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Situation: my brother and his wife live in a condo that they're selling for $270K. They've had nary a nibble in 48 days on the market and have lowered the price twice. Meanwhile they're under contingent contract to purchase a $300K single-family home 20 miles away.
If I loaned them ~$60K in order to have the requisite money on hand to buy the new place, knowing that they'll eventually sell the condo and pay me back, would that work?
would the bank balk at the "source" of that cash since it wasn't from their own savings and wherewithal?
would the bank prevent closing on the new place because they would have two mortgages (and monthly ESCROW payments) simultaneously for x months?
Can you afford to GIVE them the money without hurting you?
No. I'm comfortable but not wealthy. The amount I mentioned is about one-tenth of my current nest egg (I'm 43) but is not bound up in any "retirement" registration. I'd want it back.
Situation: my brother and his wife live in a condo that they're selling for $270K. They've had nary a nibble in 48 days on the market and have lowered the price twice. Meanwhile they're under contingent contract to purchase a $300K single-family home 20 miles away.
If I loaned them ~$60K in order to have the requisite money on hand to buy the new place, knowing that they'll eventually sell the condo and pay me back, would that work?
would the bank balk at the "source" of that cash since it wasn't from their own savings and wherewithal?
would the bank prevent closing on the new place because they would have two mortgages (and monthly ESCROW payments) simultaneously for x months?
Thank you!
Your questions depend on their individual situation and the bank.
Can they qualify for a bridge loan? This is the situation they are most often used for.
Would that work?
Sure, if everything worked-out according to plan with both the new home and the sale of their existing condo -- and nothing got in the way of promptly paying your loan back.
What would the bank do?
Why not ask the bank? ... or test the question with your own bank.
Could they otherwise qualify for a bridge loan or a HELOC?
Interesting question. If they can, then it might be a better approach than a personal family loan ... and would solve the immediate shortfall problem. If they cannot qualify (aka: the bank won't take the risk), does it make sense for you to take the risk with a personal loan?
The 'elephant in the room':
One doesn't have to look far to discover that personal family loans have an anecdotal history of turning-out bad financially and emotionally, ... even under the best of intentions. Yours may be an exception, but, just because you want to make the loan, doesn't mean it will turn-out to be a good thing.
Situation: my brother and his wife live in a condo that they're selling for $270K. They've had nary a nibble in 48 days on the market and have lowered the price twice. Meanwhile they're under contingent contract to purchase a $300K single-family home 20 miles away.
If I loaned them ~$60K in order to have the requisite money on hand to buy the new place, knowing that they'll eventually sell the condo and pay me back, would that work?
would the bank balk at the "source" of that cash since it wasn't from their own savings and wherewithal?
would the bank prevent closing on the new place because they would have two mortgages (and monthly ESCROW payments) simultaneously for x months?
Thank you!
So, based on what you write.
I'd be concerned about "nary a nibble". Check sales in your brother and SIL's area. If other condos are selling and their's isn't, if they need more than the going value...
I'd be concerned about your brother and SIL's financial wisdom in getting under contract on another property without seeing how their condo sale was progressing. Maybe they did do this and got excited. Lots of lookers and then fell off or what?
How do you know they'll eventually sell the condo for enough to pay you back?
Somewhere someone knows about their financial information since they have a contract on another place. And they'll wonder where the $60000 came from and how that will be paid back. That could be a problem if they are getting any additional financing from a lender. Or if you were to say it's a gift and sign off on that that could come back to bite you one day as well.
Loaned out money also puts you in a position credit wise if something comes up for you. You have less then, and your wisdom in parting with that money may be questioned.
That said, bridge loans can be great. Anything else their bank or loan person can come up with ?
Last edited by petsandgardens; 08-24-2018 at 02:52 PM..
Situation: my brother and his wife live in a condo that they're selling for $270K. They've had nary a nibble in 48 days on the market and have lowered the price twice. Meanwhile they're under contingent contract to purchase a $300K single-family home 20 miles away.
If I loaned them ~$60K in order to have the requisite money on hand to buy the new place, knowing that they'll eventually sell the condo and pay me back, would that work?
would the bank balk at the "source" of that cash since it wasn't from their own savings and wherewithal?
would the bank prevent closing on the new place because they would have two mortgages (and monthly ESCROW payments) simultaneously for x months?
Thank you!
Your brother should have thought of this and saved enough money to CYA.
Don't lend the money. He is not handling this properly.
He is going to have to slash his selling price to get out of this mess.
He would be using you just so he can get a better price for his own house.
I was in a similar situation when downsizing into a seniors apartment on short notice. I ended up paying $10,000 to keep my former home paid up while it was on the market. When I lowered the sell price by 25% it sold quickly and I was off the hook.
By the way, the bank doesn't care where the money comes from as long as it lands in their hands.
Situation: my brother and his wife live in a condo that they're selling for $270K. They've had nary a nibble in 48 days on the market and have lowered the price twice. Meanwhile they're under contingent contract to purchase a $300K single-family home 20 miles away.
If I loaned them ~$60K in order to have the requisite money on hand to buy the new place, knowing that they'll eventually sell the condo and pay me back, would that work?
would the bank balk at the "source" of that cash since it wasn't from their own savings and wherewithal?
would the bank prevent closing on the new place because they would have two mortgages (and monthly ESCROW payments) simultaneously for x months?
Thank you!
The bank would likely want to know where the money came from. As I recall, when we used to sign mortgage papers, one of the lines we initialed is that the downpayment is our money. Don't know what the situation is with their lender.
Lender might balk at your brother and his wife carrying two mortgages as this might put them over the limit with their monthly expenses.
Why not ask the bank if this is a problem?
If you do loan the money, I would encourage you to do it officially, through the bank, with interest rates and regular payments.
This is the only way I have ever heard of family loans working out well.
If their condo hasn't had a nibble in nearly two months, the price is too high for the market in that area, at this time.
They need to take a good long look at the recently sold comps in the area and either lower their price so it will sale, or back out of the contingent contract and give it another go when the comps will support $270K.
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