Mortgage loan

[JG EA]

A question: Have you ever seen a refi on a mortgage loan with money borrowed to pay future payments? This is bothering me, but maybe I've just never run into it before.

For example the original loan was for 500,000 and the refi is for 750,000. 200,000 of it is for 2 years of payments. (The new balance is 750,000). So they are paying interest on money borrowed to make payments????

I have limited interest deduction and AMT, but am I missing something here?

[S T]

Just what we need

Oh great JG, now you have raised another Mortgage interest issue!

Brad and Paul are going to have to publish a whole book on this subject judging from all of our posts this season.

It just keeps getting better and better!

Sorry, I don't have an answer on this one, as I am still back on the negative amortization loans.

Sandy

[JG EA]

St

Thanks for answering,

I wonder if this is "a thing" or very unusual.

[S T]

Well maybe

JG,

I haven't seen one of these yet, but plenty of other strange mortgages.

Do you suppose this is a "reverse" mortgage??

Sandy

[JG EA]

Oh

I'll find out.

Thanks again.

[HBurkholder]

Sounds like a good way to hang yourself fianancially

But if you can get the money from the lender who cares whether you put the money in the bank to make payments. It seems risky, but there may be sound reasons for doing someting like that. If the money is drawing interest until he uses it, it may not be costing him much to do it.

[GIMoe]

Escrow?

But if you can get the money from the lender who cares whether you put the money in the bank to make payments. It seems risky, but there may be sound reasons for doing someting like that. If the money is drawing interest until he uses it, it may not be costing him much to do it.

First thing I thought when I read it was that the money ($200,000) was to be held in escrow and the monthly payments made from that. Was I just imagining that, or is that the case?

[JG EA]

GIMoe First thing I thought when I read it was that the money ($200,000) was to be held in escrow and the monthly payments made from that. Was I just imagining that, or is that the case?

Well I found out that it was just that way. They borrowed money to make the payments because they were having a hard time making the other payments and thought it would be a very short time, but the money that was expected did not come (and apparently will not come).

No wonder it looked unusual - it is very risky.

HBurkholder But if you can get the money from the lender who cares whether you put the money in the bank to make payments. It seems risky, but there may be sound reasons for doing someting like that. If the money is drawing interest until he uses it, it may not be costing him much to do it.

Thanks for the insights.

[jainen]

All life is risky

>>it is very risky.<<

All life is risky. If this scheme reduces the risk of losing the house entirely, why should we denigrate it? Not everyone has the luxury of long-term goals. This is similar to a reverse mortgage or negative-amortization in that it uses existing assets or equity to service the loan, instead of new income. That is not as big a risk as the basic act of borrowing money in the first place.