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<<They are also paying an extra $100 per month to retire the 'no-interest loan' of the $15,000 downpayment/closing costs.>>

"Which is money that you guys fronted to the kids. I'm guessing that you don't have any type of lien or mortgage against the any interest that the kids are paying would also not be deductible. This can be fixed with a simple 2nd TD placed against the property. If you are not charging them interest, then you might have some problems with the imputed interest was mentioned in the prior post."

I rarely disagree with Roy, but I fear his distaste for these kinds of deals might be blurring his vision.

The kids do not own the property, so they cannot grant a 2d lien agaisnt it. Title was taken, apparently (and presumably), by aunt, uncle and wife's sister (mother of the niece). In addition, it is very likely that existing first lien contains a "due on sale" or "due on encumbrance" clasue that would allow the first lender to call its loan if the owner of the property placed a 2d lien against the property without the first lender's consent.

Lastly, I hope that aunt, uncle and aunt's sister did not misrepresent that they would be living in the house in order to obtain owner financing, as opposed to investor financing, from federal programs that are intended to encourage owner occupied housing.

Just my $0.02. Regards, JAFO

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