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. If transferring over $15K to a relative, in order for the exchange of family funds to be considered a legitimate loan and not a reportable financial gift, you must both properly document the transaction 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 financial gift.
National Family Mortgage ® will ensure the registration of your loan with the proper government authority. You will have a registered, public lien on the Borrower’s home.
Proper documentation sets clear expectations and prevents future misunderstandings with your loved ones. 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, 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.
A Strong Investment Vehicle
What are bonds, CDs, or savings accounts paying these days? Invest in a loved one; loaning money to a trusted family member can earn solid returns. Help a relative start a business or refinance other high interest rate debt. 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 conservative investments. Reinvest the money or spend it however you choose.
People get divorced. Sometimes, loved ones die unexpectedly. It’s no fun to think about, but it happens. Protect your family wealth from disagreements with your loved one’s ex-spouse or surviving spouse. With a National Family Mortgage ® the Borrower’s shared responsibilities are clear and your investment is protected, just like a bank, by a registered mortgage lien secured by the Borrower’s home.