Structuring a private mortgage for a family member who is financing a purchase

Tax Liens & Mortgage Notes
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Structuring a private mortgage for a family member who is financing a purchase

Nate Gelinas
Real Estate Agent · Las Vegas · Member since 2012 · 38 posts · 9 votes

Hey guys. Long story short, I have a family member who may be financing a purchase. They are lending me $45k, 5 year note @8%, interest only payments for the duration, lump sum due at the end.

Now I would like to set up this member to have a mortgage/lien on the property that I am purchasing simply to legitimize the loan and make them feel comfortable with the whole transaction.

Can anyone provide any insight, or point me towards a good book or anything that I can read up on?

Appreciate any help!

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  • Jon Holdman
    Rental Property Investor · Mercer Island, WA · Member since 2008 · 22k+ posts · 14k+ votes
    13y

    Its not particularly difficult, but I recommend you get local guidance for the details. I would actually recommend getting guidance from a lawyer, perhaps the lawyer who does the closing.

    You typically need two documents. A deed of trust or mortgage. Which depends on which is used in your state. This creates the security interest in the property. The borrower is the grantor and the lender is the grantee. This gets recorded along with the deed from the purchase.

    The second document is the promissory note. This outlines the terms of the loan: interest rate, term, payments, default terms, etc. This does not get recorded.

    If you've ever bought a house with a loan, you have copies of these docs. Dig through your records from the closing and you should find them. A title company or closing attorney may have boilerplate versions.

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  • Will BarnardPro Member
    Moderator
    Developer · Santa Clarita, CA · Member since 2008 · 15k+ posts · 10k+ votes
    13y

    To add what Jon stated, make sure this loan is fascilitated through a broker or attorney and make sure an attorney keeps the note within the legal limits of both the new Federal and your own state laws. Sounds like an owner occupant loan and with a 5 year balloon, could be in violation of new rules, though I am not an experts on them.

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  • Nate Gelinas
    OP
    Real Estate Agent · Las Vegas · Member since 2012 · 38 posts · 9 votes
    13y

    Thanks for the info gents.

    Will Barnard, I guess I did not specify, however I would not be personally occupying the property.

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  • Will BarnardPro Member
    Moderator
    Developer · Santa Clarita, CA · Member since 2008 · 15k+ posts · 10k+ votes
    13y

    I see, that helps tremendously!

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  • Joel OwensBusiness Member
    Moderator
    Real Estate Broker · Canton, GA · Member since 2010 · 15k+ posts · 11k+ votes
    13y

    Some states use title companies for closings.

    In Georgia title companies just perform and title search and insure title if it is required for a loan or the buyer wants it. The title search has to be performed by law here and is not optional.

    We use closing attorneys here to buy and sell properties which is different from many states. The title company is often owned by the real estate attorney or they are partnered up.

    In GA we have the warranty deed and then a security deed for the loan.

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