Unfortunately, when a couple divorces, it is not uncommon for one or both spouses to be unable to manage mortgage payments on a single income. This is especially true if it took two incomes to originally qualify for the loan. You have identified two possible solutions to your daughter's debt problem, although both could also have disadvantages. As you note, if your daughter sells the house in a soft housing market, she could possibly lose all her equity, as well as income tax write-offs. If you lend her money and she is unable to pay you back later, there is the risk of strained family relationships and the loss of your assets. If you decide to go this route, however, be sure to draw up a contract to formalize your inter-family loan.
Other possible solutions to your daughter's cash crunch could include refinancing the mortgage (if it is financially advantageous, based on current interest rates) or taking in a carefully screened roommate/boarder to help pay the mortgage payment. She may also be able to reduce her other expenses as part of a well-developed, written spending plan/budget.
Whatever you and your daughter decide, do the math in advance and make a list of all potential pros and cons for each solution.
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