DEAR HARRY: I've been working for my employer for more than 20 years. I have advanced to a responsible management position in which I make $130,000 a year. My wife and I have accumulated a net worth north of $1.5 million. My younger brother, however, has done OK, but with some bad luck a few years ago when his company closed down. He is now well on his way to recovery.
He has bought a new house and will settle next month. He has been offered a mortgage for 15 years at 3.25 percent with 1.75 points. We want to help him by offering him a better deal. We thought we would offer him the same 15-year mortgage at 2.75 percent. This is a little less than what we could get with similar security in the market. His equity will be about 82 percent. My wife wants to check this out with you. What do you think?
WHAT HARRY SAYS: It looks good for both of you. Have you considered an even lower rate? Perhaps zero interest? After all, it is your brother, and the lost interest does not appear to be a financial problem for you.
On the other hand, what will you do if he fails to make his payments or is late? I've seen families break up over such situations. In any case, get a lawyer to prepare or at least look at any agreement. My inclination is the zero-interest option.