Lien On A Property
I am planning on lending money to a relative since they are behind in their monthly mortgage payments. I want to ensure that once the house is sold, any I would get back the money that they borrowed from me. I have been told in Florida that I could have a written agreement and have it notorized with them such as a "private mortgage lien". Can anyone help me find with this? I can't find any forms on line. :-o
You can write up a document that secures credit in the amount of $10,000 or so but only allows draws of up to $1500/mo or such. This note is secured by a mortgage, which is filed at the county.
I would pay an attorney $100-150 to draw up the document and make your relative pay it for you helping him out.
GOOD LUCK
I think, in principle, loaning money to one's relatives is almost always bad business, as it inevitably leads to tension, stress, breaking up the family.
But if you do, I'd recommend your getting the deed, and giving them back an option to buy the RE back in a certain time, at a certain price...also they'd give you a written rental agreement and pay rent while they were in the house and prior to their purchase.
And absolutely have your lawyer draw this up so you're protected to the max.
Anything less than these formal procedures is just begging for trouble.
Good luck.
John Merchant
Oh, yes, and have your LLC make the loan, and tell them your partners actually run the LLC and make all the decisions.
This way, no matter how tough you might have to be in the future, you can blame it on your "partners' and you don't come out the bad Scrooge.
Your lawyer can write any checks, and look like he's the managing member of the LLC, so they'll never know it's all your decisions.
Patriciaann,
Your Uncle bailed you out. He paid your back payments, or he bought the house? I am assuming he bought the house. Is there a current mortgage that you or he is paying? He could possibly move it into a trust or an LLC. Or you could just leave it titled in his name. I guess my biggest concern is that the transfer fee is a problem, and you were in foreclosure. That means it is possible you could lose it again in another foreclosure, or tax sale. If that happened, then his trouble and expense would be for nothing. If he stays on title, he at least has the equity.
without looking it up, I think transfers are exempt between spouses, parents, children, grandparents, siblings. uncles are one step too far. the tax is 1% for the buyer and 1% for the seller. they take your assessed value and use what they call the common level ratio to determine the tax amount.
I guess I'm confused as to what happened. it was your home and you went into foreclosure. your uncle purchased your home and had it remortgaged. now he wants to give it back to you and you will pick up the payments although the loan will naturally remain in his name. do I have that right?
Patricia,
I believe that in PA the transfer tax exemption for family applies only to transfers between parents and children or between siblings. Uncles, aunts, cousins don't qualify. I don't know if this is possible in your situation, but there's also an exemption where a change is being made in joint tenants without a sale (eg, transfers between spouses). You would need to find out if, for instance, your uncle could transfer the property to you and him as joint tenants, and then you and he could transfer the property to you without having to pay transfer tax.
Good point Nancy. Patricia, I hope you don't consider my questions too prying. I just hate the idea of you getting back into the situation you were in before, and I hate even more the idea of your Uncle losing his money.
Sorry about all the crazy web addresses. I don't know why my replys are showing with them.
to do the joint tenancy, 1/2 the taxes are owed - his 1/2 transfer to himself is exempt - his 1/2 transfer to you is taxable. there is also a look back period (not sure what it is but I think 1 year) so he can't run it through your parents and then to you to avoid the taxes
Patricia,
Check with a tax advisor, but if there is no profit on the sale, there should not be a capital gain. The other issue is that if you just recently avoided foreclosure, and you want to refi it so his name is not on the mortgage, you are looking at a subprime loan at best. That carries with it high points, high interest, and usually a prepayment penalty, and is usually an adjustable rate mortgage. You will want to know what the lifetime cap is, and what your monthly payments are if your taxes and insurance increase and the ARM is at the cap. If you cannot comfortably afford that payment, you need to seek other options.
The other thing is that you will want to make sure you have a commitment letter before you transfer ownership. Having this property as a "income property" may actually help your Uncle. Having a mortgage obligation without ownership could hurt him.
[ Edited by bnorton on Date 09/19/2004 ][ Edited by bnorton on Date 09/19/2004 ]