Family Helping Family
(our son buys our house)

Dateline: 29 May 2014

This is the rural farmhouse my parents moved to from the suburbs of Syracuse, NY when I was 15 years old.  The outside of the house still looks pretty much just like it did 40 years ago. The yellow arrow shows my bedroom. With no central heating, it was the coldest room in the house during the winter. Snow flakes would often drift in around that window during a bad storm. It would get so cold that a glass of water in the room once froze overnight. I kid you not.

I’ve told the story (in My Book) of how I was totally opposed to going to the bank for a loan to build my first house back in the early 1980s and, instead, was able to get a $10,000 loan from Jay Myers, my father-in-law. That relatively small amount was enough to get Marlene and I off to a good start. We built the house ourselves, repaid the loan in full, have added on a couple of times, never had a bank mortgage, and still live in the house. 

Were I to do it over again, I would do the exact same thing. And, frankly, I wish I could do it all over again because, though it was a lot of hard work, it is a downright good feeling to live in a debt-free home that you built yourself. Be it ever so humble...

For most of our married life, Marlene and I struggled to keep the bills paid. She stopped working when our first son was born (26 years ago) to focus on being a full-time mother. I made relatively little working as a carpenter and home remodeler. I never thought during those years of raising our family on my one income that I would ever (short of receiving some sort of inheritance) be in a position to help my children financially, like my father-in-law was able to help Marlene and I.

But then I wrote that Whizbang chicken plucker plan book. One thing led to another, and God blessed me with a successful Planet Whizbang home business. It was our low-expense, debt-free lifestyle and the success of the home business that has now allowed Marlene and I to do for one of our children much the same thing Marlene's father once did for us...

Yesterday, we sold my boyhood home to our middle son, Robert. We will hold the mortgage. No banks or bank loans are involved.

We bought the property in July 2010 because my step-father was seriously sick and had to go into the Medicare system. His only financial asset was a paid-off house and he was going to have to sell it. If we purchased it, he would be able to continue to live in his home when he wasn’t in the hospital or at a rehab center. It seemed like the right thing to do.

Our thought was that, after my step-father died, we would sell the place and be done with it. But Robert expressed an interest in buying it from us. The property is only three miles from our house. If Robert bought it, he would be nearby. If Robert got married and had children, they would be nearby. It is my hope that all my sons and all my grandchildren can continue to live nearby, so we can continue to be a close family and be around to help each other. That is, after all, what family is all about. 

After six months of waiting for a survey to get done and for a Medicare-related lien release technicality to get settled, we signed the papers yesterday. Marlene and I will hold the mortgage. Robert will pay us monthly for the next 12 years. The monthly payment is comparable to what it would cost to rent an inexpensive apartment in town. If he makes his payments as per the agreement, he will have a debt-free home on 25 acres when he is 35 years old. Sooner if he wants to pay ahead.

Our intention was to sell the property for no more than we paid for it (which was somewhat less than the market value in 2010) and to not charge any interest. But it turns out that you can’t have a no-interest mortgage. The government has rules against that. And they set a minimum interest rate (currently 3.5%) that must be charged. This is what my attorney told me. He should know, right?

So how do parents who don’t want to charge their son interest get around that? Well, in our case, we lowered the selling price. In the end, the principle and interest my son pays will equal the amount we would have sold the place for if we were able to have a no-interest mortgage. The only downside to the scheme is that I will have to pay income taxes on the interest he pays me. In the final analysis, I will lose money on this deal, but that is really beside the point. 

Is it a good idea for a parent to help their children to purchase their first home? I’ve asked myself that question. I determined years ago that I would not help my three sons buy their first car, and I didn’t (my parents didn’t buy me any of my cars). Each of our three boys worked and saved to buy their first cars. Two of them have continued to save and pay only cash for their vehicles. I will admit, I paid their auto insurance until they were 21 years old.

I think, however, that a house is different. I think it is harder these days for a young person to be able to build or buy a first home than it was in the early 1980s, when Marlene and I were dreaming of our first home. So, as we are able, we’re inclined to help. We’re not giving the house to our son. We’re helping him. There is a big difference. 

Besides that, as the pictures show, this house is not exactly a high class place. It’s a fixer-upper. A lot of sweat equity will be required. But it’s a solid house with a lot of potential. It’s a starting place. It’s an opportunity. And I'm confident that this is an opportunity this son will not squander.

