If I want to buy out my daughter’s mortgage and allow her to live there until she gets financially able to pay for it, what are my tax concerns, etc.?

Asked on July 28, 2015 under Real Estate Law, Texas

Answers:

SJZ, Member, New York Bar / FreeAdvice Contributing Attorney

Answered 5 years ago | Contributor

First, be aware that you cannot "buy out" your daughter's mortgage unless the bank lets you (modern mortgages from lending institutions generally prevent or forbid someone from purchasing or assuming the mortgage from the mortgagor). 

Tax consequences in any transaction depend on whether you make a profit or not: e.g. say that you have the chance to buy a $300k house for only $200k; in that instance, you would have made a profit of $200k and will have to pay taxes on that at some point.

You do have the right to simply make your daughter's mortgage payments for her--the bank doesn't care where the money comes from. Or you could enter into a lease whereby you "rent" part or all of the home from her (regardless of whether you actually live there or not) and pay her rent, which she could then use to pay her mortgage.


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