Expert: Dick Dennis - 11/7/2011

Question
We need to either assume or get a new mortgage on the house we live in. We have been paying on this house that is in mother's name for years, she owes 36,000 on the note, it is up...the bank asked us about getting a secondary mortgage or an in house? What do those mean? Are we simply refinancing or are we getting a new mortgage loan? The house appraised at around 86,000. Can we just get a loan on the 36,000?
We are not very mortgage savy!!
Thankyou

Answer
Since you are contemplating buying the house from your mother, and you apparently have had a good paying record, MH, you should not have any trouble getting a new loan while taking over the title on the property. You don't say what the interest rate is on your mother's loan. But that doesn't matter at this point. Because if you obtained a second mortgage on the property while assuming your mother's loan, the bank would charge you a higher interest rate on that second mortgage.

If you refinance the whole thing they may be able to give you a very satisfactory interest rate on the new first mortgage. Yes, they would charge you some up-front cash for closing costs, maybe as much as $1,000. But if you intend to live there for many years it definitely would be worth it. They may offer to add the closing costs to the new mortgage balance but they may want you to pay a higher interest rate on the refinanced first mortgage.

Let's say your present interest rate is 6%. By refinancing the $36,000 you may get a lower interest rate and still have a monthly payment that might be lower than what you are paying now. Since you admittedly indicate that your knowledge of mortgages is lacking, I would recommend you hire someone who is knowledgeable and able to guide you in the right direction. For example, you may want to consult with a good local real estate attorney or a good local real estate broker. I suggest you do this because with your lack of knowledge I wouldn't trust the bank to look out for your interests. I do wish you well.

Dick Dennis
dixiedee13@aol.com