I am buying an investment property from a family member for the $125k that they owe on it. The house appraises for $160k so I'm getting a $30k gift of equity to use as a down payment.
The lender is telling me that the sale price will be $125k and that is what they are going to pay off of the existing $125k loan and give me a mortgage for $95k. That is the sale price minus the $30k equity down payment but I am having trouble wrapping my head around it.
Can someone help me understand the lender paying out $125k and giving me a mortgage for $95k?
@Nick Hawkins it sounds like the purchase and sales agreement is wrong, The way the lender is looking at it, PP is 125k and your relative is bring 30k to the closing table, The sales agreement should have been for 160k, with 30k gift. your relative will have to pay recapture of depreciation and capital gains tax plus excess gift tax unless a couple owns it.
Message I sent to my lender:
Based on what we talked about, the sale price of the house will be $125k with a $30k gift of equity down payment That means that you are going to pay off the existing $125k loan and write me a mortgage for $95k, end of story. I really like that plan but, to me, it seems like the numbers are expecting my mother and I to bring the $30k to the table at closing, which I can’t do.
In my mind, using round numbers, the sale price would be $155k minus the $30k gift of equity down payment for a mortgage on the remaining $125k.
This is the response I got:
The 30K is not in cash it has already been paid and is equity.
Thoughts??
@Nick Hawkins if you have a question or to thank someone you need to learn to tag them. I just happened to look at this thread again. Use the @ sign and start typing their name. It appears , double click and it populates the comment box in blue and then they are notified. Talk to mortgage broker,it should be doable, but who knows with thr lenders tightening up.