Well folks….Looks like interest rates for loans are about to go lower……

[CA renter]

flu,

In my family, we routinely made loans to one another, often because someone had money tied up in bonds or CDs and wanted to borrow for a house, etc. Like your situation, the lender would get a better than market rate and the borrower would get a better than market rate, and you have none of the closing costs associated with getting a regular loan. It’s truly a win-win deal.

That being said, you have to really know and trust each other. It sounds like you’re pretty safe, and I really don’t see why you shouldn’t do it. Just remind this relative that interest rates could go up, and they would miss out on those better rates, IF they go up. Make sure they know that they can’t call the loan early (unless you want them to), and that they will be stuck with the low rate you’ve agreed upon. Make sure they really understand this and that they agree not to get upset or try to pressure you to pay off the loan early in the event that rates rise of if they decide they need this money for some reason.

Just draw up a legal contract, and have them record the note. There really shouldn’t be too much extra paperwork (we didn’t have too much). Make sure you check with a CPA to be sure everything’s taken care of, and maybe have a RE atty take a look at your documents.

Good luck!

[UCGal]

[quote=flu]
So…to add drama to this saga…..after going through this refinancing, one of my relatives (distant aunt/uncle) on fixed income were complaining that their money is earning pidly 2% on a CD/etc….

So they offered to make me a personal loan at 3.5% for 15 years for the same amount, secured by my home.

I’m thinking about this…I get slightly better rate, my relative gets a slightly better return, the home is secured from their perspective since the LTV would be less than 50%…I’d still get my tax writeoff on the interest..It cuts Bank of America(who purchased loan) out of the equation…Doubly great, since I’d rather send the interest to someone I know than that bank…

The drawback I think would be, it’s a lot more paperwork to keep track of from the IRS perspective, and also mixing money with relatives is usually not a good thing. But in this case, it’s a real secured loan..Other drawbacks are that they probably could find something with higher returns, especially if rates creep up.. Conversely, if rates fall lower, it I guess I could either renegotiate with them or find a bank to refinance again…..I’d say my chances of defaulting are pretty low, since I’m am pretty “safe” investment, I think… 🙂

So, what says you? Should I try to borrow from said relatives?[/quote]

I agree with CAR. I’ve been the recipient and the lender of family loans… and I’ve also seen it backfire.

My dad loaned me enough money to get to 20% down on my first house. (I only had about 13% saved). In exchange, he was on the title and I paid him regular payments with interest on a standard amortization schedule. We had a loan agreement formally written up.

He lent money to my brother, who’d make a few payments then have issues and excuses. A few years later he’d want to borrow more. It caused quite a bit of tension between them after my dad stopped lending.

We’ve lent money to my brother-in-law for a real estate deal (he was buying an apartment building and was short about 1/2 until he sold another apartment building.) Again, we had clearly defined terms, interest, a payment schedule, etc – all in writing and notarized.

The terms in both cases were shorter than 3 years, so we didn’t bother to record the transactions.

I think the problem in family loans comes when the terms aren’t clearly defined… Parent makes a loan to their grown child – and the kid treats it like a gift… Or the terms are “pay me back when you can”… Those are the scenarios that set you up for bad transactions. I have had friends ask me why I made regular payments to my dad when I owed him money… didn’t it just go against future inheritance. I guess their family operated differently than mine.

[UCGal]

[quote=flu]
So…to add drama to this saga…..after going through this refinancing, one of my relatives (distant aunt/uncle) on fixed income were complaining that their money is earning pidly 2% on a CD/etc….

So they offered to make me a personal loan at 3.5% for 15 years for the same amount, secured by my home.

I’m thinking about this…I get slightly better rate, my relative gets a slightly better return, the home is secured from their perspective since the LTV would be less than 50%…I’d still get my tax writeoff on the interest..It cuts Bank of America(who purchased loan) out of the equation…Doubly great, since I’d rather send the interest to someone I know than that bank…

The drawback I think would be, it’s a lot more paperwork to keep track of from the IRS perspective, and also mixing money with relatives is usually not a good thing. But in this case, it’s a real secured loan..Other drawbacks are that they probably could find something with higher returns, especially if rates creep up.. Conversely, if rates fall lower, it I guess I could either renegotiate with them or find a bank to refinance again…..I’d say my chances of defaulting are pretty low, since I’m am pretty “safe” investment, I think… 🙂

So, what says you? Should I try to borrow from said relatives?[/quote]

I agree with CAR. I’ve been the recipient and the lender of family loans… and I’ve also seen it backfire.

