Expert: Dick Dennis - 7/10/2007

Question

Hi there. A little background info... My husband and I are going to be buying our first home in Texas. My sister and her husband currently own a home here as well and will be putting the down payment of 20% on our home.... We
will not qualify for an attractive mortgage ourselves with a good interest rate, so my questions are as follows...

1) If we are the Buyer/occupying and they are the co-buyer non occupant will we receive the Homestead Tax Deduction? And will they beable to write anything off on their taxes as well?
2) If we put the mortgage in their name, do they get any tax breaks for an investment property when renting to family member for the exact "monthly mortgage payment"?

I guess our main question is, who's name should the mortgage be in and why ? Should it be a co-signed, or should we just leave it in their names? What are the negatives for both them and us (we are in a much lesser
tax bracket-they are in the highest) if they just give us "cash" to put down, or if they co-sign- or if the own the mortgage? If they give us 50K cash do we have to claim that as Income next year?

How would you structure an agreement between them and us? We are looking at it that they would own 20% of the house, when we sell they get 20% of any gain, we can have the option to buy them out, they can have the option to buy us out, if we sell and lose money everyone is at a loss...

So what would you do? You have next to perfect credit and your combined income is 250k+ you are going to give 50K to a family member to buy a house valued at 250K, they have ok credit but can't qualify for a loan with good intrest rates... What do you do to protect your 20% investment, and what do you do that will be "fair" all around. Who gets the tax breaks, who hold the title and the mortgage???
Sorry for the long winded question!!
thank you Anne"


Answer
The first thing I would do would be to go to a real estate attorney and tell him/her exactly what you want and make sure your sister and husband are there, too. You want to make sure that everybody understands what us going down. Don't you dare to try to put this together by yourselves. You are asking for big trouble if you do. The attorney will make suggestions to safeguard you. If the real estate attorney is knowledgeable with taxes, that would be ideal. I do wish you well.

Dick Dennis