Receiving Mortgages

• Mortgage lenders will not simply issue a mortgage to a person, particularly a second mortgage, unless the person can demonstrate that he stands a high probability of paying the loan back. This is particularly tricky when the mortgage is not the person's first, he will have to show he has sufficient income to pay off two mortgages. When purchasing a home for your parents, you will have to classify the home to the lender as something other than your primary residence.
  
  

Second Homes

• Many individuals choose to classify their parent's new home as a second residence. To qualify as a second residence, the property must be at least 50 yards away from the borrower's primary residence, and the borrower must spend a portion of the year living in the space. Generally, the mortgage rates for second residences are not significantly higher than primary residences. However, if you don't plan to live there at all, you cannot take out this kind of mortgage.
  
  

Investment Properties

• You can also choose to take out a mortgage for an investment property. Generally, the rates for investment property mortgages are somewhat higher than for primary residences, on the theory that you will be less compelled to keep an investment property. Under this scheme, you would identify your mother's house as an investment and then charge her a notional amount of rent. The advantage of this is that some repairs to the house are tax deductible, as a business expense.
  
  

Mortgage Under Mother's Name

• Alternately, if your mother has good credit, you can have your mother take out a mortgage in her name and simply provide her with the funds to pay it off. This will only work if your mother is able to qualify for a mortgage at a reasonable rate. To do so, she will have to show that she has sufficient income to pay off the mortgage. And, for tax reasons, the yearly cost of the mortgage will have to be less than the maximum amount the IRS states a person can donate to another person without paying taxes.