Question : Holding Mortgage (insurance, loan, interest rate, rate)

[energygrrl]

Hello, please forgive me ahead of time for asking this question. This area is not my forte~

Ok, here it is: My Mother just passed away and left me her home. It is mine free and clear. The problem is :I do not want it. I neither want to stay in the city where it is located nor do I want to be a landlord, long distance or in same area. The House was built in 1920.
I want to sell this house to my nephew who already lives here and has an emotional attachment to the home, knows the issues and can do the updating type work.
Here is my problem and question: He can only give me half the cash for the home. I would have to hold the mortgage for the other half. (It is very cheap) He believes he would be able to give me the otehr half by May of 2012.
I do not know any of the legalities about this.
Yes, we do have a lawyer that would draw up the contract but I currently feel very unarmed to make any informed decisions because I do not know much about this topic.
I know that on this forum there are many well informed people and hence I felt it "safe" to reach out and ask you all about your opinion.
What type of contract do I need and what stipulations need to be in the contract that would protect me lets say if he does not come up with the other half of the cash. And no he cannot get a personal loan. He is a 21 yr old who is in college and the home is just about cheaper than a car.The market where I am at is a VERY different type of market than the rest of the country. (Honestly it would have been preferable for him to come up with all the cash and have this over all at once) But that is not the reality and I am willing to hold the small mortgage to give him an opportunity to stay in his Nana's house.
Any advise would be appreciated~
Thank you all in advance.
City-data always comes though for me and I hope this time as well

[MrRational]

Originally Posted by energygrrl

Here is my problem and question: He can only give me half the cash for the home.

Only half? This is not a problem.

I would have to hold the mortgage for the other half. (It is very cheap)
He believes he would be able to give me the otehr half by May of 2012.

Sold!

I'd suggest though, that you set things up so that he has longer to pay it off.
Five years is not unreasonable.

I do not know any of the legalities about this.
Yes, we do have a lawyer...

They aren't very complicated.

One thing though: Maybe get a different lawyer than the family/estate guy?...
For this... use somebody who specializes in RE transactions.
And likely, to explain the particulars and options to BOTH of you... one on one.

And no he cannot get a personal loan.
He is a 21 yr old who is in college and the home is just about cheaper than a car.

The question is whether he can afford to make the monthly loan payment
(including the taxes and insurance and some token interest rate too) as well as the utility bills...
from whatever source of money he presently has.

And on a personal level... whether he has the sand to both keep the place up
and do or manage the inevitable repairs that WILL crop up ...
and not make it into a party house when he brings in a housemate or two (he will).
And (in time?) to do the remodeling and updating the old property likely needs.

These sorts of concern are some of the reasons for the 5 year pay off...
don't set him up to be "house poor".

Be very clear on these points.

...I am willing to hold the small mortgage
to give him an opportunity to stay in his Nana's house.

You're a good Aunt.

hth

[energygrrl]

Thank you so much for the feedback~

[SouthernBelleInUtah]

I held the mortgage on my last home when I moved out of state; it was a buyer I didn't know from Adam. He had a good job for over a year, had a new wife and baby, and had some problem in the past, I thought likely divorce-related. Anyway, my attorney drew up the contract, specified that he had to have home owners' insurance with me as the beneficiary, and printed out an amortization schedule. Every year I sent him an interest statement based on that for his taxes. They stayed there 4 yrs before they bought a bigger house and I made out like a bandit. Most of the payments went to interest, and when he sold it I got the payout of almost all the prinicpal. Do something like that and you should be OK.