Can I loan money as a mortgage?

[JudasJimmy]

A friend of mine is having a hard time getting a mortgage. She actually has been renting from me for 2yrs and never missed a payment. So I know she is good for it.

Question is, can I lend her money to buy a condo? has anyone done that before? I'd use prime rate which is about 3%. there is no investment right now that will return 3%, so I figured why not? if it’s legally possible. anyone know?

[Twin_Cam_Turbo]

Lending other people money is a baaaaaaad idea.

[JudasJimmy]

Originally posted by Twin_Cam_Turbo
Lending other people money is a baaaaaaad idea.

Agreed, but in this case, I would think that a lawyer would be involved with the same rules as a bank, miss too many payments, I foreclose, sell off and recover my investment. As apposed to lending a friend $1000 to go on vacation, you’ll never see that money again.

[max_boost]

It's not lending, it's giving.

[max_boost]

Originally posted by JudasJimmy

Agreed, but in this case, I would think that a lawyer would be involved with he same rules as a bank, miss too many payments, I foreclose, sell off and recover my investment. As apposed to lending a friend $1000 to go on vacation, you’ll never see that money again.

Yea if you want to go through all that, sure.

[JAYMEZ]

It wont work that way.. Gifts need to be from a direct relative with a signed gift letter showing that it does NOT need to be paid back.

[JudasJimmy]

Originally posted by JAYMEZ
It wont work that way.. Gifts need to be from a direct relative with a signed gift letter showing that it does NOT need to be paid back.

I'm going to lend her the entire purchase amount. There will be no bank involved. I will be doing the financing, from my own bank account. Cash on hand

[JAYMEZ]

Oh your going to be buying it for her completely ? No bank mortgage involved? Why does she not try to go to a B lender and not a normal bank. I would not advise giving anyone money for a house . Does she have poor credit?

[max_boost]

Have her keep renting. Give her cheaper rent?

Buying her a house, WTF are you crazy? Are you hitting it too?

[roopi]

The safest way to set this up would be a rent to own senario. You purchase the property under your name and collect a monthly rent/mortgage payment from her. She then builds equity in the home with part of the payment as interest.

This way you own the property until she has enough equity built up that she can qualify on her own and that point sell/transfer the ownership to her. If she starts missing payments you still have control.

Google how to set this up. Lots of information out there. Here is a basic guide but you can find much better links:

http://www.wikihow.com/Set-up-a-Rent-to-Own-Contract

[rob the knob]

why are lenders not giving her a mortgage?
bad credit history, low income?
you can handle more risk than bank?

Originally posted by JudasJimmy
A friend of mine is having a hard time getting a mortgage. She actually has been renting from me for 2yrs and never missed a payment. So I know she is good for it.

Question is, can I lend her money to buy a condo? has anyone done that before? I'd use prime rate which is about 3%. there is no investment right now that will return 3%, so I figured why not? if it’s legally possible. anyone know?

[colsankey]

Is she buying it, or are you?

Your OP seems to suggest you'll lend/give/loan the money to her, so she can make the purchase. Most mortgage brokers and lenders will want a snapshot of her bank account going back X months, we had to show the past 3.

Any deposits higher than $2000 were flagged and we had to explain to the agent, to her satisfaction what those deposits were. Some sort of anti money laundering laws in Canada.

All of ours were either payroll transactions with our companies names, or a transfer from our savings account, so we had to show the past 3 months history on that so they could cross reference the transaction numbers.

If you are buying it, she could assume it easily enough at some point. However you would still be on the hook for the mortgage under the current mortgage laws, even after transferring title if she defaulted.


I would suggest your best option is setup a rent to own as previously mentioned. You keep the title in your name and if there's a problem, you can sell or find new renters and continue to profit from the investment. If she is able to take over the mortgage at some time when her circumstances have improved, you're free and clear to move on.

[JudasJimmy]

Originally posted by rob the knob
why are lenders not giving her a mortgage?
bad credit history, low income?
you can handle more risk than bank?

She doesn't make enough to qualify for a $280k mortgage (2 bed). Even though she has 20% (or is able to get) down payment. The banks are totally stupid. They are giving up an easy 3% investment. SO why not if I take it? Renting doesn't return me an easy 3% with no obligation.

She does qualify for a $215,000 mortgage, which is a 1 bed condo, she then looses the "roommate" potential income.
I know she can make $1300 payments, she has been doing that for 2 yrs with no problem.

[ercchry]

co-sign, or rent to own... seems pretty straight forward

[badatusrnames]

Originally posted by JudasJimmy

She doesn't make enough to qualify for a $280k mortgage (2 bed). Even though she has 20% (or is able to get) down payment. The banks are totally stupid. They are giving up an easy 3% investment. SO why not if I take it? Renting doesn't return me an easy 3% with no obligation.

She does qualify for a $215,000 mortgage, which is a 1 bed condo, she then looses the "roommate" potential income.
I know she can make $1300 payments, she has been doing that for 2 yrs with no problem.

Banks aren't stupid, there's a reason they won't lend to her.

But anyways, don't.

[Weapon_R]

Yes, you can lend her money and secure it on title with a private mortgage. It happens all the time and as long as you are aware that your only remedy is recovering the property itself (unless your loan is insured), you'll be fine.

I'd certainly look at a higher interest rate though. Lending at around prime should be reserved for those with better qualifications.

That said, if you don't know how this process works, it's not for you. Foreclosing on a property is a very expensive and lengthy procedure. If you can't make 3% on a $280k investment, you are too far out to lunch to try making money this way.

[flipstah]

YOU buy the house; she rents through you; bang for +1.

win-win.

I wish I had friends as nice as you.

[project240]

I'd agreed with either the rent to own scenario or write up some sort of contract where if she doesn't miss any payments for 5 years (or whatever length you want) then she can buy it from you at purchase price less all the payments she has made towards the principal.

Very nice of you to consider buying for her, but I would personally take more precautions regardless of who it is at 280K is a fair amount of money...

[el-nino]

CMHC has a non-traditonal down payment product.

Down Payment Requirements — Traditional sources of down payment include: Applicant's savings, RRSP withdrawal, funds borrowed against proven assets, sweat equity (<50% of min.required equity), land unencumbered, proceeds from sale of another property, non-repayable gift from immediate relative, equity grant (non-repayable grant from federal, provincial or municipal agency).

Non-traditional sources of down payment include: Any source that is arm's length to and not tied to the purchase or sale of the property, such as borrowed funds, gifts, 100% sweat equity, lender cash back incentives.

Note the Borrowed funds...
If you want to lend her the money or give her the down payment you are more then welcome too - As long as she falls within TDS/GDS Guidelines it is possible to gift/giver as little as 5%...

I know this is not the scenario you are choosing BUT it is still an option for her.

[cgyITguy]

This is the worst idea I have ever heard of. When she stops banging you OP, you will feel like a moron