Mortgage situation - what do to?

[red 5]

Long story short. I have a house that I own with my sister. (I live in the suite and she lives in the main part of the house). Victoria BC.

Our mortgage is coming due Oct 5, 2012. We had a 5 year mortgage (30 year). Rate is 5.79%.

She is wanting to sell and move to a place on her own in spring/summer 2013 (same with myself). I have already been approved for 3.04% for 5 years renewal for the current property. House value is approx $550,000 and owed at Oct 5, 2012 is $441,000.00.

Talking to my mortgage broker about the situation he calculated on my salary that I would be qualified at today's rates for approx $520,000 mortgage on my own. I make approximately $110,000/year pre tax and I have no debt.

So, my question is, do I take out a mortgage for the $441,000 @ 3.04% for 5 years and port it over to the house I will purchase after I sell my current home OR should I get a 1 year mortgage and then refinance once I port that over?

What do you think my best option would be?

[red 5]

*bump*.... still wondering if anyone has any thoughts about this.

thank you.

[Jucius Maximus]

This situation is actually pretty complex and there's a lot of ways you and your sister could get screwed over.

Btw, just because a broker says that you can qualify for a certain mortgage does not necessarily mean that the particular mortgage is actually a healthy financial decision.

I am going to be called a simpleton or overly conservative for saying this, but here goes - Just sell your house now, cash out your sister, and then temporarily rent until you can buy another house on your own. Otherwise you risk a situation with a BC property crash where the house could be underwater and you could both lose your equity. Worse yet, you get a mortgage in your own name, then the sister moves out and expects to cash out equity later, and then there is a crash and the property doesn't have enough equity. You will ruin your relationship with your sister.

Being in a partnership, particularly with family is one of the most dangerous financial and relational things you can do. I won't get preachy here unless you ask me for more details on why partnerships are dangerous.

[red 5]

Not sure if I was clear but that's what we are doing as I don't really trust her financially and I need to move on my own. We will renewing this mortgage together not on my own.

We are going our separate ways but since we want to sell next spring and our mortgage comes due Oct 5 this year we need to extend the mortgage until at least next year. I will be purchasing a new house fairly soon after we sell this house.

We could sell right now but I have too much going on with work/school... etc that I just don't have time to commit to selling.

Hope that clears it up. thanks.

[kingofwale]

my recommendation... do the mortgage on your own, do a "IOW" to your sister with promise that you will pay her her share upon the selling of the property.

when you do sell and port your mortgage, it will remain single application.

or else I would recommend you to go with a 1 year mortgage.

[BRANDONL86]

Renew into a 6 month open mortgage (to avoid penalties if you need to break the mortgage, which really is a good possibility). Put the house on the market and start looking. You should not miss out on any rate specials as the market continue to point to its current trend.

Now, if you renew into a 5 year and have it in both of your names then you cannot just port the mortgage to your new place of residence. The reason being is that it will be in both of your names. Now thankfully, common sense lending does exist and they might work something out. But, don't bet on it.

[red 5]

That's all.. i contacted my broker this morning and getting him to work on a 1 year closed and 1 year open mortgage to see what he can come up. Hopefully something positive.

I also will get in writing from my lender if I need to port the mortgage I can do so without penalty and within a certain amount of time into my own name.

He offered me 1 year open @ 4.0%

1 year closed @ 2.89

I am strongly leaning towards the open @ 4.0% which is better then the 5.79% I am paying right now.