I'm considering asking for a $50,000 loan from family to help me make a $100,000 down payment (in order to avoid PMI). This loan would accrue interest and I would make payments on it like any other loan... Could the interest be tax deductible?
If not, is there another way to go about this that would be effective?
2007-04-27 07:03:25 · 6 answers · asked by cuztis209 4 in Business & Finance ➔ Taxes ➔ Other - Taxes
The first link below defined a mortgage as "any obligation secured by real property." So: if the loan is secured for the purpose of purchasing your home, if the home itself is the collateral on the loan, and if you are personally liable, then yes, the interest is deductible. There are no requirements that the loan be obtained from a lending instituation like a bank or mortgage broker.
Check the below IRS links for details. Good luck! :-)
2007-04-27 07:09:15 · answer #1 · answered by Anonymous · 3⤊ 2⤋
If the home is pledged as security for the loan, it's a mortgage and the interest is therefore deductible. If the loan is not secured by the property, the loan is NOT a mortgage and the interest is NOT deductible.
The source of the funds does not matter. A loan from a family member can be a mortgage just like one from a bank or other lender can be.
2007-04-27 15:57:10 · answer #2 · answered by Bostonian In MO 7 · 4⤊ 1⤋
I doubt a $50,000 family loan could qualify as a tax deductible loan if structured as a simple loan.
This is what I would suggest: Apply the $50,000 loan from family along with your $50,000 in savings toward the equity in the home and than take out a home equity loan against the house to pay back your relative. You may be able to get a tax deductible loan that way.
See this article for more information:
http://www.bankrate.com/brm/news/loan/19990203.asp
Also, just for information, if your a US veteran and you take out a VA backed mortgage, you do not have to pay PMI and lenders are prohibited from requiring it.
2007-04-27 14:43:08 · answer #3 · answered by Robert F 1 · 0⤊ 1⤋
if the family puts a second mortgage on the property to secure the loan (smart thing to do) then, yes, the interest is deductible, just like it would be if a company loaned you the money.
2007-04-27 14:09:34 · answer #4 · answered by StephanieS 2 · 3⤊ 0⤋
Yes the interest could be tax deductible but be careful becuase your family would have to pay taxes on the interest they receive from you. Talk to a lawyer to save yourself lots of potential trouble in the end.
2007-04-27 14:09:20 · answer #5 · answered by CSUflyer 3 · 1⤊ 4⤋
A FAMILY LOAN IS APERSONAL LOAN AND IS NOT TAX DEDUCTIBLE AS ONE FINANCED THROUGH A BANK.
2007-04-27 16:09:50 · answer #6 · answered by Dr. Albert, DDS, (USA) 7 · 1⤊ 5⤋