How to Buy a House in California by Ira Serkes && Ilona Bray J.D

Author:Ira Serkes && Ilona Bray, J.D.
Language: eng
Format: epub
Publisher: Nolo

Responding to a Proposed Lender’s Questions and Concerns

First, and most important, if you plan to approach a relative who doesn’t have much business savvy, consider whether the loan makes sense for that person. For example, if Aunt Muriel’s health is such that she might need most of her money in the next few years, don’t borrow from her, even if she’ll lend it. She’s better off having access to her money, even at a lower interest rate.

Often, friends or relatives will be concerned about what happens to their investment should you become ill or disabled and unable to pay them back, or if you (or another breadwinner) die. The lender fears being caught needing the mortgage repaid and having to foreclose on a distressed family member or friend to get it.

One way to allay this concern is to purchase both life and disability insurance on yourself and any cobuyer, and to keep the insurance in force until the loan is repaid. With a life insurance policy, you’d make the friend or relative the beneficiary.

A good disability policy is expensive, but worth it. Make sure your policy pays at least 60% (more is better) of what you would have received had you been able to work.

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