On Thu, 6 Mar 2008 08:36:51 -0800 (PST), "hr(bob) "
wrote:

On Mar 6, 9:29Â*am, dpb wrote:
JoeSpareBedroom wrote:
h wrote in m...

...



Plus, the son cannot take any mortgage tax deductions, since it won't be a
mortgage, just a loan.
...
I'm not so sure about that. What makes a loan a mortgage? What it's used
for, or who you get the loan from? ...

What makes a loan a mortgage is what the collateral is. Â*If the
collateral is the property, its a mortgage. Â*Mortgage interest on
primary and/or secondary is deductible irregardless of the payee.

But, it needs to be structured properly for this and other enumerated
reasons and shouldn't even be considered w/o proper legal representation
for each party...

--

I am going to have a regular mortgage on the property, the land and
the house are the collateral for the oan, just like as if I were a
bank. I will have to issue a 1098 form to them for the interest paid
each year just like a bank does, and I will have to declare the
interest they pay me as interest received just like I do for interest
received on a CD.

Thanks for all the warnings, I didn't get to the position of giving
them a mortgage without having some $$$$ smarts.
================================

There may be a better solution I remember from a long ago Dear Abby
column. That one dealt with a businessman's SIL and his daughter who
wanted to forget college and start a "surefire" business right away
with her daddy's money. Daddy was quite willing to put up the money
and didn't even mind losing it all. Having young people with
creditable ambition was worth his support. But he was wary of their
ability to handle real world business problems.....and he didn't like
the idea of being taken as an easy touch.

His solution was to provide a personal guarantee for them to get a
personal bank loan. The bank would be the best and an independent
authority to assess the viability of their business plans. And the
bank would be the best authority to enforce regular repayment. If the
business failed that guaranteed amount would be all he would lose.
Its only money. That business experience and discipline would be worth
far more than any college degree can endow. If the young entrepreneurs
could not keep acceptable business accounts and make the necessary
payments leading to failure their creditworthiness would be damaged.
That would be a far more effective incentive for them to do things
correctly than he can possibly devise.

From what I can deduce the mortgage is due for renewal and a whopping
rise in payments is imminent as a result of the subprime crisis. The
best solution for your son-in-law and daughter may be to get a bank
loan to pay off the mortgage in full. With you guaranteeing the loan
they should get an affordable and stable fixed rate their income can
handle. The bank will enforce repayment as per terms. If they
default you get to pay up the balance. Their credit record may tank
but they still get to keep the house and family intact. All you lose
is money. By then it will be worth any amount of money to keep your
daughter's family still dear to you. Don't sweat the money. Or if you
still want security get that signed but undated bill of sale I had
suggested. By guaranteeing the bank loan you don't have to disturb
your current investments and savings arrangements. You don't have to
hire lawyers to do expensive paperwork. You won't have to go to court
if anything goes south. You may need an accountant or financial
planner for independent advice.

Or heck. Why don't you pay off the mortgage to buy over the house.
You have clear title. Rent it back to you daughter for the same amount
as a bank loan repayment with interest. Have an agreement whereby
should they want to buy back the house their rent payments will offset
the sale price less whatever interest amount agreed on. An accountant
will be needed to figure out the details. You can use the bank loan
figures as a guide.

Good luck.