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Floyd County, Iowa | You're talking about a contract-for-deed. It's the same thing as an outright sale, except your dad is holding the mortgage. Would be perfectly legit as long as you do the fair market value on the land and use an interest rate comparable to local lending institutions and both parties adhere to the contract terms (this is to keep the "gifting" thing at bay). You will have an amortization schedule, same as if the bank held the mortgage. You can set it up for a full 30 year mortgage, or you can set it up for 10 year mortgage with balloon payment, or anything in between, whatever you and dad agree on.
If something were to happen to your dad, the nursing home or other creditors (if it ever got to that) would be able to garnish the payments you make, but could not foreclose on the farm unless you default. There would be some clause in the contract about where money for payments is held in case of dad's demise until the contract is fulfilled, but your attorney will be able to spell all that out in the contract. If something were to happen, it would probably be advantageous to just pay it off and be done with it, if you're in a financial position to do so at the time.
Also, if you do a contract for deed, make sure there is and early payoff clause, just in case you would want to pay it off without penalty.
my 2 cents | |
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Rock in a Hard Place: Suggestions Please!!
