Legal Question in Real Estate Law in Indiana
''dummy'' mortgage in Indiana
My parents recently purchased a home outright in Indiana. They asked an attorney to prepare a ''dummy'' mortgage claiming themselves as the mortgagee and me, their single adult daughter, as the mortgagor. Their reason for wanting the mortgage is so that they can continue to claim mortgage interest payments on their taxes.
Is this dummy mortgage illegal? Does it's existence affect my ability to purchase a home in the future? Can it affect my credit?
2 Answers from Attorneys
Re: ''dummy'' mortgage in Indiana
What your parents have proposed is called fraud. It is illegal and can subject both them and you to civil and criminal penalties.
In addition, it can prevent you from qualifying for a number of professions where your honesty and a history of lawful behavior are part of a licensing process.
I sincerely doubt that they will find an attorney to prepare such a "mortgage" and if they do, I would refuse to participate in the scheme.
Re: ''dummy'' mortgage in Indiana
Sounds like tax fraud to me. If they are claiming that they paid "interest" to you to save money on their taxes, then you would be required to claim that "interest" as income. They probably would be able to find an attorney to do this, if they "forgot to mention to the attorney that whole tax fraud thing. You need to have a serious discussion with them. There would probably be no effect on your ability to purchase a home or on your credit, until you were a defendant in a tax fraud case. Then the inability to purchase a home and your poor credit rating will be the least of your problems.
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