Can’t they refinance and not put you on the mortgage? You can still make the payments once you graduate (trust me, the bank will take your check). There are other ways they can leave the house to you if they want to without adding you as an owner or party to the mortgage now. I would not do this.
^^ this. Have your Gparents designate YOU as the SOLE beneficiary of the home in their will.
Then later, when you truly CAN afford to be the ONLY one financially responsible for paying the mortgage, have your name added to the title for the house.
@intparent You can’t leave a mortgage to someone. You would either refinance or sell the house upon the passing of the mortgage holders. Mortgage rates could be at 10% in 15 years.
@thumper1 Yes, I get the Pell Grant. Usually $4700 after my income impacts my EFC.
My sense is that if OP becomes one of three joint tenants where before there were two joint tenants, and with $150k in equity in the property, OP will be the recipient of a $50k gift. This should be reported on FAFSA, and there will probably be gift tax reporting requirements, since the grandparents can only jointly gift $28,000 per year to any one person before the reporting requirements kick in.
As a joint owner, if/when OP’s grandparents die, OP will become the sole owner without any probate process involved. Other relatives can “claim” all they want, but there shouldn’t be any real issue to argue about.
OP, you’re giving up an awful lot by taking partial ownership now, including the major benefit of a stepped-up basis that you would enjoy if you became an owner through inheritance. I’m curious as to why you think it’s better to get your name on the title (and mortgage) now, instead of inheriting the property and helping with the finances until that day comes.
@BelknapPoint I think the OP wants to be locked into a <4% mortgage rate. That is the reason for bomb on the mortgage now.
But if she takes a $50,000 equity gift…will she lose that Pell Grant?
@kingpin2 do you qualify for the simplified needs test?
@thumper1 Yes, you are correct!
@BelknapPoint I am aware of the stepped-up basis, but don’t I get that basis if I live in the residence after two years?
What if I stay on the mortgage, but am not on the title (if possible)? Then, leave the house to me in the will.
Apparently you can (at least most of the time). See Scenario 1 at this website:
http://www.interest.com/home-equity/news/dying-with-a-mortgage-what-happens-to-your-home/
What is the health of your grandparents? Is there a rush to get your name on the title of the house, i.e. they are in declining health and you want to take the worry of losing their home off their minds by adding you as a co-signer?
Well if kingpin qualifies for the simplified needs test…this asset would not have any impact on her aid.
And neither would her income.
You can get the stepped up basis ONLY by them leaving the house to you in their will ! Living the house has NOTHING to do with it.
My grandparents are 60 and 67. They are in very great health. The rush really has to do with the refinancing and low interest rate. However, I am willing to keep my name off of the title until I graduate and just be on the mortgage.
I don’t think so. I think that if you are added as a joint owner, you take on the cost basis of the other joint owners. In other words, based on 30 years of ownership, all the improvements that you describe, and a mostly recovered real estate market, you are potentially looking at a huge taxable gain when (if) you eventually sell. Becoming owner through inheritance would allow you to shelter a huge part of that gain.
You really should get some expert local advice before you make this move. Get recommendations for a good real estate attorney, pay that person for an hour or two of their time, make sure they understand the financial aid implications, and learn what the plusses and minuses are for your particular situation.
@thumper1 I do not know what this is exactly… but I can tell you my situation. My parents have not been in my life. My grandparents were awarded guardianship by the courts. So, I am an independent. My income last year was $8,000. I am on my grandfather’s health insurance plan, because otherwise, I could not afford health insurance. I live with my boss rent free, so that has helped a lot.
For what purpose? It makes no sense for you to be on the mortgage but not have an ownership interest.
@BelknapPoint There is a $250,000 exclusion / deduction that you can claim (this is for all people). You are allowed to make $250,000 on your home. This is definitely a tricky and unique situation, however. My grandparents paid $100,000 for the house, but since that time, have poured hundreds of thousands into it… so today’s selling price of $400,000 (for the low side) is essentially their cost basis.
you need to read this-
"A cosigner is a borrower who appears on the mortgage but not on the title deed. Cosigners are responsible for the full debt of the mortgage, but they have NO ownership interest in the home. "
“While it’s possible for a mortgage borrower to cosign the loan without appearing on the deed, it may not be wise. If the borrowers listed on the mortgage don’t make the payments, the lender can hold the cosigner responsible for the full amount of the debt, but the cosigner CAN’T sell the home to repay it.”
http://homeguides.sfgate.com/mortgage-borrowers-title-deed-52943.html
and this- perhaps a quitclaim deed is the way to go-
"Property owners may need to add or remove individuals as titleholders over time. An example of this might be due to a marriage or divorce. This is accomplished by using a quitclaim deed. This type of deed is generally used when property is not actually being purchased but to just make changes. Granting someone else ownership to the property via a deed does not make them financially responsible for the mortgage loan. "
http://finance.zacks.com/difference-between-name-houses-title-vs-its-mortgage-3318.html
@BelknapPoint I need to read up on this more. There’s so much to consider i.e. financial aid implications, tax implications, will implications, etc.
I find it hard to believe that a property in the Washington, D.C. area has only appreciated over the past 30 years by the dollar-for-dollar amount of improvements that have been made. And bear in mind, to keep the IRS happy, you should be prepared to document all of the improvements that you are claiming add to the cost basis at the time of a sale.
@BelknapPoint Fortunately, my grandparents keep everything. And, too much. They still have tax records dating back to the 1980s. The problem is, just down the street, you can buy a new house for $600,000-$700,000 with 1000 more sq ft. Nonetheless, the pool did not add value and the kitchen (they spent $75,000 on) maybe added $20,000. It’s hard to tell with real estate.
@BelknapPoint What makes one eligible for simplified needs test? How do I find out if I am eligible for 1040A or 1040EZ. I never really understood what those were for.
Also, going back to leaving it to me in the will - the federal government has the right to take the proceeds from the home to cover costs from assisted living, etc. that a retiree receives from Medicare. Thoughts on this?