If two people own a home, mtg is $340,000, onc person wants out, wants the other person to buy out, what would they be entitled?
By Bucks Lady, Tuesday, June 10, 2008.Bookmarking Sites
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Mother & daughter situation, right to survivorship. mother wants out, thinks she is entitled to half of the house $170,000, however the mortgage of $340,000 is to the max on the house, and the value of house is less than the mortgage giving no equity. Is she entitled to $170,000.
How does one buy someone out, is it the equity or the mortgage???
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Submitted by Jack Kloskowski on September 21, 2008 - 9:45pm.
First things first: mortgage principal amount (in this case $340,000) is the money owners do not have - it is the amount that was borrowed from the lender at the time of the purchase or last refinancing to take ownership in the property.
If the deed reads "joint tenants with right of survivorship", it indicates both mother and daughter own the property (asset) together in equal share (50%) and, in the event of death of one party his/hers share is transferred to remaining party. If the property is sold, parties are entitled to 50% split of the net sale proceeds after satisfying mortgage demand.
Mortgage is a debt obligation against the value of the property used as a collteral. If both parties are on mortgage note, they are equally responsible for full amount of oustanding debt no matter who strokes the check.
Under normal circumstances, if one party wants out, it can be acomplished by deed transfer (or quick claim deed in case of family memebers) which will remove one party from the title to the property. However, deed transfer does not remove a party from mortgage obligation - this can be only accomplished by refinancing with only one party as a borrower. If the property in question has net equity , one would calculate net property value (by subtracting mortgage amount from appraised value and dividing the result by 2) and pay out the party that wants out by check or proceeds from cash-out refinancing.
Unfortunately in the above situation there seems to be no equity or rather "negative equity" - which means property has no net value to divide - rather an obligation - so refinancing is not possible, unless remaining owner brings funds (cash) to the closing to make up for the difference. In the aforementioned case mother will get nothing, rather may have to pay in order to remove her name from the property that is upside down and not be responsible for paying the mortgage.
This can be compared to "joint investment" let's say in stock of a company goes bankrupt and shares owned are worthless. How much would be 50% of 0? Nothing, of course.
However, it may be possile to negotiate with the lender on behalf of the borrower mortgage principal reduction. If succesfull, refinancing may be possible. This proces is called loan or mortgage modification. If you are interested findong out more about it, call us at 813.600.4446 (http://www.harborline.net) for assistance.