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Hello everyone, my aunt who has a home which she wants to sell off to me. The property is worth $250,000. However, she is selling off the property for only $170,000. How should I make the deal so that I won’t have to pay mortgage insurance and gift taxes?

jerry · Posted: Thu Jun 30, 2011 2:41 am Post subject:

Hi Maria,

In order to avoid the mortgage insurance, you’ll have to offer 20% down payment. You should take out a loan amount equal to 80% of the value of the property. As far as gift taxes are concerned, you won’t be liable for paying it. It is your aunt who is gifting you the property. Thus, he will be liable for paying the gift taxes.

Thanks,

Jerry

gmakerley · Posted: Thu Jun 30, 2011 8:26 am Post subject:

Regardless of the dropped "s" it's a possibility that your aunt could render this property to you by selling it for $250000, gifting you the down payment (a gift of equity), and thereby allowing you to borrow the $170K you need without the need for mortgage insurance. Your loan to value ratio in that instance would be 68%, well below the threshhold that brings you into a need for mortgage insurance. She could also sell for $212500, which would bring your loan amount of $170000 to an LTV of 80%, again avoiding MI in the process.

Gift taxes are something to be checked out with your tax advisor (or hers).

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Avoid gift tax and mortgage insurance

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