The catch: if you are not a "registered mortgage lender" then any loan you make to a family member on a house purchase, even if is amortized the same as any other home loan, is not considered a mortgage by the govt. and the interest paid is not considered mortgage interest and is not deductible for the home purchaser. The IRS considers it a simple loan, and the interest paid is taxable to the lender who receives it but it is not mortgage interest. Seem unfair? I think so but that is the law according to my tax attorney. You can thank the Dodd - Frank act for this little nuance. Before that it was considered deductible just like any other home mortgage. And another tidbit, if you loan a family member money , and it is not a gift, you must charge a minimum interest rate specified by the IRS on a monthly basis (called the "AFR" rate) and it varies based on the term of the loan. Fun stuff.
