A mortgage may be best on parental home loan


September 18, 2005

Q. A few years ago I lent my child a sizable down payment when she wanted to purchase a house. For her to benefit from the "first-buyers" discount, we decided to put the house only in her name; however, my name also was on her mortgage. As the mortgage rates continued to drop, I paid off the house for her (to avoid the refinancing charge), and she has been paying me back monthly without fault. She has recently married, and we recognize that my name should be added to the deed. What steps and information do I need to achieve this? Thanks for your help.

A. It is an easy matter to add your name to the property deed. Your daughter would sign a new deed conveying an interest in the property to you. The property transfer might have income or gift-tax consequences for your daughter, and the matter should be discussed with your tax adviser.

However, I am not sure if adding your name to the deed is really what you want. You state that the initial down payment was a loan to your daughter, and that you paid off her mortgage balance to avoid refinancing charges. If your daughter still is paying you back, you might want to record a mortgage on the property, giving you a lien for the balance owed.

A first mortgage would give you a priority over claims of other creditors and also would provide a measure of protection in case marital problems develop between your daughter and her husband.

Your attorney can prepare the mortgage. A recordation tax will have to be paid when the mortgage is recorded in the land records.

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