I’m toying with the idea of buying a house nearby for one or both young adult children. They aren’t in a position to really pay any rent now. Currently we are paying rent for adult daughter at various places - she has some mental health issues and struggles to hold a job.
I called Better mortgage out of curiosity of mortgage rates - and the person told me that the loan would be considered an investment property loan, not a second home, in spite of the fact that family members live there and there will be no rent. The rates are somewhat higher - I was quoted a range of 7.0% to 7.35%, which is a little higher than I expected.
The home would be about $360k. 80% finance. I could pay more down but I’d pretty much deplete my ibonds and cash reserves to do so and would have to tap retirement accounts for something unexpected like wife losing job or maybe a car purchase. I’m over 60 so no penalties for tapping retirement accounts. Other than cash and ibonds we don’t have any other taxable accounts.
Also, does the financing status of investment property have anything to do with tax status? We already itemize so if it was a 2nd home we could deduct interest. But as an investment home since there is no rent revenue there would be no deductible expenses.
Between higher rates and potential non deductibility it has put a bit of a damper on my interest in doing this.
In summary is there any way of getting around house being an investment for financing purposes, and how would I determine the tax status and tax deductibility of interest for tax purposes?
I called Better mortgage out of curiosity of mortgage rates - and the person told me that the loan would be considered an investment property loan, not a second home, in spite of the fact that family members live there and there will be no rent. The rates are somewhat higher - I was quoted a range of 7.0% to 7.35%, which is a little higher than I expected.
The home would be about $360k. 80% finance. I could pay more down but I’d pretty much deplete my ibonds and cash reserves to do so and would have to tap retirement accounts for something unexpected like wife losing job or maybe a car purchase. I’m over 60 so no penalties for tapping retirement accounts. Other than cash and ibonds we don’t have any other taxable accounts.
Also, does the financing status of investment property have anything to do with tax status? We already itemize so if it was a 2nd home we could deduct interest. But as an investment home since there is no rent revenue there would be no deductible expenses.
Between higher rates and potential non deductibility it has put a bit of a damper on my interest in doing this.
In summary is there any way of getting around house being an investment for financing purposes, and how would I determine the tax status and tax deductibility of interest for tax purposes?
Statistics: Posted by JBTX — Tue Sep 17, 2024 3:19 pm — Replies 2 — Views 146