Consumption and Real Estate
Is my home considered free and clear?
Question : Is my home considered free and clear?
About 2 years ago, my mom sold me her house (she already had it paid off). However, there is no bank involved, just went to lawyer to have deed filled out and transferred. So, she sold it to me for 87000, but no mortgage through a bank, and I pay her whenever I have the money. I have only paid about $ 5000 so far. My question is, is this considered a free and clear title since no bank is involved? Also, if I were to open up a Home Equity Line Of Credit, is there a maximum amount I can borrow since I have only paid about $ 5000? The reason I ask is because I am selling a car that I still owe about 20500 on. I am selling it for about $ 17000 and also purchasing a car for 5500. Therefore, I was looking to open up a HELOC and borrow about 10000. Not sure if all this is possible or not. Also, my car has warranties that I can cancel and get a prorated refund back, but do I have to cancel those warranties a certain amount of time prior to buying the car? lots of questions, i know. Also, do HELOC’s have a fixed rate or a variable rate? Opinions and advice would be greatly appreciated.
Thanks
home warranty rating
Best answer:
Answer by Ted
HELOC are variable rate.
Your home is not “free and clear” because you owe money on it (to your mother). You mother is the “bank” and loaned you the money for all practical purposes. The fact that no loan was recorded doesn’t mean that no loan exists and that loan will be a prior claim.
If you apply for a loan without listing the debt to your mother, it is credit fraud. The HELOC lender might let it go through but they might want an explanation of where the cash came from to buy the house since no loan is recorded.
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#2 written by KL 1 year ago
1.) Do you own the home free and clear? No. You have a private loan on it through your Mom, right? Then you don’t own it free and clear. If you apply for a HELOC part of the ap is to disclose all debts. If you don’t disclose this it will be fraud.
2.) Max combined loan-to-value on most HELOC’s is around 80%-85%. Take the estimated value, times it by .80 and subtract the amount owed to your Mom.
3.) HELOC’s have variable rates that can adjust monthly. Many offer a one-time lock provision but this will depend on the lender.
4.) Can’t provide an answer r/e the warranties…contact the dealer directly for this.
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Hello Kyle,
You may or may not know this, but your mother did a blessing on you offering you a private loan. Now your your first question is quite clear. The home is in your name, but you owe your mother, so that is still considered a debt or liability. Moreover, you should thank her for saving you 1000′s of dollars in interest that you would owe to the bank. As far as the HELOC goes, you can count this as a private loan and say it has 0% interest. Stating this might make your situation become beneficial in obtaining the HELOC.
The most important question to ask yourself is why your obtaining the HELOC. If your creating equity into your home, banks and/or credit unions are satisfied that the home is offered as collateral. Do not get fooled into tricks to make you pay a higher interest because the lender might take your home if payments are not made, so you are also aiming to have job security.
What I suggest you do for the car is sell the 17 grand car and buy the 5.5k car, so you are easily able to pay 11500 towards what you pay in the 20500. This way you will save quite a bit on interest towards your car payment. Not going by what I read, (but don’t take my word for it) I believe you will easily get the $ 10,000 you want in HELOC if you present a reasonable argument. Going to the warranties for your car, my simple question would be to ask you why you want to cancel them. These will increase a buyer’s interest, and if anything you can tell them about the refund back, so you both benefit, if the distribution is fair.
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