Selling At Cost To My Son
I want to sell a renovated house to my son at cost and then I want him to get a mortgage and pay me off. I want to do the legal paperwork for the tranfer and the debt note without any lawyers. What legal documents would I need and how is tiltle transfer handled. I live in NJ.
Selling at cost to your son suggests that you are selling below market value. If so, then you will have gift tax issues as well.
Even if you decide to handle the details of the sale without legal assistance, please consult a professional tax advisor on this point.
Now, if you expect your son to obtain a new loan to pay you off, why not just have your son go through the loan application process in the first place and buy the property outright with his own financing? Why do you need the intermediate step you are proposing?
The question was why do I need an intermediary step with my son.
As far as a gift goes, my son worked on the house for the past few years, the increase in value is his own labor. My costs were only material costs.
If he goes for a direct loan they have to increase the price of the house above my costs by 20% to avoid PMI for my son and I would have to pay taxes on the higher price which I would never receive, but at the same time, I don't want him stuck with paying an extra $74 or so per month for the PMI.
there are lenders that can do 80/20 loans so as to avoid PMI. WIth an 80/20 you have a first mortgage for 80% of LTV or purchase price and a second for the other twenty. The lender or broker would quote you a blended rate, that is, a rate that takes into account the interest rate for each of the loans. No PMI and fully tax deductible.
What you can do is quit claim your son onto the title of the house. In about 1 year your son can refi the mortgage balance because his name is now on title, the new mortgage will now be under his name and you can then remove your name from the title if you choose.
Hmmm