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#2260749 - 10/05/21 09:19 PM Rent-to-Own Purpose
jel99 Offline
Junior Member
Joined: Sep 2021
Posts: 27
I am having some confusion with a rent-to-owned property. The deed was transferred the day of closing and the funds of the loan were used to payoff an external institution's balance on the loan for the property.

If names were not the same on new and existing loans, this cannot be a refi correct? Would this be considered a purchase?

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#2260879 - 10/07/21 02:45 PM Re: Rent-to-Own Purpose jel99
CloudShape Offline
Platinum Poster
Joined: Oct 2002
Posts: 505
Edge of Sanity
At least one borrower has to be on both loans (paid off and new) in order to be a refi. If there is no borrower in common, you are correct, it cannot be a refi.

You may need to check your state law, but if title passes to a new owner, we always call that a purchase. So if it was rent-to-own and the title to the property is passing to the renters now, we would call that a purchase.
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#2260883 - 10/07/21 03:07 PM Re: Rent-to-Own Purpose jel99
Dan Persfull Offline
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Dan Persfull
Joined: Aug 2002
Posts: 46,952
Bloomington, IN
Does the rent to own contract grant ownership to the "renter", does the contract constitute an extension of credit under state law?

An exert from page I-2 in the 2021 GIR.

2. Extension of credit. Under ยง 1003.2(d), a dwelling-secured loan is not a closed-end mortgage
loan unless it involves an extension of credit. For example, some transactions completed
pursuant to installment sales contracts, such as some land contracts, depending on the facts
and circumstances, may or may not involve extensions of credit rendering the transactions
closed-end mortgage loans.
The opinions expressed are mine and they are not to be taken as legal advice.

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