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By FindLaw Staff | Reviewed by Chris Meyers, Esq. | Last updated November 28, 2022
More people are turning to loved ones to secure loans for the purchase of a new home. Everyone legally has the option to borrow from family or friends if both parties are willing. If you handle loaning money correctly, everyone can end up winning.

These loans are often referred to as private home loans, a personal loan or an intra-family loan. They are not as uncommon as you might imagine. They are almost the same as a mortgage that you could get from the bank or another traditional lender in many respects.
The process can be flexible to you and your friend or family member’s (called a private lender below) needs. As an example, let’s say you have a private loan for $50,000 for a home. Just like with more traditional loans and mortgages, you will probably have to agree to:
Like with a bank, you would also have rights against the private lender as well. When borrowing from family or friends, your lender could not ask for full payment without just cause (not if, for example, you missed your grandmother’s 80th birthday).
There are several benefits that you may get by opting for a private loan that you may never get by going to a bank. You may be able to get the loan you need at a lower interest rate than you could have received from a bank. In turn, the people you borrow from may be able to get an interest rate better than even the best savings account can offer.
In addition to benefiting the borrower, a private loan also bestows benefits to the private lender. These benefits could include things like:
If you have come to an agreement with a friend, family, or loved one to have them finance all or a portion of your home loan, you should treat it just as a bank would. To this end, you should draw up the necessary paperwork, such as a promissory note and various documents that go along with a mortgage. Also, you may want to think about putting down a proposed repayment schedule in writing.
Just like with a traditional loan agreement, if you run into problems in paying off the loan, you should be sure to contact your private lender as soon as possible. Because your lender will be family or a friend, you may be able to work out a solution, such as forgiving some payments on the loan. It would be best if you tried not to take advantage of this in excess, however, as it may place significant strain upon the relationship between you and your lender.
Buying a home is the biggest transaction you will likely make in your lifetime, and while it’s considered a "good" form of debt, it’s still a huge commitment. You may encounter multiple legal issues when closing on a home sale or securing financial resources, even if you’re able to procure home loans from friends and family. Consider speaking with a real estate attorney to make sure your private loan terms protect your interests.
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Meeting with a lawyer can help you understand your options and how to best protect your rights. Visit our attorney directory to find a lawyer near you who can help.
Contact a real estate attorney to help you navigate mortgages or home equity loans.
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