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Thinking about Loaning Money to a Loved One for Their Home Purchase? Read This First...

Interest rates are still sitting high, which is preventing many buyers from successfully purchasing a new home.


As such, some buyers are exploring alternative ways to buy a home without a traditional mortgage, including getting loans from loved ones.


If you are considering offering a loan to a child, family member, or loved one to purchase a home, there are certain things you should know before you sign on the dotted line.


A recent article from realtor.com outlined best practice for giving loans to loved ones, including:


Get clear from the get-go: When you are loaning a large sum of money, it is important to be super clear about the arrangement from the start. Discuss the terms and put it in writing; that way, if any challenges arise down the line — like a disagreement over payment terms — you have the documentation to back yourself up. You will also want to include clear guidance on what happens if the recipient defaults on payments.


Get legal guidance: As mentioned, you will want to get everything in writing when offering a home loan to a loved one. But don’t just write it on a piece of paper and sign it; make sure to get legal guidance on how to structure the contract.


Think carefully: It is a very kind gesture to lend money to someone you care about so they can buy a home. However, it can also add extra pressure to the relationship, particularly if things go south. Before you enter a loan arrangement with a child, family member, or friend, make sure you really think it through, including how you will handle things if something goes wrong.


Bottom Line


Thinking about making a loan to a child, family member, or loved one to purchase a home, let's connect. We can help you get all the information you need to make an informed decision and would be honored to assist you!


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