Gifting House to Bro?
This might be an odd one and I am talking to banks and lawyers, but thought someone here may be able to help. I have a house out of state that my younger brother has been living in for over 10 years. I would like to give him this house. This would consist of him…
This might be an odd one and I am talking to banks and lawyers, but thought someone here may be able to help. I have a house out of state that my younger brother has been living in for over 10 years. I would like to give him this house. This would consist of him taking over the payments of my 1st mortgage and Equity Line of Credit on the property – which he has in effect been paying in rent for years. I’m open to keeping the mortgages in my name if we can also get his name on them and the title, or any other ideas. He is younger and has just begun creating a credit history so his score is not good (not sure exactly and will find out but last I knew it was not good enough to get him a refinance in his name alone). If it matters both the 1st and Equity LOC are around 100K for a total owed on the property of about 200K. An appraisal would put the value between 210K-250K. Does anyone know of a way to do this?
Thank you all!
Also don’t forget that there may be capital gain tax on a property that is not a primary residence for the seller. All the more reason to talk to an accountant and/or lawyer.
I believe, unless the mortgage is assumable (and very few are nowadays), that the bank cannot be forced to change the name/debtors on the loans. Even if you put the deed in his name, the mortgage company can still require that you fulfill the terms of the original loan. That is probably why the bank is telling you to refi, they don’t want to transfer the loan to someone whose risk they haven’t evaluated. By refinancing your brother would effectively be applying for the loan and they have an opportunity to verify his financials. If you think about it, if the banks allowed people to transfer loans between each other, than people who were underwater on their mortgage with good credit scores could transfer their loans (for $$) to someone who already had bad credit, and then allow it to default, in effect preventing themselves from getting a foreclosure ding on their credit report.
Also re gift tax, just conjecture, but I would question whether or not the gift tax is even triggered if you owe $200k on the property and it’s appraised at say $210k at time of transfer. I’m not an accountant or lawyer but seems like the total equity “gift” transfer in that case is only $10k equity and gift tax exclusion limit is $13k this year.
Sort of a conundrum in that respect, because it seems like more equity in the property the better chance of being able to do a refi and get the loan in brother’s name, but also more likelihood that you would have to pay gift tax.
Perhaps the route of having your brother just start paying the mortgage directly and claiming the deduction would be easiest. You just have to keep an eye on the statements and make sure he doesn’t miss or make late payments.
Anyway, I would talk to an Oregon-based accountant and lawyer in if I were in your shoes.
A 250K gift between siblings will trigger gift tax issues, so you should probably consult with an attorney to make sure it is structured properly (in Oregon as there may be state tax issues there too.)
Also remember, some of the advice on this board may be of limited help as some states (incl. Oregon IIRC) usually use deeds of trust rather than mortgages which means that the bank (as trustee) is the name on the title.
Thanks EVERYONE – this is all so helpful. Keep the info coming!
fyi: what the banks are saying is in line with what CMU said (would have to refi to get his name on which I don’t think is an option)…The house is in Portland Oregon (not nyc). And making things more difficult is that the mortgages were with WAMU which is now Chase but loans are not completely transfered over yet so blah blah blah…
🙂
whoamikidding: would love to know details, as I was told that by a TIC lawyer. what was your transaction? Did the names on the deed change? In my case, I have to get my wife off the deed and my partners on, so supposedly this violates the terms of the existing mortgage.
thanks senator
bitter_bubble_buyer: the brother is not claiming ownership; he is claiming the tax deduction BECAUSE he is paying the bill.
The cross reference on both tax returns is the correct “Cover Your Ass” procedure.
can you transfer the title without getting it by the gift tax? that does not sound right to me
Dave –
I just did before posting that!