Author Topic: Anyone take a carryback loan or mortgage from their parents?  (Read 1032 times)

jeromedawg

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Have any of you taken a carryback loan or mortgage from your parents or any relative for that matter? If so, would you generally recommend it? What have your experiences been?

I posted another thread about how my parents originally wanted to gift us their remaining ownership of our TIC condo, and the overwhelming response was that it's a bad idea due to the anticipated strings attached. So in light of this, my parents have offered carrying back a loan for us on their 75% ownership of the condo. We actually have a smaller carryback loan from them on our 25% portion and we are currently about $30k away from paying them off. Their 75% ownership is about $392k. If we really wanted to, we could probably buy them out in cash, but we'd be left with barely any reserves in our taxable accounts, which are currently heavily invested in S&P500 index funds. Otherwise, we could put a smaller downpayment up front and increase our monthly payments. I guess this is where interest rate and what they would want for a downpayment would all factor in in terms of negotiations, etc.

Also, payments would be made to their trust, so even when they've passed on, we would still continue making payments into the trust until it's paid off. Everything in their trust is scheduled to be divided 3 ways between my two older brothers and I.

Thoughts?

« Last Edit: May 27, 2017, 04:35:26 PM by jeromedawg »

Janie

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Re: Anyone take a carryback loan or mortgage from their parents?
« Reply #1 on: May 27, 2017, 07:00:21 PM »
I have a great relationship with my family. Even so, I wouldn't want to take loans from them. If you want to condo why not get a mortgage?

jeromedawg

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Re: Anyone take a carryback loan or mortgage from their parents?
« Reply #2 on: May 27, 2017, 07:11:59 PM »
I have a great relationship with my family. Even so, I wouldn't want to take loans from them. If you want to condo why not get a mortgage?

So we co-own the condo already (since 2007). It's 25/75 ownership where they own the majority. They flat-out own all of it too. The loan essentially be a seller-financed loan in the form of a promissory note. They want to help us with gaining more equity so this is another option while seemingly reducing the "strings attached" (especially versus them gifting in the form of early inheritance). We'll probably be here for a while but eventually we want to move into a single family home, especially after recent headaches.

jeromedawg

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Re: Anyone take a carryback loan or mortgage from their parents?
« Reply #3 on: May 27, 2017, 09:59:41 PM »
So my parents are now saying they don't want to take a downpayment from us (they'd rather us keep the money to invest for a downpayment on a bigger house). They are saying "come up with an amount that's comfortable for what you can pay monthly and then determine whatever that translates to for the % interest rate and that's what we'll agree too" - so they basically want to give us the most minimal private loan ever. Is this even possible or legal in terms of the IRS-approved applicable federal rate (AFR)?

It doesn't seem like you are supposed to be arbitrarily setting whatever interest rates you want, even for private loans within the family.

Sidenote: my parents keep pushing the point on us that this is all about equity and having leverage in an asset to get a bigger place. My dad even said "you are going to have issues buying a home when you don't have any assets..."? Huh? So how are first-time home buyers, who have no real estate assets, able buy their first house? The problem I have with paying back a loan they're carrying is that the loan amount is based on the sale price the condo was purchased at during the peak in 2007. So it's not like we're even buying it at discount or anything. I don't know if any amount of favorable financing would solve that problem. At that point, I'd be more inclined to think that the home is a liability, especially when the end-goal is to move out of here and into a SFH. The only thing we'd be banking on is continued appreciation. But what happens when there's another downturn/crash? We now have potential negative equity in this "asset"
« Last Edit: May 27, 2017, 11:49:19 PM by jeromedawg »