Mom wants to help us purchase a new house -- need answers

[Anonymous]

We want to purchase a new home. My mother has offered to chip in a good chunk. I am absolutely stunned that she wants to help, but I am not going to look a gift horse in the mouth on this one.

She said that while she is a generous person, she would want to be on the deed. I think that's reasonable, but I started thinking about tax issues, etc.

How should we proceed? What should her expectations be and what should our expectations be? I want to offer to pay her back, not sure that she wants the money, but in case she does, what do you recommend? What is the best way to handle this for taxes? What if there is a death?

Any helpful comments are greatly appreciated! I can't stress enough how out of the blue this offer was to us and we are grateful, grateful, grateful.

Thanks!

[Anonymous]

I have only seen parents GIFT downpayment money over to their adult children (no strings attached) or cheaply loan money to their adult children. Either way, a one page document of the understood terms was signed by all. No one wants a surprise down the road.

Various names on the deeds can be a hairy mess. Not even worth it for estate tax purposes unless you really document things. We saw a lot of this from my husband's "old school European" parents. Some countries have such high inheritance taxes, that parents put all their kids on every deed. Big problems arise later. And buying someone out of a deed can trigger new mortgage underwriting, gov't recordation fees, etc.

On the other hand, there are tax limits to how much can be gifted per year to a person (like $12.5k or so) so perhaps there is a way to efficiently do this.

This also could be very cultural. In some cultures taking such money would imply that you will house and feed your elderly parents later on. Or buy them a retirement condo, payment in kind sort of thing.

[Anonymous]

I've only heard of "gifting" the money. It gets complicated, even st underwriting if she is on the deed but not the loan.

[Anonymous]

What is her reason for wanting to be on the deed? It will be a pain for any future refinancings and after her death when you need to get her name removed.

[Anonymous]

being on the deed is not a gift

[Anonymous]

If it's a gift, you just need a gift letter to show your lender, and to evidence the gift actually came from your parent (i.e. snaps of her bank statement, then yours). Any gift above $13K, I think, unless the limit has been raised rcently, will trigger a gift tax for your mother.

If it's a loan, you could have issues w/ your lender unless they approve a 2nd position mortgage deeply subordinate to their 1st. You will have to explore that with your lender. I don't think they will let you put her name on the deed.

[Anonymous]

If it's a gift, then she shouldn't be on the deed, and you need to worry about gift taxes.

If it's a loan, then she also shouldn't be on the deed, but may want to get a mortgage. You need to make sure that the IRS considers it a true loan, or it may charge her "imputed" interest for what she's not charging you, and/or may determine that the uncharged interest is a gift. Google "intrafamily loan."http://www.fpanet.org/journal/BetweentheIssues/LastMonth/Articles/LowInterestRatesMakeIntrafamilyLoansAppealing/.

If it's an equity-sharing agreement (eg, she owns part of the house and will share in the appreciation/depreciation) then she should be on the deed and there are a lot of associate tax issues.

You need a lawyer!

[Anonymous]

I think you should refrase your question, OP. Your mother did not offer to heklp you purchase YOUR house. she is offering to purchase a house WITH you. she would be a co-owner, with all the rights of a owner. she could leave her share to anybody, sell it, or even force the sale of the house and get part of the selling price.

You should definitely look into this gift horse in the mouth, since it is clearly not a gift. I am not saying you should not accept it, but look at it for what it is, and consider all the consequences and be prepared. how much would be her share of the house? if you buy now and sell in 10 years and the house had gained a lot of value, how much is she going to get? what happens of her share if she dies? if she is on the deed, but not on the mortgage, is the mortgage company going to give you a mortgage? what with the deduction of the interests? in short, look into it before doing it, if you want to avoind problems later

[Anonymous]

I think you should refrase your question, OP. Your mother did not offer to heklp you purchase YOUR house. she is offering to purchase a house WITH you. she would be a co-owner, with all the rights of a owner. she could leave her share to anybody, sell it, or even force the sale of the house and get part of the selling price.

You should definitely look into this gift horse in the mouth, since it is clearly not a gift. I am not saying you should not accept it, but look at it for what it is, and consider all the consequences and be prepared. how much would be her share of the house? if you buy now and sell in 10 years and the house had gained a lot of value, how much is she going to get? what happens of her share if she dies? if she is on the deed, but not on the mortgage, is the mortgage company going to give you a mortgage? what with the deduction of the interests? in short, look into it before doing it, if you want to avoind problems later

[Anonymous]

Anonymous wrote:I think you should refrase your question, OP. Your mother did not offer to heklp you purchase YOUR house. she is offering to purchase a house WITH you. she would be a co-owner, with all the rights of a owner. she could leave her share to anybody, sell it, or even force the sale of the house and get part of the selling price.

You should definitely look into this gift horse in the mouth, since it is clearly not a gift. I am not saying you should not accept it, but look at it for what it is, and consider all the consequences and be prepared. how much would be her share of the house? if you buy now and sell in 10 years and the house had gained a lot of value, how much is she going to get? what happens of her share if she dies? if she is on the deed, but not on the mortgage, is the mortgage company going to give you a mortgage? what with the deduction of the interests? in short, look into it before doing it, if you want to avoind problems later

My parents [my dad decided] gave us a check and a nice note ...we deposited it and used the $ towards a down payment. Putting a name on the deed isn't a gift. It's a responsibility and if she dies??? Or goes into a nursing home???

[Anonymous]

DON'T DO IT.

It's not a gift and you WILL encounter problems with her being on the deed. Among the other complicated issues the above posters pointed out; if she dies, your home or at least some percentage of it becomes property of her estate. That becomes a mess where you have to buy out the estate. That assumes no one contests the estate.

There is a reason they say never do business with your relatives. This will end badly. Politely decline and run the other way.

[Anonymous]

If you put anyone else on the deed then it is their collateral.

If something bad happens (medical issues, debt issues, bankruptcy), debtors will go after any asset with that person's name on, regardless of who else is on the deed. In fact, other people on the deed also put at risk their cars, savings, and retirement accounts should things get really bad. (Brother In Law on family deed levered up the house for a stupid start-up that went bust. Infuriating, because my husband was then liable too).

Just get a 3rd party to update your mother and you/your spouse on all of this. A gift like this should not include a name on the deed. I'm hoping she just threw that out there and simply needs to get educated on things and how to help someone buy a property in less risky ways.

[Anonymous]

Listen to PPs, OP -- this is a recipe for disaster.

If your mother wants to "help" you buy a house, she can give you cash toward the down payment. Again, subject to gift taxes and knowing your mortgage lender will still need to see that you can afford the payments on your own. This is how we bought our house, and I suspect how many others do.

Being on the deed is a deal breaker. If she won't go for that, then you're on your own.

[Anonymous]

Oh man, my husband had "help" on his first condo years ago. We then met, got married and sold it when we moved to another city. I asked countless times if we owed his parents their money back plus appreciation. I was more comfortable giving it all back and having a clean slate.

He "thinks" it's a gift, but I'm waiting for the call that they "want their $100k money back". I don't know how to budget for that either as we are only starting a family and need money. Basically, I don't know where we stand.

Money has a lot of power. Like the saying "my dad came over to mow the lawn and now feels he owns the house."
Paying off debt is liberating, especially family debts.

[Anonymous]

Way too controlling
Not generous at all with strings attached
Cut the cord & finance it on your own, as you'll never be free of her!