All Forum Posts by: Kyle Thomas

You're in a unique and potentially very advantageous situation, and it's great that you’re thinking through creative ways to structure this transfer. Since your parents have a low-interest conventional loan (2.99%) that’s not assumable, directly taking over their loan as-is isn’t possible under normal lending rules. However, you have several viable paths forward that balance your financial capacity with the goal of preserving the favorable terms as much as possible.

One approach you're already exploring—using a gift of equity—is commonly used in family sales and may be the cleanest route if you're getting a new loan. Your parents could sell you the home at a discounted price, applying the gift of equity to reduce your loan-to-value ratio. This would help you avoid PMI and potentially keep your monthly payment more manageable despite today's higher rates. While the interest rate would increase with a new loan, lowering the loan amount through the equity gift could offset some of that impact. It's also a way for them to legally and transparently transfer some value to you while still receiving enough cash to fund their next purchase.

The idea of putting the property into a trust or LLC, with you and your parents as beneficiaries or members, is worth considering from an estate planning and tax perspective but won't solve the financing problem by itself. The lender will still expect the existing loan to be repaid upon transfer of ownership unless an exception applies (such as the Garn-St. Germain Act for certain family-to-family transfers, which is limited and may not help in this case if you're not moving in as your primary residence).

A potential hybrid route could be your parents retaining ownership and allowing you to “rent” or pay the mortgage directly for now, while you save or arrange financing to formally buy it from them later. This isn't a permanent solution but could buy time. If structured informally, though, it could raise legal and tax complications, so be sure to put any such arrangement in writing and review with a tax or estate attorney.

In all scenarios, be mindful of gift tax rules (the 2025 annual gift exclusion is $18,000 per donor/recipient), capital gains implications for your parents when they sell, and your own debt-to-income ratio since you already own another property. You’re on the right track—keep working closely with your loan officer and possibly a real estate attorney or estate planner to ensure the transaction is optimized both legally and financially.

Note: This information is for educational and informational purposes only and does not constitute legal, tax, financial, or investment advice. No attorney-client, fiduciary, or professional relationship is established through this communication.