Posted on: 07th May, 2013 05:38 am
my son and his 2 children have lived with us for 14 years. he recently remarried and his wife has 2 children. we want to let them have our bigger home that his children have grown up in and we will downsize to smaller home a few blocks away. our home is mortgage free and probably appraised at over $500000/$600000. we want to sell them about half of the house for a minimum of $300000. then we want to gift them the rest. we will take the cash we receive from them and pay for smaller house. they would have to borrow the $300000. would the gifted part cover their 20% downpayment and could they get a home equity loan for the $300000? what are tax ramifications on both sides?
you can sell your property to your son, but make sure you do it with the assistance of a real estate lawyer. they need to show equity in the home and at the same time have enough savings with which they can make a down payments of at least 20% to qualify for what you said as home equity loan. however, as far as tax implications are concerned it is best handled by a competent tax preparer or consultant.
The gift covers their required down payment. Since you are gifting them 50%, their new loan to value would be 50%. They would have to pay the required lender and closing costs associated with the transaction. For the tax, you are best to consult a tax professional. With rates so low, your son would probably be best taking a 15-30year fixed loan, instead of a variable HELOC. Good luck!
