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My sibling owns a house 1800 miles away, he moved back to the east coast for health reasons, he's behind on the mortgage payments, and he wants to get rid of the house, but doesn't have the time or energy to clean it out and sell it. He also concerned about the tax implications ( health insurance wise ).

If I were to assume the mortgage from him how would that work? He has some equity in the home, but hes only 5 years into a 30 year mortgage. Would I have to worry about any tax liability? it would not be like he is "giving me" the house as I would be assuming the mortgage.

Also wondering who the title of the house goes to when someone else assumes a mortgage.

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    Why would you not 'simply' purchase it from him for whatever amount will pay off his mortgage - using a new mortgage of your own? It seems like this would be a much more straightforward transaction, with almost certainly the same mortgage qualification requirements & procedure as you trying to assume the existing mortgage, and would leave no doubt about who holds the title. Since he has some equity already I assume there's not be a problem with loan-to-value ratio for a standard mortgage ... ?
    – brhans
    Jan 2 at 2:55
  • Where in the world are you (country, province/state)? Any tax liability will be entirely dependent on relevant tax laws, which varies from place to place. Please edit your question to add a country tag
    – yoozer8
    Jan 3 at 14:21
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Would I have to worry about any tax liability? it would not be like he is "giving me" the house as I would be assuming the mortgage.

He would be selling you the house.

Also wondering who the title of the house goes to when someone else assumes a mortgage.

You would be the owner.

If I were to assume the mortgage from him how would that work?

If you were to do go down this path. You would negotiate a price for the sale. It could be anything you both agree to. It could be equal to the mortgage balance.

The lender would have to agree to this. Some don't want to deal with it and don't allow somebody else to assume the mortgage. If the original mortgage does allow this they will have to approve you for that mortgage. They would look at your credit history, income, and other debts.

They are part of the approval process because the ownership paperwork filed with the government includes their lien on the property.

Now the taxes. I am assuming the United States.

If the sale results in a profit they may owe taxes. You said they are 5 years into the mortgage, so if it was the principal residence for that time, then they can shield 250K if they are single, or 500K if they are married, from capital gains taxes. If they rented it out, or they owned multiple houses the tax situation is more complex.

Of course if they sell below the market rate, the IRS could consider the difference as a gift to you.

he's behind on the mortgage payments, and he wants to get rid of the house, but doesn't have the time or energy to clean it out and sell it.

The question will be how much time does he have before the lender seizes the property, and sells it. When they do that the equity your brother has can be wiped out. The fact he is are behind might make the lender block any attempt for you to assume the mortgage. A straight up sale would allow them to exit the situation. Foreclosing and trying to sell the property might take some time.

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  • I can't help but wonder - If the mortgage has been sold, there really is no bank, just servicing companies that don't care. But, if it's a local bank that still holds the loan, they might welcome a sibling bringing it current, and upon qualifying, change the liability to the sibling. Jan 2 at 15:15
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If the mortgage is not FHA, USDA or VA, it's not assumable unless you create and use a trust:

Conventional loans are not typically assumable because they almost always contain a "due on sale" clause in their loan documents, requiring that the mortgage be paid off if the property is transferred.

There are also situations where you can transfer a mortgage without triggering the due-on-sale clause; these will typically involve the transfer of real estate through a trust or inheritance, or as part of a divorce.

https://www.valuepenguin.com/mortgages/mortgage-loan-assumption

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