Family Gift
 our family may have either saved a bit on the side knowing you might need it, or are willing to use a home equity loan to tap into the often significant appreciation of the family manor.
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An example
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| You want to buy a house for $100,000. You don't have the $20,000 down payment, but you do have a financially "comfortable" parent whose paid-off house has appreciated greatly over the years and is now worth $350,000. |
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| Said parent can refinance the old place and buy the new one for cash. |
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Options for paying off the loan are:
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- You pay for the refinancing by making monthly payments to your parent in the amount of the refinance loan payment.
- Your parent can basically give you the house by giving you up to $850/ month tax-free as a gift ($10,000/ year) which is used to pay off the loan.
- Your parent can outright grant you the house (raising some interesting tax issues) and pay the refinancing loan payments.
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Get a loan from grandma
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| Try talking to relatives and grandparents who grew up in the Depression and have invested their money in bonds and banks. |
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| Offer them a better interest rate than these options. You can reassure them that while you may be riskier than their savings account, they will at least know where you live. |
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Document document document
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| The lender will require a "gift letter" outlining the amount (and often the terms), but you should make sure that the terms are in writing and have been agreed to (and signed) by all parties in any case. This can keep family dinner conversations much less painful. |
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The tax factor
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You should talk to an accountant or financial consultant who is familiar with your finances to see how a gift or loan from your parents would affect you and your parents' taxes.
You may have to pay income tax on the gift. |
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