My in-laws have some money on the side and they approached me(I think given the low CD rates and their lack of willingness to buy treasury or other fixed income) and suggested that they want to pay off my entire remaining mortgage balance (it is about $190K) and asked me to pay them the monthly payment. it is about $1200/month…saying that they can provide me that extra safty net in case I lose my job or whatever disaster may happen in my life. Well, I am currently pretty secure in my finance, very comfortable with my mortgage payment, job situation in my firm is pretty stable (at least as far as I can see). I like the idea of the potential saft-net they are talking about…in case I get layoff (I do work for a TARP bank), I can have lot of breathing room. However, I would feel that I may be held “hostage” by my in-laws if I do this. I usually stay away from doing any finance-related deal with other family members. For example, I can get on the phone and “yell” at the customer service rep of a mortgage company if they make some mistake, however, I can’t really yell at my in-laws if mistake happens. Thought? Thanks guys!!
sounds like a good deal. the additional risk is your marriage. it could put a strain on your marriage.
^That is one of my concern too.
if you enter it in good faith and hold up your end of the bargain, there isnt much to it. you need to make monthly payments right on time. if you lose your job, it could get tricky but if you can show that your intentions are honest, you should be fine. although you may have to be doing more chores around the household, which should not be a great problem.
Stay as far away as possible!
Too weird for me. I wouldn’t do it.
Don’t do it!
If I do this, I will certainly enter is good faith, paying the month payment is not a problem at all. My main fear is in case of losing my job then I fall behind on payments, friction can happen.
sounds great but doubt it makes financial sense b/c the tax implications are probably the reason not to do this, i’m not a tax expert but questions/reasons I would think not to do are: 1) you lose interest deductions from taxes 2) not sure how paying your inlaws “rent” would qualify (income for them?) but there may be a way to get around this…
I agree with needhelp, it really depends on the relationship you have with your in laws. Although it sounds like a great idea, it may become a strain on your marriage in the future. Also, if you decide not to take them up on their offer, would they take it the wrong way? How does your spouse feel about the situation?
CFASlayer Wrote: ------------------------------------------------------- > Also, if > you decide not to take them up on their offer, > would they take it the wrong way? How does your > spouse feel about the situation? I didn’t even think about this…damn, good point.
Step back from this offer and ask yourself what are you really getting. They are getting a a higher interest payment on their money, but what are you getting? Nothing, unless you lose your job and they let you slide on payments. But is that really an upside? What kind of tension would that cause in the family? Would they follow through and let the payments slide? Would they REALLY be cool with that? I mean they are obviously trying to increase their rate of return. Tax implications also. Sounds like a bad deal to me.
mwvt9 Wrote: ------------------------------------------------------- > I mean they > are obviously trying to increase their rate of > return. > I believe that is the biggest reason they wanted to do this since they can’t get anything from CD these days.
You should find out the tax implications like ConvertAb mentioned. If they would be detrimental to your inlaws, you can use that as a loophole in the event you decide not to take them up on their offer.
ws Wrote: ------------------------------------------------------- > If I do this, I will certainly enter is good > faith, paying the month payment is not a problem > at all. My main fear is in case of losing my job > then I fall behind on payments, friction can > happen. What if they come under financial pressure and need liquidity? Do you keep the optionality of pre-paying your loan?
ws Wrote: ------------------------------------------------------- > mwvt9 Wrote: > -------------------------------------------------- > ----- > > > I mean they > > are obviously trying to increase their rate of > > return. > > > > I believe that is the biggest reason they wanted > to do this since they can’t get anything from CD > these days. Right. So if you default cause you lose your job they are going to be pissed (I would think) and that is the only real upside for you, them covering a period of default if you lost your job (which you don’t think is going to happen anyway).
Who gets the money when you sell the house?
You can still get your mortgage interest deduction even if borrowing from your inlaws, but you’ll need a lawyer to draw up the documents as well as someone to prepare the tax forms. Alternatively, it sounds like they’re in a pretty high tax bracket, so they’d probably be willing to reduce your payment amount by their bracket % if you pay in cash. Assuming their bracket is higher than yours, its a better deal for you to do this.
JustPass Wrote: ------------------------------------------------------- > ws Wrote: > -------------------------------------------------- > ----- > > If I do this, I will certainly enter is good > > faith, paying the month payment is not a > problem > > at all. My main fear is in case of losing my > job > > then I fall behind on payments, friction can > > happen. > > > What if they come under financial pressure and > need liquidity? Do you keep the optionality of > pre-paying your loan? Good point. If they ever want the money back, you would have to take out another mortage and who knows what the rate will be at that time.
I would pay NOT to live in my in-laws house. Seriously, don’t just let them pay it off and “rent” from them - there are quite a few implications there. What if you get divorced (which would happen pretty fast for me if I lived in my in-laws house) - you would have no claim on your own house. They can do “owner financing” - you still own and carry the deed to the house, and have a promissary note to them just like you would have to a bank. Definitely get together with a lawyer to draft the promissary note and agreements. There are also various legal and tax implications if they offer you forbearance (allowing you not to pay your mortgage if you get laid off), but it all can be worked out.