Their might be a circumstance where someone might ask, is it possible for me to buy my parents house? This could be a situation for either business or pleasure, and it is in fact much more easier than it might sound.
Many mortgage professionals categorize this transaction as a less typical risky one than a home sale affiliated with total strangers. The bond between family members can add many strengths to a home sale.
Advantages of buying your parents home
* Your ability to inherit your parents assets, including their equity is of importance to the lender
* Everyone benefits from a sale like this
* You can save your parents from resorting to draining their net worth by succumbing to pitches for reverse mortgages or annuities
* Buying your parents home would keep the home and money within the family
* When your parents die, you would overall inherit the money left over that you paid
* You could use that inheritance money to be put towards the mortgage
* Simplifies inheritance taxes when parents die if you have siblings
How does buying my parents mortgage simplify inheritance?
It gives you a place to live, and your parents the cash they might need for retirement. When two or more siblings traditionally inherit their parents home upon their parents death, they’ll both have to file the proceeds they have split along with paying any taxes such as capital gains taxes. Where as if one child has the title to the house, whether from purchasing it or acquiring the name of the mortgage, the only question would be when and how to put it up for sale.
How everyone wins from a situation like this?
Purchasing your parents home would give them any extra cash they’d need for retirement. And as stated above, even when they pass away those inheritance funds could go back to you and towards the mortgage. And on another plus, owning this home before the death of your parents guarantees that it’s yours, and would help to avoid any inheritance lawsuits. Many large inheritances in wills lead to disputes that go through a type of family court. This is called a probate, which is usually reserved for large estates in wills. Prior ownership eliminates this possibility.
Getting Down to the Process
If you’re facing this option, but it’s being put off because of the fear of more stress, please become aware that applying for buying your parents house isn’t really different from getting any other mortgage loan. A good step would be to clarify in the application that the sellers are your family. Brokers most likely would want to be told additional information in a case like this, but this information really works for your own favor. Buying a parents home allows for more chance to get lower interest rates, this is so because it means less risk to the borrower. A child buying their parents home might be considered of less risk because of the trust between the two parties.
If Your Parents are Senior Citizens
If your parents are senior citizens, then they would automatically qualify for a reverse mortgage, which in short terms is a second mortgage that does not need to be paid back unless your parents move from their residence. If your parents were making the decision of a reverse mortgage purely on their own behalf, it might be a good idea, unless they’d like to preserve an old family home.
A reverse mortgage would drain the equity out of your parents’ home, and when they died it is a fact you would not have the debt to repay their reverse mortgage, but the family home would be lost. At the point of death on a reverse mortgage, the home is sold to repay the reverse mortgage. Buying your parents home instead of getting a reverse mortgage would keep the money, and the house in the family, protecting a precious and expensive family heirloom.
We’ve discussed the topic of buying your parents home, or mortgage from them. It’s been established that’s its really no harder than the process of buying your very own home from a stranger and the benefits are well for both parties. If your reading this article and thinking about this possible option, try not to hesitate in doing so. You might be preserving a piece of your own history for your children and grandchildren.