What is the current rate of paying capital gains on an investment home?

Buying second home for mother, looking for best loan option.?

• I recently paid off my mortgage on my primary residence and now own my property valued at $135,000. Now I am looking to purchase a second home (Freddie Mac foreclosure with asking price of $125,000) for my Mom to live in to help her with her financial situation. She will be paying me a small monthly fee to help with the mortgage payments. She has her first grandchild on the way this summer from my sis and plans to help take care of the kid for compensation of about the same amount she will pay me. I did some research on my loan options and planned on getting a loan for a second home. The 2 large mortgage banks I talked to said I would have to get a investment property loan which comes with higher rates and fees and that a second home loan wasn't an option because of how I planned on using the property. I talked with a small local lender and was given a completely different option, which seems to be the best option to me. That option is to take out a cash-out loan on my property for $100k and use the money to pay cash for the home for my mom. We plan to offer 100-110k cash for the property with a pre-approval letter. I will be getting an interest rate that is about 1.5% lower than the investment property loan rate with similar closing costs and fees. Then I continue to make payments on my loan just as I have for the last several years with the same tax deductions for the interest. What is my best option for this scenario? I don't understand why the large mortgage lenders never even suggested the last option. Am I missing something here with tax consequences or deductions? I'm pretty sure I need to claim the payments my mom gives me as income, but is there a way around that? Any information on this situation is much appreciated, thanks for any answers.

• Answer:

  you probably won't be able to borrow more than 80% of YOUR home's value are they offering you a FIXED rate? - if not - you could get whacked in the future since rates have nowhere to go but up in the future if the asking price is $125,000 (which is probably already reduced), how do you expect to get it for $100-110,000? - very doubtful the bank will accept such a low offer