Prepaying property tax

[Anonymous]

[quote=scaredyclassic]
so if you have the cash on hand and are definitely staying put, why not just amend the loan docs to agree that interest in say years 2-4 will become immediately payable in year 1 of the loan. and not payable in years 2 -4.[/quote]

Because whatever that payment was would no longer be interest. It would be a fee or something else.

If you paid off the loan before year 2, does that bank give the prepayment back also?

There are all sorts of weird exceptions in tax law, but all of this would be inconsistent with basic accounting principles. Basically you can’t have interest unless there is a principal balance and time has passed. If interest is due up front, it really isn’t interest.

[scaredyclassic]

ok then.

what about a variable rate mortgage where year one has 25 perc interest, and years 2 thru 9 have 1 perc interest?

[Coronita]

Are things really going to be that bad, if you factor in the ridiculous equity markets gain?

Yes, it will suck if you live paycheck to paycheck, have no investments, have no financial plan to invest…But I doubt many of us piggs are worker bees alone. Many probably are heavily invested too.

Does paying an extra few grand in taxes matter more than dow rising 400 points in a few days?

Just curious.

[Anonymous]

[quote=scaredyclassic]ok then.

what about a variable rate mortgage where year one has 25 perc interest, and years 2 thru 9 have 1 perc interest?[/quote]

If you want those terms, I’d be happy to give you a loan.

[scaredyclassic]

Well, whatever comes out to market. 15 percent year 1, .15 percent next X years. Then deduct all the interest now.

Prob not kosher, something about it having no legitimate business interest or something

[NotCranky]

you were talking about a second dwelling on your parcel , scaredy. You might want to look into how much mortgage and property tax you can take off the top of the rental income from a 2 on 1.

Can anyone lay out how that works? In my case it seems to be great, but I don’t have much knowledge about how my accountant does it(justifies it with the IRS) .

[bewildering]

[quote=HLS]
I don’t think you are going to get your loan servicer to adjust your impound account payments. Eventually you will get the overage refunded to you.
(You may even get a decent rate of interest on the excess funds in your account) Audits are usually done once a year, on their schedule.

Your loan servicer has a specific amount that they expect every month to keep your account current.
You really don’t want to mess with that.

You might be able to ask them to remove your impound account if you are willing to pay taxes & Insurance on your own going forward.

Please report back if they tell you that will adjust your payment manually.[/quote]

Thanks for the input.

I chatted with a representative. They confirmed what you had stated. They have no problem with me paying the property taxes, and will simply send a refund after the annual Escrow accounting in May 2018. I have already paid the mortgage payment due on January 1st. I read online that as long as you pay early enough then that month will count towards 2017 on your 1098.

I also notice the idea has gone mainstream:

https://www.cnbc.com/2017/12/04/homeowners-use-these-year-end-tax-moves-to-save-ahead-of-tax-reform.html

ps I am stuck with an impound account AFAIK. Even though my LTV is about 60%. I should have asked for no impound account at my last refi.

[zk]

Thanks for the idea, bewildering. I called my tax lady and she confirmed that you can pay your April property tax this year and deduct it. She also confirmed that, in my particular situation, it will be a good idea.

In my case, it’s a good idea whether the tax plan passes or not. My situation is a bit unusual, and I’m not sure whether it would be advantageous in a lot of situations. Her take in general is to plan and pay taxes as if the tax bills will not pass. I didn’t ask, and she didn’t say, whether this was because she thinks it’s not going to pass or for some other reason.

[HLS]

[quote=bewildering][quote=HLS]
I don’t think you are going to get your loan servicer to adjust your impound account payments. Eventually you will get the overage refunded to you.
(You may even get a decent rate of interest on the excess funds in your account) Audits are usually done once a year, on their schedule.

Your loan servicer has a specific amount that they expect every month to keep your account current.
You really don’t want to mess with that.

You might be able to ask them to remove your impound account if you are willing to pay taxes & Insurance on your own going forward.

Please report back if they tell you that will adjust your payment manually.[/quote]

Thanks for the input.

I chatted with a representative. They confirmed what you had stated. They have no problem with me paying the property taxes, and will simply send a refund after the annual Escrow accounting in May 2018. I have already paid the mortgage payment due on January 1st. I read online that as long as you pay early enough then that month will count towards 2017 on your 1098.

I also notice the idea has gone mainstream:

https://www.cnbc.com/2017/12/04/homeowners-use-these-year-end-tax-moves-to-save-ahead-of-tax-reform.html

ps I am stuck with an impound account AFAIK. Even though my LTV is about 60%. I should have asked for no impound account at my last refi.[/quote]

There is no reason to make the January payment this early.
Servicers have automated systems. December interest isn’t due until Jan 1st.

Depending on when your servicer sends out your next statement, you run the risk of having your payment credited ALL to principal as a reduction, and not to your January payment.
Make sure that your payment posts the way you intend it to.

