Home Buying in Kershaw>Question Details

Sheep51, Home Buyer in Kershaw, SC

My daughter and son-in-law owe me money that I loaned them to buy a house. Now they are going to buy a house for me with a portion of the money they

Asked by Sheep51, Kershaw, SC Mon Jun 21, 2010

owe me. Whose name should be on the deed and mortgage?

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Answers

4
Hello Sheep and thanks for your post.

So long as you are the owner of the home, your name (and your name alone) should be on the deed of the home. After all, the money being used to buy the home is actually YOUR money since it part of a loan made to the daughter. I am going to assume that the loan would not be fully discharged with the purchase of the home, so speaking as a former accountant, my suggestion would be to keep this situation as "clean" as you possibly can.

First, the loan between you and your daughter should be "memorialized" in writing in an informal promissory note. For example, "Daughter owes Mother $100,000, signed Daughter, dated June XXX, 2010."

Now, let's assume that the home you're purchasing is $75,000. If your daughter and son-in-law buy a $75,000 home for you, then you would acknowledge payment of $75,000 against the outstanding $100,000 promissory note. This means they still owe you $25,000, but now, their payment for the home is duly acknowledged. On the deed, however, you are the owner of the home--again, it is really your money being paid back to you that is supplying the funds for the loan.

The only problem occurs when the home is purchased by your children using a loan. In this case, the loan is taken out by the daughter and son-in-law AND the lender will want the bank and the children's names on the deed. If this is the case, then the payment you should acknowledge toward the daughter's loan should be just the downpayment for the home, and your name will also appear on the deed. Ownership can be split based on contributions toward the home purchase. For example, a home with a sales price of $100,000, in which your daughter and son-in-law put down $25,000 (part of the original $100,000 they owe you--using our example above) would result in a deed showing 25% ownership of the home in your name and 75 percent ownership of the home in your daughter and SIL's names. At the same time, you would show payment toward the daughter's debt of only $25,000 (the amount of the downpayment). The kids would be solely responsible for their mortgage, but would also retain their 75 percent ownership. In the meantime, however, they would still owe you for the remainder of the payments toward the original $100K loan made to them for their home. If you choose to pay the mortgage on the new home yourself, then their names should NOT be on the deed, but they would still owe you for the remainder of their $100K loan from you.

Finally, the one word of caution I can impart to you is that financial entanglements between family members are best avoided at all costs. Some of the most complicated and destructive financial battles occur within families over money, and, while the intentions at the beginning are good, most of the time decisions are made without legal or accounting assistance or counseling this becomes kindling for a family sized "bonfire" of complaints at a later date. If you and your family members choose to buy a house together, work with an attorney and accountant to discuss and protect your assets and the assets of your family, and to have, in place, contracts that will spell out precisely how the asset is to be treated in death or divorce (between the children), so that you do not inadvertently find yourself without payment of the original loan and without a home at the same time!

Good luck, and protect yourself first!

Sincerely,
Grace Morioka, SRES, Former Accountant, CID Manager/Consultant
Area Pro Realty
Santa Clara, CA
0 votes Thank Flag Link Tue Jun 22, 2010
Sheep there are a lot of variables involved. Talk to an attorney because there are a lot of senarios that could come into play and none of use have the information nor is there room here to put everything down that would be needed to make an intelligent recommendation. Let me give you one senario though.
______________________This is not legal advice_______________________________________
Sheep is in her 60's and need a place to live. Daughter is willing to buy a home for Sheep as a way to pay back a loan. Daughter is an only child or Sheep has made similar loans to other siblings. Sheep may not be in the best of health. Daughter purchases property in a LLC that she controls (not husband) and grants Sheep a life estate.

Solves a lot of potential problems depending on the situation.
0 votes Thank Flag Link Tue Jun 22, 2010
It's in everybody's best interest to consult with an attorney who specializes in real estate--he/she can best advise as it relates to your situation.
0 votes Thank Flag Link Mon Jun 21, 2010
This is something probably best determined between you and them. Are they purchasing the property out right or financing it?

Depending upon the circumstances, it may be helpful to consult an attorney for their input.

Good luck

Bill
0 votes Thank Flag Link Mon Jun 21, 2010
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