Primary residence owned outright, thanks to loan from parents... Question on paying them back...

6 Replies

hey guys and girls, 

This is my first time posting so I hope this is the right place for my question... 

Long story short, my parents had a vacation house, sold it, and gave my brother and I a good amount of money towards either a house, business, or marriage. 

I started my own business already, and wanted to move it to a new state, so i decided to use it towards a house. 

So I now live in VA. They helped me buy my house, (bought outright for $165k) and I send them $1000 monthly as a "rent/mortgage" payment towards paying them back, until I can qualify for a mortgage or home equity loan to pay them back (roughly $100k I owe them) so this leads me to my question.... I've only been in business down here for 1 year, and I know being self employed I need to be in business for at least 2 years to get a mortgage. Is a mortgage my best option for paying them back? Or is there a better way? I'm just not sure how this would work, since the house is already paid for in full. (My name as well as both of my parents names are on the deed)

Should I basically "buy" it from them with a mortgage and take their names off of the deed? Seeking advice on the situation. 

Thanks in advance!


@Kodi Rath

It depends on when they need the money back and if they are charging you interest?

Sounds like since the house is paid off (by your parents), you would be taking out a loan on the equity of the house. Whatever bank you go with would require an appraisal most likely and they would probably loan up to a certain percentage of that appraised value.

@Kodi Rath , you said they "gave my brother and I a good amount of money...", but was it always understood to be a loan-only? Or, do they see themselves as having proportional (two thirds) equity if you ever sell?  Do they know that you would like to get them off the Deed (by paying them back)?

Short answer is: ask them (and maybe get their answer in writing to avoid ambiguity later on)! Cheers...

thank you everyone for the responses!

So total, they gave me $117k, but like I said after paying them for a little over a year now I'm down to about $100k. They are not charging interest, basically they don't NEED the money back until they are ready to buy their retirement home (which is now probably happening next year) and I'm just not a fan of owing them money. I know since there is no interest involved, nothing will be as "cheap" as just paying them the way I have been, but even though they say they're not worried about me stressing over paying them back, I would still like to get them that money before they are ready to move. 

They don't expect two thirds equity, actually they don't expect anything in return, however I would like to pay them interest as an appreciation for really helping me get a head start on my life. 

I just wanted to know the best option, since I know this isn't necessarily a typical situation for a first time home buyer. And again, I'm 23 and still very new to real estate, but I'm trying to learn as much as possible, as I plan on buying properties as a source of long term income for my future. 

Thank you all again! 

With both your and your parents' names on the deed, I am guessing most lenders will treat a loan as a cash out refinance.  In this instance, all owners on the deed will probably also need to be a party to the loan.  

While you are waiting to have a discussion with your parents about when they will want to be repaid, you can start asking about a loan at your local bank.  Speak with the residential loan officer about any available options to buy your parents out, then pick one or two that are affordable for you to discuss with your parents.  

In this interest rate climate, you want to discuss fixed rate loans only.  Adjustable rate loans may have a lower interest rate, and a lower monthly payment initially, but if interest rates go up too quickly, your monthly payment may become too expensive for your budget.

I would like to get a loan from my parents for $150,000 to purchase a house cash.   What are you doing with the money your parents gave you on your taxes?

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