I want to purchase a home that my parent own. It has a mortgage in the amount of $250,000 and has been appraised for $499,000. My parents want $200,000 out of it. Should I ask them to refinance and get the money they want and then just arrange to put the house in my name? Or should I purchase the home and give them the money? I want to put an addition on the property and would like to have money to do this without stressing out financially.

We have to analyze this from two points of view: you and your parents. I do not know what your parents paid for the property, but if they have owned and used it for two out of the five years before you buy it, they will be able to take the entire up-to-$500,000 exclusion. Since the price you plan to pay will not exceed $500,000, it would appear that your parents would not have to pay any capital gains tax. If your parents refinance the property, how can you be sure that they will get the $200,0000 they want? They currently own $250,000, which means that they will have to get a refinance loan in the amount of $450,000 in order to take out that amount of money. And even if their credit is pristine pure, I doubt that a lender would agree to such a large loan. Furthermore, your parents will have to be concerned about a gift tax. Currently, each of your parents gave give you (tax free) up to $12,000 per year. However, if they give you the house, that clearly exceeds the free gift amount and they must determine how this will impact on their own tax and financial situation

click here for article

search for : mortgage, refinance the property