What is a Family Mortgage?
A family mortgage is a home loan set up between family members. Parents might help children buy or refinance, or a more distant relative can lend a hand. Ideally family mortgages are win-win solutions for everybody.
This page focuses on Virgin Money’s Family Mortgage offering.
Documentation
To formalize your family mortgage, Virgin Money provides loan agreements (along with miscellaneous riders - if the property is a condo, for example). They also provide documents to secure the loan. A secured family mortgage may help borrowers with income tax deductions, and they help protect lenders in case the borrower defaults, dies, or is sued.
Family Mortgage Packages
Virgin Money offers several "packages" for your family mortgage:
- Basic - legal documents needed for a proper family mortgage
- Full Servicing - documents, plus payment processing and optional credit reporting
- Full Closing - Full Servicing, plus closing and title work
Cost
The cost depends on which Family Mortgage package you choose. You can always ask local attorneys what they’d charge to document a family mortgage and make an informed decision. The Basic package is least expensive, and cost goes up from there.
If Virgin Money services your family mortgage, you pay a fee with each payment. Minimize these fees by paying less often than monthly: quarterly or semiannually, for example.
You can also cancel some services if you find that you no longer need them.
Family Mortgage Logistics
To set up your family mortgage with Virgin Money, contact them directly. Provide details about how you want to design the loan. You can be creative with your family mortgage, but be sure to follow tax laws and local rules.
Once you apply and pay Virgin Money, they send documents to the lender for approval. The borrower signs the documents (with a notary) and forwards them to Virgin Money. Virgin Money then sets up bank account links and files your family mortgage documents with local government offices. .
Refinancing With a Family Mortgage
If you refinance an existing mortgage with a family mortgage, you’ll need to pay off the old mortgage somehow. First, pick a closing date and ask your current lender how to pay off the mortgage by that date (sometimes called a 'payoff letter')
The new (family) lender sends funds to the old lender, and the old lender releases any liens on the property.
Tax Reporting
Virgin Money provides tax information about your family mortgage. They do not send an official tax form, but you get a “statement” that you can forward to your accountant.
