My wife and I are moving back to TN as part of a job transfer and to be near family again. We currently have a mortgage on a home that we will be selling, however for a few reasons, we will need to buy a house in TN about 1-2 months prior to selling the current one. Therefore a traditional loan contingent on the current home selling won't work.
My parents have offered to use some cash they're sitting on (~300k) as a short term help to get us in the new house. From that point once our current home sells, we pay them back in full.
The tricky part is how to do this without being hit with gift taxes and without having to duplicate title transfer fees, closing costs etc. Any input on the following scenarios would be great.
- Have them buy the house in cash outright then resell to us. Downside: Added few thousand $ by transferring to their name then to mine, attorney fees, title insurance etc
- Have them pay down the balance of my existing mortgage so there's no outstanding mortgage . We then secure a conventional mortgage on the new house Downside: Gift tax implications of them paying down this house (is it considered a gift at that point?)
- Secure a mortgage on the new home while maintaining mortgage on existing. Possibly use the annual $14k/person gift exemption to help with down payment. Downside: I've heard lenders may not give their best rate for a 2nd home mortgage, even if you plan to sell the first home quickly
All other combinations seem to hit snags, for example Parents write a "short term loan" to use their money, however lenders may see that as outstanding debt and scare them off.
If you have ideas, please share them as there doesn't seem to be a clear or easy way to do this.
Thanks!