You’ve been asked to loan money to a friend or family member. While this may not be a bad idea, it would be wise to obtain security over the loan. The most common form of security is a mortgage over real estate.
The legal term for this is a mortgage. You may already have a mortgage over your home when you borrowed money from the bank.
‘A mortgage in itself is not a debt, it is the lender’s security for a debt’. Wikipedia
Your decision to obtain security over your loan may well depend on the amount of money involved in the transaction combined with your anticipated risk of not getting paid back.
The mortgage will give you the right to sell the real estate if the loan is not repaid. If you do not have a mortgage or any other security and things turn sour you may not get any of your money back at all. It is always good business (even with family) to ensure that you have a backup plan if things do not turn out for the best. Having a mortgage in place at the beginning of the transaction will ensure that you have a far better chance of recovering your money.
Don’t regret the day you agreed to lend a friend or family member money. Take the time to protect yourself against unforeseen circumstances. Put a legal document in place, have the terms of your agreement documented and give yourself the confidence of a documented agreement.
Would you benefit from talking to Patrick Sheridan for 10 minutes to resolve your most immediate questions? Patrick will review your situation and give you the practical advice you need right now.
The answer will help determine the best course of action for you, your family and your future.
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