How to Help Children With a Mortgage
- 1). Gift your children some money. You can theoretically give as much money as you want to your children, or anyone else for that matter, but the amount you can give without having to pay tax is limited by the Internal Revenue Service. As of 2011, the annual limit on gifting without tax was $13,000 per person, although this is subject to change annually. If you are married, you and your spouse can therefore give $26,000 to your child tax-free, or $52,000 to your child and his spouse, and you can make those gifts annually. Your child can then use this money as either a down payment or to help with the mortgage. You have no further legal or tax liability regarding that money or your child's mortgage.
- 2). Co-sign the mortgage loan. Co-signing your child's mortgage loan means you are promising the lender that if your child cannot make the payments, you will. Unlike with a straight gift of money, co-signing a mortgage loan makes you legally as liable for the mortgage debt as your child. However, by being named on the mortgage loan you can also help your child make payments, and you do not have to worry about running afoul of any gift taxes, as you are merely paying a bill that you legally owe.
- 3). Draft an equity-sharing agreement. In a typical equity-sharing agreement, you will agree to pay the down payment on your child's house, but they will make the monthly mortgage payments. However, as with co-signing a loan, you are legally responsible for the mortgage payments in an equity-sharing agreement if your child cannot pay.
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