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Concerned about tax complications in paying off mom's mortgage

She’s selling and moving to a new house. Same funds could be used to reduce her obligations on new home so her monthly payments would be lower.


EAR HARRY: My mom owns a home with a remaining mortgage of $100,000. I am a co-signer on the loan but I am not on the deed. She is in the process of selling this house and buying one that is being built. At present, I am not going to be on that deed either. I have offered to help make this transition. I could easily pay off the present mortgage and get repaid when the properties are both settled. However, I am concerned that this might trigger some adverse tax complications. Or I could use the same money to reduce her obligations on the new home so her monthly payments would be lower. Or something else. What would you suggest?

WHAT HARRY SAYS: Paying off the mortgage will have no tax effect. The real question is whether you want this to be a short-term loan, or one that is almost permanent like a mortgage. In either case, paying off the mortgage now will make settlement a bit easier. You will have to decide the issue of a short-term or long-term loan. Keep in mind that a long-term loan may require some financial gyrations if you later should need the money. And you are considering a hefty $100,000, not $100. Without knowing your financial circumstances, I cannot help with that decision.

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