What is a mortgage? can my parents pay off my mortgage? Can I pay tax when someone pays off my mortgage? These are some of the frequently asked questions about mortgages we will be discussing in this post.
So, we advise you read everything bit of this article with rapt attention if there’s anything you want to know about mortgages.
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Can my parents pay off my mortgage?
Yes, your parents can pay off your mortgage either directly or indirectly. They can pay your mortgage indirectly by giving you the amount in cash or by crediting your account while you use it to settle your debt.
The easiest way to pay off your parents mortgage is to look for a way to get the mortgage bills, usually this monthly bills could be in their mail, after getting the bills, look for a way to establish contact with the a’and simple go straight to the point letting them know you want to offset your parents mortgage.
They company might help you with a payment plan that works for you. This could either be on monthly or outright payment plan.
Can I pay tax when someone pays off my mortgage?
If someone else pays off my mortgage will I be taxed?
No, you won’t be taxed if someone else pays off your mortgage because it’s seen as a gift.
Gifted money is non-taxable under IRS regulation, which means you aren’t mandated to pay any tax if your parents or siblings pay your mortgage.
However, the only exception is if your spouse was the one who settled the loan. It is said that you will be taxed if your spouse pays your mortgage loan.
If someone else pays my mortgage is that income
The money you received from someone to settle your mortgage loan isn’t an income; you won’t be taxed.
An income is a money you receive after delivering one service or the other. However, the money used in paying your mortgage isn’t the same as income as it will only go straight into the lender’s account.
The only exception is if your account is first credited by someone before you transfer it to the lender’s account to settle your loan. In that case, the money might be seen as an income at the initial stage and you would be taxed especially if it’s a huge sum of money.
How to pay off someone else’s mortgage
Whether you are paying as a gift, a contribution, or anonymously, get the person’s mortgage account number and the lender’s contact details and name.
Then complete the transaction by sending the money into the person’s mortgage account via phone, online, or email (emailing the cheque to the lender’s mail).
What Is A Mortgage
A mortgage is a loan secured from a financial institution— especially a mortgage bank— to purchase a fixed asset like a home, land, or other things that promise to generate significant revenue or income within the shortest period.
A mortgage should be at least 85% of the overall value of the house or property you intend to purchase to boost your chances of obtaining such a loan.
This is because the property you want to buy with the mortgage will also serve as collateral; which means the lender or bank will seize the property if you fail to pay the loan within the time frame.
As much as getting a mortgage shouldn’t be any difficulties, there are factors you must consider and documents you must meet before taking a mortgage. Don’t worry; we will touch that aspect later in the article.
Things To Consider when taking a mortgage
As mentioned earlier there are some factors to consider before applying for a mortgage as they can make or mar your hopes of convincing your lenders. These factors include the following:
- Credit Scores
Your credit score is one of the first things or factors you must consider while applying for a mortgage as it will determine the interest rate attached to your loan.
A credit score is a three digits number that represents your creditability and ability to repay your loan within the stipulated period.
It provides your potential lenders a clue of what to expect from you regarding your ability to keep your side of the bargain.
A credit score ranges from 300 to 850, and your final score is determined automatically by software created by some top mortgage loan service providers (such as FICO and
VantageScore) whose agents will review your previous credit history, payment history, previous loan length, and how often you borrow.
Your credit score is a huge determining factor; you shouldn’t score less than 670 to get a mortgage loan from FICO, or below 661 to obtain a loan from VantageScore.
- Your Earnings
Your earning is another crucial factor to consider when applying for a mortgage loan as it will give you a clue about the amount you can repay without any disappointment.
Your income is so important that it can influence a lender’s final decision. A steady income earner will easily gain lender’s approval or favor over applicants without a guaranteed or steady source of income. This is why self-employed individuals hardly get or obtain a mortgage loan
- Type of mortgage loan and interest rates
The type of mortgage you intend to borrow is another factor you must consider before reaching an agreement with your lender. There are five main types of mortgage including conventional loan, Jumbo mortgage loan, government-insured mortgage loan, fixed-rate mortgage loan, and adjustable-rate mortgage loan (ARM).
Other factors to consider when getting a mortgage include previous debt, cash left over, mortgage insurance, home prices, closing costs, and number of loan applicants (pre-approval).
Getting A Mortgage Process
Below is a brief list of the process or steps you must take to get a mortgage loan that suits your financial prowess
1. Estimate your budget
determine the amount you need and how much you can refund without any financial constraint. In this stage, you must consider all the factors discussed earlier before making a final decision.
2. Find The Best Mortgage Lender
Get a lender with the best mortgage types and suitable interest rates. According to Forbes, the best mortgage lenders are Chase, Flagstar Bank, Mr. Cooper, PNC bank, better.com, ALLY, Bank of America, Guaranteed Rate, Northpointe Bank, PenFed Credit Union, Rocket Mortgage, Truist, New American Funding, and Loan Depot.
3. Fill and submit the mortgage application form
4. Obtain a pre-approval letter from your chosen lender: The pre-approval letter is a document that contains the lender’s promise to give you the mortgage loan you need to purchase your home or other fixed assets
5. Complete all the subsequent application processes
6. Obtain your loan and purchase your house. Meanwhile, you can read extensively about the process of getting a mortgage here.
Conclusion
Anyone can pay your mortgage without any side effects or implications. However, you shouldn’t get a mortgage loan without a steady source of income.
Is there anything you feel like adding to this content? Feel free to share it with us via the comment section below.
Likewise, don’t hesitate to ask anything regarding a mortgage loan and other loan-related issues. We will happily attend to you as soon as possible.
Sources
https://themortgagereports.com/65881/mortgage-loan-process-explained-in-9-steps
https://www.forbes.com/advisor/mortgages/best-mortgage-lenders/
https://corporatefinanceinstitute.com/resources/knowledge/finance/mortgage/
https://www.fool.com/the-ascent/mortgages/factors-determining-mortgage-approval/