Tuesday, July 15, 2014

Need a Middleman for your Parent-to-Child Home Loan?

Longtime readers of this blog will remember Circle Lending, which took care of the paperwork for private loans, and Virgin Lending, which bought Circle Lending just before the crisis, and then folded shortly thereafter.

Looks like National Family Mortgage has gotten organized to fill the void, per Kathleen Pender's Chron story this am.  They charge $725 to originate the loan (set up, record and handle 1099 forms at the end of the year), and then there's a separate $15/mo servicing charge (to cover sending out monthly mortgage payment bills, letting you know if a payment issue comes up), which can be paid by the lender or borrower, at your direction.

Note that if you were to "gift" funds to a relative, you are liable for gift taxes.  The IRS has a "Applicable Federal Rate" which is a safe-harbor rate that avoids any liability.  It's currently just over 3% for a long-term loan.  So while market rates are closer to 4.375% for a 30 year loan, you could lend a relative at 3.06% and not worry about whether a portion of the arrangement would be considered a gift by the IRS.  The program allows you to set the rate at whatever you agree on.

See their site at nationalfamilymortgage.com, and/or check out a guide to borrowing at this site.

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