Refinancing a House
Whether you need extra cash for necessary home improvements or simply want to take advantage of lower interest rates, refinancing your home responsibly can be a useful tool for capitalizing on real estate equity. Many consumers look to the possibility of refinancing their home as a way to improve their financial status. Sometimes, in order to help a family member, individuals wonder if it is possible for them to refinance a family member's home in their own name. The most common relationship when this question arises is between parents and their children. But whether you intend to refinance in your own name the property of a parent, sibling, cousin or total stranger, most of the answers remain the same.
Even Co-signing Carries Its Own Credit Issues
Regardless of whom you intend to sign or even co-sign for, your personal credit history, personal income, and debt/credit ratio will determine the amount of money you can refinance in your parents' home. Home mortgage lenders are concerned with your reasonable ability to fulfill the terms of any refinanced home loan. Consequently, their willingness to approve your proposal will depend on their evaluation of your creditworthiness.
Lenders also want to make sure you can afford the monthly payments. This will depended largely on your financial lifestyle, current financial obligations and level of income. Current financial obligations that may frustrate your loan approval could include credit card debt, student loans, an auto loan, or (perhaps most relevant) your own home mortgage payments. As a general rule, mortgagers shy away from approving loans where the borrower's total mortgage payments account for more than 36%-40% of the borrowers total monthly income. As such, your lender's willingness to approve your refinancing strategy rests greatly on your ability to make the extra monthly mortgage payment within your fiscal means.
Collateral: It's All in the Family
Another issue of concern to potential home mortgage lenders when you consider refinancing a parent's home in your name is collateral. Lenders demand a modicum of security. All banks and most lending institutions prefer your monthly cash payment to the possibility of foreclosure and seizure of land.
Banks are in the money business, not real estate. But at the end of the day, your lender will need proof that in the event you default on your loan, the lending institution will be able to salvage the money it lent you. The fact that the home you intend to refinance is in another person's name may be problematic when the bank evaluates its security risk in your home mortgage refinance application. Before make any hard-set plans, talk to your personal lender or a real estate attorney about local or state laws that may complicate your request to refinance your parent's home in your name.
