Should You Borrow Money from Friends and Family to Buy a House?

Should You Borrow Money from Friends and Family to Buy a House?

With the average contract interest rate for a 30-year fixed-rate mortgage decreasing to 4.47% and the average contract interest rate for a 15-year fixed-rate mortgages decreasing to 3.96%, it is a great time to consider buying a house. In 1963 the national average contract mortgage interest rate was just under 6% and climbed to 15.37% in January of 1982. Since 1982, rates have been slowly descending to what is now an incredible national average contract mortgage rate that makes it really tempting to buy a house, but a down payment is still needed to buy a house and the amount depends on your credit.

Borrowing money from friends and family can really turn ugly if you can’t repay the money. Many people have been happy in their careers and making money only to find out that they are unexpectedly out of a job the following month. Borrowing money from friends and family is a huge risk, but if you are willing to take that risk, some simple rules should be taken into consideration.

If you have a friend that is in the position to loan your money to help your buy a house, you should draw up a contract with the amount that you will be borrowing and the amount your will be repaying them each month for your to buy your house.

Always make your payment on time. It is very important that you make your payments on time with the friends or family that your are borrowing money from. It is easy to say, can you wait another week, money is tight this month. You will only lose trust with that statement.

If you are borrowing money from a friend or family to buy a house, keep it all business. If you are out to dinner with them and offer to pay, don’t say I will put this towards the money I owe you, this will just cause confusion. Either go dutch or pay for their dinner and keep your loan business and send them the proper amount your owe them.

If you are borrowing money from a friend or family to buy a house, give them some type of collateral in the contract. If you own a car, you may want to put that down as collateral or some other item that you have that is of value.

When it comes to borrowing money from friends and family to buy a house, only do it if you definitely know you can repay the money each month or a friendship and family member might go sour.

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