Purchase home from Family members
Three siblings own a home in which one sibling is living in the home. The sibling living in the home is going to purchase the other 2/3 from the other two siblings (The home is currently paid).
(1)''Home Equity'' loans are more expensive then a ''Mortgage''.
(2)A mortgage cannot be issued to purchaser if he is already an owner of the home.
I understand that a ''Home Equity'' loan can be used to purchase the home from the other two siblings with the payment of funds received from the ''Home Equity'' loan paid to the other two siblings in which the new deed will be issued to to the purchaser and the other two siblings removed from the deed.
Question: Can the purchaser deed the home to the other two siblings, thereby no longer being an owner of the prpoerty.
Based on that can he then apply and qualify for a ''Mortgage''(lower interest rate) and purchase the house at the 2/3 value to then pay the other two siblings. The objective here is to get the lower interest.
Any recommendations or anything illegal with the mortgage transaction?
1 Answer from Attorneys
Re: Purchase home from Family members
There is a 3rd scenario that you are probably not familiar with, and that is for an Owelty Lien (or loan). It is for the specific purpose of buying co-owners or soon-to-be-ex-spouses out. It falls outside the home equity rules and usually costs about the same as a purchase money mortgage. Although your scenario is legal, the new lender will look and the chain of title and not loan the money because of the recent deed-back. There are also some gifting issues. I recommend that you shop around for an Owelty Loan and keep it simple.