A family loan agreement can help prevent future misunderstandings.
Why use National Family Mortgage? There are plenty of reasons!
Prevent IRS scrutiny. The current IRS annual gift tax exclusion is $15K per person. In order for an exchange of family funds to be considered a legitimate loan and not a potentially taxable gift, you must properly document the transaction as a loan and also 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 report earning less than the appropriate AFR, the IRS may impute the interest as income and also view the forgone interest as a taxable gift.
A proper family loan agreement sets clear expectations and prevents future misunderstandings. If anything happens to you, your registered mortgage documentation also protects the interests of your other children or family members who could be affected by the proper accounting of the loan. Our optional loan servicing platform reduces awkward conversations, provides year-end tax statements for the IRS, and keeps everything business-like.
A Strong Investment Vehicle
What are your bonds or CDs paying these days? Invest in a loved one and earn a solid return. Help a loved refinance student loans, refinance credit card debt, or start a business. The emotional returns are strong, too.
Monthly Income Stream
Your National Family Mortgage ® will generate a recurring monthly cash revenue stream from payments by your Borrower. This is an attractive feature relative to many other investments. Reinvest the money or spend it however you choose.
You can rest assured that your investment is protected with a registered mortgage lien as filed with the proper government authority. This can be especially important when an unforeseen event occurs, such as the death of the Borrower, or a Borrower’s divorce.