My dad loaned me enough money to get to 20% down on my first house. (I only had about 13% saved). In exchange, he was on the title and I paid him regular payments with interest on a standard amortization schedule. We had a loan agreement formally written up.

He lent money to my brother, who’d make a few payments then have issues and excuses. A few years later he’d want to borrow more. It caused quite a bit of tension between them after my dad stopped lending.

We’ve lent money to my brother-in-law for a real estate deal (he was buying an apartment building and was short about 1/2 until he sold another apartment building.) Again, we had clearly defined terms, interest, a payment schedule, etc – all in writing and notarized.

The terms in both cases were shorter than 3 years, so we didn’t bother to record the transactions.

I think the problem in family loans comes when the terms aren’t clearly defined… Parent makes a loan to their grown child – and the kid treats it like a gift… Or the terms are “pay me back when you can”… Those are the scenarios that set you up for bad transactions. I have had friends ask me why I made regular payments to my dad when I owed him money… didn’t it just go against future inheritance. I guess their family operated differently than mine.

[UCGal]

[quote=flu]
So…to add drama to this saga…..after going through this refinancing, one of my relatives (distant aunt/uncle) on fixed income were complaining that their money is earning pidly 2% on a CD/etc….

So they offered to make me a personal loan at 3.5% for 15 years for the same amount, secured by my home.

I’m thinking about this…I get slightly better rate, my relative gets a slightly better return, the home is secured from their perspective since the LTV would be less than 50%…I’d still get my tax writeoff on the interest..It cuts Bank of America(who purchased loan) out of the equation…Doubly great, since I’d rather send the interest to someone I know than that bank…

The drawback I think would be, it’s a lot more paperwork to keep track of from the IRS perspective, and also mixing money with relatives is usually not a good thing. But in this case, it’s a real secured loan..Other drawbacks are that they probably could find something with higher returns, especially if rates creep up.. Conversely, if rates fall lower, it I guess I could either renegotiate with them or find a bank to refinance again…..I’d say my chances of defaulting are pretty low, since I’m am pretty “safe” investment, I think… 🙂

So, what says you? Should I try to borrow from said relatives?[/quote]

I agree with CAR. I’ve been the recipient and the lender of family loans… and I’ve also seen it backfire.

My dad loaned me enough money to get to 20% down on my first house. (I only had about 13% saved). In exchange, he was on the title and I paid him regular payments with interest on a standard amortization schedule. We had a loan agreement formally written up.

He lent money to my brother, who’d make a few payments then have issues and excuses. A few years later he’d want to borrow more. It caused quite a bit of tension between them after my dad stopped lending.

We’ve lent money to my brother-in-law for a real estate deal (he was buying an apartment building and was short about 1/2 until he sold another apartment building.) Again, we had clearly defined terms, interest, a payment schedule, etc – all in writing and notarized.

The terms in both cases were shorter than 3 years, so we didn’t bother to record the transactions.

I think the problem in family loans comes when the terms aren’t clearly defined… Parent makes a loan to their grown child – and the kid treats it like a gift… Or the terms are “pay me back when you can”… Those are the scenarios that set you up for bad transactions. I have had friends ask me why I made regular payments to my dad when I owed him money… didn’t it just go against future inheritance. I guess their family operated differently than mine.

[UCGal]

[quote=flu]
So…to add drama to this saga…..after going through this refinancing, one of my relatives (distant aunt/uncle) on fixed income were complaining that their money is earning pidly 2% on a CD/etc….

So they offered to make me a personal loan at 3.5% for 15 years for the same amount, secured by my home.

