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Intra-Family Mortgage Calculator
Parents frequently act as lenders on a child's first home. A properly-structured intra-family mortgage — at AFR or above, recorded as a lien, with real payments — preserves the borrower's mortgage interest deduction while keeping principal and interest flowing back to the parents. This calculator sizes the arrangement.
Monthly P&I
$1,878
Loan amount
$360,000
Loan-to-value %
90.0%
Year-1 interest (to lender/borrower deducts)
$16,980
Borrower year-1 tax savings
$4,075
Balloon balance (if applicable)
$0
How the math works
$400K purchase with $40K down and $360K intra-family at 4.75% / 30yr: monthly P&I $1,879. Year-1 interest $16,932 — if borrower itemizes at 24% marginal, tax savings $4,064. That exceeds most standard-deduction vs itemize tradeoff thresholds and makes the deduction meaningful.
Record the mortgage lien at the county. Use a template mortgage or deed of trust from your state's title company. Have both sides sign and the lender sends an annual 1098-equivalent to the borrower for tax filing. Zero exotic structuring — standard mortgage practice between family members.
How to Use
- Enter home purchase price and down payment from borrower's cash.
- Enter AFR-compliant interest rate and amortization term.
- See monthly payment, parent's interest income, borrower's deductible interest, and LTV.
Frequently Asked Questions
Can the borrower deduct the interest?
Yes if: (1) borrower's primary residence or second home, (2) loan is secured by and recorded against the property, (3) rate at or above AFR, (4) borrower itemizes (vs standard deduction). Borrower reports deductible amount on Schedule A. In 2026 mortgage interest deductible on up to $750K principal for loans originated post-2017.
Does the loan have to be recorded?
Yes for the interest to be deductible. File a deed of trust or mortgage with the county recorder. A $200 recording fee is cheap protection for the lender. Without a recorded lien, IRS can challenge deductibility and the loan itself has weak priority if the borrower has other creditors.
What if borrower defaults?
Parents can foreclose like any lender — but family dynamics usually intervene first. Common resolutions: modify terms (lower rate, extend term), forgive a portion (becomes gift), or take back the property. Document everything and talk to a RE attorney before acting on default.
Can I do interest-only?
Yes. Interest-only intra-family loans with balloon payoff at a future date (say 7 years) are common. Keeps monthly payment low for the borrower, maintains AFR compliance, and the parents' principal comes back as a lump sum. Just ensure the borrower can refinance or sell at the balloon date.
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