Posted on: 13th Dec, 2007 11:41 am
My mom bought a second home for me to live in 7 years ago. During that time, I have made all the mortgage payments, taxes, repairs, etc. She wants to sell to me for her original purchase price plus a 2nd mortgage, totalling 190,000. The most recent tax appraisal was 354,000. Can I buy the house from her for only 190,000 without worrying that the equity is some sort of 'gift' any of us might be taxed on?
Thanks!
Thanks!
I apologize for not researching my question before posting. This site is more informative than I thought possible. I think I found my answers.
1) My mom writes me a Gift of Equity letter.
2) I purchase the home and will have about 40% equity. (I'm going to go through a first time home buyer program in Washington State).
3) My mom will have to file a gift tax return, but can apply the equity amount against her lifetime credit of 345,800. She will avoid taxes until she surpasses that limit.
Does that cover it? I've been searching for this information forever and you're the first site that had it all with a little research. Thanks. I think I'm ready to go...
1) My mom writes me a Gift of Equity letter.
2) I purchase the home and will have about 40% equity. (I'm going to go through a first time home buyer program in Washington State).
3) My mom will have to file a gift tax return, but can apply the equity amount against her lifetime credit of 345,800. She will avoid taxes until she surpasses that limit.
Does that cover it? I've been searching for this information forever and you're the first site that had it all with a little research. Thanks. I think I'm ready to go...
hello indiepages,
the lifetime gift exemption limit is $ 1 million. if she doesn't exceed this limit in making total gifts during her lifetime, she doesn't have to pay any gift tax. but she will have to file a gift tax return.
is $ 190,000 only the amount of the second mortgage?
does your lender know that the property which you are planning to buy has a second mortgage on it?
the lifetime gift exemption limit is $ 1 million. if she doesn't exceed this limit in making total gifts during her lifetime, she doesn't have to pay any gift tax. but she will have to file a gift tax return.
is $ 190,000 only the amount of the second mortgage?
does your lender know that the property which you are planning to buy has a second mortgage on it?
Not a second mortgage, sorry. Origianl loan has 139,000 left on it. Then she took out an equity loan of 50K. She owes about 43,000 on it. So alltogether the total owed is about 182,000.
Indie,
You got it all right! You can purchase this home from your mom as a gift of equity it is done all the time. Sounds like a great deal! Let me know if you have questions.
Bradley D. Gertz
Office: 561-746-1484
Cell: 772-607-1925
Fax: 561-746-7383
email: "brad@accesslendinginc.com"
[Email address deactivated as per forum rules. Thanks.]
You got it all right! You can purchase this home from your mom as a gift of equity it is done all the time. Sounds like a great deal! Let me know if you have questions.
Bradley D. Gertz
Office: 561-746-1484
Cell: 772-607-1925
Fax: 561-746-7383
email: "brad@accesslendinginc.com"
[Email address deactivated as per forum rules. Thanks.]
indie, it seems like the question concerning the existing first and second mortgages is irrelevant.
do you intend to acquire your own, brand-new, first mortgage; or are you simply retaining the existing loans and continuing to pay those? if the latter, be careful, as the lender may not be happy about it.
do you intend to acquire your own, brand-new, first mortgage; or are you simply retaining the existing loans and continuing to pay those? if the latter, be careful, as the lender may not be happy about it.
Thanks Jenkin, George & Brad. My wife and I plan to acquire our own brand-new, first mortgage. Washington State has a 'Key Bond' plan for first time home buyers. We take a class presented by industry reps in January, then they give us a certificate. The idea is to help us aquire a lower interest loan.
I think the certificate is also to assist in a down payment, but maybe our equity will qualify as such, and we won't need to come up with money except for closing costs?
I think the certificate is also to assist in a down payment, but maybe our equity will qualify as such, and we won't need to come up with money except for closing costs?
Hi Indiepages,
Welcome back.
Nice to see you again! Did you enjoy the Christmas by the way?
Well, the House Key State Bond Program includes features such as low interest rate and interest-only option is also available. Are you going for the fully payment option or interest-only feature?
