Help please! HELOC, Student Loan, Sell?

[specialk23]

Hi everyone,

I'm new here, and in desperate need of advice. Here's my situation:

I am 23, make next to nothing at a non profit, and have terrible credit.

I am attending law school next year in Charleston, Sc and will be taking on student loans to pay for it - (going part time to lessen the burden)

I recently received a very generous gift - a condo in Honolulu (where I currently live) it is worth 310K-320K, and has 185K left on the mortgage, but the mortgage is NOT in my name. I own 99% of the title.

I need money for my move, a car, and to help with living expenses while in law school.

What are my options here? What will this asset do for my credit, and what would you do with it? My realtor says it is probably work about 320-325K, but could sell it soon for 310.

Should I hang on to it, and borrow against it (how can i do this) or should I just sell?

Help!!

[swanson719]

You first need to acquire the other outstanding 1% of the title - I don't know how you have 99% of the title in the first place. Then you can go ahead and sell the condo. Borrowing against the condo means that you pay interest, and a lot of interest, to pay it back. The rate might be low 4 or 5%, but think of 4 or 5% of $140K? You're talking about $7,000 in interest a year for the first few years alone. From a purely mathematical standpoint, you'd be far better off to sell it than to get a HELOC or Cash out Equity on it.

Keeping this place will only help your credit if you don't sell it and continue to make the payments on it for 6 months, and have the mortgage in your name. If the mortgage is not in your name, then it doesn't matter if you make payments or not because it won't affect your credit either way, period.

If you do keep it, then make sure you find some awesome tenants, which shouldn't be difficult. You should be able to refinance the loan into a 15 yr fixed at $180K, or whatever is left on the mortgage. You're payments would be in the $1,450 a month range without insurance or taxes. That's assuming a 15 yr fixed at 5.0%. If you can't get that in rent each month, you'd be just as well to sell the place because being a landlord is a difficult task when close, and nearly impossible when 5000 miles away at law school.

It sounds like you need to get it 100% in your name, then sell it, put the money into a money market mutual fund that has no check writing privileges on it, and let it grow until your tuition comes due, then go and get the money out. If you put it where you can get to it easily, it will get spent on things other than tuition. This amount of money will pay for all of law school and save you from student loans if you use it right.

[maat55]

My guess is that the mortgage has a lien on the property. If you sell the lien will have to be satisfied.

It's possible you will only recieve 99% of the remaining balance. This will leave you with about 110k after selling costs. I would use this sparingly in order to get the most for your money and accure the least amount of school debt possible.

If you are leaving the area, you should sell the property. IMO.

[specialk23]

thanks...I have 99% of the property because I did not want to take on the mortgage, and in order for the person who gave it to me to keep their loan, they need 1% interest in the place.

[maat55]

thanks...I have 99% of the property because I did not want to take on the mortgage, and in order for the person who gave it to me to keep their loan, they need 1% interest in the place.

Please explain how a mortgage company would loan 60% on a property but only have 1% ownership of the property.

[swanson719]

He's talking about a split deed. The mortgage company doesn't hold the deed - they hold a huge lien on the deed. The mortgage company doesn't care who's name is on the deed so long as the mortgage gets paid. So they did some fancy paper work that says he has 99% interest in the property while the person with the other 1% interest still can maintain the mortgage in their name because they have an interest in the property. It removes the credit risk from him while still giving him the property in essence.

The best thing to do in this situation is to get in a position where you can satisfy the mortgage for about 90 days, get the last 1%, put the condo on the market about $15K under current market value, get it sold quick, and then put the money somewhere you won't touch it. If you sell without having the mortgage in your name, the proceeds of the property have to be split as well, and the mortgage holder has a legal claim to compensation. Meaning that if they want to, they can ask for more than 1% and sue you, and have a leg to stand on. It's a whole big contract law mess. Either you need to have 100% complete trust in the mortgage holder that they won't do this, or get that last 1%.

[snafu]

Would it be accurate to say you want to convert a generous gift to cash?
23 y/o, with bad credit expects to manage a large sum of money?

[ezme]

I wouldn't sell. Rent it out or something and live on the income! It could be useful having a place to live after you graduate.

[wnlbutterfly]

How will the person feel that gave you the condo if you sell it? I would be concerned about that (hopefully they won't mind). Just a thought though.

[Runaway Finances]

Sell it! If you have terrible credit then we don't have all the details. You must have other debts that you haven't paid on in order to have terrible credit. You sure don't need more debt. I don't know where you plan to go to Law School, but that is expensive too and those loans have to be paid off. Be sure you get some SERIOUS help if you sell it to make sure you use the proceeds right. I would also consult with the person that gave you the gift. That person did something right financially if they can gift a $300K place to you. You need more help than a bunch of us on a blog telling you what to do when we don't have near enough facts to give you great advice.