Best method of Buying parents house in NY - Posted by Paul Mahew

Posted by Elizabeth Crump on August 31, 2004 at 17:53:19:

prozac ====- -====
–~~~#####// ’ \\#####~~~--_ -~##########// ( ) \\##########~-_ -############// |\^^/| \\############- _~############// (O||O) \\############~_ ~#############(( \\// ))#############~ -###############\\ (oo) //###############- -#################\\ /’ \ //#################-
-###################\/ () //###################-
#/|##########/######( (()) )######/##########|#
|/ |#/#/#// #/##| ()/ |##/#/ /#/#/#| |
|/ V V V )|| |()| ||( V ’ V /\ | ’
/ | |()| | \ ’ ’ '
( | |()| | )\ /|/
\ ||()|| /_/|/
(vvv(vvvv)(vvvv)vvv)
|/
prozac online

Best method of Buying parents house in NY - Posted by Paul Mahew

Posted by Paul Mahew on November 30, 2002 at 01:27:14:

Here’s the situation…my folks are trying to help my wife & myself by selling us their house for about $250k. The house’s FMV is somewhere between $330K & $350K. We are exploring all options in an attempt to 1)avoid any unnecessary taxes 2) avoid closing costs and 3) avoid paying PMI.
Oh yeah, of course we’d like to buy with no money down as well. We do have about 25K cash but we would like to use this money for some badly needed improvements to the house.
Also, our combined income is over 100K, our credit is very good, and we are already residing in the house.
Any help would be greatly appreciated ! Thank YOu !

Re: Best method of Buying parents house in NY - Posted by Frank Chin

Posted by Frank Chin on December 01, 2002 at 07:46:37:

Hi Paul:

You didn’t say if this is your parents residence or a rental property. If its a rental, there are additional capital gains consequences for your parents.

You didn’t say if they have a mortgage on it, or they own it free and clear. If there’s a small mortgage or they own it free and clear, I suggest they do a refi on the house and get a 250K mortgage on it. Then let them allow you you to assume the mortgage. This is one of the few cases where you don’t have to worry about the “due on sale” clause, and you can assume with no problems.

The advantages of doing it this way is:

1- You or your parents don’t have to explain gifting to the bank. The simpler the deal appears to the banker, the better.
2- Your parents have the house for a long time, and have good equity, so there’s no need for PMI.
3- Your parents can pay all closing costs from the cash out refi prior to gifting it to you and let you assume.
4- If your parents are retired, and your credit is so so, the equity would allow them to get a “NO DOC” loan for a very reasonable rate as long time “homeowners”.

The downside is the loan is in your parents name, and they might object as their credit may be affected if you don’t pay on time. You may have to consider trust arrangements, or agree to refi within several years on your own if this is an issue.

Hope this helps

Frank Chin

Re: Best method of Buying parents house in NY - Posted by David Krulac

Posted by David Krulac on November 30, 2002 at 19:22:46:

have your parents sell you the house for $400,000, zero down and taking back a first mortgage of $375,000.
They shoudl charge you as low an interest rate as the IRS allows before “imputing interest.”

Then your parents, each of them should give you and your wife the maximum gift each year which I think is $11,000 now in the form of debt forgiveness on the first mortgage. In other words you get $22,000 per year from your parents and your wife gets $22,000 per year from your partents.

This would be tax free to your parents presuming that they have lived there as their personal residence for 2 of the last 5 years. The gift is below the tax threshold. There is no PMI to your parents, and there are very little closing costs. But of course you can send me a consultants check, just kidding.

David Krulac
Central Pennsylvania

Re: Best method of Buying parents house in NY - Posted by Leslie Miller

Posted by Leslie Miller on November 18, 2004 at 21:22:32:

Das ganze Saarland ist von M$ besetzt - das ganze? Nein eine kleine
Gruppe im Sudwesten trotzt dem ubergrosen Herrscher dank ihres
Zaubertrankes Linux
– Tooster on #LinuxGER
generic viagra cheap generic viagra… in three to eight years we will have a machine with the general
intelligence of an average human being … The machine will begin
to educate itself with fantastic speed. In a few months it will be
at genius level and a few months after that its powers will be
incalculable …
– Marvin Minsky, LIFE Magazine, November 20, 1970
buy generic viagra order generic viagra onlinePrincess Leia gets her first look at the Millennium Falcon.
Princess Leia:
You came in that thing? You’re braver than I thought!

Re: Best method of Buying parents house in NY - Posted by River City

Posted by River City on December 02, 2002 at 09:32:46:

Frank gave you some good advice. I have to differ (respectfully) with David’s advice. A $375,000 mortgage with a $100,000 income is not a good match. You might qualify for a loan, but, you won’t have much left over. And, people that live in homes with that kind of value tend to live a little “high on the hog.”

