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| Buying 1st rental, Name on loan? |
| Posted by: Shelley |
| Date: August 05, 2006 09:37:40 AM |
| Our home is in my name, deed is in both mine and husbands. Should I put my name on this rental mortgage, doing same with deed. Idea is to leave one of us with more buying power for the future: Other possible rentals, credit in general.
Does this make a difference if both our names are on this rental mortagage?
Thank you in advance for advise! |
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| Re: Buying 1st rental, Name on loan? |
| Posted by: Ralph |
| Date: August 05, 2006 10:28:21 AM |
| I don’t understand what you mean by “Our home is in my name, deed is in both mine and husbands.” It’s either in your name only or in both names. Ownership of real estate is whatever is on the deed. The mortgage must have the same mortgagors (signers) as the as the deed shows as owners.
What names should be on the title is a serious legal decision that impacts in many ways including estate planning, risk management, and income taxes. Accordingly, if you do not fully understand the ramifications of title yourself you, should consult with an attorney (or attorneys), CPA, and/or other professionals who are competent regarding the various issues.
Furthermore, you will find that competent attorneys will recommend that title not be held as individuals, but that title to each rental property be held by a separate limited liability entity. These days, a Limited Liability Company (LLC) is the most often recommended entity. Again, you should seek advice from competent professionals.
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| Re: Buying 1st rental, Name on loan? |
| Posted by: Shelley |
| Date: August 05, 2006 10:40:12 AM |
| Thank you for your quick response. I should say the loan is in my name, deed is in both. We're now wondering if we should do the same for the rental..its a condo. Freeing up his credit for future possible investments. |
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| Re: Buying 1st rental, Name on loan? |
| Posted by: Ralph |
| Date: August 06, 2006 09:52:00 AM |
| Are you saying that only one party signed the mortgage even though both names are on the deed? This is generally only possible if the mortgage was put on the property while only one spouse was on the deed and then a new deed was recorded transferring the property to both spouses. Is this what happened?
I don't think that what you are suggesting would be helpful. Lenders generally want to know of all real estate (and other assets) in which a borrower has an interest. Your spouse's failure to disclose the property for which he is on the title but not on the mortgage could actually be considered fraud. If the jointly titled property is shown as an asset, the mortgage would have to be shown and I doubt that the fact that one spouse's name is not shown on the mortgage would matter because the other spouse's equity in the property is affected by the mortgage whether or not his name is on the mortgage.
Even if you don't worry about your spouse failing to disclose his ownership interest in the property, not showing the equity in the property on his loan application would reduce his net worth and this may be more important than having the loan. Unless there is a cash flow problem, larger net worth is usually more important than more mortgages.
Again. as previously stated, I think that there are a number of estate planning, income tax, and risk management issues that are much more important to consider than your concern about "freeing up credit." |
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| Re: Buying 1st rental, Name on loan? |
| Posted by: Denise |
| Date: December 06, 2007 03:45:47 AM |
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| Ralph:
I understand exactly what this person is talking about. I was faced with the same problem. I was purchasing a rental property by myself.
My spouse did not want anything to do with the purchase. The mortgage lender told me the mortagage can be in my name only but my spouse had to sign the deed. Reason given by the mortgage lender was, Texas is a community property state, therefore both names had to be on the deed. Since my spouse didn’t want to sign any documents, I had to seek the advice of a realestate lawyer about this matter. The lawyer informed me, this is the mortgage lender’s tactics to hold both me and my spouse responsible for the mortgage, incase of default. The lawyer informed me, Texas community property laws do not apply to investment properties. He suggested I find another mortgage lender. I did and since then have purchased 4 properties in my name only. Each time I tried to purchase a property and was presented with this issue, I simply told the mortgage lender, this is an investment property and the community property laws for the state of Texas does not apply to investment properties. Never had a problem since.
The one mistake I made, as a novice investor, was not incorporating and purchasing the properties in the LLC’s name. All 4 rental I have are in my personal name. Wrong Move. Because now my debt to income ration is high because of all the mortgages (5), including my personal residence, listed on my personal credit. And, I am told there is NOTHING that can be done about this. I am now trying to correct this drastic error. So, any purchased made in the future will go on my business credit and not my personal credit. Sounds to me like this person is headed down the wrong path, like I did. My advice to the person, who posted the initial question, on purchasing first rental property, is to start your corporation or LLC first. Then, purchase properties in your LLC or Corporation’s name. This purchase will reflect on your business credit and NOT on your personal credit and it will save you a lot of headaches. |
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