Gift of Equity
I am not sure of how this works. My mother lives in my house-which I pay the mortgage on. I live in hers-which she pays the mortgage on. I want to get things tot he point where I (and she) can take the tax exemptions we are entitled to, but can't take as we do not reside in our own homes (primary residence). I have heard we can do a gift of equity so the equity is not lost on the homes. She owes 195k on her house, Realtor told me the house would sell for about 290K. Can anyone guide me on how a gift of equity works; is it taxable as income at the end of the year; does it reduce our out of pocket expenses for the new mortgage? What is the benefit-and is there any pitfalls? I owe 142K on my home, would sell it to my mom for 160k so I have some funds to finish the improvements needed on her home (the one I live in). Currently last improvement I made was a new heat pump etc. which I still ma paying off. Any advice? We live in Texas. by james Hulick from Haslet, Texas. May 30th 2014
Dave Metsker (DaveMetsker)
#35 ranked lender in Oregon - 2,318 contributions
As previously suggested, you want to work this as a refi, not a purchase. Too complicated to explain here, but there is a way to balance the equity that does not involve gift funds. Our company is licensed to do business in Texas, and I can help you with the entire transaction, which must be done in the correct sequence, in order to accomplish what you want to do. Both refi transactions would be done at the same time, and the balancing of equities, plus the cash out you need, would happen all at the same time. Contact me, Dave Metsker, at primefinancial@frontier.com. Properly done, there will be no income tax or gift tax.
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