Question by Michael: Assuming a Mortgage or Refinancing?
I bought a house with a friend of mine as co-borrower two years ago. I got married recently and want to take over the house and the mortgage. The house has two mortgages when it was purchased at 100% financing at that time. Rates are good. I called up the lending bank who holds both mortgages and they said I can assume the first mortgage but the second mortgage is not assumable. I have to refinance for the second mortgage.
Another option would be to refinance altogether and combine the two mortgages into one under my name. But since the house was purchased almost two years ago, there has not been that much equity so in order to refinance I have to put down a lot of money. The bank can only finance 95%LTV.
If I go with refinancing with the second mortgage, the bank will need 85%LTV maximum.
Not sure what to do. What do you think?
Thanks Christopher B.! But what is the Power of Attorney for?
The first mortgage is a 30 year fixed, with 6.5% interest. The second mortgage is a 30 year fixed with 7.9% interest.
My buddy got married too and intends to buy a house in a year or so. Hence the need to take him off the mortgage.
Answer by Christopher B
Keep it simple – and cheap. Assume the first mortgage. Ask your friend to allow you to continue to carry the second mortgage. As it is a second, and smaller, it will have less of an impact on your buddies Income to Debt ratio. If he is cool with it, then just get a Limited and Durable power of attorney from your friend, and that way you can continue to service the mortgage, and you can refinance or sell at any time you want in the future, and won’t need his signature.
Power of attorney is to allow you to continue to service the mortgage – i.e. make payments, talk to the financial reps, make changes – as well as being able to sell or refinance. When a house is being sold or refinanced, all parties must agree to the transaction and be present during the transaction – UNLESS, there is a POA in hand. The holder of the POA can sign for and authorize the transaction.
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