Lord willing, I hope to be able to help my other two sons in like manner.

I'm wondering if any of you who read this can relate similar experiences of family helping family to acquire property without the need for a bank loan?

A view from the yard out to the back-25 acres.  A nice old  barn was once located right in the middle of this picture, with an old apple orchard behind. The barn declined from neglect  and rotted away. Robert has worked at leveling the area and cleaning out the brush.


Cyndi Lewis said...

This post makes my heart sing. We hope to do the same for our children. One way we hope to "help" is when our kids graduate high school we will charge them a nominal rent to live at home but this money will go into an account that will be given back to them when they get married or buy a house or some other major life event. Hopefully we will also be in a financial position to help more if needed.

JT said...

Mr. Kimball,
Very well done and a pat on the back.
Years ago my sisters husband died unexpectantly, leaveing her with 3 young daughters, my parents bought a piece of ground on a farm from family friends at an extremly reduced price due to circumstances. We ( family) built her a house and my parents held the mortgage, fast forward to today and my parents have a home on the property as do I, my parents hold the note and we pay them. Neither my sister nor I could live in as nice places and have ground for gardens and fruit trees without our parents and we know and appreciate it. What you've done for your son will be remembered and told to generations from now.
My hat is off to you and your wife!

Herrick Kimball said...

It sounds like a good plan.

Your comment has literally brought a tear to my eye. What a wonderful testimony.

Gorges Smythe said...

I believe interest income is considered capital gains and is taxed at a lower rate. You WILL have to give him a 1099 form every year, I think.

Herrick Kimball said...

I did not know that. Thanks for the information.

Anonymous said...

We too helped our son and his new wife get a home. It was a house we had bought and rehabbed and our son, still single at the time, helped us do. Then we rented it for a year or two to some college guys. Then our son got married and we were able to sell him the house (after we did some major cleaning--college guys are not your cleanest tenants :0) He got a good deal, we probably lost money on the deal but they are raising their 3 children there yet.

Unknown said...

Think of the mortgage interest this way... although you'll have to pay taxes on this, since it is revenue to you, it is deductible for him, so you've given him a tax benefit.

(BTW, that illustration points out the folly of how politicians like to make the mortgage interest deduction to be some kind of "give-away" as if they are doing you a favor by allowing the deduction. The fact is that the money is already taxed - the interest receiver is taxed on it, thus the taxes have been paid, which is why it's deductible.)

Herrick, this story really is wonderful. I think you had posted in the past that this was in the works. Having followed your story since you started blogging, it's been great to share in the joys of watching how you've been faithful to God through the desire for land yet not willing to compromise on principles. Seeing how God has been faithful and rewarded you with a family business, additional land, and now not only being able to help your son but also that it has some land for him and is close by for you; well all of that has just been a great testimony of faith.

I'm looking forward to being able to continue to follow and share in the journey!

Cj said...

That's cool, very cool. This post speaks wonders about the character of yourself and your family in general. I look forward to shaking you hand someday, whether on earth or in glory!

Kyle Sonnier said...

Mr. Kimball,
I really liked this post and I'm going to share it with my family. What I like about it (in addition to the wisdom you share) is this sentence: "Were I to do it over again, I would do the exact same thing." No regrets (regarding your decision to have a debt-free home)! I love it.

It ties in nicely with a theme in some of your essays from last year regarding the Contra Mundum worldview. Going Against the Worldly system. Living debt-free and avoiding the hyper-consumerism mindset aren't exactly virtues extolled by most Americans these days, are they?

But you've fought the good fight and have taught your children (and now grandchildren) these principles of hard work, sacrifice and debt-free living. Good for you! The hard work was worth it and it paid off.

Also, your boyhood home that is full of good memories for you will continue to make memories for future Kimballs for years to come. That is truly a blessing. Thank you for sharing such a nice story.

Anonymous said...

My Daddy was a builder and he blessed me with my "Start-Over" home many years ago...he built the house, sold it to me, and held the mortgage. Dad's in Heaven now, but he left Mom in good financial shape. She held a mortgage on a home that I helped my son purchase. I gifted the down payment and co-signed the note. Mom got better interest on the money than she would have in the bank. We try to live by my very wise Daddy's philosophy: "Don't go to the bank, BE the bank." He built many houses in his life, selling them to good folks, and holding mortgages for them. (He worked hard, saved his money, and kept reinvesting the profit from selling homes until he could afford to hold the mortgages!) Smartest man I ever knew....

timfromohio said...

