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Loren
Loren, Lawyer
Category: Real Estate Law
Satisfied Customers: 30349
Experience:  30 years of real estate practice experience.
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My husband and I own a home that we are doing a "rent to own"

Customer Question

My husband and I own a home that we are doing a "rent to own" with his brother. We do have a contract stating how much monthly payments are and what total payments are, provisions, ect... It is slated to be paid for in 2020. My question is: would it be legal for my husband and I to borrow money against the house? We are in Mississippi.
Submitted: 9 months ago.
Category: Real Estate Law
Expert:  Loren replied 9 months ago.
Good afternoon. I am Loren, a licensed attorney, and I look forward to assisting you.
Is title in your name? Does the contract allow a lien to be placed on the property? Would you be buying out the contract with the mortgage proceeds?
Customer: replied 9 months ago.
the home is titled or deeded in our names. the contract does not specify anything about a lien, and there is no mortgage, we own the home outright, we want him to continue to live in the home and continue buying it....we would be using the loan for other things
Expert:  Loren replied 9 months ago.
Thank you for the additional information. Assuming you are contractually prohibited from placing any mortgage liens on the property before paying off the contract for deed, if you can find a lender to make such a loan to you, before you pay off the seller, it is not legally prohibited.
Expert:  Loren replied 9 months ago.
Are you still online with me?
Expert:  Loren replied 9 months ago.
should say "...not contractually prohibited..."
Customer: replied 9 months ago.
I am sorry, I do not understand what you are saying. We are the owners, we are selling the home to someone else on a monthly note basis "rent to own agreement". WE want to borrow money against the house, we do not OWE any money on the property
Expert:  Loren replied 9 months ago.
I thought you were the buyer. If the contract does not prohibit and you pay it off when the deed is given to the buyer then you can mortgage the property.
Customer: replied 9 months ago.
ok, so, for instance, we borrow money against it, and then--for some crazy reason--cant pay the loan back and the bank takes the house, would it be considered illegal that we did that since we have a contract giving him the right to own the home after he pays us xxx amount of dollars?
Expert:  Loren replied 9 months ago.
You would be in breach of the contract with the buyer if they made their payments and you could not convey the property to the buyers free and clear. They would be able to sue you for damages.
Customer: replied 9 months ago.
ok, so he could sue us for the value of the home or whatever?
Expert:  Loren replied 9 months ago.
for the loss of the home that they paid for.
Customer: replied 9 months ago.
ok, but if the buyer doesn't pay us, as outlined in contract, and we don't pay the loan back and loose the home he would have no recourse, correct?
Expert:  Loren replied 9 months ago.
If the buyer breaches then they would not be able to enforce the contract with you. A party in breach is estopped from enforcing the contract they are breaching.
Expert:  Loren replied 9 months ago.
Are you still online with me?
Expert:  Loren replied 9 months ago.
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