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Deferred Mortgage Interest and Taxes

The deferred mortgage interest loan, also known as an option ARM, offers flexibility on payments. Most people don’t realize it also offers tremendous deductions for taxes.

Among all mortgage choices, the loan that’s most widely used to obtain the lowest monthly payment is a deferred mortgage interest, or option ARM, loan. Some people refer to this as a Negative Amortization loan, but you won’t hear that term from your mortgage broker.

The way these deferred interest loans work is that they give you four payment options on your statement each month. You can choose from a 15 year fixed amortized payment on your original loan balance, or a 30 year fixed payment on your original loan balance. The third option is to use it for interest only payments, and while that is attractive, it is still based upon an interest rate that is higher than the standard loans on the market. The catch-all for this product is their “Start Rate” or the minimum amount of interest that you need to pay each month. If your loan is predicated upon a 7% interest rate, and your start rate is only 2%, then this option says that you only have to pay the 2% cost monthly.

The problem with this loan is that you are deferring the other 5% of the cost to a future date. If you do that for long enough, you have deferred away a large sum of money. This works if you are a magnificently disciplined investor, and you take the savings and sock it away into an investment. Most people are not. As a matter of fact, most people use this deferred interest loan just to dig themselves out of a hole. In truth, they are often actually digging a crater for themselves.

So much for the doom and gloom of this strategy, let’s explore the positive side. Although millions of people enjoy the benefit of this low payment strategy, too few understand the tax advantage of this loan. How about you? Did you know that you are entitled to bring the deferred interest forward to your current tax return? For many people, this amounts to thousands of dollars in immediate tax savings.

We can show you how to report this interest to your tax advisor in the correct format so that you will get to use the deduction much this tax year. This amounts to thousands of dollars in additional tax refunds simply as reward for accurately reporting the proper information.

With this knowledge we’ve already helped thousands to cut their taxes, and obtain the largest income tax refund they will ever get in their lifetime. Imagine a tax refund in the amount of $10,000, $20,000, $50,000 or more. The wealthiest people in the country have been using this strategy for years, leveraging assets to create wealth. Thanks to our current economy, we can now employ this for any homeowner in America. Contact us today for a no-obligation consultation.

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