Need Help from any Loan Officers/Loan Advisers

[TandJ61574]

OK here's the deal.

We are moving and selling our home to our son for $300,000 (we gave him a big price break btw) and we owe 150,000.

(So he will be living in the home and we will NOT be)

We are doing a co-ownership where we keep the original mortgage and he takes out a loan for 150,000 and the entire borrowed amount would go to us.

He will then be paying 2 mortgage payments (the one in our name and the one in his name) he is also paying all taxes, ins. repairs, etc.

When he decides he wants to sell he will of course pay off both mortgages and keep whatever profit he makes.

My questions are:

1.) Which is the better way to do this. should we repurchase or refinance the home for 300,000 and co-sign with our son this way he only has to make out one big mortgage payment a month.

Or just have him take out a loan for 150,000 and pay two seperate payments per month?

I am assuming I have to get a real estate attorney so we can change the deed over to both names?

We won't consider a home equity so forget that.

Also looking for the most cost efficent way of course re: closing fees, pts. etc.

Do we need an appraiser?

He is a first time home buyer. What type of mortgage would you recommend? He thinks he might live in the home for the most 5 years. So would a lower interest rate of a 5yr. ARM be better for him vs. a fixed rate?

Also, have heard pros and cons on interest only loans. What is your opinoin on that?

Thanks so much for your time and help!!

 

[SillyMe]

Hmmm, no loan officers replied yet? Probably because they're too busy calling and screaming at me wondering where their appraisals are.

Sorry, I don't have an answer to your question, but I just couldn't resist posting. I deal with loan officers every day...my favorite people.

 

[TandJ61574]

 

[TandJ61574]

No one can help???

 

[golfgal]

Hmmm, no loan officers replied yet? Probably because they're too busy calling and screaming at me wondering where their appraisals are.

Sorry, I don't have an answer to your question, but I just couldn't resist posting. I deal with loan officers every day...my favorite people.

Ok, off topic, I can safely assume you are a real estate appraiser. That is something I have been considering getting into. There is always a back log of appraisals in our town and our friends that are mortgage officers at the bank are always wishing for more. So, what does it involve? What kind of course work, etc? I assume it would be somewhat different from state to state, but a general idea would be good. Also, there is a chance we may be moving next summer, would it be better to wait until we move to start or get some experience here and then look for a job in the new town?

Sorry, op for hijacking your thread.

 

[golfgal]

OK here's the deal.

We are moving and selling our home to our son for $300,000 (we gave him a big price break btw) and we owe 150,000.

(So he will be living in the home and we will NOT be)

We are doing a co-ownership where we keep the original mortgage and he takes out a loan for 150,000 and the entire borrowed amount would go to us.

He will then be paying 2 mortgage payments (the one in our name and the one in his name) he is also paying all taxes, ins. repairs, etc.

When he decides he wants to sell he will of course pay off both mortgages and keep whatever profit he makes.

My questions are:

1.) Which is the better way to do this. should we repurchase or refinance the home for 300,000 and co-sign with our son this way he only has to make out one big mortgage payment a month.

Or just have him take out a loan for 150,000 and pay two seperate payments per month?

I am assuming I have to get a real estate attorney so we can change the deed over to both names?

We won't consider a home equity so forget that.

Also looking for the most cost efficent way of course re: closing fees, pts. etc.

Do we need an appraiser?

He is a first time home buyer. What type of mortgage would you recommend? He thinks he might live in the home for the most 5 years. So would a lower interest rate of a 5yr. ARM be better for him vs. a fixed rate?

Also, have heard pros and cons on interest only loans. What is your opinoin on that?

Thanks so much for your time and help!!

Interest rates are climbing. An ARM probably isn't the best idea now. Also, check to see what the jumbo rate is in your area. Usually the interest rates for homes over about $325,000 in our area have a higher interest rate. If the rate on your mortgage is low, then a second mortgage might be the way to go to keep that low rate. If the current rates are lower, then it makes more sense to get one mortgage at a lower rate then one with a high rate and one with a low.

The most cost efficient way to do this is for him to pay you directly for the mortgage but then he isn't taking out a loan and the house is still in your name. I would make an appointment with your banker and discuss all the options out there. There are so many to consider.

I am not big on the interest only loans. The only equity he will build is IF the home increases in value over the time he owns it and with the housing market being so iffy now, that is not a good option. If he can't afford the payments on the $300,000, maybe you could have him pay the rest of your mortgage now and then when he sells, you get the rest of your money then.

 

[SillyMe]

Ok, off topic, I can safely assume you are a real estate appraiser. That is something I have been considering getting into. There is always a back log of appraisals in our town and our friends that are mortgage officers at the bank are always wishing for more. So, what does it involve? What kind of course work, etc? I assume it would be somewhat different from state to state, but a general idea would be good. Also, there is a chance we may be moving next summer, would it be better to wait until we move to start or get some experience here and then look for a job in the new town?

Sorry, op for hijacking your thread.

I sent you a PM.

 

[TandJ61574]

Interest rates are climbing. An ARM probably isn't the best idea now.

But wouldnt a 5 yr. ARM be better for him cuz the rates are much lower and he only plans to stay there 5 yrs or less?

 

[golfgal]

But wouldnt a 5 yr. ARM be better for him cuz the rates are much lower and he only plans to stay there 5 yrs or less?

