DEAR BOB: We are thinking about refinancing our home loan, which has a 6.75 percent interest rate. The mortgage broker who made us our loan several years ago offers an “interest only” mortgage at 5.75 percent guaranteed for five years with no closing costs. As we plan to sell our home in three or four years, is this a “good deal?” – Ron R.

DEAR RON: The big advantage of an interest-only home loan is 100 percent of your monthly payment is tax-deductible interest. Another advantage is your payment is as low as it can go at that interest rate.

Purchase Bob Bruss reports online.

The reason, of course, is there is no mortgage amortization or balance pay down. If you expect to sell your home in a few years, mortgage balance reduction is probably of zero concern to you.

However, if you expected to stay in your home “forever,” then a zero-interest mortgage might not be a smart decision because you will never own your home free and clear with no mortgage.

OLDER HOMEOWNER SUGGESTS BUYING A HOME WITH ONE LEVEL

DEAR BOB: My wife and I have been faithful readers since your excellent articles began appearing in our newspaper. Because we plan to stay in our home until they carry us out, we have not needed to act on much of your superb advice. But, as senior citizens, it occurred to me your readers might benefit from my suggestion to buy a home on one level. We bought a one-level home, with a gently sloping driveway, so that as we age we need not be concerned about climbing steps. Just thought you and your readers might benefit from this suggestion – Mr. R.E.

DEAR MR. R.E.: Thank you for your valuable suggestion.

Personally, that’s why I bought my one-story rancher house 26 years ago. I anticipate when I get too old and feeble to climb the two steps from my attached garage to the house, it will be time to move to an old folk’s home. Until then, like you, I’m staying in my one-level home.

NO TAX DEDUCTION FOR UNSECURED BORROWED MONEY

DEAR BOB: Last year, my generous mom and dad loaned my wife and me $45,000 for the down payment on our home. We agreed to pay them 5 percent and have been faithfully paying each month. Can we deduct this interest on our 2004 income tax returns? – Nate W.

DEAR NATE: The answer depends whether or not your parents have a security interest in your home, such as a second mortgage. If they made you an unsecured loan, then your interest payments are not tax deductible.

However, if your promissory note is secured by a second mortgage or deed of trust recorded against your home, then you can deduct the interest you pay your parents on your tax returns. For full details, please consult your tax adviser.

The new Robert Bruss special report, “Robert’s Realty Rules: How to Avoid the 10 Worst Home Buyer Mistakes,” is now available for $4 from Robert Bruss, 251 Park Road, Burlingame, CA 94010 or by credit card at 1-800-736-1736 or instant Internet PDF download at www.bobbruss.com. Your questions for this column are welcome at either address.

(For more information on Bob Bruss publications, visit his
Real Estate Center
).

***

What’s your opinion? Send your Letter to the Editor to opinion@inman.com.

Show Comments Hide Comments

Comments

Sign up for Inman’s Morning Headlines
What you need to know to start your day with all the latest industry developments
Success!
Thank you for subscribing to Morning Headlines.
Back to top
×
Log in
If you created your account with Google or Facebook
Don't have an account?
Forgot your password?
No Problem

Simply enter the email address you used to create your account and click "Reset Password". You will receive additional instructions via email.

Forgot your username? If so please contact customer support at (510) 658-9252

Password Reset Confirmation

Password Reset Instructions have been sent to

Subscribe to The Weekender
Get the week's leading headlines delivered straight to your inbox.
Top headlines from around the real estate industry. Breaking news as it happens.
15 stories covering tech, special reports, video and opinion.
Unique features from hacker profiles to portal watch and video interviews.
Unique features from hacker profiles to portal watch and video interviews.
It looks like you’re already a Select Member!
To subscribe to exclusive newsletters, visit your email preferences in the account settings.
Up-to-the-minute news and interviews in your inbox, ticket discounts for Inman events and more
1-Step CheckoutPay with a credit card
By continuing, you agree to Inman’s Terms of Use and Privacy Policy.

You will be charged . Your subscription will automatically renew for on . For more details on our payment terms and how to cancel, click here.

Interested in a group subscription?
Finish setting up your subscription