to borrow from your parents.
- glennLv 72 years ago
The money you are paying is really rent to them. Unless the lender will allow you to assume the loan (I bet they would require you to qualify). Years down the line when the condo is sold- if it had been homeowner occupied - no income tax would be owed on any profit- but if it is a rental property (which it is right now) then the profit would be taxed. There are lots of legal issues.
- Anonymous2 years ago
Let's see now since you had problems with credit and payments before, according to your history, you will more than likely NOT pay the mortgage and they get THEIR credit ruined. You own nothing, you are mere tenants.
- TavyLv 72 years ago
Not possible. A loan company would require your signature, if they pretended to be you then that is fraud.
They have a mortgage in their name, it is not possible to transfer it to you.
You are paying their loan and you are their tenants.
You have no security whatsoever.
- loanmasteroneLv 72 years ago
Your parents are not taking out a mortgage loan for you and your husband. They are applying for a mortgage loan to purchase a house or property for themselves.
Your parents would have to be careful about the mortgage loan they would apply for. In applying for and being approved for a mortgage loan, there are 3 questions that could cause legal problems if answered incorrectly.
The would be required to indicate the reason for the purchase of the property. The options are #. Owner Occupied #2. Second home #3. Investment property.
You have stated they would not reside in the property. Therefore there are two options left. If the property is not far enough away from their current residence they are not able to select 2nd home. The only other options left is investment property. If the selection for the purchase of the property is to be used as an investment property the interest rate would be higher.
If they select the option they would be using this house as their primary residence they would be committing fraud.
Once the transaction close
#1. Your parents would be legally required to repay the mortgage loan
#2. Your parents would be required to pay the monthly mortgage payments each month. (You nor your husband would have this liability or responsibility).
#3. Your parent's name would be recorded on the title deed.
The other legal consequence in this transaction is, are your parents able prove they have the down payment and closing cost in one of their bank of other financial accounts for over 90 days, with bank or other financial statements? This is a basic requirement of all mortgage lenders.
Why are your parents doing this transaction on your behalf? Normally the reasons for someone else to be involved in the purchase of a property for others would be.
#1. You and your husband do not have sufficient credit?
#2. You and your husband do not have a sufficient credit score
#3. You and your husband do not have a sufficient income
You, your husband and parents might consider applying for a mortgage together, even if you and your are not qualified financially or with the proper credit or credit scores.. In doing so,
#1. You would eliminate the possibility of fraud against either of you. There would be no question as to the purpose of the mortgage loan application and the use of the property
#2. All your names would be listed on the mortgage loan application and approval.
#3. Each of you would be required and liable for the monthly mortgage payment
#4. Each of your names would appear and be listed on the title deed.
You and your husband might consider applying for a mortgage loan to see if you would be approved or not. If you are, all well and good. If you and your husband would not be approved, you would still be able to add your parents to the mortgage loan application.
Having a low credit score, which would cause you to have a higher interest rate would not be a reason to add your parents to the mortgage loan application. You and your husband might have neglected your credit in the past. This is your problem, not the problem of your parents.
Your parent should not be involved in you and your husband financial situations. They are considering retirement and do not need the potential financial headaches of you and your husband.
You are the ones that placed yourselves in this position, your parents should not be required to bail you and your husband out of your financial situation. This is your problem to solve.
If you encounter a high interest rate based on your credit score, continue with the mortgage loan application to approval and the purchase of the property you want.
After you have successfully paid your monthly mortgage payment for 1 year without being late, you are able to refinance your mortgage loan to a much better interest rate.
You might also want to consider applying for a FHA mortgage loan. The down payment is lower and the approval requirements are not as strict as a conventional mortgage loan requirements, even if you think other wise.
I hope this has been of some benefit to you, good luck.
- sunshine_melLv 72 years ago
They can't take out a mortgage for you.
They have taken out a mortgage in their own name, against a property they own.
Unless you have a clear legal agreement with them, you have no claim whatsoever to own the property even if you're paying the mortgage - you're currently tenants.