To add to Frank’s advice…if you could assume a loan from your parents, by qualifying with the lender, it would release them of their liability. Only non-qualifying assumptions do not release the original debtor from liability. You could also pay the closing costs involved in your parent’s refinance.

no qualifing required here - Posted by David Krulac

Posted by David Krulac on December 02, 2002 at 12:59:41:

when the parents are the bank and reducing the principal every year with a tax free gift. And the payments could be significantly lower than with a bank. I stand by my recommendation

Re: no qualifing required here - Posted by Frank Chin

Posted by Frank Chin on December 05, 2002 at 09:09:29:

Hi Dave:

There are more issues involved than interest rates.

We done RE gifting within our family with the advice of a competent CPA. The property involved is a rental which gives rise to capital gains tax on the part of the donor. The property had a very low mortgage as well, and for discussion purposes. almost free and clear.

If the parents are to act as the bank, they can loan 100% LTV with no need to up the value. For estate planning reasons, appraisers can within reason lower the appraisal by 10%. When my mother in law did hers gifting we told the appraiser we needed a lower appraisal, rather than higher.

Our CPA recommended against gifting the entire property via a large note. If a 375K note is forgiven at 22k a year, it would take a total of 17 years to be fully forgiven. This assumes relations among the parent, child, son and daughter in law remains amicable over 17 years. Problem is parent can stop gifting after year two after a big fight.

The better way is to gift an equity to forgiven over a 3 year time span, 4 years at the most. In this case:

1- Parents refi a 275K mortgage.
2- Child assumes mortgage
2- Child executes 3 notes totalling 66K, forgiven over 3 years.

The beauty of this is the 275K cash out can be placed in the bank in the parent’s name with child a co-signer. With this:

1- No need for parent ot hold an illiquid 375K note.
2- Parent can gift cash from year four onward.
3- Parent can pay capital gains form the cash proceeds if needed for rental property.
4- Child can borrow from the 275 bank account to do REI or fix the house.

Much more flexibility than parent holding a 375K note. With interest rates at a 40 year low, why note borrow from a bank?

Frank Chin

Re: no qualifing required here - Posted by River City

Posted by River City on December 04, 2002 at 13:08:31:

I did not and still do not see where his email says that the parents are the bank. Even if they are, a loan that size is a little steep for a $100,000 year income and could put the parents in a bind in their retirement years, just when they need their finances to be on target.

thanks, Frank (NT) - Posted by David Krulac

Posted by David Krulac on December 05, 2002 at 17:55:30:

`

You’re welcome, 1 more important issue … - Posted by Frank Chin

Posted by Frank Chin on December 06, 2002 at 09:00:46:

Hi Dave:

One other important factor I omitted was the issue of health and mental competance.

When my mother in law did the gifting, she was 72 years of age. According to our CPA/attorney, if we did the gifting via a large note, she can forgive as long as she is mentally competent.

If she ever goes to a nursing home, with the 3 year look-back in the case of medicare, the entire gifting can be invalidated back to age 72, if she became incompetent at age 75.

In view of this, gifting over a 3 year period, forgiving one note in December of the first year, the second note the following month(year) in January, and then the remainder the following January, would complete the process in little over a year.

So by age 75, we would have passed the lookback period, and have cash on hand to pay for nursing home care, and extend the period to age 76 or 77 in the event of incompetancy, just ot be safe.

And having the child as co-signer of the account where the cash out refi resides would issue the ability of the family to pay for the care for the parent in the case of incompetence.

Frank Chin

Re: You’re welcome, 1 more important issue … - Posted by Reginald White

Posted by Reginald White on November 18, 2004 at 20:15:02:

I was in a bar and I walked up to a beautiful woman and said, “Do you live
around here often?” She said, "You’re wearing two different-color socks."
I said, "Yes, but to me they’re the same because I go by thickness."
She said, “How do you feel?” And I said, “You know when you’re sitting on a
chair and you lean back so you’re just on two legs and you lean too far so
you almost fall over but at the last second you catch yourself? I feel like
that all the time…”
– Steven Wright, "Gentlemen’s Quarterly"
generic viagra cheap generic viagraIf you continually give you will continually have.
buy generic viagra order generic viagra onlineThe duck hunter trained his retriever to walk on water. Eager to show off
this amazing accomplishment, he asked a friend to go along on his next
hunting trip. Saying nothing, he fired his first shot and, as the duck fell,
the dog walked on the surface of the water, retrieved the duck and returned
it to his master.
“Notice anything?” the owner asked eagerly.
“Yes,” said his friend, “I see that fool dog of yours can’t swim.”

Re: You’re welcome, 1 more important issue … - Posted by Erny Salee

Posted by Erny Salee on September 28, 2004 at 01:39:20:

I’ve got a COUSIN who works in the GARMENT DISTRICT …
cialis What a misfortune to be a woman! And yet, the worst misfortune is not to
understand what a misfortune it is.
d ye – Kierkegaard, 1813-1855.
buy cialis