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[quote=Anonymous][quote=Anonymous]We are doing this.  Google "intrafamily loan."  If it is a loan, then you have to treat it like an actual loan, including interest, or there could be negative repercussions with the IRS for your in laws).  You should have a loan document (promissory note) drawn up and they should charge interest.  The minimum interest rate and loan term are specified by the Applicable Federal Rate set by the IRS monthly.  These rates are generally lower than what you would get from a bank.  But if you DONT charge interest on the loan, the IRS will consider the foregone interest as income to your in laws, and will tax them on that income.  The loan should look as much like a bank loan as possible, including being secured with a lien on your house.

There is a web-based service that says it will take care of the paperwork for you:  http://www.nationalfamilymortgage.com

What we did was structure a 9 year loan at the minimum interest rate required, repayable in a balloon repayment at the end of 9 years.  If we sell before 9 years we have to repay the mortgage and all the interest accelerated.  We did it this way because my relative had a lump-sum they wanted to give us, so this was the way we could guarantee that they get paid back the right amount.

Much easier if they just gift you the downpayment!!
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To clarify, the loan is structured so that interest and principal are due in a balloon payment.  We don't have to make any payments in the interim.  [/quote]

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