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If we end up giving them the rest of the money to buy the house it would end up being about 170k. We'd just take it out of retirement savings. ...
So, if that's the case, you either need to be on title or you need to treat it as a private mortgage and have the closing attorney draw up the mortgage docs and record it for you. You would be the bank and can charge interest. It wouldn't be the worst thing in the world since you'd be primary lien holder and you can charge a an interest rate (I recommend 4.99%) over 10/15/20/30 years or whatever. You would be very secure that you'd get your money back over time with interest and you have all the same powers a mortgage company has to collect.
On paper it's better than just giving them the money no strings attached, but still sounds likely to turn into a mess. For the powers to collect to have value you have to be willing to enforce them. And if you're not willing to let the family members sink or swim on their own right now, are you going to be able to foreclose, force sale, etc should it come to that?
Maybe if you made it your last straw and had strong resolve. Here's what we're doing, this is your chance, if you screw it up we're done. You'd have to be willing to follow through. If not you might be better off giving them the money and avoiding the nearly guaranteed drama of becoming their lender/landlord. I can count on one hand the times I've seen my father cry. Likewise for the times I've seen him so mad I thought he might actually hurt someone. Most of those were surrounding the drama with their rental house and sis/husband.
I know some people make it work and have happy endings. But the general wisdom seems to be, if you care about the relationship don't become a lender to family.
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I know some people make it work and have happy endings. But the general wisdom seems to be, if you care about the relationship don't become a lender to family.
I agree with your entire post even I only quoted part of it. It does ensure they can't take a primary mortgage out over the loan and they can't sell w/o satisfying the balance. Even if payments aren't consistent or stop coming in, it's best option if the OP chooses to help. It also gives the option for the S-I-L to work on improving the credit and taking out a mortgage to pay the family back.
Thank you all for the replies and being understanding! I belong to a lot of financial groups and topics like this will come up. Undoubtedly there are always people who will lay guilt on the person who doesn't want to keep bailing out family members. Especially if the family are your parents. At least you all here are sympathetic and I appreciate it.
We don't mind helping. But people like this can drain you of everything you have. Givers need boundaries because takers have none!
Well the closing didn't happen today. They were told they need more documents and maybe closing will be next week.
I wonder if we are getting the whole story or can a closing be like this? Like at this point, shouldn't a mortgage company know if you have a mortgage or not? To fall through at the last minute and they are told that "possibly" next week?
If we end up giving them the rest of the money to buy the house it would end up being about 170k. We'd just take it out of retirement savings. We can swing it but we definitely aren't rich enough that we wouldn't feel it.
So they are sitting in a house that is sold but the flipper is letting them stay for now. And they may or may not have a mortgage on the new house.
The poor sellers of the house they are buying must be sitting on pins and needles! What a mess this all is.
DOn't do that. If you must give them enough for First, Last, Security deposit and cut them off.
Dave Ramsey is controversial but he does seem to have healthy advice for boundaries. He recommends a book called "Boundaries" by Dr. Henry Cloud. Consider having your husband read it.
They can be. DH and I bought a $250K house in 2015. I was one year post-retirement and DH had retired years ago- he was 15 years older. We had excellent credit ratings and wanted to put down $100K and borrow $150K. I swear they fixated on DH's income and a small pension of mine ($900/month) and ignored our investments, which were over $2 million at the time. We ended up putting down $150K.
To bad. Their poor decisions got them there. I'd hate to see your financial future jeopardized by trying to buy the house for them.
you should have talked to other lenders, including taking out a loan against your investments.
Any loan is based on 3 items and ALL are considered:
Capacity (can you repay the obligation)
Collateral (40% down helps)
Character (aka credit score)
Regular banks aren't in the business of saying "well, we know we'll probably have to foreclose, and hopefully by the end of it that 40% down will still cover us"
I know some people make it work and have happy endings. But the general wisdom seems to be, if you care about the relationship don't become a lender to family.
I don't loan money. It's either a gift from me to you or a hard no.
Thanks again for all of the replies. I agree with simplechamp and everyone else about not becoming a lender to family. That's why we are going to be giving them the rest of the money and not want it paid back. Instead we are telling them to take the money that would have paid the mortgage and save it. That will likely not happen. They love spending. But at least we can have a comeback if they ask for money in the future. "What about all the money you've been saving?"
We sold our house a few years back and my husband was a part of a small start up company that was sold last year. We have money in our savings that was going to pay for at least half of a house here. An 1800 square foot house here is 700-800k. We are instead going to use that money to give them. It will be about 170k. We should still have 30% left for when we buy a house. We decided to leave our retirement accounts and not touch those.
You know how some people make you a better person? My inlaws have made me a worse person. I used to be so much more trusting and sympathetic toward people. I find myself very skeptical and doubting now when people cry the blues about not having money. I realize there are true hardships in this world. But I also wonder if half of those hardships are just spendthrifts who never learn their lesson.
Well at least they will have their house paid. The poor sellers can move on with life. The flipper can get his house and start working on it and not deal with squatters. My husband is angry at his parents and we aren't happy givers right now. But it's the only way we can move forward and enjoy our life and what we've worked for.
Thanks all for your input here. I do appreciate the advice and understanding!
That's why we are going to be giving them the rest of the money and not want it paid back. Instead we are telling them to take the money that would have paid the mortgage and save it. That will likely not happen. They love spending. But at least we can have a comeback if they ask for money in the future. "What about all the money you've been saving?"
That is very generous of you. I hope the appreciate y'all for your kindness and realize how lucky they are. Before you even do that, perhaps you can wait and see if they get the mortgage?
I just wanted to give everyone a final update in case anyone cares, lol
Brandon, that's a good question. And we were only going to pay for the house because, according to MIL, it didn't look like they were getting a mortgage at all. So their plan was to squat in the house while they were shopping for another mortgage. And so the guy who bought their house is getting screwed and the sellers of the house they are buying are hung up waiting. And they are buying in a rural part of the south where it could be months before these poor sellers got another buyer.
So we were prepared to just buy the house for them. But it turns out they just needed a bigger down payment. So we gave them 25k and that seemed to work. They have a closing set for tomorrow.
My husband and I are so relieved. We feel like we got away with only paying 25k. What I just don't understand is how a mortgage is so shaky right up until the very end. They had already verified employment, ran credit, did the appraisal. Why is there always that last minute scrambling? We had the same thing with our mortgage years ago. It was so stressful. But anyway, that's what happened.
Word to the wise, keep business as business. Don't get hung up with grifters like my inlaws. Don't try to "be nice" to people. That flipper buying their house was nice enough to let them stay to close on the new house and have time to pack and they were fully prepared to give him the finger and stay in the house until they were kicked out. Gloating over the fact that he'd have a hard time throwing them out right now with the virus.
Thanks for the update and I'm VERY glad the amount you gave them was considerably less than $170K and you're not personally responsible for the mortgage.
The two of you do need a game plan going forward. Given their track record there will be emergencies: furnace needs replacing, car transmission dies, hot water heater stops working... I can picture them neglecting ongoing maintenance that any house requires and then having expensive problems. Maybe you need to set an annual budget right now for "helping clueless relatives" and when it's gone, it's gone till the first of the year.
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