Cash-Out Refinance and Quitclaim

[SamG]

Jurisdiction

California

My sister and I are joint tenants of a home. I am in need of money and am thinking of doing a
cash-out refinance for an amount to cover for my share of the home and quitclaim the home to my sister. Should the cash-out refinance and quitclaim occur at the same time? Do I have to pay any taxes for this quitclaim? Thank you.

 

[Zigner]

Yours is not a legal question.
The tax question is not something that can just be answered in a vacuum. Someone will need to look at your overall situation in order to advise you on the tax implications. As for the refinance and the quit-claim: The mortgage company will be able to advise you.

 

[adjusterjack]

Should the cash-out refinance and quitclaim occur at the same time?

I would think that would be up to your sister. You would be leaving her with a larger mortgage debt but she would become sole owner. Probably to her advantage to have you quitclaim your interest to her at the same time if she goes along with it.

Whether a lender would accept the idea is impossible to predict.

Keep in mind that your name will stay on the mortgage even though the ownership changes. You'll want to carefully read your mortgage contract to see if there is a "due on sale/transfer" clause in the new mortgage contract.

Do I have to pay any taxes for this quitclaim?

Maybe, per Zigner's comment.

 

[flyingron]

One thing to also note, is that she better refinance in her own name if you're going to quit claim it to her. A quit claim will not otherwise release you from your obligation to the debt.

 

[SamG]

I would think that would be up to your sister. You would be leaving her with a larger mortgage debt but she would become sole owner. Probably to her advantage to have you quitclaim your interest to her at the same time if she goes along with it.

Whether a lender would accept the idea is impossible to predict.

Keep in mind that your name will stay on the mortgage even though the ownership changes. You'll want to carefully read your mortgage contract to see if there is a "due on sale/transfer" clause in the new mortgage contract.



Maybe, per Zigner's comment.

Thank you.

 

[SamG]

One thing to also note, is that she better refinance in her own name if you're going to quit claim it to her. A quit claim will not otherwise release you from your obligation to the debt.

Thank you.

 

[zddoodah]

My sister and I are joint tenants of a home. I am in need of money and am thinking of doing a
cash-out refinance for an amount to cover for my share of the home and quitclaim the home to my sister.

You're intending to take out a loan and then quitclaim your interest in the property to your sister? Is she also going to be a borrower on the loan? Very unlikely that you will find a lender willing to give you a loan against only your interest in the property and without your sister being a co-borrower.

Should the cash-out refinance and quitclaim occur at the same time?

While anonymous strangers on the internet CAN express an opinion about this, you would be beyond foolish to heed any such opinions.

Do I have to pay any taxes for this quitclaim?

Assuming you're intending to record the quitclaim deed, you'll need to pay a documentary transfer tax. It's also possible that the transaction could trigger income tax liability, but we know nothing about your tax situation.