Prepay the Reverse Mortgage? Can You Do That?
It doesn't really go with the territory but quite a few seniors get in touch with me and ask if they can pay the mortgage company monthly.
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.
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.
A big reason many people ask is they have the desire to use the interest write-off. The reverse mortgage is just a mortgage so, like a forward mortgage, you can use that write off the same way.
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.
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.
So, the government has rules for this too.
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.
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.
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.
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.
A big reason many people ask is they have the desire to use the interest write-off. The reverse mortgage is just a mortgage so, like a forward mortgage, you can use that write off the same way.
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.
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.
So, the government has rules for this too.
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.
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
6:32 AM
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