This morning I’m kicking around an interesting idea in my head. It involves nontraditional financing for a new house and a way to control who gets my hard-earned interest money.
Preface: I’m looking into buying a house. I know I could qualify for a loan at great rates since I have a good job and savings and a top-tier credit score. So I’m looking for a starter house, something around or about $100,000. While it’s less portable than renting, the monthly payments are comparable and I would be building equity, not throwing my money away on rent.
With traditional mortgages, the interest I pay goes to the bank. It’s the bank’s risk and the bank’s profit. Fair enough. But wouldn’t it be great if I could let people or businesses of my choosing make that money instead? That’s where my idea comes in. Why not sell portions of my mortgage to my friends and family who want to invest instead of going through a traditional bank? I’d feel good about giving my interest payments to investors I personally know, and they’d have the peace of mind of a long personal history with their investment.
For the family who want a piece of my new house, this becomes an investment that pays better than a savings account or CD. The going rate for a 30-year fixed mortgage is currently about 4.25%. Not a bad deal, huh? In fact, I may be interested in investing in my own mortgage!
I’m sure there are mortgage companies willing to administer the deal. Plus, we even have a lawyer or two in the family to draw up the contracts. That person would make the standard closing fees for services rendered, of course. Also, from what I’ve been reading, it may be possible to use an IRA to invest in my mortgage. Cool!
So, how about it? Anyone want a piece of me? (Or my new house?)