I’m thinking about this…I get slightly better rate, my relative gets a slightly better return, the home is secured from their perspective since the LTV would be less than 50%…I’d still get my tax writeoff on the interest..It cuts Bank of America(who purchased loan) out of the equation…Doubly great, since I’d rather send the interest to someone I know than that bank…

The drawback I think would be, it’s a lot more paperwork to keep track of from the IRS perspective, and also mixing money with relatives is usually not a good thing. But in this case, it’s a real secured loan..Other drawbacks are that they probably could find something with higher returns, especially if rates creep up.. Conversely, if rates fall lower, it I guess I could either renegotiate with them or find a bank to refinance again…..I’d say my chances of defaulting are pretty low, since I’m am pretty “safe” investment, I think… 🙂

So, what says you? Should I try to borrow from said relatives?[/quote]

I agree with CAR. I’ve been the recipient and the lender of family loans… and I’ve also seen it backfire.

My dad loaned me enough money to get to 20% down on my first house. (I only had about 13% saved). In exchange, he was on the title and I paid him regular payments with interest on a standard amortization schedule. We had a loan agreement formally written up.

He lent money to my brother, who’d make a few payments then have issues and excuses. A few years later he’d want to borrow more. It caused quite a bit of tension between them after my dad stopped lending.

We’ve lent money to my brother-in-law for a real estate deal (he was buying an apartment building and was short about 1/2 until he sold another apartment building.) Again, we had clearly defined terms, interest, a payment schedule, etc – all in writing and notarized.

The terms in both cases were shorter than 3 years, so we didn’t bother to record the transactions.

I think the problem in family loans comes when the terms aren’t clearly defined… Parent makes a loan to their grown child – and the kid treats it like a gift… Or the terms are “pay me back when you can”… Those are the scenarios that set you up for bad transactions. I have had friends ask me why I made regular payments to my dad when I owed him money… didn’t it just go against future inheritance. I guess their family operated differently than mine.

[UCGal]

[quote=flu]
So…to add drama to this saga…..after going through this refinancing, one of my relatives (distant aunt/uncle) on fixed income were complaining that their money is earning pidly 2% on a CD/etc….

So they offered to make me a personal loan at 3.5% for 15 years for the same amount, secured by my home.

I’m thinking about this…I get slightly better rate, my relative gets a slightly better return, the home is secured from their perspective since the LTV would be less than 50%…I’d still get my tax writeoff on the interest..It cuts Bank of America(who purchased loan) out of the equation…Doubly great, since I’d rather send the interest to someone I know than that bank…

The drawback I think would be, it’s a lot more paperwork to keep track of from the IRS perspective, and also mixing money with relatives is usually not a good thing. But in this case, it’s a real secured loan..Other drawbacks are that they probably could find something with higher returns, especially if rates creep up.. Conversely, if rates fall lower, it I guess I could either renegotiate with them or find a bank to refinance again…..I’d say my chances of defaulting are pretty low, since I’m am pretty “safe” investment, I think… 🙂

So, what says you? Should I try to borrow from said relatives?[/quote]

I agree with CAR. I’ve been the recipient and the lender of family loans… and I’ve also seen it backfire.

My dad loaned me enough money to get to 20% down on my first house. (I only had about 13% saved). In exchange, he was on the title and I paid him regular payments with interest on a standard amortization schedule. We had a loan agreement formally written up.

He lent money to my brother, who’d make a few payments then have issues and excuses. A few years later he’d want to borrow more. It caused quite a bit of tension between them after my dad stopped lending.

We’ve lent money to my brother-in-law for a real estate deal (he was buying an apartment building and was short about 1/2 until he sold another apartment building.) Again, we had clearly defined terms, interest, a payment schedule, etc – all in writing and notarized.

The terms in both cases were shorter than 3 years, so we didn’t bother to record the transactions.

I think the problem in family loans comes when the terms aren’t clearly defined… Parent makes a loan to their grown child – and the kid treats it like a gift… Or the terms are “pay me back when you can”… Those are the scenarios that set you up for bad transactions. I have had friends ask me why I made regular payments to my dad when I owed him money… didn’t it just go against future inheritance. I guess their family operated differently than mine.

[CA renter]

[quote=UCGal]
I think the problem in family loans comes when the terms aren’t clearly defined… Parent makes a loan to their grown child – and the kid treats it like a gift… Or the terms are “pay me back when you can”… Those are the scenarios that set you up for bad transactions. I have had friends ask me why I made regular payments to my dad when I owed him money… didn’t it just go against future inheritance. I guess their family operated differently than mine.[/quote]

Exactly right, UCGal. In my family, we always had legal documents, and recorded them if they were used for home loans.

