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Buying a home with Mother In Law Supplying down payment

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rxyl81
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Buying a home with Mother In Law Supplying down payment  Reply with quote  

My fiancÚ and I have recently been talking about purchasing a house. His Mother offered to put down the 20% for our down payment. I asked him what she expects out of doing this for us and he said "if anything she would like the tax benefit of being on the mortgage." I have no idea what this means. It actually makes me a bit uncomfortable that she would be on the mortgage to begin with. It wouldn't really feel like it would be our home. I think his expectation would be to add her to the mortgage for financial, interest rate and tax purposes. I am completely new to this and want to do all of my research before I agree to anything. Can you please point me in the right direction. What would be the best way to go about this if we were to accept her help with the down payment? I am completely unsure how to go about this and know nothing about owning a home as this would be my first. Thanks for your help!
Post Mon Oct 21, 2013 8:49 pm
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clydewolf
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Re: Buying a home with Mother In Law Supplying down payment  Reply with quote  

quote:
Originally posted by rxyl81
My fiancÚ and I have recently been talking about purchasing a house. His Mother offered to put down the 20% for our down payment. I asked him what she expects out of doing this for us and he said "if anything she would like the tax benefit of being on the mortgage." I have no idea what this means. It actually makes me a bit uncomfortable that she would be on the mortgage to begin with. It wouldn't really feel like it would be our home. I think his expectation would be to add her to the mortgage for financial, interest rate and tax purposes. I am completely new to this and want to do all of my research before I agree to anything. Can you please point me in the right direction. What would be the best way to go about this if we were to accept her help with the down payment? I am completely unsure how to go about this and know nothing about owning a home as this would be my first. Thanks for your help!

Congratulations on your upcoming wedding.

Where do you fit in the ownership of this home? It is not a good move to purchase a home with someone that is not your spouse. All kinds of troubles come into these arrangements.

Why does future MIL want/need to make a down payment?
Is it because fiance does not have the ability to do this? Again not a good idea to have future MIL on the mortgage or the title. MIL will want some control over what happens to the house.

If MIL is making the down payment, the lender will want to know that, and that may be enough to not qualify for a mortgage.

Here is a link with more information: http://www.mortgageloan.com/parents/
and this from the NY Times: http://www.nytimes.com/2012/12/30/realestate/mortgages-to-givers-of-down-payments.html?_r=0

It would be best for you and your husband save for your own down payment to purchase your home.

Typically it is best for newlyweds to rent for the first year. This will give them time to get to know each other. Renting is vastly different than owning. When a renter has something break, they can call the landlord. The homeowner has the responsibility to make the repair or see that the expert makes the repair - and then pay for that repair (think HVAC breaks or roof leaks etc.)
Post Tue Oct 22, 2013 12:03 am
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rxyl81
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His dad passed away last year and his mom received some money from life insurance. She says the money is for him and his brother. So that's why she is "giving" him the money. But I told him it is either a gift or it is not. It does not line up for me. I don't consider it a gift if she wants to be on the mortgage for a tax break. I'd feel better if she truly does consider it to be a gift if she gifts him the money with no strings attached and if not then i have no problem saving up on our own until we can put 20% down.
Post Tue Oct 22, 2013 12:18 am
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coaster
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My mother and father gave my sister and her husband the money for a large down payment on their first home (many years ago, now) and it was a constant source of irritation, arguments, and negative feelings between my mother and my sister for many years. Eventually they just forgave the remaining balance, figuring it would never get paid off, anyway.

~Tim~
Post Tue Oct 22, 2013 5:08 am
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littleroc02us
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There are too many ways this deal can go bad.

1. Mother in law gets on the note and wants to sell and you don't.

2. Relationship goes sour with Mother in law due to money reasons.

3. You buy a home with your fiance and god forbid it doesn't work out and now your both on a note and not together.

So many problems. If you cannot afford a down payment on a home by yourself, then I don't recommend buying a home. A house isn't a blessing when your living house poor. I would suggest renting for a year, just like Clydewolf stated, it gives you time to build up cash and to do this thing properly once your married. Tell your Mother in law thanks, but no thanks. If she wants to give a gift then that would be great, but if there are strings attached then no thanks.

You should also know the math on the Tax break on mortgage interest paid to the bank. For example if you had a 30 year mortgage on a home and you pay the bank interest of $10,000 for the year. Well when you file your taxes you get a deduction on your taxes from whatever your tax bracket is. So if your in the 25% tax bracket then you'll get to deduct $2,500. So basically you pay 10k to the bank to save $2,500. Not a good deal in my mind if that is the only reason you want a mortgage.

Risk comes from not knowing what you're doing. (Warren Buffet)
Post Tue Oct 22, 2013 2:48 pm
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clydewolf
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quote:
Originally posted by rxyl81
His dad passed away last year and his mom received some money from life insurance. She says the money is for him and his brother. So that's why she is "giving" him the money. But I told him it is either a gift or it is not. It does not line up for me. I don't consider it a gift if she wants to be on the mortgage for a tax break. I'd feel better if she truly does consider it to be a gift if she gifts him the money with no strings attached and if not then i have no problem saving up on our own until we can put 20% down.

IF the life insurance was for the sons, why were they not named as beneficiaries on the policy?
Post Tue Oct 22, 2013 6:08 pm
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rxyl81
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I am not sure why. I asked him last night why the money isn't in his name. From what it sounded like, it was all in her name and she decided a portion of it (I think) will be for her sons. I told him last night I don't want to be on a mortgage with his mother. We are in our rental until September so we wouldn't buy anything before then. I'm fine with saving for a while before we purchase a home. I'm in no rush and I don't want to make a bad decision. Thanks for your help!
Post Tue Oct 22, 2013 7:27 pm
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