Believe it or not I get many people call me wanting to get a reverse mortgage with the intent of actually making payments on the mortgage.
There is no doubt they intend to make payments. Whether they will is a different story.
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.
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.
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.
What is different about the reverse mortgage in comparison to the forward mortgage is you don't make periodic interest payments, so most reverse mortgage customers don't get that particular write-off until the very end of the mortgage.
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.
So, there is an order to that which parts of the mortgage can get paid.
Of all the costs originally financed into your reverse mortgage one of the largest was the lender's loan origination fee. This fee could have been two percent of the home's value or even more.
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.
There is no doubt they intend to make payments. Whether they will is a different story.
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.
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.
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.
What is different about the reverse mortgage in comparison to the forward mortgage is you don't make periodic interest payments, so most reverse mortgage customers don't get that particular write-off until the very end of the mortgage.
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.
So, there is an order to that which parts of the mortgage can get paid.
Of all the costs originally financed into your reverse mortgage one of the largest was the lender's loan origination fee. This fee could have been two percent of the home's value or even more.
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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