Like I said, rates are going up. Say you take out an arm this year at 4% or whatever, well next year they go up to 5% and the year after that to 6.5%, then in the third year they are at 7.5%, etc. You are stuck with that arm when he could have had a loan now for 6% or lower. Unless there is a cap on the ARM at a certain percentage, I wouldn't take one now because of rising interest rates. Also, what if plans change and he doesn't move in 5 years? If rates were on a downward trend then an ARM would make sense but interest rates have gone up over a point in the last few months and are continuing to rise.

 

[jel0511]

If he truly is only planning on staying 5 years than a 5 year ARM would give you the lowest rate. IF there is any chance he'll stay longer, than it coulc be disastorous after that 5th year passes. Also, you seem to be overlooking an important point. If you're selling the house at a substantial discount (even going to co-ownership) you're going to have to pay gift tax. Say the house is worth $500k and you're selling it to him for $300k that $200k difference is considered a gift for tax purposes. If going to co-ownership you'd be be gifting him$100k since he's half of the $500k would be $250k and he's taking out a $150k loan. I don't think there is a way around it, I'd consult a CPA or tax attorney.

 

[TandJ61574]

from what I have heard..you are a allowed a once in a lifetime gift not to exceed one million without being taxed.

 

[jel0511]

from what I have heard..you are a allowed a once in a lifetime gift not to exceed one million without being taxed.

That's incorrect. It's a one million exemption lifetime, with annual gifts having a limit.

If you give people a lot of money or property, you might have to pay a federal gift tax. But most gifts are not subject to the gift tax. For instance, you can give up to the annual exclusion amount ($11,000 in 2005) to a person, every year, without facing any gift taxes, and without the recipient owing an income tax on the gifts. And you can give up to $1,000,000 in gifts, total, in your lifetime, before you start owing the gift tax.

http://www.turbotax.com/articles/TheGiftTax.html

 

[TandJ61574]

Ahhh..thanks for clearing that up Jel. Did you know that I can gift my son 11,000 per year and also my husband can do the same for him? And if he were married my husband and I can both give to his spouse seperately also which would give them a grand total of 44,000 per year!!!

 

[jel0511]

Ahhh..thanks for clearing that up Jel. Did you know that I can gift my son 11,000 per year and also my husband can do the same for him? And if he were married my husband and I can both give to his spouse seperately also which would give them a grand total of 44,000 per year!!!

Yes I did. I used to be a CPA before having kids, so I'm pretty familiar with the tax code.

 

[PlutoPony]

We are doing a co-ownership where we keep the original mortgage and he takes out a loan for 150,000 and the entire borrowed amount would go to us.

Have you checked with the leinholder of YOUR mortgage to see if you can actually do this?? Your mortgage balance of $150,000 is secured by this house and is the first mortgage for the property. I don't think you can have a second primary mortgage secured by the same property can you? You might want to talk to your mortgage holder first and see if they're OK with what you're planning to do - if they're not you're going to need to start from scratch and refinance the whole thing. Also agree with others that there may well be gift tax implications - you might check with a tax consultant before you get too far into this.
Good luck!

 

[mum4jenn]

How about a re-fi on what is owed on the house and let him rent it?


Who is getting to claim the house on their taxes??

 

[TandJ61574]

Have you checked with the leinholder of YOUR mortgage to see if you can actually do this?? Your mortgage balance of $150,000 is secured by this house and is the first mortgage for the property. I don't think you can have a second primary mortgage secured by the same property can you? You might want to talk to your mortgage holder first and see if they're OK with what you're planning to do - if they're not you're going to need to start from scratch and refinance the whole thing. Also agree with others that there may well be gift tax implications - you might check with a tax consultant before you get too far into this.
Good luck!

Good Questions Pluto. No we haven't checked with anyone but plan on doing that very soon. I think you may be right with the refinance thing. We might have to do this and then just put joint ownership names on the deed.

As far as gift tax the market value is only about 20,000 above the 300,000 so we are in the clear as far as the gift tax goes.

 

[Ronda93]

Back to the CPA and the annual gift limit. It probably wouldn't work in this situation, but could they title the property as tenancy in common and then gradually shift the ownership from gifter to giftee over the years?

 

[thelionqueen]

OK, I am a Sr. Mortgage Broker and have an opposing view. I would strongly suggest an ARM if your son is thinking about staying 5 years or less.

Most people have a "the sky is falling" attitude and "better to lock in a little higher now than risk it being even higher later". I almost always suggest to my customers that if it makes sense to them, and ARM is a great option.

Here is my way of thinking. If you can handle the smaller payment for 5 years and this is most comfortable for you,then do it. Usually ( I stress usually) people will end up making more money by the end of the 5 year term and the value of the house has continued to rise. At the end of the 5 years, you can leave if you choose or refinance. If for some reason the occupant decides to stay, then you refinance.

Having been in the business for many years, I can tell you from personal experience that most of my customers refinance every 5-10 years or so anyway. Think about everyone you know for a second...how many of them have stayed with the exact same loan and exact same home for 30 years. Probably not many if any at all.

My point is, get a payment and program that is comforatable for the buyer today, and worry about the interest rate in 5 years. It could go up, it could go down, but you won't know for 5 years.

I know there are people who agree and disagree with my train of thought, but it is only my opinion, no flames please.

Good luck with whatever you choose...lucky kid!!!

 

[TandJ61574]

Who is getting to claim the house on their taxes??

Well since he is paying both mortgage payments or just one big one we are giving the tax write off to him. It's only fair.