The certificate is offered so that it becomes easier for you to qualify as a first time buyer. I don't think it's for down payment assistance. anyway, you can ask the lenders and if needed, you may get it from the AmeriDream which is quite well-known.
Just in case, you don't have the brochure for the House Key State Bond program, here it is at http://www.wshfc.org/buyers/Brochure.pdf .
Hope I could explain it clearly and in case you have further queries, please feel free to ask.
Regards,
Jessica
Welcome back.
Nice to see you again! Did you enjoy the Christmas by the way?
Well, the House Key State Bond Program includes features such as low interest rate and interest-only option is also available. Are you going for the fully payment option or interest-only feature?
The certificate is offered so that it becomes easier for you to qualify as a first time buyer. I don't think it's for down payment assistance. anyway, you can ask the lenders and if needed, you may get it from the AmeriDream which is quite well-known.
Just in case, you don't have the brochure for the House Key State Bond program, here it is at http://www.wshfc.org/buyers/Brochure.pdf .
Hope I could explain it clearly and in case you have further queries, please feel free to ask.
Regards,
Jessica
Thanks Jessica! Christmas was very relaxing, spent a lot of time with the boys (6 & 10). Hope your new year is prosperous.
Thanks so much for the help. My wife and I have done internet research, but we haven't personally spoke with anyone except to sign up for the House Key program class which we take next week.
Ideally we'd like to buy my Mom's house. We've been living in the house and making all the payments ourselves since she bought it 7 years ago. My Mom lives in Alaska, and on her tax return she's been treating this house as a rental.
My final question is regarding the gifted equity. The equity will be about $170,000. Will that be considered our down payment - or do we come up with our own downpayment? We have saved about 10,000 so far. Our household income is about 60K.
Thanks again for everybody's help.
Cregan
Thanks so much for the help. My wife and I have done internet research, but we haven't personally spoke with anyone except to sign up for the House Key program class which we take next week.
Ideally we'd like to buy my Mom's house. We've been living in the house and making all the payments ourselves since she bought it 7 years ago. My Mom lives in Alaska, and on her tax return she's been treating this house as a rental.
My final question is regarding the gifted equity. The equity will be about $170,000. Will that be considered our down payment - or do we come up with our own downpayment? We have saved about 10,000 so far. Our household income is about 60K.
Thanks again for everybody's help.
Cregan
Hi Cregan,
Yes, the equity will be considered your down payment...b/c this will be structured more like a refi since you have been in the home for the past 7 years. With that loan to value, it should be a very simple process, depending on your credit, and all the closing costs can be included in the new loan amount, if you don't want to come out of pocket with any money.
If you want to get the payment down a little more (about $100), you could apply the 10k that you have saved...but it would probably be a wiser move to put that savings in an interest bearing account for a "rainy day", as $10k less in loan amount will not result in a significantly lower payment.
Kim
Yes, the equity will be considered your down payment...b/c this will be structured more like a refi since you have been in the home for the past 7 years. With that loan to value, it should be a very simple process, depending on your credit, and all the closing costs can be included in the new loan amount, if you don't want to come out of pocket with any money.
If you want to get the payment down a little more (about $100), you could apply the 10k that you have saved...but it would probably be a wiser move to put that savings in an interest bearing account for a "rainy day", as $10k less in loan amount will not result in a significantly lower payment.
Kim
Hi Indiepages,
I would go by what Kim said here that the gift of equity would be treated as the down payment. I think it depends more upon how the lender would structure your loan. But you won't know this until and unless you have a talk with the lender. However, if you use the gift of equity as down payment, you can keep your savings intact and can utilize it for other purposes.
Regards,
Jessica.
I would go by what Kim said here that the gift of equity would be treated as the down payment. I think it depends more upon how the lender would structure your loan. But you won't know this until and unless you have a talk with the lender. However, if you use the gift of equity as down payment, you can keep your savings intact and can utilize it for other purposes.
Regards,
Jessica.
the exemption on capital gains tax only applies to a home that she has lived in for 2 out of the last two years.