Ask the Expert: Take over payments

I would like to take over payments on my brother’s house. The interest rate is a little bit lower than I can get now. Plus, it would help him out. Can I just put my name on the loan?

The short answer is no: No mortgage allows you to just put a new name on the loan.

What you are asking about is called assuming a mortgage and it can be a more complicated matter than you might expect.

First, all conventional mortgages are not assumable. They require that the loan be paid on sale or transfer. So, in this case, you would need to get a loan and buy in the usual way.
Some non-conventional loans can be assumed, however. They are FHA loans, USDA loans, and VA loans.

If your brother has one of these three loans, it might be a good deal. It is at least possible that you could benefit from the lower interest rate and have lower costs. In addition, the loan would have a shorter term since your brother has already been paying on it.

If the loan is assumable, remember you would have to qualify for the loan. Your credit score, income, debt, and employment history must meet the criteria of the lender.

Sometimes even if the loan is assumable and you qualify, it might not be the best choice.

For example, if the loan is a VA loan, the veteran’s entitlement stays with the loan. If your brother wishes to buy another house, he won’t get the whole entitlement on his new house.

Lenders usually see mortgage assumptions in the case of divorce, family gifts, or estate planning. But assuming a mortgage is not always possible and may not be the best way to go.