Mortgage Forebaerance agreement affecting tax situation?

Discussion in 'US Taxes' started by Spin, Nov 17, 2008.

  1. Spin

    Spin Guest

    Gurus,

    Not a tax question per se, but I can't find a group devoted to the credit
    industry or real estate. But since this may be an outside tax question I'll
    ask it here. In this economic downturn, people are trying to re-finance
    their mortgages for a lower interest rate and/or longer payment terms. In
    rare circumstances, a reduction in principal. My question is, what about a
    Forbearance agreement, in which postponement of loan payments, granted by a
    lender or creditor, for a temporary period of time. This is done to give the
    borrower time to make up for overdue payments. Would there be a tax
    implication on this and, do you think this would affect one's FICO credit
    rating?
     
    Spin, Nov 17, 2008
    #1
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  2. If there's no change in the debt amount, then there are no direct tax
    implications. Indirectly, there may not be enough interest paid to amount
    to a hoot in the wilderness. So it's possible with the possible loss of
    itemizing the taxpayer may fine themselves underpaid and owing come April.

    Just a reminder that you are only able to deduct the "mortgage interest
    PAID" - which means you have to remit a check to deduct the interest. So if
    you don't make payments, you don't get any deduction. Future years, when
    payments are (hopefully) made, is when the tax deduction for mortgage
    interest paid will be felt.
     
    Paul Thomas, CPA, Nov 17, 2008
    #2
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  3.  
    Jackney Sneeb, Nov 17, 2008
    #3
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