DIY and or Virgin Money Details: how do I unwind?

June 10, 2009 5:40 PM

Mortgage payoff/refi and lien removal process. DIY or Virgin Money. What do I need to know?

I’m considering refinancing by borrowing money from a family member, call him Z. Aside from the potential relationship snags, what do I need to know or watch out for?

I’d probably use Virgin Money http://www.virginmoneyus.com/RealEstateLoans/FamilyMortgage/PackagesPrice/tabid/56/Default.aspx to create a loan document and file a lien on my property etc so it all looks legit.

Of course, YANML (nor my accountant, broker, or adviser). I’m on the hook for whatever I do…

Main questions:
1) Will this affect my ability to sell the property later? I don’t know the process of paying off a loan at closing and having the lien released. Maybe Z will be a little slower than a bank to release the lien since he doesn’t do this every day like a real bank. Are there any potential snags that could come up at closing when I sell?
2) Can I do it myself without spending $600-$700 at Virgin Money? I’m willing to pay since they know what they’re doing, but would a local lawyer be cheaper or better? I want Z to have a lien in case I die, get sued, etc, and possibly for tax reasons. If I can just get the lien done myself, how do I do it (in a deed of trust state, as if I knew what that means)?
3) Any other financial, legal, or practical reasons this is a bad idea? Assume that we’re ignoring personal/relationship issues for the moment, everything is well documented, we follow applicable tax laws (such as using at least the AFR), and we otherwise don’t get crazy. I’m not worried about credit reporting, or a mortgage falling off my reports.
4) Will this affect my ability to get a second mortgage if I ever wanted to?

My main concern is that it may be difficult to clear off the lien in the future, but maybe this is all the same as any other refinancing transaction except I know the lender.

If you know of any good DIY mortgage filing sites or experiences of others who’ve used Virgin Money for a mortgage those would be helpful as well.

Thank you!

posted by powpow to Work & Money (3 answers total)

Best answer: I've been doing residential real estate work for the last 12 years, and have done several private home financings. However, I'm in New York, which uses mortgages, rather than deeds of trust.

Here's a pretty good explanation of the difference between the two, from this site:

"The basic difference between the mortgage as a security instrument and a Deed of Trust is that in a Deed of Trust there are three parties involved, the borrower, the lender, and a trustee, whereas in a mortgage document there are only two parties involved, the borrower and the lender. In a Deed of Trust, the borrower conveys title to a trustee who will hold title to the property for the benefit of the lender. The title remains in trust until the loan is paid.

Often a title company, escrow company or bank, is listed as the trustee on the Deed of Trust. When the loan has been paid, the trustee will issue a release deed or trustee's reconveyance deed. This deed of reconveyance should be recorded at the county recorder's office, to make public notice that the loan has been paid and that the lender's interest in the property has ended."
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Not saying this just because I work for a real estate attorney, but I really think you'd be better off finding an attorney in your area and asking him or her to do this for you. It probably would cost about the same as Virgin Money, and since you're concerned about getting the lien removed from the property when you sell, having an attorney you can call when that happens is probably a better bet than trying to call an 800 number and getting a customer service rep.

(Also - is there any additional charge that Virgin Money imposes to "maintain" the account? Could you make the payments directly to Z or would you need to make them to Virgin Money and then they would pay Z? It's hard to tell from a cursory look.)
posted by Lucinda at 8:36 PM on June 10, 2009

Response by poster: Thanks Lucinda.

The link is helpful.

FYI - Virgin Money charges $9/payment if they're involved with servicing, but you can also pay your lender directly and skip the fee (the "Basic" package is where you pay the lender directly and you use the "Full Service" package if you want VM to handle payments). The only reason I'd pay them to service the loan is to have them report the loan to credit reporting agencies - 2 of the major 3, and it's reported as a mortgage with "Virgin Money" as the lender.

I'd probably pay quarterly or 2x/yr to minimize that cost. My credit is pretty good anyway (FICOs around 800) so I could probably do without the reporting and/or live with whatever funny stuff happens when you have a quarterly payment.

So far it looks like the main advantage of Virgin Money over a local attorney is the credit reporting, and they're easier to find. However, a local attorney will know a few details and tips that VM won't know about, and you have a more personal relationship with accountability.

Please let me know if you have tips on finding a local attorney other than Google searches such as: "MyTown real estate attorney" or "MyTown deed of trust attorney".

Thanks again.
posted by powpow at 9:14 PM on June 10, 2009

I know you addressed this, but to reiterate it: when you borrow money from a relative, Thanksgiving doesn't taste the same.
posted by bensherman at 10:25 PM on June 10, 2009