Posted on: 17th Mar, 2009 11:44 am
my daughter cannot refinance her (7 1/2%) mortgage because her debt to equity is too high...because her home has depreciated in value, she is in a zero equity position. can i loan my daughter enough money to qualify her to refinance? i would like to do this as an interest free loan because i do not want my daughter to be taxed on the amount of money i give her.
Hi grannywendy,
By giving a certain amount of money to your daughter, you won't be able to increase the equity in the property. You can pay off a certain amount of mortgage on her behalf which will help her to build some equity in the property. But again if that is done, it doesn't make any sense to refinance the property because the mortgage will be already reduced. Moreover your daughter would be paying a lot of money in the form of closing costs. By the way, why does she need to refinance the property? Does she wants to take advantage of the lower rates?
As far as taxes are concerned, your daughter will not be liable to pay the taxes. Rather, the money that you give her will be considered as a gift and you will be charged a gift tax.
By giving a certain amount of money to your daughter, you won't be able to increase the equity in the property. You can pay off a certain amount of mortgage on her behalf which will help her to build some equity in the property. But again if that is done, it doesn't make any sense to refinance the property because the mortgage will be already reduced. Moreover your daughter would be paying a lot of money in the form of closing costs. By the way, why does she need to refinance the property? Does she wants to take advantage of the lower rates?
As far as taxes are concerned, your daughter will not be liable to pay the taxes. Rather, the money that you give her will be considered as a gift and you will be charged a gift tax.
If your daughter was to do a rate and term refiing, meaning basically she is refinancing to get in JUST a lower rate/monthly amount, her LTV (loan to value) can go up to 96.5%. BUT, her debt to income would need to be 55% or lower. If you wanted to put 3.5% towards her mortgage balance she could refi. I would validate that she has the income to support this though before I paid any money towards it. Good luck!