Question about paying off home equity

[LoriLor6]

I took out a home equity loan in June of 2006 for approximately $24,600. Long story short, I still owe about $24,200. Yes, my interest is high. I have contacted the mortgage company (who I would NEVER use again) and they say there's nothing they can do for me. I just want to be done with them and have them out of my life. My parents have graciously offered to loan me the money to pay this mortgage company off using my parents' own home equity line and repay my parents directly. This would end up saving me about $150/month. My question is, do my parents get their mortgage company to write out a check to me and then I transfer it over to my mortgage company? Does their mortgage company write a check over to my mortgage company? I was told by a friend that if the money is given to me, it would be considered income. Is this true? Help me!

[Qtip]

Quote:

Originally Posted by LoriLor6 I took out a home equity loan in June of 2006 for approximately $24,600. Long story short, I still owe about $24,200. Yes, my interest is high. I have contacted the mortgage company (who I would NEVER use again) and they say there's nothing they can do for me. I just want to be done with them and have them out of my life. My parents have graciously offered to loan me the money to pay this mortgage company off using my parents' own home equity line and repay my parents directly. This would end up saving me about $150/month. My question is, do my parents get their mortgage company to write out a check to me and then I transfer it over to my mortgage company? Does their mortgage company write a check over to my mortgage company? I was told by a friend that if the money is given to me, it would be considered income. Is this true? Help me!

As I understand it, you get blank checks with Equity lines. Why not just make the check on the name of the mortgage company and pay them off that way?

[jlynn]

There's only a certain amount that can be gifted per year without being taxable, however this is not a gift its a loan. Check with an accountant...

And please, even though its your parents, put everything in writing!!! Save the potential for heartache and bad feelings down the road that you don't believe at this moment will ever - could ever happen.

My .02 cents

[Hedwig]

Even if it's a gift, the recipient pays no tax--the person giving it would pay the tax. So no, it wouldn't be income to you.

In 2008, any person can give any other person $12,000 without any taxes on either side. That means that your mother can give you $12K and your father can give you $12K. In other words, they could give you $24,000 and there would be no taxes due from anyone. And you could kick in the $200 yourself.

If it's a loan, the interest you pay your parents is income to them and they would have to pay taxes on it. It would need to be a "reasonable" rate or the IRS will impute income. I'm not sure what that rate is.