Rick Mullen Realty Group

Financing a Mortgage by a Family Member Part 3 of 3

Rick Mullen — Tue, 03 Feb 2009 17:18:00 GMT

If first mortgage financing by a family member makes sense in your particular case, a first mortgage may be drafted by either a title company experienced in drafting first mortgages or a Real Estate Attorney. It is important that both the Mortgagee ("the bank") and Mortgagor (the borrower) discuss issues of non-performance and remedies for non-performance in advance. The Mortgagee may wish to disallow the taking of a second mortgage on the property to further protect their first mortgage position as well as to require that the monthly payments include property tax payments into an escrow account. To protect the Mortgagee, most mortgages contain an acceleration clause that will require payment in full if the Mortgagor defaults. In most cases the Mortgagor may be foreclosed upon if they are unable to comply with the acceleration clause. The mortgage will outline this process in general terms and state stautes will determine the specific details related to foreclosing on a property. If the Mortgagee has flexibility related to non-performance issues, then the general provisions that govern non-performance issues should be detailed in the mortgage. Family members may avoid a conflict by allowing a third party to administer the mortgage and collect payments. This will require the Mortgagee to sign an agency agreement with a third party mortgage Administrator - usually for a fee. While conflict between the Mortgagee and the Mortgagor may be minimized by utilizing a third party to administer the mortgage, it is still likely that the emotions of the Mortgagee and Mortgagor will create family turmoil in the event of non-performance. Because of this, it is important to have a written back up plan, such as putting the home up for sale in the event of non-performance. It is also critical that the Mortgagee is in a position to remain financially sound in the event that the Mortgagor defaults on the loan. In some cases a family member may wish to consider the mortgage "paid in full" upon their death. If this is the case, a mortgage satisfaction may be prepared at the time the mortgage is drafted. This document should be filed with an estate Attorney and may be recorded at the time of Death of the Mortgagee. While family finanacing has many pitfalls, it may be the right option in situations where it is mutually beneficial to the Mortgagee and Mortgagor.

Financing a Mortgage by a Family Member Part 2

Rick Mullen — Tue, 03 Feb 2009 17:15:00 GMT

Financing a home through a family member may have pitfalls. To simply and securely make arrangements for a family member to finance a new home purchase or refinance an existing home, it is critical that you utilize a professional Real Estate Agent and/or an Attorney and a title company that offers expertise in family member financing. If you consider the family member as "the bank/Mortgagee" it will be easier to determine which factors are important in your transaction. Family members should be careful not to take shortcuts and to treat their transaction just as they would if the transaction was taking place with a non-family member. Just like in a regular transaction, the Mortgagee/family member should require a down payment and proof of homeowners insurance. A title company will be able to provide title insurance just like they would in any other transaction. Title insurance will protect the Mortgagee from title defects (liens and encumbrances) not discovered during the title search. The title search will determine the actions which must be taken by the Seller/Owner to provide clear title to the property. Stay tuned for the final details and please remember to consult with professionals prior to undertaking family financing.

Financing a Mortgage by a Family Member

Rick Mullen — Thu, 15 Jan 2009 18:33:00 GMT

Clients of mine were contacted by their parents to determine if they would be interested in working out an arrangement for their parents to carry the first mortgage on their home. The parents are retirement age and felt that they would like to minimize their risk in the stock market by investing in more secure products. They found that bonds and certificates of deposit failed to pay a return that would work for them. My Clients agreed to allow their parents to hold the mortgage. The parents became the Mortgagee and their Children became the Mortgagor. At an interest rate of 5% on a $120,000 mortgage, amortized over 30 years, the first payment to the parents would be allocated as $500.00 in interest and $144.19 in principal. A nice win-win arrangement as the parents received an acceptable rate of return and their Children were given a better interest rate than what they were offered on the open market. Please stay tuned for instructions on how to simply and securely make this arrangement.

Open House in Riverview on Saturday

Rick Mullen — Wed, 21 Nov 2007 01:05:00 GMT

Riverview, Wausau - We invite everyone to visit our open house at 4119 Briarwood Avenue on December 1 from 12:00 PM to 1:30 PM.

Rick Mullen Realty Group

Financing a Mortgage by a Family Member Part 3 of 3

Financing a Mortgage by a Family Member Part 2

Financing a Mortgage by a Family Member

Open House in Riverview on Saturday

903 North 7th Street, Wausau East, $79,900

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