Friend is holding a mortgage for us & wants to be on the house papers..
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Friend is holding a mortgage for us & wants to be on the house papers..
A friend is paying $86,000 cash for a house & we are putting $15,000 down house will be paid off in 5 years with 10% interst.Realtor says it should be drawn up as our friend being the bank/holding the mortgage & we are on the house only. Our friends wants to be on the house too but the realtor says gives friend too much control. Friends says if something happens, he wouldnt have to go thru a forecloser but he would have our 15000, 20,000 equity already once we buy the house begin a foreclosure & being a contractor, all the upgrades would give it more equity. How should it be drawn up FAIRLY..
Asked on May 16, 2009 under Real Estate Law, Florida
Answers:
J.M.A., Member in Good Standing of the Connecticut Bar / FreeAdvice Contributing Attorney
Answered 14 years ago | Contributor
Unfortunately, there are not a lot of options. You could set up an limited liability company (LLC) to own the property where you are all members, giving your friend a small interest in the LLC (i.e. he gets a small pecentage of the proceeds of any sale in exchange for a reduced interest rate of 5%). The LLC takes title to the house and you continue to pay off your friend. once the house is paid for in full, the friend releases the mortgage from the property. Because your friend will have minority interest in the company he will not be able to make decisions to out vote you. he can however, foreclose on the property should you fail to pay him. It is sort of a compromise... but I would try to avoid the friend from being an owner at any level as there is no need since he will have a mortgage on the property securing his interest.
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