# Purchase Mom's condo?



## faline (Feb 10, 2011)

Hi everyone, 

I am listing my home in Ottawa for sale soon and not purchasing a new one. I JUST signed a new 4 year term mortgage in Feb!! Oops! It will cost about $8,000 to break. 

My Mom owns a condo worth ~80,000k less than my home. She is currently on a variable mortgage and only paying enough to cover interest, not paying down principle at all. 

We are thinking about having me purchase the condo from her at FMV, and have her pay my mortgage in rent. She would be paying ~ the same amount she is currently. 

I don't really see the benefit to her, except an easy, stress-free sale with no real estate commission. But she would have money in the bank now vs later. She's not sure if she will ever want to move out. Personally, I doubt it. 

The benefit to me is avoiding the 8k bank fees to break my mortgage. Also, I get to stay in the RE market game with THE most perfect tenant. I'd sell it when it becomes empty. 

Opinions? Am I missing something?

From reading another post, I'm wondering if another option would be to have us both on the mortgage. 

Thanks in advance.

Faye Faline


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## Potato (Apr 3, 2009)

A few things to consider:

1. Is your mortgage even portable? Is there a fee to port it, and if so, how does that compare to the fee to just break it? ($8k doesn't sound like much of a break fee).

2. Assuming your mom is also in Ottawa, you'll likely have to pay Ontario land transfer tax on the transaction. For a $300k condo, that would be about $3k. (Though you may be able to avoid that by becoming joint owners -- I'm not sure on precisely what the rules are for that situation).

3. Capital gains: assuming the condo goes up in price and you sell at some point down the road, if it's your mom's principal residence, she could sell tax-free. If you buy it as an investment, any gains would be subject to capital gains tax. Since you're not buying another, you might be able to designate the condo as your PR, but keep in mind if you do buy another house for yourself, you'll have to make one of them an investment and one a PR.

4. Complications: the arrangement will _probably _go swimmingly, but what if it doesn't? If your mom's fridge breaks, will she then come to you to pay to have it fixed since it's now your fridge? If your mom does want to move, and you then sell the condo, do you get mad at her because you have to incur more transaction fees because of her decision? It can make life complicated.


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## MoneyGal (Apr 24, 2009)

faline said:


> The benefit to me is avoiding the 8k bank fees to break my mortgage. Also, I get to stay in the RE market game with THE most perfect tenant.


As noted above, you are unlikely to avoid ALL fees - you will incur at least some fees to make this transaction. In addition to the land transfer tax, you will have legal costs. You should cost this out before you act. 

Also - do you WANT to be in "the real estate game?" Is your mom's condo something you'd choose to own in different circumstances? How long is your mom likely to want to live there? What are your mom's long-term plans otherwise - is she OK with becoming a tenant?


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## the-royal-mail (Dec 11, 2009)

What I don't see here is the WHY - I've considered a roughly similar idea in the past and discussed it here. The conclusion was that there are too many questions, too many things that can go wrong and now your name is on the title if you ever end up in a divorce or other adverse situation. It seems to me you're taking on a lot of liability and I don't really see the benefit. 

I believe that everyone needs to handle their own affairs when it comes to housing. Just because you can do something, doesn't mean that you should.


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## Cal (Jun 17, 2009)

Personally I am not too interested in tying my money up on something to break even. It could be put to such better use elsewhere. I am assuming that you would put down as little of your own money and finance the rest, which your mother's rent would cover.

Yes, it does appear that you would have the ideal tenant though.


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## marina628 (Dec 14, 2010)

2. Assuming your mom is also in Ottawa, you'll likely have to pay Ontario land transfer tax on the transaction. For a $300k condo, that would be about $3k. (Though you may be able to avoid that by becoming joint owners -- I'm not sure on precisely what the rules are for that situation).
If you own 50% you have to pay 50% land transfer ,you own 20% you pay 20% and so on.Does your mom have to pay fees to discharge her mortgage,just because it is variable does not mean there are no fees.I would recommend you keep it clean and just sell and leave your mom alone .Obviously a guy who does a 4 year mortgage and decides to sell 2 months later can change his mind on things very quickly.If you have the funds prepay your max ,discuss doing a blend now if it will reduce the penalty a bit.OBVIOUSLY if you have anything under 4% you won't have the blend option.
To make yourself feel better add 8k to the list price so you feel like somebody else is paying that penalty


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## faline (Feb 10, 2011)

Thanks for the points


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## skyavenuerealty (Apr 13, 2012)

> Assuming the condo goes up in price and you sell at some point down the road, if it's your mom's principal residence, she could sell tax-free. If you buy it as an investment, any gains would be subject to capital gains tax. Since you're not buying another, you might be able to designate the condo as your PR, but keep in mind if you do buy another house for yourself, you'll have to make one of them an investment and one a PR.


I am agree with this point that if you are selling it as an investment you have to pay a capital gain tax on it.


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