[patricia frank]

What are the advantages and disadvantages of holding a mortgage for a home buyer? The buyer is my daughter and son-in-law. Can they mortgage half the price and I hold the mortgage for the other half? What are the advantages and disadvantages to me? What are the advantages and disadvantages to them?

[excon]

Hello patricia:

The advantages to you are that you earn a high interest rate on your money that is secured by real estate. The downside is, you may have to foreclose.

The advantages to your children are they can get financed if they're not especially creditworthy or long in cash. The downside to them, is that their parents will have to foreclose on them if they don't pay. That's going to cause MORE problems than if a bank did it.

However, if they have enough equity (or cash) to finance HALF the cost of a house, they could get their OWN financing, and leave you out of it. If I were them, that's what I would do - for sure.

excon

PS> Ahhh, I see that you're talking about holding a 2nd mortgage. Nothing changes, though, in my advice.

[ScottGem]

The advantages to you depend on a) the interest rate they will pay b) your need for the cash c) your relationship with your daughter and her husband and d) the local economic climate.

There are really very few advantages to you. The greater advantages are to them. But if you don't need the cash from the sale, and you trust their ability to pay and you want to help them out towards home ownership, then it may work for you.