Deal Structuring Questions
My parents own a home valued at $700k, with no mortgage. I want them to buy a rental near my college because there is a housing shortage, high rents, and the city is very tough on new developments. Approx. value of homes here are $500k.
So what are some options for them to buy a new home here?
Here are some ideas I had, tell me where I am wrong:
(1) Take a home equity loan against the house and use that money as a down payment, then finance the rest conventionally?
(2) Pay off (via home equity loan) the equity the seller has built up, and assume the existing loan. This seems like the best for both of us, because they get what they want, CASH for their EQUITY, and I get what I want, a low-payment mortgage plus a slightly higher payment for the home equity loan.
(3) Pay off some of the equity (as a down payment), like above, then have seller finance the remaning balance.
Any suggestions/help/critiques would be great. Thanks alot.
[ Edited by ckoenig on Date 04/14/2004 ]
Any of the suggestions will work.
What do your parents think of the free & clear home? Do they mind the risk of taking out a mortgage/HELOC?
I am assuming they will create a lien on the new property so that it is clear you owe them the money. Cleaner if something happens later and an outsider needs to figure out how to settle things.
Can you qualify for a loan on your own (any amount)?
Option 2 might be the front runner but there is a lack of detail to really tell.
BTW - What do your parents get out of this? Maybe they should be thinking of estate planning and making gifts to you from their estate. Professional advice would be best if that is the case.
John
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