Lots of reverse mortgage potential customers contact me asking if any stipulations exist precluding making early or even monthly payments on the mortgage.
I have reservations about their intentions to make monthly or periodic payments.
Let's face it most people are getting a reverse mortgage because a need exists for money. If the need for money exists for those on fixed incomes (generally) chances are there won't be excess down the line to make mortgage payments.
But the fact is some will make occasional payments. So, I always get the question of stipulations regarding making payments on the mortgage.
FHA sets the rules for reverse mortgage lending. FHA is clearly borrower favorable in that you can make payments at any time with out monetary repercussion.
One strong reason people wish to make payments is to reduce their tax burden. Remember, you get to write off interest on a reverse mortgage just as you would with a typical forward mortgage.
The thing to understand about the interest write-off and the reverse mortgage is one can only get that write-off the same year in which the interest is paid. You see, when you aren't making payments on the mortgage you don't get the write-off.
You have to make payments. This would be a good reason for someone to prepay the reverse mortgage.
The thing about getting this interest write-off is that there exists an order in which one can apply payments when prepaying a reverse mortgage. The vast majority of borrowers stick the closing costs into the mortgage. These costs must get paid prior to payments applying to interest.
Just keep in mind the order in which early payments are applied.
A benefit of paying costs first is the origination fee which was financed into the loan. This is one of the biggest closing costs when you closed on your mortgage.
At least you have the lender's fee as a write-off while paying off closing cost prior to getting the interest write-off. Please check with your CPA on all tax related matters.
I have reservations about their intentions to make monthly or periodic payments.
Let's face it most people are getting a reverse mortgage because a need exists for money. If the need for money exists for those on fixed incomes (generally) chances are there won't be excess down the line to make mortgage payments.
But the fact is some will make occasional payments. So, I always get the question of stipulations regarding making payments on the mortgage.
FHA sets the rules for reverse mortgage lending. FHA is clearly borrower favorable in that you can make payments at any time with out monetary repercussion.
One strong reason people wish to make payments is to reduce their tax burden. Remember, you get to write off interest on a reverse mortgage just as you would with a typical forward mortgage.
The thing to understand about the interest write-off and the reverse mortgage is one can only get that write-off the same year in which the interest is paid. You see, when you aren't making payments on the mortgage you don't get the write-off.
You have to make payments. This would be a good reason for someone to prepay the reverse mortgage.
The thing about getting this interest write-off is that there exists an order in which one can apply payments when prepaying a reverse mortgage. The vast majority of borrowers stick the closing costs into the mortgage. These costs must get paid prior to payments applying to interest.
Just keep in mind the order in which early payments are applied.
A benefit of paying costs first is the origination fee which was financed into the loan. This is one of the biggest closing costs when you closed on your mortgage.
At least you have the lender's fee as a write-off while paying off closing cost prior to getting the interest write-off. Please check with your CPA on all tax related matters.
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