On homes and real estate: Parents plan to sell home to children

Q. Our parents are in their late 80s. Three years ago, they moved from their home to a rental apartment. I moved in to their house and have been renting it from them.

My sister and I will inherit it when our parents pass away, but we are interested in buying it now to keep the inheritance so it doesn’t go toward paying for nursing home care if needed. Our parents will hold the mortgage for us, and we would pay market value.

How would we share the mortgage, taxes, etc., if I am living there and my sister is not? Also, when they pass away, how do we split the inheritance given that we have both paid the mortgage while only one is living there?

We have pondered over this for over a year and are confused.

A. Let’s assume your parents pay expenses, like any landlord, and as tenant you pay them normal rent. You can simply continue doing that after you and your sister purchase the house. The owners (you and sis) share expenses as landlords. As tenant, you pay full rent to the owners. No point in paying half to yourself, though, so you just pay your sister the other half. That’s fair.

Someday, when the property is sold, you’re simply co-owners, and you split the proceeds 50-50.

I must point out that when your parents don’t have the house to use for medical costs, your mortgage will count as their asset instead. And if they’ve been out of their house three full years by the time you buy, they may owe capital gains tax on the sale. Too bad you didn’t investigate everything with an attorney last year when you started thinking about this. Do so now. Look for a lawyer who specializes in estate planning or elder law.

Q. My daughter is 36. She has been employed by the local university for five years in a good job. She purchased a home five years ago. The interest rate then was more than 6 percent. She has never been late and has a good credit rating (to the best of my knowledge).

I have encouraged her to refinance, since she is paying almost double current interests rates. She says no one will refinance her because she is a single female. I am frustrated. She should not be paying “extra” every month.

A. Being a single woman doesn’t make any difference in mortgage financing. Either your daughter is mistaken or she has some problem she does not want to share with you.

Perhaps she doesn’t have enough equity to qualify for a new mortgage. But if she really believes being a single woman is the barrier, it’s time to consult a couple of mortgage brokers to see what’s available. And no matter what the problem, she should stay in touch with her lender. New programs to help homeowners are coming out all the time.

Q. I want to purchase my brother’s rental home in the easiest way. Do I need a Realtor or can I just have a notarized purchase agreement and take that to the bank? The mortgage is about $45,000 and my credit is excellent.

A. It’s not clear whether you are looking to get a new loan or to take over the existing one. In either case, you can certainly consult lenders on your own. But I’d suggest using a professional — either a lawyer or a real estate broker, perhaps hired by the hour — to help with drawing up a purchase contract (which need not be notarized, by the way).

Ÿ Edith Lank will respond to questions sent to her at 240 Hemingway Drive, Rochester, N.Y. 14620 (include a stamped return envelope), or readers may email her through askedith.com.

© 2012, Creators Syndicate Inc.