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Mentor
Why is she looking to refinance, to lower the rate, take cash out? Why can’t she refinance on her own without your dad? Also, if you’re on the mortgage she can’t just take you off, she would have to refinance again or sell the property. I would suggest keeping your finances separate from your parents.
Mentor
Not only that but this will bring down your DTI which limits how much you can borrow
I would only do this if you’re on the deed or the beneficiary of a trust or a member of an LLC that owns the property. If you’re on the mortgage, you should be an owner.
Thanks for the input! If I do go through with it I’ll make sure I’m on the deed
I think it’s fine as long as you have rock solid trust with your parents, and keep your name on the title. I did the same thing with my parents. At their age they have the capital and we (young professionals) have the W2, so it can be a win win situation to save some money on interest and mortgage.
Better question you should be asking is how far into her 30 (15?) year payment schedule is she and what is the interest rate difference. Lowering her monthly payment sounds good but it may be at the cost of many more years of interest.
I see, $3k on $480 is a bit high, you might be able to get mid-low $2k. Talk to a lender first, then you have the facts in front of you to calculate if it even makes sense. Then you can sit down and decide whether you want to do this for your parent.
Keep in mind that having a mortgage in your name, but no rental income, is going to drastically decrease your DTI (debt to income) if you decide to get another loan. The reason it works for me is to have high enough income that it could support having multiple mortgages. If you aren’t there now, you could be in the future so I’m still not saying it’s a dealbreaker but something to be aware of.
Mentor
Duuude don’t refinance now. With rates being 5%, I can’t see the benefit of refinancing, unless you’re in dire straights and are willing to take the financial burden for short term help
Mentor
Sure no prob! Can you tell me what your current rate is or when you bought? Rates now are 5%, so if you’re sitting on a rate higher than that then yes I could see refinancing
Now is not a good time to refinance. I love my parents to death but I would not do this for them right now. I would rather give them the money they are trying to take out the house or make payments on their house before I refi because you dont need this mortgage on your credit if you plan to buy a house soon. As many others have said, you cannot just pull your name off the mortgage and who knows where prices or interest rates will be when you decide to buy.
Refi is not cheap, several thousand each time plus you restart your interest amortization schedule (more interest going straight to the bank).
If your dad can get a refi himself in 6 months then just wait for that. Help out with the payments in the meantime. By far the overall best solution here.
Mentor
Something sounds odd about this. I don’t understand the motivation to refinance as a result of appreciation
If this is to capture cash, that’s an awful idea. At best, she owes money. At worst, that puts a huge financial burden on her if the market corrects
Mentor
Ah that makes more sense. I better understand your motivation now
Rates will continue to increase. Rates > 5% are ‘usual’ to the housing market and the fed intends to combat inflation by increasing rates, so anyone who tells you not to refinance now isn’t exactly correct. Rates will likely increase from here on out.
That’s a great !! There’s so many ways to improve credit. I would look at some of the community sites for MyFICO.com or CreditKarma.com. I’m know there are others. It can be fixed, and addressed! I’m rooting for you! (But yeah, I wouldn’t sign if I were you. It could prevent you from being to able to do simple things like buy a car)
This is a terrible idea. First, if there already a mortgage, it has to be at a better rate than they will get today. Second, if a bank won’t give your parents a mortgage, you shouldn’t be guaranteeing it either unless you can afford to take the loss if they stop paying. Putting your name on the title guarantees you ownership if they default but then you don’t get any step up if you eventually inherit the property, which could cost your a ton in taxes.
From an estate planning perspective it’s best to inherit property because then you get a step up in value when the owner passes. However the risk of this is that the owners might not will the property to you - thing can happen, people get divorced and remarried and new spouses can take properties. Trusts and will can protect but unless the trust is irrevocable the owner can change wills.