Gift Equity Purchase (5%, mortgage, mortgage, property)

[Shikaka805]

Scenario:
"Relative A" has a house payment that is too high and wants "Relative B" to come in and either help with payments or sell/deed it to "Relative B" to get a lower payment.

Choice:
A lender told me of a Gift Equity Purchase. Basically a relative can do this with another relative with a 5%-10% down payment depending on loan approval. The first loan would be paid off and the second loan would be a lower payment.

Questions:
1. Does anybody have any experience with this kind of transaction and what is exactly involved?
2. Are there any hidden tax consequences?
3. Is this actually an option?

Thanks!

[ChipL]

The equity in the property is given to the buyer as a gift. That gift can be used towards the downpayment, prepaid items, closing costs, financing costs and any required cash reserves or a gift may be in the form of equity at closing.

And yes, it is a viable option as long as there is enough equity in the property and if the buyer can qualify.

Tax consequences, not sure. Check with your tax person.

[shenane]

Really bad idea to get relatives involved in mortage/financial issues.
Also wrong to ask relatives to help when it could hurt their credit or what if relatives what to make a big purchase but can't because they have the mortgage thing they are helping out with. Instead of asking relatives to spend their hard-earned money to help out, the original owners of the expensive mortage can try some other things:
Get a 2nd or 3rd job. Give up cable television. Give up eating out. Give up alcohol, sweets, cigerettes, sodes, etc.. (as applicable - anything not needed). Give up their DSL or broadban plan and use the computers at the library.
Give up eating out. Walk or ride bikes where possible instead of drivingf. Do all this until the bank mix-up is fixed then refinance. In the future, don't get a big loan if it's going to be hard to pay.
Or Sell the house and get a smaller one.

Originally Posted by Shikaka805

Scenario:
"Relative A" has a house payment that is too high and wants "Relative B" to come in and either help with payments or sell/deed it to "Relative B" to get a lower payment.

Choice:
A lender told me of a Gift Equity Purchase. Basically a relative can do this with another relative with a 5%-10% down payment depending on loan approval. The first loan would be paid off and the second loan would be a lower payment.

Questions:
1. Does anybody have any experience with this kind of transaction and what is exactly involved?
2. Are there any hidden tax consequences?
3. Is this actually an option?

Thanks!