That is an awesome story and let me tell you, sweat equity or not that is a GREAT looking first home! I hope your son realizes how blessed he is with that home and, more importantly, to have a dad who wants him around and will help him get started in life.

SharonR said...

I would like to add that in the "early 1980s", the Reagan years may have kicked in, but in 1979, 1980 and maybe 1981, it was almost impossible to buy a house. Interest rates were (as I recall) from 17.5-20%. Mobile home sales were at an all time high. That's what my husband ended up buying. No wonder your fil loaned you the money. What a blessing! Those very late 70s and early 80s were a terrible time to buy a house.

People who know about loaning money say to never loan money in the family - makes the Thanksgiving meal dinners uncomfortable - but, I think yours may be an exception. My aunt told my husband to "pay it back as you can". Of course that time never came. Thanksgiving dinners WERE very uncomfortable. But, since you have a scheduled payment plan, it should be good. Congratulations on your good business that allows you to do this. Well done.

Anonymous said...

A wonderful post. I must say. Isn't this what God and Jesus want us to do. Helping our friends and family is really what life is truly about.

Leigh said...

Good grief, I still picture your kids as described in Writings of a Deliberate Agrarian, as, well, kids! How time flies.

This is such a great, thoughtful post. I have to agree about helping / not helping our children with various major purchases. I think it goes back to allowing them to be responsible for their own lives. The house is an excellent, wise exception.

One comment about your paperback versus Kindle versions. Is it possible to have them listed / linked on Amazon as all available formats? They are listed separately with no way of knowing the other format is available. I don't know how you'd do that but other book listings offer all formats. Surely someone at Amazon would know!

Herrick Kimball said...

Wow. Thank you everyone for such great comments on this post. I had a feeling that if I asked for other people's experiences with family helping family to own a home, I would get some wise and inspiring responses, and I was right.

They growed up fast. That book is a snapshot of my family as it was in days gone by. Getting that Amazon glitch fixed is on "my list."

By the way, congratulations on selling 1,000 copies of your own book. I have a copy and am looking forward to reading it when things slow down around here.

Thank you again everyone for your feedback on this essay. I encourage anyone else with a similar family-helping-family story to share it here in the comments.

Sheila Gilbert said...

I know this is a late post, but I still wanted to share what I have done that will be passed on to my children. Back in 1995 my husband had a stroke, and after Thousands and thousands in medical care bills, we had no choice but to claim bankruptcy, and also lost our home. We had just upgraded it, and it was to go on the market in about a month. Over 30 years of hard work went into this home that was intended to become our retirement income. All Gone, in one day! We used all profit from our last home, that went into the one we lost after 10 years there. So we lost more than $265,000.00 in profit when we lost the house. We went from living in the best neighborhood around, to eventually living in a one room motel for 3 of us! It was a nightmare. I only relate this part because it is important to understand "where we were" at the time. No home, no money, my husband was very ill, sever heart condition too, and could hardly afford to eat. I knew that God was with me, and that He would care for us, but to think it would get better, was almost impossible. My husband had to quit working and was disabled. I had always believed in owning my own home, and wanted to start by purchasing property. Still impossible. One day my daughter-in-law showed me a property that was only $1,500.00 very small and worthless to anyone else, but to me was a prayer answered. I still had no money, but I went to the lot, and stood there and prayed for God to give me a way to own that property. I talked to the owner and she allowed me to purchase it with a very little down, and make payments. Because my husband was getting a small retirement check, I could make the small payments, and in a few moths, I owned the property. BUT it wasn't the one I prayed over, it was the one next to it. So, I prayed again, and today I own that property too! Same deal, time payments. My husband agreed that it should be in my name because if he passed away, I could loose it. So both went into my name. My daughter and her husband just purchased the property next to my property, and next month my property will be in a will that turns my two lots over to my children. My husband passed away in July 2013 and I thank God that He even had us change the way we deeded it, because otherwise, it would have gone to an estate, and may have been lost. Right now I'm in the process of starting garden beds and fruit trees on those properties, and will eventually build a home there, and with God's help, I know it will get done. It's been a very long road, but with God's grace, miracles do happen, and my children inherit all His grace too.