Q: Eighteen years ago, my husband’s aunt bought a house for us to live in. The payments and deed are in her name, however we make the payments, including insurance and taxes.
We structured the deal this way because we were young, with no credit. Now we are older and because of what we did, we still have no credit, although we do have a child in college.
About ten years ago, my husband’s aunt met a new boyfriend that we do not trust. What can we do to make sure that if anything ever happened to her we would take over the payments and deed to the property? We have a 30-year mortgage with her, so there aren’t too many more years left.
How can I have peace of mind now that no one can take our home? Is there something we can get drawn up that says this is a deal between her and us?
A: For eighteen years, you have known that you live in a house that you call your own, but you do not own it. You should have taken care of this issue years ago for so many reasons.
However, we want to talk about your credit. Eighteen years ago, you say you had no credit and you now say that you still don’t have credit. We wonder if you mean that you don’t have savings as opposed to having no credit. Usually when people say they don’t have credit, they mean their credit is poor or that they can’t borrow money.
If your credit was poor then and is poor now, we wonder if you have had the ability to take care of your finances over the last eighteen years. To improve your credit, you don’t have to have money, you just need to pay your bills on time and manage your credit well. That is to say, you don’t want to take on too much debt on credit cards and pay all your bills when they come due.
If you’ve taken care of paying your bills on time and don’t have too much debt, you should have a pretty good credit score – even if you are unable to borrow money from a bank to refinance the loan on the home.
When your relative purchased the home for you and your family, she took title to the home and obtained financing for the purchase of the home. Her credit has been at risk all this time that you have owned the home. We wonder why you have been unable to refinance the mortgage and take title in your own name. For one, interest rates have gone down significantly over the last eighteen years.
You only have twelve years left on the mortgage on the home and at that time, the loan should be paid off in full. Ideally, from your perspective, you’d probably want title to the home to be in your name and your husband’s name.
If your husband’s aunt dies or becomes incapacitated, title to the home may be tied up, or worse, his aunt’s will might fail to designate that the home is for the two of you and you could be out ownership of the home, at worse, or bought yourself a good lawsuit to clean up the mess, at best.
We’re sure that there may be some other details to this arrangement that you might have missed. You should talk to a real estate attorney as soon as possible to evaluate your options. Transferring title to the home might be rather simple, you might just need your husband’s aunt to sign a deed transferring title to the home over to the two of you. In some states, that transfer could be by using a quitclaim deed, while in others it might need to be a warranty deed.
Your husband’s aunt could also consider transferring title to the home to a trust and with the provision that the title to the home go to you upon her death. There are quite a number of alternatives, but if she marries this man, you should know that some states give a spouse certain rights to property owned by the other spouse. Moreover, those rights could extend to the home you live in.
If the two of you have a good relationship with his aunt, you might see if it would be possible to have title to the home transferred over to the two of you. The ideal situation would be for the two of you to refinance the current loan and at the same time transfer title of the home to your names. We say ideal because, your husband’s aunt would not have to worry about having a loan on a home she no longer owns and you would have a new low interest loan on a home you now own.
Just a word of caution, if you are able to refinance, we would probably suggest that you not refinance the home with a new 30-year loan. With a new lower interest rate loan, you might be able to refinance to a 10-year loan and perhaps keep your monthly payments at around what they are now and in about 10 years or so, you’d own the home free and clear as you plan for retirement or plan on selling the home.
Get moving and good luck.