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.
An article from Nerdwallet discussed the pros and cons and ins and outs of 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 and get it notarized when completed.
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
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