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I think you are the one “completely oblivious”. You don’t pay your debts???
Maybe you are confused. I pay my debts but I am not required to do so. It’s typically a voluntary arrangement
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If he’s and his fiancé don’t pay, they lose the house, just like if they got a mortgage from a bank. Of course I have taught my son that he must pay his debts and from everything I’ve seen him do financially to date, he learned that. He’s almost obsessive about it.
To be fair he doesn’t have to pay you back, that’s simply not a fact, it’s what you hope happens. If he doesn’t pay you back are you willing to force him, his wife and your future grandchildren out of the house? If it leaves them homeless and in debt to you with no collateral to secure it? Are you going to do that?
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We have talked with his fiancé about this and she is fully on board with the move. In fact long before this move was a thought, she said she wished they lived closer. Her only concerns in this was for us taking the risk but since this will be a legal, private mortgage she was satisfied.
Great
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You are right there is a lot at play here but as my son says, this is a “big picture” move. Once they are here and settled we will be happy we did it. I can’t wait.
As long as it works out to plan everyone will be happy
There is nothing strange about this. The post is doing what I hoped. It’s thinking about and responding to these negative posts that have convinced me this is a good idea.
There is something strange in that your wife wasn’t full boat on the idea but somehow you have figured it out by posting on citing data, I’m sure you wife figured it out since you started the thread right?
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My accountant knows my son (he’s also a good friend) and knows our situation. He knows we are going to have a legal mortgage on the house which will protect us should they default. He also knows how good my son is with money and how he is very diligent about paying his bills. I trust his opinion.
Your accountant is an idiot. Him being your friend is a problem, you don’t need a friend here, him knowing your son isn’t a benefit and his understanding of your son’s finances is probably limited as there’s no reason an accountant has intimate knowledge of your son’s finances. An accountant should be giving you advice as an accountant, not a friend, not someone who knows your son or some silly assessment of his finances
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If you read what I actually said, my sons fiancé is fully on board with this move. Her hesitation was more about the risk we were taking in this but that was eliminated when she heard it’s a legal mortgage on the property. In fact she is up early every morning scouring the real estate websites for listings. She also is learning about the towns around us so she can jump on a good one.
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As I asked, you really don’t pay the money you owe??? You must have one lousy credit rating.
Where did you get the idea I don’t pay the money I owe? I didn’t say that so are you just fabricating things now?
Maybe you are confused. I pay my debts but I am not required to do so. It’s typically a voluntary arrangement
To be fair he doesn’t have to pay you back, that’s simply not a fact, it’s what you hope happens. If he doesn’t pay you back are you willing to force him, his wife and your future grandchildren out of the house? If it leaves them homeless and in debt to you with no collateral to secure it? Are you going to do that?
Great
As long as it works out to plan everyone will be happy
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Originally Posted by Lowexpectations
There is something strange in that your wife wasn’t full boat on the idea but somehow you have figured it out by posting on citing data, I’m sure you wife figured it out since you started the thread right?
Your accountant is an idiot. Him being your friend is a problem, you don’t need a friend here, him knowing your son isn’t a benefit and his understanding of your son’s finances is probably limited as there’s no reason an accountant has intimate knowledge of your son’s finances. An accountant should be giving you advice as an accountant, not a friend, not someone who knows your son or some silly assessment of his finances
Great
Where did you get the idea I don’t pay the money I owe? I didn’t say that so are you just fabricating things now?
I’m sorry but you are the one who keeps saying people don’t have to pay their debts. Of course they do if they want to maintain a good credit rating and in this case there is nothing to indicate they won’t. If anything they will likely want to be sure to pay the obligation because its family.
If things get as bad as them losing the house, it will be no different if it’s me foreclosing and selling the house or the bank. I’d still be in a position that I’d have to do whatever I can to keep them from losing the house. I’d pay either way. That is what close family does for each other.
My accountant is not an idiot. He’s very smart and knows me and my family very well. He knows the risk involved and the chances of a problem. Like me he doesn’t see it.
I don’t think I said my wife wasn’t on board with this. In fact, my son first approached her and she was enthusiastic. That surprised me since she’s normally very frugal.
I questioned your credit rating because you keep saying that you don’t have to pay your debts. I can only assume that this is your belief. You said it, not me. Have a good day.