Always safer to wait until statement is printed. Payment made the last week of December counts the same as payment made today.

What’s your loan balance & current interest rate ?
You may benefit by refinancing to a lower rate at no cost AND get rid of impound acct. Saving just a 1/8th of a point (.125%) can save a lot of money over time.

[Coronita]

.

[scaredyclassic]

[quote=flu]Are things really going to be that bad, if you factor in the ridiculous equity markets gain?

Yes, it will suck if you live paycheck to paycheck, have no investments, have no financial plan to invest…But I doubt many of us piggs are worker bees alone. Many probably are heavily invested too.

Does paying an extra few grand in taxes matter more than dow rising 400 points in a few days?

Just curious.[/quote]

theoretically, this tax plan significantly lowers your property values. itemizing loses value, flus real estate empire lises value

[SK in CV]

[quote=scaredyclassic][quote=flu]Are things really going to be that bad, if you factor in the ridiculous equity markets gain?

Yes, it will suck if you live paycheck to paycheck, have no investments, have no financial plan to invest…But I doubt many of us piggs are worker bees alone. Many probably are heavily invested too.

Does paying an extra few grand in taxes matter more than dow rising 400 points in a few days?

Just curious.[/quote]

theoretically, this tax plan significantly lowers your property values. itemizing loses value, flus real estate empire lises value[/quote]

Lower top marginal rates reduces the government subsidy for mortgages for medium and high wage earners. Same thing with the loss of the deduction for state taxes (and possibly property taxes). I don’t know if it will be significant, but the effects on residential real estate values could be material in some price ranges.

The financial markets are pretty much in the same trajectory they’ve been in for more than 8 years now.

If you’re at risk of not itemizing with a larger standard deduction, move all deductions into this year that you can. Or if you’re in a top marginal bracket, do the following:

Pay your 2nd half taxes now.

Make your January mortgage payment before the end of the year. If you pay it online, get it in by 12/31 and it will be reflected properly on your year end statement.

Get rid of stuff to goodwill now. Next year’s church donations now.

Business dues, investment expenses, etc. if you have deductible employee business expenses now if they can be accelerated.

If it’s likely you’ll owe state taxes, make an estimated tax payment of what you will now and deduct this year. (Be VERY careful with this one if you get any ACA premium tax credit, a refund next year is counted as income.) But be careful of AMT.

If you pay your own insurance premiums and have deductible medical expenses, make sure you pay Jan premium this month.

[bewildering]

[quote=HLS]

There is no reason to make the January payment this early.
Servicers have automated systems. December interest isn’t due until Jan 1st.

Depending on when your servicer sends out your next statement, you run the risk of having your payment credited ALL to principal as a reduction, and not to your January payment.
Make sure that your payment posts the way you intend it to.

Always safer to wait until statement is printed. Payment made the last week of December counts the same as payment made today.

What’s your loan balance & current interest rate ?
You may benefit by refinancing to a lower rate at no cost AND get rid of impound acct. Saving just a 1/8th of a point (.125%) can save a lot of money over time.[/quote]

OK. Good news. My servicer accepted my Jan 1st payment. And the interest paid is reflected in my 2017 interest amount.

It also looks like my Servicer paid the property tax installment for me. The property tax was due in March 2018, but they paid it on Dec 4th. I actually owe them $115 on my Escrow account. I guess the representative with whom I chatted must have understood that I wanted them to pay my property tax early.

I refi-ed last year to 3.375% on my 30 year. I guess that will be my last refi. I have refi-ed 3 times in 3 years. The yield premium spread that you mentioned in another thread made a lot of sense, and I got rid of all my PMI after the 2nd refi. It is really a shame I do not know your real life identity, otherwise, I would suggest you for friends who are looking to buy.

[HLS]

So your servicer has made TWO property tax payments in the last few weeks for you and you are only $115 dollars short ?

Please confirm that so you get the 2017 deduction that you want.
Unusual that they paid it for you that fast (you called yesterday)
but not impossible.

No limit to number of times you can refi. 😉

You probably know that you can adjust your payment and pay off in any term that you want; you don’t need to start over at 30 years each time. They key is your interest rate.

You have a great rate and no PMI = Excellent~ HLS

PS: Private message sent

[bewildering]

[quote=HLS]So your servicer has made TWO property tax payments in the last few weeks for you and you are only $115 dollars short ?

Please confirm that so you get the 2017 deduction that you want.
Unusual that they paid it for you that fast (you called yesterday)
but not impossible.

No limit to number of times you can refi. 😉

You probably know that you can adjust your payment and pay off in any term that you want; you don’t need to start over at 30 years each time. They key is your interest rate.

You have a great rate and no PMI = Excellent~ HLS

PS: Private message sent[/quote]

Cheers. Yes, it does appear there are two payments. I am trying to work our the payment history, but I think it makes sense. The $115 would be ~$700 if I had not paid the January 1st payment early.

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