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.
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.
Regardless, a goodly portion of my potential customers ask if the reverse mortgage company will ding them if they make payments on the loan.
The fact is you can make payments anytime you like on reverse mortgages and not be in jeapardy of some form of pre-payment penalty.
You may be asking why someone would want to make payments. Well, people have reasons from hating debt of any sort to using the mortgage as a tax shelter. This latter reason is one of the biggies.
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 gotta make mortgage payments to get the write-off. This in itsef is an enticing reason for a customer to at least ask the question.
Of course, when prepaying the mortgage one must consider the tax laws. They always cramp the average person's style and this is no different. Since most people finance closing costs in a reverse mortgage these costs must be paid prior to getting any interest write-off.
So, the government has rules for this too.
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 have reservations about their intentions to make monthly or periodic payments.
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.
Regardless, a goodly portion of my potential customers ask if the reverse mortgage company will ding them if they make payments on the loan.
The fact is you can make payments anytime you like on reverse mortgages and not be in jeapardy of some form of pre-payment penalty.
You may be asking why someone would want to make payments. Well, people have reasons from hating debt of any sort to using the mortgage as a tax shelter. This latter reason is one of the biggies.
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 gotta make mortgage payments to get the write-off. This in itsef is an enticing reason for a customer to at least ask the question.
Of course, when prepaying the mortgage one must consider the tax laws. They always cramp the average person's style and this is no different. Since most people finance closing costs in a reverse mortgage these costs must be paid prior to getting any interest write-off.
So, the government has rules for this too.
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.
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