How can I buy brother's house...owner financing? He still owes the bank..

Why don't you just get a mortgage and buy it from him outright? That seems easiest....

Can't get a mortgage.

You can ask the lender if the note on the property is assumable. In that case, a buyer can take over the payments You may also do what is called a
"wrap around" mortgage or "all inclusive" loan.In this case, ownership of the property transfers to the buyer but the loan remains the loan agreement may have an "acceleration clause which would make the loan all due and payable upon transfer of property

thanks for the info....it got me goggling and i found "subject-to" deals...apparently the title goes into the buyers name and the seller is still responsible for the loan. seems like the odds of the bank calling the loan are remotely small....right?

"RENT with an option to BUY" The odds of the present mortgage being assumable, are infinitesimal. If you draw up a contract as above, the bank will most likely call it immediately.

So with a "rent with an option to buy", you occupy the house as a renter, and pay your brother RENT. You have a contract written up that a certain portion of that rent, goes towards the future OPTION to buy the house. Portion can be anything up to the total amount of the rent. Just be careful not to make it look like an immediate sale. Which if your brother follows-through and continues to pay the bank, pays off some principal and lowers the future balance you will need to pay him.

The bank doesn't see an ownership transfer right away (there is none effectively), and doesn't call the loan due immediately. You are more or less buying the house in the future, after it's paid off.

Now, you HAVE to trust your brother doesn't encumber the house with a second mortgage or use it for collateral on something. You also trust he continues to pay the mortgage as regular, and doesn't pocket the money. If you do this, make SURE you get it in a legally enforceable contract! Both you and your brother have financial exposure to each other, and that can be hard between family members.

Quote from MikeBear : "RENT with an option to BUY" The odds of the present mortgage being assumable, are infinitesimal. If you draw up a contract as above, the bank will most likely call it immediately. So with a "rent with an option to buy", you occupy the house as a renter, and pay your brother RENT. You have a contract written up that a certain portion of that rent, goes towards the future OPTION to buy the house. Portion can be anything up to the total amount of the rent. Just be careful not to make it look like an immediate sale. Which if your brother follows-through and continues to pay the bank, pays off some principal and lowers the future balance you will need to pay him. The bank doesn't see an ownership transfer right away (there is none effectively), and doesn't call the loan due immediately. You are more or less buying the house in the future, after it's paid off. Now, you HAVE to trust your brother doesn't encumber the house with a second mortgage or use it for collateral on something. You also trust he continues to pay the mortgage as regular, and doesn't pocket the money. If you do this, make SURE you get it in a legally enforceable contract! Both you and your brother have financial exposure to each other, and that can be hard between family members.

Essentially what you're wanting to do is rent to buy while subletting to yet another renter.

Another option could be to rent from him for a few years, then find another renter and, when you have the money, buy it from him, either in cash or via mortgage. You might be able to get a mortgage in a few years.

Quote from MikeBear : "RENT with an option to BUY" The odds of the present mortgage being assumable, are infinitesimal. If you draw up a contract as above, the bank will most likely call it immediately. So with a "rent with an option to buy", you occupy the house as a renter, and pay your brother RENT. You have a contract written up that a certain portion of that rent, goes towards the future OPTION to buy the house. Portion can be anything up to the total amount of the rent. Just be careful not to make it look like an immediate sale. Which if your brother follows-through and continues to pay the bank, pays off some principal and lowers the future balance you will need to pay him. The bank doesn't see an ownership transfer right away (there is none effectively), and doesn't call the loan due immediately. You are more or less buying the house in the future, after it's paid off. Now, you HAVE to trust your brother doesn't encumber the house with a second mortgage or use it for collateral on something. You also trust he continues to pay the mortgage as regular, and doesn't pocket the money. If you do this, make SURE you get it in a legally enforceable contract! Both you and your brother have financial exposure to each other, and that can be hard between family members.

Ok. Thanks this make sense. So if we have a legal contract that says 100% of my rent goes toward the future option to buy the house, than in say 5 years I can exercise my option to buy the house for say $20k or what ever is left on the loan?

I was also going to give him $2k down. You said don't make it look like an immediate sale...so does that mean I should avoid doing this?

Also, you said that if he pays extra money against the principal, than I will owe him. Is this because we have a set purchase price in the contract between him and me?

What benifit is there to him by doing 100% towards payments. He gets his mortage paid (for now) but has to incure maintenance costs on the house. If his mortgage is 500/month you should pay at least 700.

Quote from nizzy1115 : What benifit is there to him by doing 100% towards payments. He gets his mortage paid (for now) but has to incure maintenance costs on the house. If his mortgage is 500/month you should pay at least 700.

I will be paying him $550/month which covers the payment and property tax. I will also pay for all maintenance out of my pocket.

I think it's always a mistake to do any kind of business with relatives or close friends. If you do, get everything, the smallest detail, written down and go through a lawyer. Anything that involves money is bound to end badly if you don't use a professional - and even then it's risky.

Quote from eddiehaskell : I will be paying him $550/month which covers the payment and property tax. I will also pay for all maintenance out of my pocket.

Still seems like a crappy deal for him. Hes sitting on that pile of debt with nothing coming of it.

Quote from nizzy1115 : Still seems like a crappy deal for him. Hes sitting on that pile of debt with nothing coming of it.

He has had some bad experiences with renters not paying, moving out after a year or two (losing a month or two of rent until new renters are found) and renters damaging the property/bringing in pets. He has his primary residence mortgage to pay so he wants to know he'll have the money on time every month without having to fix anything. Selling it to me alleviates all these problems...with the full backing of mom and dad kicking both our butts if there are any problems.

Quote from eddiehaskell : He has had some bad experiences with renters not paying, moving out after a year or two (losing a month or two of rent until new renters are found) and renters damaging the property/bringing in pets. He has his primary residence mortgage to pay so he wants to know he'll have the money on time every month without having to fix anything. Selling it to me alleviates all these problems...with the full backing of mom and dad kicking both our butts if there are any problems.

Whatever you do, get the contract written by an attorney, so it's done right, and you won't have any issues with the bank. If you put money down, and if 100% of your "rent" goes towards the payments, the bank may see it as a sale and call the loan. Then you'd have to lie to say it isn't, when it basically really is. So, don't wake them up with stuff too obvious.

I didn't mention anything about 'extra" principal payments, I was just saying make SURE he continues to make at least his REGULAR payments. Some people in this same situation didn't, and instead pocketed the money. Then the poor sap doing the "rent to own" got a nasty surprise at the end of it.