<p>Good morning T1. The official home value by our county assessment is about 30% lower than our purchase price. That will be the number we use for taxes and profile filing.</p>
<p>Called our realtor. She said the price of a house is what a buyer is willing to pay. So both the mortgage appraisal and the county assessment are for references only.</p>
<p>Have any of you considered holding a mortgage for someone? I realize there are pitfalls but I have seen two situations where the parent held the mortgage for their child. In both cases they were parents of only children (different thread) and the feeling was the mortgage return was better than the parents could get in the bank and when the parents passed the mortgage was paid off essentially. Both worked out fine.</p>
<p>^I haven’t considered doing that (my kids aren’t of house-buying age yet) but if I were to do it, it would only be in the example you gave – lending to family members.</p>
<p>It’s interesting that you mentioned the mortgage would essentially be forgiven upon the death of the parents. That’s not always a given, and it might make sense to ask an accountant if that forgiven debt is seen as a taxable event.</p>
<p>DadII – in terms of credit score, over 740, it’s all gravy – you don’t get better terms. Hope your refinance goes smoothly.</p>
<p>And the increase in appraised value doesn’t necessarily => higher taxes. The tax assessor isn’t given the value from your appraisal.</p>
<p>It would be a taxable event I imagine. The mortgage is an asset that passes through the estate- so basically as the sole heir you end up paying yourself.</p>
<p>tom…how would the mortgage be paid off? Unless the parents have their own mortgage insurance (which is expensive)…the balance of the mortgage on that home at death would need to be paid by SOMEONE (either the heirs or the estate).</p>
<p>The way I understood the two situations the parents held the mortgage and when they passed the mortgage was included as an asset in the estate. Their only child inherited the entire estate which included the mortgage. They continued making “payments” on the mortgage and each year needed to include the interest that they earned on the mortgage as taxable income. I think one couple actually just paid off the mortgage from other assets that were in the estate.</p>
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<p>Could you please explain this? I really don’t understand what you are saying.</p>
<p>Usually when a parent dies…if they own a house, it becomes part of the estate. Either someone inherits the house or not. If the house is bequeathed to someone (the kids?) I thought they had to get a mortgage in their own name (a dead person cannot be a mortgage holder).</p>
<p>D2-
In this market it is unusual for an appraised value to go UP unless improvements were made to the house since the last appraisal. Have you done remodelling? Did you update the kitchen, bath, , finish a basement or make an addition to the house?</p>
<p>The kid bought a house and the parent lent them the money the way the bank would. The parent did not own the house. The parent held the mortgage. After both parents died the mortgage was an asset of the estate. The entire estate was left to the child- the owner of the house.</p>
<p>OH!!! I see…the parents actually were the “bank” for their kids…the kids were paying the parents…I get it now. </p>
<p>Interesting idea. I’d never thought of that.</p>
<p>I don’t get it. </p>
<p>Say kid bought a house or $100,000. If parents gave him/her the $100K to pay the sellerr. The kid has to pay gift tax on that $100K. Also, the parent must have 100K to give.</p>
<p>Then, kid pays parents every month and he/she will not get the tax break on the interest.</p>
<p>Who said it was a gift?</p>
<p>Don’t try this at home… It takes a trained professional. ;)</p>
<p>If the “kid” is an adult, filing their own taxes, why woundn’t they take the interest paid on the loan?</p>
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<p>Depends on where you live. In our neighborhood, housing prices are rising, even tho no improvements are made. It is a matter of supply & demand, as always. There is a very finite supply of real estate & homes in our area of the state–good neighborhood, older & stable. Our area never had any significant drop in prices.</p>
<p>Allowing the kids to get financing from you as the seller sounds like a great alternative to reverse mortgage for all concerned, as long as the people pay as promised & market rates & protections are used. Interesting thing to consider in estate planning. ;)</p>
<p>If both dh and I die before the mortgage is repaid, there will be an appropriate adjustment made to the division of our estate to reflect the debt.</p>
<p>Silpat- I am no expert but I believe your will and other estate documents would need to make some provision for the debt to be forgiven- or at best make it clear that the mortgage is solely left to your child that is the mortgagee.</p>
<p>In the two situations I was aware of the loan was granted as a win-win for both parties. The parents earned better interest than the bank was giving and the child paid less and saved on bank fees.</p>
<p>Tom, in one case with which I am familiar, the child/borrower along with his two siblings received equal shares of their parents’ estate. From the borrower’s inheritance he repaid the estate the balance of the mortgage, after which that amount was divided three ways to be distributed to all siblings. It could have just been done on paper, with the appropriate adjustment made to the borrower’s share, but one sibling was math-impaired and could not understand that the borrower would have indeed repaid his debt. Following this example assumes that the parents wish to leave equal shares, per stirpes, to their children.</p>
<p>For those interested in the OP’s question, rather than the slightly off topic discussion that followed, here are the rates today from Provident Funding all assuming a max $417K (conforming) mortgage with plenty of equity and good credit:</p>
<p>30 year fixed 4.25% with -.5% point (negative points are a credit towards closing costs)
15 year fixed 3.375% no points
7/1 ARM 2.875% with -.125% points
5/1 ARM 2.50% with -.125% points
3/1 ARM 2.375% with -.25% points</p>