We make buying a home from a family member safe, easy, and successful.
Why use National Family Mortgage? There are plenty of reasons!
Prevent IRS scrutiny. The current IRS annual gift tax exclusion is $15K per person. If your relative simply transfers the deed to their home to you, the IRS may treat the fair-market value of the property as a reportable gift. In order to prove the exchange of value is a legitimate loan and not a reportable financial gift, you must both properly document the transaction in writing that your Lender has extended “Seller Financing”. Additionally, the Lender must report earning interest at a rate equal to or above the minimum rate required by the federal government, called the Applicable Federal Rate (AFR). Even if you document the loan, but the Lender reports earning less than the appropriate AFR, the IRS may impute the interest as income and also view the forgone interest as a financial gift.
National Family Mortgage ® coordinates the government registration of your loan with the your real estate closing attorney, title company, or escrow company. This will allow you to legally deduct your mortgage interest payments from your federal tax return — just like with a bank mortgage. (You cannot legally deduct these interest payments on non-registered loans — even if the money is used to purchase a home.)
Proper documentation sets clear expectations and prevents future misunderstandings with your family. If anything happens to you, or your Lender, your registered mortgage documentation helps protects the interests of all parties who could be affected by the proper accounting of the loan. Our optional, Dodd-Frank Act compliant, loan servicing platform reduces awkward conversations, processes monthly payments, provides year-end tax statements for the IRS, and keeps everything business-like.
Traditional lenders often require private mortgage insurance (PMI), require Lender’s title insurance, appraisals, and lots of hidden fees. Borrowers can save thousands of dollars in closing costs with a National Family Mortgage ®.
A Low Interest Rate
Usually, interest rates charged through intra-family loans are lower than rates charged by banks. On average, National Family Mortgage ® interest rates are 1.25% lower than prime lending rates offered by most banks; this can add up to thousands of dollars in interest savings over the life of the loan! And, you’re keeping money in your family!
A traditional bank loan application can take weeks of work and waiting with no guarantee of approval. With a National Family Mortgage ®, Borrowers qualify so long as their Lender agrees to make the loan. Each family sets their own loan terms, (but, within our Standards.) No credit checks or down payment required!