Friend is holding a mortgage for us & wants to be on the house papers..

UPDATED: May 16, 2009

Advertiser Disclosure

It’s all about you. We want to help you make the right legal decisions.

We strive to help you make confident insurance and legal decisions. Finding trusted and reliable insurance quotes and legal advice should be easy. This doesn’t influence our content. Our opinions are our own.

UPDATED: May 16, 2009Fact Checked

Get Legal Help Today

Compare Quotes From Top Companies and Save

secured lock Secured with SHA-256 Encryption

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


J.M.A., Member in Good Standing of the Connecticut Bar / FreeAdvice Contributing Attorney

Answered 13 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.

IMPORTANT NOTICE: The Answer(s) provided above are for general information only. The attorney providing the answer was not serving as the attorney for the person submitting the question or in any attorney-client relationship with such person. Laws may vary from state to state, and sometimes change. Tiny variations in the facts, or a fact not set forth in a question, often can change a legal outcome or an attorney's conclusion. Although has verified the attorney was admitted to practice law in at least one jurisdiction, he or she may not be authorized to practice law in the jurisdiction referred to in the question, nor is he or she necessarily experienced in the area of the law involved. Unlike the information in the Answer(s) above, upon which you should NOT rely, for personal advice you can rely upon we suggest you retain an attorney to represent you.

Get Legal Help Today

Find the right lawyer for your legal issue.

secured lock Secured with SHA-256 Encryption