People have often commented about the fact that we paid interest to one another with our family loans (I’ve always had to pay interest to my parents, even as a teenager). IMHO, it’s just good business, and reinforces the fact that it’s real money with a real opportunity cost. We will do the same with our kids whenever they borrow money, or if we ever have to borrow from them.

[CA renter]

[quote=UCGal]
I think the problem in family loans comes when the terms aren’t clearly defined… Parent makes a loan to their grown child – and the kid treats it like a gift… Or the terms are “pay me back when you can”… Those are the scenarios that set you up for bad transactions. I have had friends ask me why I made regular payments to my dad when I owed him money… didn’t it just go against future inheritance. I guess their family operated differently than mine.[/quote]

Exactly right, UCGal. In my family, we always had legal documents, and recorded them if they were used for home loans.

People have often commented about the fact that we paid interest to one another with our family loans (I’ve always had to pay interest to my parents, even as a teenager). IMHO, it’s just good business, and reinforces the fact that it’s real money with a real opportunity cost. We will do the same with our kids whenever they borrow money, or if we ever have to borrow from them.

[CA renter]

[quote=UCGal]
I think the problem in family loans comes when the terms aren’t clearly defined… Parent makes a loan to their grown child – and the kid treats it like a gift… Or the terms are “pay me back when you can”… Those are the scenarios that set you up for bad transactions. I have had friends ask me why I made regular payments to my dad when I owed him money… didn’t it just go against future inheritance. I guess their family operated differently than mine.[/quote]

Exactly right, UCGal. In my family, we always had legal documents, and recorded them if they were used for home loans.

People have often commented about the fact that we paid interest to one another with our family loans (I’ve always had to pay interest to my parents, even as a teenager). IMHO, it’s just good business, and reinforces the fact that it’s real money with a real opportunity cost. We will do the same with our kids whenever they borrow money, or if we ever have to borrow from them.

[CA renter]

[quote=UCGal]
I think the problem in family loans comes when the terms aren’t clearly defined… Parent makes a loan to their grown child – and the kid treats it like a gift… Or the terms are “pay me back when you can”… Those are the scenarios that set you up for bad transactions. I have had friends ask me why I made regular payments to my dad when I owed him money… didn’t it just go against future inheritance. I guess their family operated differently than mine.[/quote]

Exactly right, UCGal. In my family, we always had legal documents, and recorded them if they were used for home loans.

People have often commented about the fact that we paid interest to one another with our family loans (I’ve always had to pay interest to my parents, even as a teenager). IMHO, it’s just good business, and reinforces the fact that it’s real money with a real opportunity cost. We will do the same with our kids whenever they borrow money, or if we ever have to borrow from them.

[CA renter]

[quote=UCGal]
I think the problem in family loans comes when the terms aren’t clearly defined… Parent makes a loan to their grown child – and the kid treats it like a gift… Or the terms are “pay me back when you can”… Those are the scenarios that set you up for bad transactions. I have had friends ask me why I made regular payments to my dad when I owed him money… didn’t it just go against future inheritance. I guess their family operated differently than mine.[/quote]

Exactly right, UCGal. In my family, we always had legal documents, and recorded them if they were used for home loans.

People have often commented about the fact that we paid interest to one another with our family loans (I’ve always had to pay interest to my parents, even as a teenager). IMHO, it’s just good business, and reinforces the fact that it’s real money with a real opportunity cost. We will do the same with our kids whenever they borrow money, or if we ever have to borrow from them.

[happyrenter]

Anyone recently locked a 30 year conforming fixed, What are the rates like? We are close to locking and want to make sure we get it right.

Currently my broker is quoting 4.25% at 0.75 points

[happyrenter]

Anyone recently locked a 30 year conforming fixed, What are the rates like? We are close to locking and want to make sure we get it right.

Currently my broker is quoting 4.25% at 0.75 points

[happyrenter]

Anyone recently locked a 30 year conforming fixed, What are the rates like? We are close to locking and want to make sure we get it right.

Currently my broker is quoting 4.25% at 0.75 points

[happyrenter]

Anyone recently locked a 30 year conforming fixed, What are the rates like? We are close to locking and want to make sure we get it right.

Currently my broker is quoting 4.25% at 0.75 points

[Author]

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