Purchasing Home With Help From A Family Member
REM #F647
By Ilyce R. Glink
Summary: A reader is considering buying a home with help from his mother. Ilyce explains the difference between being named on a deed and a mortgage, and how to structure deals made with family members.
Q: I have a friend, "Bryan," who is looking to buy his first home.
His personal finances will allow him to purchase something just under $200,000,
but his mom has offered to purchase something more expensive with her own home
equity loan and has suggested adding his name on the deed.
We’re trying to figure out the pros and cons of each scenario. "Bryan" knows that with his mom’s assistance he could get a bigger, better home - but does simply being on the deed and not actually on the loan make a big difference?
A: If I had a choice, I'd rather be on the deed, but not on the mortgage. That
way, if something happens, you have access to the equity but no mortgage risk.
But something doesn’t feel quite right for this situation.
It's generous of Bryan's mom to offer to purchase the property, but it's better
if she and Bryan purchase it together. She can contribute the equity from her
home equity loan, and he can be on the mortgage, which will help boost his credit
history and score.
But I don't think Bryan should stretch too far. And, the partnership agreement
with his mother should be formalized in writing. Otherwise, if something unexpected
was to happen to her, and she would die, there could be serious estate and tax
complications.
Over time, Bryan should buy out his mother's share of the property (or, she
can set it up in a way that she gifts her share to him over a number of years).
An estate attorney can help out here. I suggest your friend Bryan find a good
one and work out how to make this property purchase happen.
NOTE: This column is distributed by Real Estate Matters Syndicate, PO Box 366, Glencoe, Illinois, 60022. This column may not be resold, reprinted, resyndicated or redistributed without written permission from the publisher.
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