Legal Question in Real Estate Law in Illinois

a family house has a big monthly mortgage is possible to sell it to a family member for a much smaller

sum in order to get a lot smaller mortgage ?

Asked on 2/18/22, 4:35 pm

1 Answer from Attorneys

Henry Repay Law Offices of Henry Repay

If I am understanding your question correctly, the simple answer would be "no." When you sell, since the mortgage is a lien on the property, it would typically have to be paid off in full. Without seeing the details and without them being included in your facts, but focusing on the tone of your question, I expect that paying off the loan may not be feasible (that there probably is not enough equity in the property to pay it off).

If the monthly payment is the primary issue, you may be able to have it modified. Lenders have programs (especially in this time of pandemic recovery and government programs) to restructure the loan (often reducing the interest rate or even the balance). Applications, however, are evaluated on a case-by-case basis and the process can be cumbersome.

If selling is crucial, but the equity is not there to at least break even, one possibility is to request a short sale, which means the lender would be releasing the mortgage without being paid in full. This usually requires a detailed application, a hardship statement, and various supporting documents (such tax returns, bank statements, pay stubs). The process is often drawn out over months. Essentially, the lender is being asked to recognize that there is not any way it will ever get paid in full and that it would be served well to just get what it can. The downside to this option is that it usually requires an arms-length transaction (in other words, doing it with a relative is probably not going to fly).

To reduce your monthly obligations, you should review your property taxes and insurance. First, if this is your primary residence, make sure that you are getting your homestead exemption on your property taxes (sometimes listed as "owner-occupied exemption"). Next, there are other possible property tax benefits available in certain situations (senior, vet, disability). Check the county's website (for example, click on the Exemptions tab on the following site: Finally, shop around for a better price on your homeowners' and auto insurance policies. If you make a change, however, make absolutely certain that your lender knows you have a new policy.

If necessary, contact a bankruptcy attorney. There are circumstances in which the balance on a mortgage can be reduced ("crammed down") based on the limited value of the property.

One way or another, consult an attorney before you give up on the property. I wish you well.

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Answered on 2/18/22, 6:23 pm

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