Yes, we would lend him the $350,000 as a mortgage on the house. We would draw up a legal mortgage recorded on the land records so that would protect us should they break up. The money would come from a Home Equity Line of Credit on our house which is fully paid off. They will pay us and we will pay the HELOC.
Financially we are secure. I am retired but have not touched our retirement funds or Social Security yet. We live off income from my wife’s job which she loves and will likely keep doing as long as she can. She has a small pension from a state job that fully pays our medical insurance.
We have a sizable retirement account that, as I said, we haven’t touched yet. We also have a years income as savings invested outside our retirement account. We have no debts so financially we are in good shape.
Actually I have talked with our accountant and he thinks this is a great idea as long as we protect ourselves. It gives our son and his fiancé a nice house near us and helps them make what could be a difficult move easier. It means they will be close to help us as we age and be near our grandkids which they want in a few years. To me it seems more than worth the little risk there is.
Glad you are talking to CPA.
My understanding that you can’t give someone a mortgage without them paying the minimum interest rate established by the IRS and applicable at the time of a mortgage. You need to check that minimum interest rates
Then - you owe tax to IRS - as the interests you receive is becoming your income.
You will need to reconcile all that in your tax return and your son’s
Depending on yours or your son’s income - it could work or not.
You have to have a reliable system of records - your son will be able to deduct the interests he is paying to you.
It is convoluted - talk to CPA first and foremost. You may need to tweak your ideas. There are simpler ways to achieve what you want
Last edited by L00k4ward; 08-18-2022 at 04:49 PM..
Glad you are talking to CPA.
My understanding that you can’t give someone a mortgage without them paying the minimum interest rate established by the IRS and applicable at the time of a mortgage. You need to check that minimum interest rates
Then - you owe tax to IRS - as the interests you receive is becoming your income.
You will need to reconcile all that in your tax return and your son’s
Depending on yours or your son’s income - it could work or not.
You have to have a reliable system of records - your son will be able to deduct the interests he is paying to you.
It is convoluted - talk to CPA first and foremost. You may need to tweak your ideas. There are simpler ways to achieve what you want
Thanks. I have consulted with my accountant who is a CPA. He is well aware of the requirements. Basically my son will pay the interest I pay so it should be fully deductible on both our returns. I’m not sure how much simpler than this you can get.
Another thing to consider is that this way there is only one house closing to deal with. That’s much more of an issue than just refinancing the mortgage later. Also should my wife and/or me die, that house will not have to go through probate. It’s their house, plain and simple.
Thanks. I have consulted with my accountant who is a CPA. He is well aware of the requirements. Basically my son will pay the interest I pay so it should be fully deductible on both our returns. I’m not sure how much simpler than this you can get. .
The devil is in the details:
You can not deduct HELOC interests rates on your taxes unless you use the money to improve your own home or buy property in your name and this law applies until 2026.
However, the interests rates your son is paying you - is your income - you need to pay tax on it!
That is my understanding.
Get another consultation with a different CPA
Last edited by L00k4ward; 08-18-2022 at 06:48 PM..
learn something every day https://www.investopedia.com/mortgag...ax-deductible/
So,if OP takes out HELOC on his mortgage free house,and use it to pay for his son's house,the interest he pays on the HELOC is not tax deductible,but the interest income from his son is.
Then it is better for his son to get his own mortgage
The devil is in the details:
You can not deduct HELOC interests rates on your taxes unless you use the money to improve your own home or buy property in your name and this law applies until 2026.
However, the interests rates your son is paying you - is your income - you need to pay tax on it!
That is my understanding.
Get another consultation with a different CPA
Why wouldn’t it be deductible as investment interest expense?
Why wouldn’t it be deductible as investment interest expense?
Thought the idea was to have the newly purchased house in sons name - as it is his house plus to avoid probate in case of OP’s demise?
That is why I said - the details matter
Thought the idea was to have the newly purchased house in sons name - as it is his house plus to avoid probate in case of OP’s demise?
That is why I said - the details matter
Correct, father is loaning money to his son and daughter in law. Therefore HELOC was used to buy a mortgage receivable, an investment asset, which would make the interest expense on the HELOC investment interest expense.
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