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Originally Posted by TrudyM
I have diversified greatly, and was not hit too bad in recent events. Or at least I don't think of it that way because I never saw the bubble gains as real. That said we plan on refinancing our sons house so we have a stable income. He has a good job and would never stiff us. That said in order for it to be arms length and make the payments deductable for him (and income for us but at our lower tax rate) the rate has to be the same or not much lower than what he can get elsewhere. This has the side benifit of avoiding state inheritence taxes in some states (Fed not an issue we don't have that much)
This was suggested by the investment bankers and hedge fund managers in my family.
Hope this helps
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I have an opinion on this one. Please forgive me for not keeping it to myself. I know you did not ask. This is not directed at your specific situation, just family mortgages in general.
This could be a good idea because it is recycling the family money. You know about the imputed interest rate and the IRS stuff. And I assume you are going through an attorney and filing the mortgage at the courthouse and making sure the title is clear and figuring out how the property taxes and insurance will be handled. You are the bank when you do this so from an investment perspective, you have to think like a bank, not like mom and dad.
But I just have to say that anyone doing this really needs to consider what would happen if for some reason the house payment did not come through, one time, two times, maybe more not than often.
By bringing this up, I am not saying that a child would intend such a thing to happen. What I am saying is that life happens. Illness. Job loss. A spouse. An ex-spouse. All sorts of things could possibly get between you and the house payment.
But if the answer is that you could really do without the money if you had to, and if all the bases are covered, just like you are the bank, these things can work out fine. Just not always.
I have known of family mortgages. I know people who have done it. I have seen the good, the bad, and the ugly. But a family mortgage can't truly be arm's length. Even if on paper it is that way.
When looking at this as an investment, the bottom line has to be whether you as the lender can afford not to get paid. Life happens.
I wish you the best. (And I really do know of some of these that have worked out beautifully. But possibilities must be considered, just like with any investment.)
Boomer