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Private family home loan vs bank loan

Home Mortgages and Home Buying Private family home loan vs bank loan

  • Avatar ElephanHat 
    Participant
    Status: Other Professional, Spouse
    Posts: 9
    Joined: 07/25/2017
    Splash Refinancing Bonus

    Yes, that’s correct.

    #218784 Reply
    ENT Doc ENT Doc 
    Participant
    Status: Physician
    Posts: 3502
    Joined: 01/14/2017

    Yes, that’s correct.

    Click to expand…

    See attached.  The cost of capital is your alternative investment – what you are sacrificing by paying refi costs or that which you would invest in with additional cash flows post-refi.  Green cells can be changed.  Blue highlights the value of your refi decision in present value terms.  As the spreadsheet has it currently, you get the threat of a forced change in lenders out of your hair for under $600.  Who knows what rates will be if that happens.  If you can’t beat 4% with a doctors loan (ok with <20% equity) then something is dreadfully wrong.  Rates are very low right now.  Point is, you might just be able to ditch the MIL for free!  Only time I’ll use that 4 letter word.

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    #218788 Reply
    Avatar hightower 
    Participant
    Status: Physician
    Posts: 1485
    Joined: 12/07/2016

    Definitely refinance.  Even if you need to sell in 3 years, it’s better to owe money to a bank in the form of a mortgage, then it is to owe money to your family.  Why?  Because if the housing market crashes and you can’t sell that house for what you paid for it, you can just walk away from a mortgage with very little consequence (other than ruined credit for 7 years).  You can’t do that to your MIL.  Plus, the interest you pay on a mortgage is tax deductible (if you’re able to itemize).

    FWIW, I have no problem with you borrowing from family if the money is there and they are willing.  It can be a perfectly fine situation if you have a good relationship and the means to do it.

    #218796 Reply

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