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Old 11-21-2013, 01:28 PM   #41
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And the problem is that if you pay it off now and rates do go up a lot..... you have no way of getting your low rate back...

I have a low rate 15 year and plan on taking all 15 years to pay it off...
+3 (12 years at 3%).
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Old 11-21-2013, 02:22 PM   #42
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30y fixed at 3.75%. Not paying extra (did before j*b became iffy), have no plans to ever pay it off. Will likely move first. But the payment is around $460, so easily affordable under most circumstances...
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Old 01-03-2014, 08:23 PM   #43
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OK ...so son is closing in a week ...we gifted him enough to avoid PMI ...he'll be paying back, though.

How best to structure the loan? Can I set it up some way to maximize his tax deduction opportunity? All interest and then "forgive" the loan when the total amount is paid back?
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Old 01-03-2014, 08:31 PM   #44
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OK ...so son is closing in a week ...we gifted him enough to avoid PMI ...he'll be paying back, though. How best to structure the loan? Can I set it up some way to maximize his tax deduction opportunity? All interest and then "forgive" the loan when the total amount is paid back?
Interesting question. My take would be that you can't charge interest on the loan because it wasn't a loan, but rather a gift.
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Old 01-03-2014, 08:33 PM   #45
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I believe you can, but it has to be structured and documented properly, and you have to report the interest just like any other bank. Whether it's worth your while to set all that up is for you to determine, but I'm guessing not.
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Old 01-03-2014, 08:44 PM   #46
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Did the bank ask your son where the down payment was coming from? If not then you can charge going rates as you choose. Any amount forgiven would then be income to him or the balance could be gifted. But if there is documentation that it was initially a gift you are creating a hot mess.
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Old 01-03-2014, 10:09 PM   #47
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15 or 30?
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Old 01-03-2014, 10:13 PM   #48
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The house has to be collateral for the loan in order to allow an interest rate deduction. You have to charge a minimum interest rate per IRS guidelines or you'll have virtual income that the IRS will expect to see on your tax return. You must document the loan to set out these parameters. Have all parties sign it.

You can gift just like normal, $13k/year/person or whatever it is now to avoid estate tax complications.

I guess the best structure would be a very long-term loan, or interest only, to maximize the interest versus principal repayment. Let him pay it off when he wants, or you can gift the principal when it is low enough to fit within the yearly gifting limits and he has paid interest equal to the original loan amount. I think that's what you intended. Seems like that would work for the IRS, though I'm no expert. I wouldn't write the gifting into the documentation though.
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Old 01-03-2014, 10:26 PM   #49
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He decided 30 worked better and he realizes he can pay early.

Animorph got what I was thinking about ....some way to maximize the tax deductibility while balancing payback options!
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Old 01-03-2014, 11:24 PM   #50
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I've done both. I would do a 15year the next time but I am approaching child territory and I am thinking about just renting my way through that until they are the non-destruction age.

Then again if you can pay a modest home off in 15years and live in it for 30, it seems like a good idea. I personally could not live in one place for 30years.
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