We're looking at buying a second-hand house for own use. I'm thinking of financing half the cost and using some savings to pay for the other half. Is it better to

A. Pay the entire cost using cash up front, with parents help and then get a home loan afterwards to pay back parents, or
B. Don't get parents financially involved and arrange the loan at the same time

I realize option A is probably more hassle free initially when dealing with the seller. But I'm wary if taking option A may complicate the process of getting a home loan later on.

Would appreciate if any brokers or couples with similar experience can share their thoughts, what are the pros and cons of the options.

Thanks!

go for A and pay back parent with lower interest, assuming they don need the money now.

if ur parents are financially ok, i think better option is get the loan from your parents; besides better interest - you save the hassle dealing with the banks, which are money suckers....and the banks can possibly be the one that slow down the purchase of home

if you cut out the bank, you can also save on the loan agreement fee...unless ur parents want to have a loan agreement with you

This post has been edited by leongal: Feb 28 2010, 12:09 PM

do it the hard way...choose B.....if everything can come hassle free, one wont learn to stand on own feet

Using parents money is meant to be a temporary only because parents aren't a bank for me. So it appears that paying the loan agreement fee is inevitable.

However, I wonder if I still have to incur property valuation costs if (under Option B), I already hold the title and the loan amount is only 50% of the price paid for the property. Any thoughts?

how do u hold the tittle without buying the house yet?
yes, u have to do valuation still.

What I meant is to get the title by paying off the seller with cash first.

If you and your parents have enough cash to buy the property without any loan, you may be able to get a lower price from the seller depending on how you negotiate. Some sellers would prefer getting the full amount earlier and you might be able to knock a few thousand off the price.

There's no reason this will complicate things when you apply for a loan later. You just might raise some questions with IRB though, but if you're able to justify where the money came from then no problem.

You can contact me for any further info.

Regards,
Roy
teoengchin@gmail.com

mortgagebroker.com.my

Option A will be good if u can have documents support for your money paid, otherwise be prepare to answer to IRD once they query u for the source of income, that will include you n your parents.

This post has been edited by Tohsan: Feb 28 2010, 02:14 PM

Roy, thanks for the insight about price negotiations. I'll bear that in mind when talking to the seller.

if you're looking for loan, i can help you for it. I'm from AIA SHD BHD. AIA is offering a very good housing loan. Pm me if you're interested. I can share with you more in details.