Quit Claim Deed
My parents would like to give us the house we are renting from them. They have a mortgage on this house. They will give it to us for they still owe on it. They bought it last year so it is at market value. My question is: what is the best, legal, way to do this so we can avoid closing costs and down payment?
I would simply do a contract for deed for the amount of the loan, insurance, etc and make the payments on behalf of your parents to the lender.
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By doing a contract of deed, may I then deduct the interest on my taxes? Also, would it be possible to refinance the property out of there name?[ Edited by imshanni on Date 12/06/2002 ]
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By doing a contract of deed, may I then deduct the interest on my taxes? Also, would it be possible to refinance the property out of there name?
Yes, you do deduct mortgage interest and property taxes on your tax return.
No, you will not be able to refinance the property because your name is not on the title. Instead, you will have to obtain a new purchase loan to get the loan into your name. Once that happens, you will also get the deed into your name.
May I suggest that you first attempt a much easier approach. Contact the lender that holds your parent's mortgage and ask them for their assumption package. If you qualify to assume the loan, you accomplish everything you want a little easier. On a side note, your parents can make a gift of equity for up to $22000 to you tax free (if you are married, they can give another $22000 to your spouse for a combined tax free gift of equity of up to $44000). This may allow you to make the purchase for the current loan amount without creating a taxable event for your parents.
First, let me say how much I appreciate all you help. I have a few more questions. Is a contract of deed something I can do myself or do I need to hire someone? If so, how do I go about it? The loan my parents have say it is not assumable. Is there some exception for relatives? How does the gift of equity work? Does the amount of loan increase? For example, the loan balance is 210,000. The property appraised for 260,000. We do not have a down payment. Please let me know your thoughts.
put the house in a trust. make yourself trustee. the bank can not exercise the due on sale clause. you then get a warranty deed to trustee and a quit claim deed from your parents. closing cost are $0 the house is protected from the fed and other relatives in case of death and closing cost are $0. Contract for deeds are shaky at best as far as i am concerned. (that is my opinion and everyone has one)