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This. It is an seller financed installment loan drawn up by your attorney. They would claim real estate tax deductions as well as interest paid on the loan. You would give them a 1098 int. form each year with the total interest paid and you would claim the payments made as income to pay taxes on. Doing it this way, I believe you lose the 500,000 gain exclusion, though.
No, a Seller-financed sale (either Land Contract or purchase money mortgage) is still considered a sale, even if the Deed isn't delivered until it's paid off (as with a Land Contract).
No, a Seller-financed sale (either Land Contract or purchase money mortgage) is still considered a sale, even if the Deed isn't delivered until it's paid off (as with a Land Contract).
Thank you for clarifying, I was not sure about the exclusion for that.
OP if you still have the mortgage on the old house, know it will reduce the amount you can borrow for this new home, I assume you already know and your situation is workable with two mortgages. By renting it out you can count the rent as income but the ratio of debt service to income will make it likely the rent wont offset all of the mortgage payment on the old house.
lots of big other issues but most have been mentioned so wont repeat them
OP if you still have the mortgage on the old house, know it will reduce the amount you can borrow for this new home, I assume you already know and your situation is workable with two mortgages. By renting it out you can count the rent as income but the ratio of debt service to income will make it likely the rent wont offset all of the mortgage payment on the old house.
lots of big other issues but most have been mentioned so wont repeat them
Got it, clear on the potential fraud dilemma. In order to avoid all that it shall be match everywhere (rental property with rental hazard policy, and of course rental on tax returns). Last thing I need is fraudulent charges.
I was also googling some tax differences in second home vs rental and seems the rental would benefit our scenario.
To the comments about selling out right, I agree. The idea is this is done in a manner that protects both sides. Ultimately if they aren't able to keep up with the payment they will be removed and home will be sold for market value. They can also sell their home and simply pay off this one. We have options and this arrangement isn't contingent on fragile strings.
Much apprecaited.
Excellent!
Quote:
Originally Posted by MikeJaquish
I would commend you for being open to helping your in-laws.
And, I think you are smart to want to do it "right."
We can sell the house and let it be history. My in-laws live 5 houses down in their current home. When they heard we were selling ours, they said no we'll keep it. Unfortunately they have sub par credit (600-620) to qualify for a decent loan. Secondly they aren't selling their current home, so definitely not enough credit to carry two loans. Lastly they are not interested in starting a 15/30 year loan off from scratch. Frankly I doubt they will even live alone for more than 10 years. (will probably end up with one of their kids, hell even in our new house).
We've discussed our concerns and how it would play it in a financial hardship situation and all sides have come to an agreement that we are all happy with. What will probably happen is they will sell their current home and use the proceeds to pay off this home, and once done we transfer ownership and done.
Why would they want to keep your old house? And not even live in it because they want to keep their current house?
This whole idea makes no sense.
What do they plan to do with 2 homes on the same street? Which they cannot afford. Which they are expecting you to finance (keep the mortgage)
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