Why might a buyer choose an Equity Holding Trust purchase, even if loan on the property were to be greater than the propertys value?
The “over-encumbrance” on an Equity Holding Trust property is often perceived as simply a trade-off for a partys inability to qualify for a mortgage loan, or lack of a standard down payment or preferred credit. In that the Equity Holding Trust purchase may avoid the handicap of self-employment, newness on the job, limited job history, or marginal credit history one might choose to disregard the over-encumbrance. The fact is, that if by the end of the agreement, the resale value of the property had not increased sufficiently to cover the loan against it, then the resident may 1) petition to extend the agreement, or 2) just move out and return the property to the original owner. If the aggregate monthly (after-tax) payment is in keeping with normal rent, and if the loan need not be paid-off at any particular time, an Equity Holding Trust buyer might find an over-encumbrance inconsequential.
Related Questions
- Can an Equity Holding Trust resident co-beneficiary (the Buyer) legitimately move from the trust property before the end of the agreement?
- How is the propertys "mutually agreed value" determined at the inception of the Equity Holding Trust, since there is no sale price per sé?
- Why might a buyer choose an Equity Holding Trust purchase, even if loan on the property were to be greater than the propertys value?
