is it wise for me to hold the mortgage on a new house that my daughter is buying?

Asked by Hmc1946, 11780 Tue Jan 12, 2010

My daughter is buying a newly constructed home for $191,000. My wife and I are gifting out $125,000 to our daughter who will obtain a $65,000 15 year fixed rate mortgage. The principal and interest payback at a rate of 4.75% over the 15 year period is approx. $90,000. Are we better to hold the mortgage in our names, thereby, saving $25,000 in interest.

Are there any other factors that we should consider? thank you.

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Lisa Leib, Agent, Smithtown NY, NY
Sun Jul 1, 2012
What a great family to be so supportive. Holding the mortgage in your names will save enormous costs at closing and the rates are so amazing that once your daughter is in a position to take on the responsibility herself she can finance the property herself and shop the best rates and best closing costs....since I don't know what the reason is for your daughter not financing On her own, I am only coming to the conclusion that at this time it might not be an option, but being in 2012 when rates are amazing and if her credit is good she can finance it later and in the mean time your interest savings might be a moot point if she is able to finance this on her own within the next few years.
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Ralph Windsc…, Agent, Hauppauge, NY
Sun Jan 31, 2010
Wow! This is a difficult question to answer appropriately. It would be rather presumptuous of me (or anyone else) to give you advice on what could be a very emotional decision. God bless you for being so generous to your daughter. I hope she fully appreciates it. From your end, there may be some considerations. Gifting that amount of money may have tax implications for you and your daughter. I would recommend speaking to your accountant or tax attorney regarding the gift because when your daughter goes to obtain the mortgage, the bank will want to know where the $191,000 came from. They will probably want an affidavit saying that she does not have to pay the money back. If you decide to hold the entire mortgage, there will also be a savings of the much of the closing costs associated with getting a mortgage through a bank. There are other considerations such as what happens if your daughter defaults on the bank loan putting your gift at risk of foreclosure. Good luck with your decision.

Ralph Windschuh
Century 21 Princeton Properties
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Nunzio Zappo…, Agent, Easthampton, MA
Tue Jan 12, 2010
Most important is the gift just that or are you expecting the gift to be paid back? if it is truly a gift and you are ready to give up this money as such than I can continue. Let your daughter obtain the mortgage in her name, than she will be gaining responsibility for the property and her credit. The intrest will be a deduction for her and at these terms it could not get any better for her. If she can not handle these terms and defaults you will have no obilgation and the family / money thing which could be compilicated will not exisist or be a problem. You will also at this time have a choice... you could put the property up for sale while making her payments which will give you the chance to recoop some money while saving her credit... suggestion... dont make any payments prior to putting property up for sale. she need at this point to know she has lost control and you do not want another property you are just trying to make a bad situation better.
Hopfully she will take this great opportunity and prevail.
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