Reverse Mortgage Flexible About Prepay
Lots of reverse mortgage potential customers contact me asking if any stipulations exist precluding making early or even monthly payments on the mortgage.
I know everyone has good intentions and you've heard about the best laid plans.
The question I have to ask is where is the money going to come from to make those payments. After all, reverse mortgage customers generally get reverse mortgages because they lack dollars. There is typically no reason this will change.
It makes almost no matter. People continue to ask if the lender will charge extra or allow these borrowers to make early payments.
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.
In order to get the write-off the borrower must make payments. It's at least a good reason to ask about repercussions.
Keep in mind the tax laws. Most people roll closing costs into the loan when they initially get a reverse mortgage. Last time I checked the tax laws said closing costs needed to get paid prior to being able to make payments on the mortgage for the sake of writing off interest.
Just keep in mind the order in which early payments are applied.
One big expense when paying closing costs is the origination fee. That can easily be up to two percent of your appraised value when you first obtained your loan.
The origination fee is a big write-off. Make sure you run this stuff by your CPA. They are more abreast than I and things change.
I know everyone has good intentions and you've heard about the best laid plans.
The question I have to ask is where is the money going to come from to make those payments. After all, reverse mortgage customers generally get reverse mortgages because they lack dollars. There is typically no reason this will change.
It makes almost no matter. People continue to ask if the lender will charge extra or allow these borrowers to make early payments.
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.
In order to get the write-off the borrower must make payments. It's at least a good reason to ask about repercussions.
Keep in mind the tax laws. Most people roll closing costs into the loan when they initially get a reverse mortgage. Last time I checked the tax laws said closing costs needed to get paid prior to being able to make payments on the mortgage for the sake of writing off interest.
Just keep in mind the order in which early payments are applied.
One big expense when paying closing costs is the origination fee. That can easily be up to two percent of your appraised value when you first obtained your loan.
The origination fee is a big write-off. Make sure you run this stuff by your CPA. They are more abreast than I and things change.
posted by Credit Counseling at
7:22 AM
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