WHAT ARE MY LEGAL RIGHTS TO THE EQUITY IN MY HOME IF THERE IS A CONTRACT FOR DEED ON IT?
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WHAT ARE MY LEGAL RIGHTS TO THE EQUITY IN MY HOME IF THERE IS A CONTRACT FOR DEED ON IT?
DO I HAVE THE LEGAL RIGHT TO BORROW AGAINST THE EQUITY? MY HOUSE IS VALUED AT $40,000 AND THERE IS A $15,000 CONTRACT FOR DEED ON IT.
Asked on April 30, 2011 under Real Estate Law, Missouri
Answers:
SJZ, Member, New York Bar / FreeAdvice Contributing Attorney
Answered 12 years ago | Contributor
If you're in a contract for a deed, you cannot due anything which would encumber the title further; so, for example, you cannot take out a new mortgage, a new home equity loan, or a new home equity line. Doing so would create new security interests and affect your ability to conveny title.
On the other hand, if there is already an existing line of credit, then you may draw against it. That's because drawing on the line does not create a new security interest--one already exists--but rather will only affect how much money you will be able to make on the sale (since you'll have to pay off the loan). The only caveat is that if you borrow so much that you won't be able to pay the loan(s) off, since that would then affect the ability to transfer title, you may be in breach of contract.
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