I am lending $30,000 to my mom to buy a house. How is the best way to insurance that she pay me back.
Get the loan recorded with the house that way you have a claim on the house (2nd), however make sure that you are not running afoul of any lending rules with her primary lender by doing this.
@Aaron K. Thanks so much. No is a house that just $45 And she have the other money.
I can't imagine anyway this could go wrong.
@Ramon Paredes just be aware that there are laws around lending money, even to family members. This is because because people will gift money and in an effort to avoid the gift tax, they call it a loan. The IRS watches for this and large money transfers are tracked.
- IRS regulates the minimum interest rate you can charge
- The interest she pays you must be claimed as income on your taxes
My general advice when lending money to family members is only lend the money if you are prepared to lose 100% of the money and not be angry. People who borrow from family members are more likely to default than when they borrow from banks.
To protect yourself, you should secure the loan with a lien on the property. That gives you first rights to have your loan paid off, should the property be sold. It also gives you legal rights to foreclose on your mother if she doesn't pay. It is unlikely you would do that.
It is not a good idea to loan money to family or friends, but I can appreciate a son wanting to help their mother, so I realize this is an emotional decision.
@Terrell Garren , is that anything like renting out your place to a family member? ;-)
@Alan Grobmeier You know it. Any renting or loaning to family should be thought of as a gift or loss. There will be surprises and most of them will be bad. Just talked with a wonderfully nice lady last week that recently rented to her daughter and boyfriend. They did not pay and left the property a mess. Now she's in tears, the family is not speaking and she wants out of RE investing.