Kathy:
I presume you want to “borrow” against the equity that exists in this property and pull some cash out ($20K).
You will have to deal with the life estate in order to allow for an insurable valid lien be placed against the property. It is doubtful any title insurance company will be willing to insure the trust deed lien as representing a valid 1st lien unless the “life estate” interest is aware of the lien or is willing to extinguish their life estate.
As for specific chapter and verse, contact a competent real estate attorney in your area or one of your local title insurance companies should be able to shed more light on this for you.
It is likely you parents retained the life estate interest against the property for just such a reason, and that is they would want to aware of you selling or attempting to borrow against the property unknowingly.
we have good equity,but cant borrow on it, or so were told. - Posted by walt trumbull
Posted by walt trumbull on June 16, 2000 at 20:10:57:
my partner,both of us newbies, inherited a condo from her mothers estate. her mother left her friend a life estate in the condo for residency until he dies.
by my understanding of orc(oregon revised code) regarding life estates, she can if she chooses, to use her interest(equity) in this property to obtain a loan.
we had a mortgage company who was able to get a lender to loan us the $40,000 we were looking for,(the condo is worth approximately $125,000-no encumberances). but when the title company would not place the lender in first position, it fell through.
does anyone first have any insight on this, and also is there any source for legal private money to be found that can work with this problem.
also, there is no chance of getting the life tenant to place himself second, or enter into any agreement upon any terms for making this work.we tried!
we want to use this cash for rehab of fixers to flip and or rent.
Walt:
You may be able to convince some title insurance companies to insure a mortgage lien as being superior to an individuals life estate interest, providing the party with the life estate interest agrees to subordinate to the mortgage financing. However Most lenders WILL NOT allow for a mortgage to be placed against a property where a life estate interest exists EVEN IF they do agree to subordinate because a foreclosure may NOT wipe out the life estate. This means a prospective lender in a default situation may not be able to repoesess fee simple & clear title to the collateral property unless they are willing to take it “subject to” the life estate interest. Thats cumbersome at best.
A Private investor MAY be willing to do a mortgage loan if they are amply compensated, although I would not make such a loan myself because of the same reasoning as outlined above.
If you wish to borrow against the equity in this property to “crank out” some working capital cash, then you most likely will have to request of the person who has the life estate be willing to extinguish that life estate interest so that a lender will warm up to their ability to put a mortgage against the property with no strings attached.
Re: Life Estate IS the problem - Posted by Kathy Hoglund
Posted by Kathy Hoglund on August 25, 2000 at 20:37:34:
my parents have given me a large piece of property and have kept a life estate on the property. I would like to sell a deed of trust to my neighbor for $20,000.00 and not let my parents know. Will I be allowed to do this in the state of North Carolina. and if not can you please give me the general statute that says I can or cannot do this.
If the party who retains the life estate interst in a property dies,(sometimes called a remainderman interest) then the life estate interest interest that party had also dies along with them. It in essence becomes extinguished.