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Old 01-02-2019, 11:03 PM
 
Location: Texas
9,121 posts, read 3,534,321 times
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An elderly relative of mine loaned his son money using his own house as collateral. So if the son doesn't or can't repay the money, the house is taken. If the money can't be repaid I'm worried this elderly person will wind up homeless. Anyone familiar with this type of financial arrangement?
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Old 01-02-2019, 11:20 PM
 
21,628 posts, read 27,717,127 times
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Quote:
Originally Posted by PriscillaVanilla View Post
An elderly relative of mine loaned his son money using his own house as collateral. So if the son doesn't or can't repay the money, the house is taken. If the money can't be repaid I'm worried this elderly person will wind up homeless. Anyone familiar with this type of financial arrangement?
This makes no sense.

The borrower is the one who has to provide collateral, not the lender.

Are you maybe trying to say that the elderly person took out a home equity loan and lent the money to his son with the understanding that the son would pay him back?

If that's the case, then sure, the original lender may choose to foreclose if payments aren't being made.

Can't say I'm familiar with this type of arrangement because I don't know anyone that stupid.

Last edited by Metlakatla; 01-02-2019 at 11:57 PM..
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Old 01-02-2019, 11:42 PM
Status: "On The Lookout" (set 22 days ago)
 
Location: The Triad (NC)
28,388 posts, read 61,750,545 times
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Quote:
Originally Posted by PriscillaVanilla View Post
An elderly relative of mine (borrowed money for) his son using his own house as collateral.
So if the son doesn't or can't repay the money, the house is taken.

If the money can't be repaid I'm worried this elderly person will wind up homeless.
Anyone familiar with this type of financial arrangement?
I know it exists and it rarely turns out well.
Never been a party to such though.

Did they get an actual equity loan or maybe a reverse mortgage...
or did they go to the loan shark in the back of the pool hall?


https://www.youtube.com/watch?v=xsOfx7SFOX4
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Old 01-03-2019, 12:18 AM
 
Location: Vallejo
13,983 posts, read 15,986,717 times
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Quote:
Originally Posted by Metlakatla View Post
This makes no sense.

The borrower is the one who has to provide collateral, not the lender.

Are you maybe trying to say that the elderly person took out a home equity loan and lent the money to his son with the understanding that the son would pay him back?

If that's the case, then sure, the original lender may choose to foreclose if payments aren't being made.

Can't say I'm familiar with this type of arrangement because I don't know anyone that stupid.
Probably HELOC and personal loan or just informal understanding the son would make the payments. Stupid, yeah. Especially if said elderly relative is on a fixed income and can't make the payments. But it just depends. Not all elderly people are poor. They may be on a fixed income with plenty of assets and sufficient income to make the payments and the HELOC is jut a low interest way to take the loan. If they're planning on giving an inheritance to the son anyway it could be reasonable. If the son doesn't pay it back it's just getting his inheritance early.

I have a grandmother who did that. Took out a HELOC to get the capital for her daughter/son-in-law to start their business. In her case it wasn't a particularly smart decision. She's not wealthy and while still working at the time if the HELOC wasn't repaid, it would have really hurt her in retirement. It worked out in that case. She got ripped the hell off. Daughter divorced but with the settlement and proceeds from the sale of the business it's not like money is an issue. Distribution of money is. She should have come out with at least a few million for her investment in the company and didn't. Daughter isn't a jerk though, so if my grandmother ever has any financial issues it's not like she'll be out in the cold. I mean, nobody went into this thinking they'd come out wealthy. It just sort of happened. Non-business people doing things wrong, basically.
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Old 01-03-2019, 02:01 PM
 
Location: Texas
9,121 posts, read 3,534,321 times
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Quote:
Originally Posted by Metlakatla View Post
This makes no sense.

The borrower is the one who has to provide collateral, not the lender.
Then the son must have had his elderly dad sign over the house to him so he could put it up as collateral. He must be trying to get his inheritance early.
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Old 01-03-2019, 04:55 PM
 
4,414 posts, read 2,571,615 times
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Hmm.

I'm reminded of the phrase "never a lender nor a borrower be".

I certainly would not do it. I would never ask someone to do it for me.

But not all people are me.

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Old 01-03-2019, 05:04 PM
 
Location: Philadelphia/South Jersey area
2,840 posts, read 1,377,263 times
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Quote:
Originally Posted by galaxyhi View Post
Hmm.

I'm reminded of the phrase "never a lender nor a borrower be".

I certainly would not do it. I would never ask someone to do it for me.

But not all people are me.

unfortunately it's not "someone" it's usually a child. In the interest of full disclosure I have done a few foolish things to try and help my kids out. like cosigning on an apartment.

now I don't use my house for collateral for anything.

Hey parents mortgage their houses to put their kids through college, and help financially in other ways.

I do have friends that used their houses as collateral to get business loans. not the best solution but everyone thinks their business will succeed.
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Old 01-03-2019, 05:06 PM
 
13,102 posts, read 17,661,987 times
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Quote:
Originally Posted by PriscillaVanilla View Post
Then the son must have had his elderly dad sign over the house to him so he could put it up as collateral. He must be trying to get his inheritance early.
Not necessarily. As cosigner he can provide the collateral.
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Old 01-03-2019, 05:07 PM
 
10,451 posts, read 15,432,427 times
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Father could have been a co-signer on son's loan, using house as collateral.
No matter which way you turn it, it stinks.
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Old 01-03-2019, 07:02 PM
 
Location: Florida
4,309 posts, read 3,644,056 times
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If the father had to lend the son money because the son has a poor credit rating then they both are headed for problems.
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