I purchased a home for my son for $166,000. Both of our names are on the deed. He would like to now mortgage the property to pay me back, but he has no real income to speak of. His home is now worth around $200K and he owes me $156K. Can he use the house for an asset based mortgage?

  • Who's name is on the mortgage? (My grandparents just loaned me the money -- thus becoming the mortgage holders -- when I bought my house.) – RonJohn Mar 18 '18 at 17:32
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    With no income, how will he pay the loan back? – JTP - Apologise to Monica Mar 18 '18 at 18:25

An asset based mortgage implies that the asset is some way will generate money. In the case of a house - it would be mortgage payments or lease payments

If he can qualify for a mortgage loan on his own, then yes he can. With "no real income" it's unlikely anyone will give him a mortgage though.

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  • Thanks for your replies. Currently there is no mortgage - I lent my son the money to buy the home. Both of our names are on the deed. He pays all the taxes and insurance. My son has income, he is an artists who sells his work, he has 2 roommates who pay him rent in cash, and one part time job (1099). So he has money to pay the mortgage, it's just not what a typical mortgage broker is looking for. Hence my question as to whether or not he can use the house as an asset. Thanks, – G Groovetoon Mar 19 '18 at 18:28
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    Any mortgage / loan will be secured by the asset so if he doesn't pay or falls into default they can take the house and sell it to get their money back. The issue is that unless he can show enough income to afford the loan payments, the lender will be concerned that they will have to immediately take and sell the house to cover their loan - this is an expensive and time consuming process, and they won't make the loan in this case – Prescott Mar 19 '18 at 20:38
  • Thanks Prescott - do you know of a lender that would give him an asset based mortgage with his house as an assett? He's in Philadelpha. – G Groovetoon Mar 20 '18 at 22:08

If you don't need the $156K right away, consider selling your son the house (i.e. getting your name off the title) with a mortgage of $156K (with you as the lender). He makes payments to you instead of a bank, and you might be willing to be a little more forgiving than a bank would be should your son hit a lean period when he cannot sell his work and has trouble making the mortgage payment. You get your $156K back in dibs and drabs rather than in a lump sum, and you have to report the interest component of the payments as income (and charge your son a fair rate of interest, else the difference between the rate you charge and the fair rate becomes a gift to your son) etc.

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  • Thank you - as much as I'd like to help him in that way - I'd also like to free up the funds in the event that my other son might need it. – G Groovetoon Mar 20 '18 at 22:08

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