Can I buy a house and have someone else pay the mortgage?

The short answer is, yes, you can buy a house and have someone else, like your parent, pay the mortgage or a portion of it. However, you have to keep in mind that it could have negative consequences if it’s not managed properly.  

If you’re buying a house and having a parent or someone else pay for it, make sure you’ve thought through the following: 

1. Loan Responsibility

If the mortgage is in your name, you are legally responsible for making the payments. If your parent misses a payment, the lender will hold you accountable for missed or late payments. 

As a precaution, have money saved to pay the mortgage in case your parent is unable to pay.  

2. Tax Implications

If your parent is paying the mortgage for the house you own, there are a few considerations around taxes.  Talk to your accountant before making the purchase to decide on the best way to proceed with limited tax implications. 

Mortgage Interest Deduction:If you're the one paying the mortgage, you can deduct the mortgage interest on your taxes. However, if your parent is paying, and you're taking the deduction, you need to be careful not to misrepresent who is actually making the payments.

Gifts vs. Rent: If your parent gives you money to pay the mortgage, it can be considered a gift. The IRS allows annual gifts up to a certain amount ($17,000 per person for 2024) without requiring a gift tax return. If the amount exceeds this limit, you may need to file a gift tax return.

Rent Payments: If your parent is paying you "rent" to cover the mortgage, you would need to report this as rental income, which could have tax implications. The IRS could see this as rental income, which would be taxable.

3. Estate Planning & Ownership

Consider how you want to structure ownership of the house. If you have siblings, will there be controversy if you own the house and your parent has been paying for it?  If other family members are involved, it’s important to talk to them prior to this arrangement to limit disputes over the estate.    

4. Consulting Professionals

Before proceeding it’s essential to talk to a tax advisor to ensure you handle the payment in a way that aligns with the tax laws and your financial situation.  In addition, consult an estate attorney to structure the agreement properly. 

The fact that you’re considering buying a property to provide for your parent is very thoughtful.  Just make sure that you think through all the implications so that your thoughtfulness doesn’t backfire for either of you.