Paying Off Mortgage

[ConfusedWizard]

Hi All,

I'm not sure if this is a Tax law question or Real Estate question or even security clearance question. Please let me know and I will post it in the appropriate location.

My relative who live outside the US is offering me to pay off my mortgage. The person is a US citizen in the 60s. In return, the person wants to buy a house, but it will be under my name. He will pay part of house and the financing will be under my name.

Do you think from IRS point of view this arrangement is suspicious?
Since I have high security clearance, do you think such payoff would jeopardize my clearance?
Should I decline such offer?

I know that you all have more questions than answer, but I thought I will start with this and answer any questions that rise up.

Thanks for any advice anyone can provide.

 

[Shadowbunny]

Hi All,

I'm not sure if this is a Tax law question or Real Estate question or even security clearance question. Please let me know and I will post it in the appropriate location.

My relative who live outside the US is offering me to pay off my mortgage. The person is a US citizen in the 60s. In return, the person wants to buy a house, but it will be under my name. He will pay part of house and the financing will be under my name.

Do you think from IRS point of view this arrangement is suspicious?
Since I have high security clearance, do you think such payoff would jeopardize my clearance?
Should I decline such offer?

I know that you all have more questions than answer, but I thought I will start with this and answer any questions that rise up.

Thanks for any advice anyone can provide.

So WHY does your relative want to do this?

 

[adjusterjack]

My relative who live outside the US is offering me to pay off my mortgage.

I don't see any problem with that.

In return, the person wants to buy a house, but it will be under my name. He will pay part of house and the financing will be under my name.

So, you will own two houses. One you live in that's paid for. The other you'll be paying a mortgage on but not living in it. Who's going to live in it? Who's going to make those payments? Your relative? Basically, you'll be owning a rental house and your relative will be your tenant. There are probably insurance and tax issues that are easy enough to handle.

But the big question is why doesn't your relative just buy his own house instead of getting into something convoluted?

That's the part that smells.

 

[ConfusedWizard]

I don't see any problem with that.



So, you will own two houses. One you live in that's paid for. The other you'll be paying a mortgage on but not living in it. Who's going to live in it? Who's going to make those payments? Your relative? Basically, you'll be owning a rental house and your relative will be your tenant. There are probably insurance and tax issues that are easy enough to handle.

But the big question is why doesn't your relative just buy his own house instead of getting into something convoluted?

That's the part that smells.

Thanks for the useful replies. My relative will live in the house.
I will make the mortgage payments. The reason my relative is not buying the house himself is that he has living abroad for 20+ years and he may not qualify for the loan due to no credit history.

My concern is that receiving such payment to payoff my house, do you think I need to pay Gift Tax?
Furthermore, would money transfer of $200K+ be investigated as it may be considered suspicious activities (e.g. Money Laundering red flag) and may jeopardize my high security clearance?

 

[Zigner]

I suspect the (any) mortgage company may not like the feel of this arrangement.

 

[LdiJ]

Thanks for the useful replies. My relative will live in the house.
I will make the mortgage payments. The reason my relative is not buying the house himself is that he has living abroad for 20+ years and he may not qualify for the loan due to no credit history.

My concern is that receiving such payment to payoff my house, do you think I need to pay Gift Tax?
Furthermore, would money transfer of $200K+ be investigated as it may be considered suspicious activities (e.g. Money Laundering red flag) and may jeopardize my high security clearance?

This really does not make any sense. If your relative has enough money to pay off your mortgage, then your relative has enough money to buy a house of his own. A 200k down payment should qualify him for a loan without too much trouble. In many parts of the country it would completely pay for a very nice home.

You would have to report a foreign gift of more than 100k to the IRS on form 3520. I have no idea if that would impact a security clearance or not, but I would assume that it would be investigated more heavily than other foreign gifts, simply due to your security clearance.

Really, this whole thing seems a bit odd and unnecessary. Let your relative come back to the US, find temporary housing, and bring in his own money and buy his own house. It makes a lot more sense.

 

[HighwayMan]

Why was your relative living abroad for so long and why is he now looking to come back?

 

[adjusterjack]

I suspect the (any) mortgage company may not like the feel of this arrangement.

It's more than that. Many mortgage contracts require that the borrower live in the home for the first year. Non-compliance would put the loan in default.

He would likely have to take out an investment loan for the second property that would not have that requirement. That could take a down payment of 30% to 40%.

 

[FlyingRon]

I can't see why the IRS would care. You had better make sure that any money transfers from foreign sources meet the reporting requirements.
You'd need to be open about the situation with whoever you're attempting to obtain new financing (noted by others, whether the person on the mortgage is intending to occupy the property, etc...).

Frankly, as far as security clearances go, if the person is solely a US citizen residing abroad, such "help" shouldn't be a problem. However, if that person also has attained foreign citizenship, your relationship with them could very much attract attention on the security clearance. The clearance people have qualms with people who have "bonds of affection" with foreign nationals, let alone those foreigners that can exert financial control over them.