How to take over a parent's mortgage
Taking over a mortgage held by your parents is not as simple as taking over the mortgage payments on your parents' behalf.
Instead, most mortgages contain "Due on Sale" clauses that require full payment of the loan in cases where the mortgage is assumed by persons other than the current mortgage holder. For this reason, it is important to consult a title professional or real estate attorney before attempting to assume your parent's mortgage.
Negotiate the appropriate sales price for your parent's home. Typically, if the goal is simply to pick up where your parents left off in their mortgage, then the agreed sales price will be the amount left on your the outstanding mortgage. Request a payoff to be sure that all interest and prepayment fees will be considered before agreeing upon a sales price.
Execute a sales agreement between yourself and your parent. The sales agreement should include the purchase price, and details on which parties will pay which closing costs. Consult with a title professional to find out which fees are typically paid by which parties in your state.
Secure financing for the sales price of the property. Shop around with mortgage companies in order to find the best interest rate and loan terms. You will need to have a new loan in your name in order for your parent's loan to be paid off. You will begin paying for the property under the terms of your new loan.
Choose a real estate attorney or title company to handle the sale transaction. The title company will issue a title insurance policy, which certifies to your new lender that the seller's (your parent's) title to the property is marketable and protects the lender from any hidden liens. Moreover, you will have the option to purchase an owner's title policy to protect your interest to the property as well. You may choose to pass on it since your parent probably purchased one when she originally bought the property.
Close the deal. Your title company or real estate company will schedule a closing of the sale. At this time, your parents will execute a Warranty Deed transferring title to the property out of their name and into your name. You will execute all of your new lender's closing documents including a Mortgage or Security Deed, which secures the new lender's interest in the property and binds you as the new responsible party. Once the title company pays off your parent's mortgage using the funds supplied by your new lender, your parent is released from any liability under her mortgage, and her name is now removed from the title to the property.
After your closing date, you are the sole person required to make the payments on the home and your parent can no longer be held accountable for missed or late payments.
If you are wanting a spouse to be included on the deed to the property, it is important to notify the title company prior to the closing. Your mortgage company may require that your spouse also qualify and be listed as an obligor on the new loan prior to allowing your spouse to be added to the title.