Hey Barry! Thanks for the reply. Why we decided to do it this way is a very good question. A couple reasons. One is that I got advice from someone who seemed more knowledgeable than me that this would be a good idea. Now, I need to find the time to touch base with him again and ask what he was thinking for step two. The other reason is that it seemed like a good way just do the cash out in one step, rather than two (purchase, second or purchase HELOC).
Now, seems almost like two steps would have been easier than this.
To answer your other questions, this is far stronger than a mere rent-to-own, or right-to-purchase even. The documents are done. The warranty deed is signed over to us. Its sitting in escrow waiting. Our title company knows the deal and is ready to go with title insurance as well. The escrow documents say "pay off the balance of the 95k loan and then record the warranty deed." So, the moment we close, the underlying 95k is paid off, and the deed gets recorded. Old loan gone, new first position loan in our name and promissory note recorded. Boom, done.
Perhaps I'm not seeing the title problems this might cause? To me it's just like a cash-out sale (thought technically refinance since we have equitable title to the place), which the big banks just don't really seem to do anymore. Goes from one owner to the next without any trouble. Do you think this might cloud the title somehow?
So, the only thing I would expect a lender to want to do is vet us (income, credit scores, etc.) and get the house appraised to make sure it really is worth it. If it's not worth as much as I think (which I based on zillow and realtor.com because I don't want to have to pay twice for an appraisal) then the lender and I just renegotiate the cash out so that the loan is 75% LTV. No biggie. Then, maybe I don't add a new bathroom, but convert an existing room into a bathroom.
Thoughts?
