Denver, CO asked in Real Estate Law for Colorado

Q: Can I buy my mother out of a loan on her house and then have her act as the bank for the remainder of its value?

I want to buy a house from my mother but have her act as the bank so she can benefit from the interest/payments. She unfortunately borrowed on the house recently. Can I take out a mortgage to pay off what she owes and then have her act as the bank for the remainder of it’s value? Is this legal and if so how can we go about doing it?

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1 Lawyer Answer
John Roland Lund
John Roland Lund
  • Carbondale, CO
  • Licensed in Colorado

A: You should be able to make this work. You would end up holding title to the house with a "first" mortgage to the bank who loans you the money to pay off the current balance. And the transaction with your mother, where you borrow the rest of the money from her, would give her "second" or junior position.

This is complicated enough that you would want to have a lawyer write up the transaction between you and your mother, but I would start by finding a bank who is willing to provide you with the first mortgage. (Among other things, they will want to know where you are getting the rest of the finding/financing to complete the purchase.)

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