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1) Son sells his home and slogs it out in an apartment with a buyout-lease option that's closer to the OP, so when the son seals the deal on a new home, he can move accordingly. OP is then on the hook for nothing.
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the son has already found the new home,the owner OF the new home is going to move into a facility,and he wants to sweeten the offer by offering CASH.
Cash will come from OP,the father,who has a house with no mortgage,he will use his house line of credit to come up with the cash/
Son living in another town has a house,he will sell it and use the money from that house to upgrade this new house.
Mortgage between father and son stays.
(this is between father and son)
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the son has already found the new home,the owner OF the new home is going to move into a facility,and he wants to sweeten the offer by offering CASH.
Cash will come from OP,the father,who has a house with no mortgage,he will use his house line of credit to come up with the cash/
Son living in another town has a house,he will sell it and use the money from that house to upgrade this new house.
Mortgage between father and son stays.
(this is between father and son)
I understand the situation. I was speaking of other homes to buy later on, where there is no need to rush a deal with the setup described in the OP, just because the widow's house happened to come up. I described other options that could be taken rather than ask his father for a HELOC to pull it off. It's not an urgent situation/emergency or anything. They could also explain their situation to the seller and see if they can work a deal where the son gets a regular mortgage. It's not clear if they asked that first.
I would like to make this clarification:
Quote:
Free-R: So future home value is allegedly going to be gained, even if OP gets stuck with the mortgage.
Replace "mortgage" with "house you just bought for cash from the HELOC." The cash home will have no mortgage, but the HELOC will still exist, and the son is expected to take a mortgage out for the cash home once the upgrades are completed.
So, to me, the issue is of ownership. I'm not a home appraisal expert, but if the OP retains ownership of the cash home, and the son upgrades the cash home, and then son backs out of buying the cash home from the dad, and also stops paying/won't reimburse the HELOC payments, who gets credit for adding x amount of value to the cash home from the home improvements? Say it's 20k to 50k in upgrades, and the OP sells the home for a $100,000 profit in a hot market to get his money back to repay his HELOC. Or, if the son is paying the father's HELOC in the meantime (is the OP just going to eat that, or get that back when the son pays him with a new mortgage sale), what claim can the son make against the money he spent on the cash home if he chooses to back out? And are there any landlord rules that need to be followed in the period before the son takes out a mortgage on the cash home in this situation? Seems like a mess.
To be sure, I don't have a problem with the deal on its face if everything works out as planned. I wouldn't take a HELOC out for even myself, lest I be in a situation that I knew I couldn't come back from and had to do it to get the money. If OP's son has always been a good son, responsible, great with money and saving as described...that kind of thing, I wouldn't necessarily expect problems. There are less complicated ways if being patient, that's all. But if they want to work it this way, okay.
... I can’t think of any downside since we’d have the house as collateral against the mortgage. Any thoughts or concerns? Am I missing something? ... We are not buying him a house. We are giving them a mortgage so they can buy a house without having to wait to sell their house first.
First off, this isn't a loan. A simple loan is just giving someone liquid funds (either cash or wire transfer to their bank account) and having a simple, hopefully notarized, letter about getting paid back.
This is something totally different involving two properties and a real estate transaction with all sorts of issues attached. Maybe things are unregulated in your state, but in most states, unless you have all sorts of licenses and business stuff squared away, you aren't giving them a mortgage. Now, maybe in your state you can, but unless you already own a lending company, this isn't giving them a mortgage.
Also, it sounds like you already have a home equity line open. The collateral for that is against your current home, right?
There are a few ways this can play out. Here is one path that seems to be what you want to do:
You will take equity money out on your current home via the home equity line, which the collateral is your current home. You'll buy the other home but instead of you owning it, you'll turn right around and deed it to your son. Your son will then pay you some sort of money to cover the costs and eventually get his own mortgage to buy the home he already owns and pay you back whatever it cost you to originally buy the home.
I know rules that govern RE transactions, deeds, lending, etc. vary from state to state. What I'd do is this:
You take the money from your HELOC, buy the home. You and your wife are on the deed to the home. You get a legal lease agreement that your son and his fiance sign. They rent the home from you until they are ready to buy. They get a mortgage, their names go on the deed, and you pay off your HELOC.
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Originally Posted by Jonmarc
Yes, we would lend him the $350,000 as a mortgage on the house. We would draw up a legal mortgage recorded on the land records so that would protect us should they break up. The money would come from a Home Equity Line of Credit on our house which is fully paid off. They will pay us and we will pay the HELOC.
If this is something you can do in your state, so be it. Sounds like you'd be protected. That being said, you already cleared it with an account, now you need to start talking to an attorney that specializes in real estate to confirm that your plan is legal in your jurisdiction.
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Originally Posted by Jonmarc
That’s why at age 25 he had the down payment for a $250,000 house while fully funding his retirement accounts to their max.
Your kid is in his late 20s now. Fully funding retirement accounts means your kid has been saving roughly $24,000/year between IRAs and 401(k) type plans. He has done this for two to four years (depending on what age "late 20s" is) and has $50K to $100K in retirement accounts. He also should have some sort of equity in his current house if he had even a 10% down payment.
If seems your kid does fine with money. My only concerns is how you word how you are going to structure this assistance/transaction. So long as it is legal and you trust your kid to pay you back, are OK with owning this home if he changes his mind, and/or willing to foreclose and evict your kid if he doesn't pay you back, I don't see anything wrong with helping them out.
I dont like the part of OP the dad using his home as a check book .
The housing market has taken a downturn due to rising rate and slowing economy.
Originally son wants to offer all cash to sweeten the deal,may be he does no have to do so now.
OP, what about your other child? You have made a lot of monetary gifts to this son. Paying for undergrad and grad school. Now you will be paying for this house. Yes, the plan is hopefully that your son will eventually make improvements on the house and be able to take over the mortgage... but we've all seen things happen in life. Do you have the financial means to make an equal gift to your other child if something goes wrong? What if your son and his wife divorce and she gets half the value of the house? Can you still make your other child a similar gift without it affecting your retirement plans?
I think it's a great thing to want to help your kids out but I think it's important to always be fair and if you give to one child, do the same for the other.
Does a healthy relationship/marriage matter? Of course it matters, how on earth could you ask that question seriously?
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OP said his son is planning to get married,they are living together now and plan to move together to where OP is/
The son said, that’s right and that’s why the other poster asked about the other half.
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