Adding someone to a deed while there's an existing mortgage can indeed be complex, but it's not impossible. It involves understanding how deeds and mortgages work, and managing the process correctly to ensure the security of both your investment and the lender's interest. Let's delve into the details of this procedure step by step.
Before proceeding, it's crucial to understand that adding or removing someone from a deed doesn't automatically change the mortgage. The mortgage follows the deed, which means changes to the title can impact the mortgage, but the two are separate documents with separate title and loan numbers.
Understanding Deeds and Mortgages
A deed is a legal instrument that transfers the ownership of real property from one party to another. The party transferring the property is called the grantor, and the party receiving it is called the grantee. Meanwhile, a mortgage is a security interest in property that secures the payment of a loan.
When you have a mortgage, you're using your house as collateral for your loan. This means that if you fail to make payments, the lender can foreclose on your property to recoup their money. Therefore, whenever there's a change in ownership, lenders need to ensure their interests are protected.
Types of Deed Ownership and Their Implications
There are several types of deed ownership, each with its own implications. Joint Tenants with Right of Survivorship (JTWROS) is one of the most common. In this case, if one joint tenant dies, the other automatically owns the property. This type of ownership can't be changed without the other joint tenant's consent.
Tenants in Common (TIC) is another type. Here, each person owns a specified or undivided interest in the property. The ownership percentages don't have to be equal, and each tenant can pass on their interest upon death. Unlike JTWROS, TIC ownership can be changed without the other tenant's consent.
Qualifying the New Party on the Mortgage
When you add someone to the deed, they become co-owners of the property. However, to be fully responsible for the mortgage, they need to qualify for it. This means the lender will need to evaluate their credit history, income, and debt-to-income ratio. If they don't meet the lender's qualifications, they won't be held responsible for the mortgage.
However, if the new party can't qualify, or if the lender doesn't allow additional parties on the mortgage (which is common), you might need to consider other strategies. This could involve refinancing the loan, which would reset the terms and potentially require the new party to purchase the existing owner's share. Alternatively, you could create a separate loan for the new party to buy their share, but this could split the original mortgage into two separate loans.
Steps to Add Someone to a Deed with a Mortgage
If the new party can qualify for the mortgage, the process typically involves the following steps:
1. **Consult a Real Estate Attorney**: An attorney can help navigate the complex legal aspects of adding someone to a deed and ensuring the mortgage is properly transferred.
2. **Prepare the Deed**: The new party's name and their interest in the property need to be added to the existing deed. The deed could also be rewritten to accommodate the change.
3. **Submit the Deed to the Mortgage Company**: The lender needs to review and approve the changes. They'll update their records to reflect the new owner and may require additional paperwork or fees.
4. **Record the Deed with the County Recorder's Office**: This makes the change official in the public record. There may be fees associated with this step.
Remember, adding someone to a deed while there's an existing mortgage is a complex process. Always consult with a real estate attorney and your lender to ensure the change is done correctly and that both your interests and the lender's are protected. To start this process, reach out to your lender and a real estate attorney today.