Mortgage Payments

Christmas is just around the corner, and if you’re in a position to do it, paying off a family member’s mortgage is one of the biggest gifts you could give this holiday season. A mortgage can be a heavy burden on a young homeowner, which is why paying it off is the ultimate act of charity. But when it comes to paying for someone else’s mortgage, the process isn’t entirely straightforward.

So how do you pay off a family member’s mortgage? Here’s what you need to know.

Be Wary Of The Gift Tax

Under US law, you can provide a cash gift to someone else – entirely tax-free – as long as it doesn’t exceed the annual limit for that calendar year (for 2015, the annual limit is $14,000). If the gift amount exceeds the annual limit, you’ll need to pay tax on the difference or tap into your lifetime exclusion.

The IRS gives all citizens a unified credit/lifetime exclusion, which allows the transfer of up to $5.43 million – tax-free – over the course of your lifetime. If you exhaust this amount, you’ll need to pay taxes on all financial gifts you give thereafter.

Make Sure You Write A Gift Letter

If you plan on paying off a family member’s mortgage, you’ll want to include a gift letter with the payment – otherwise, the bank and the government may believe the money is a loan. A gift letter clearly states that you are giving money to a relative to assist them with a mortgage. In your gift letter, you will need to plainly state that you have no intention of ever seeking repayment and that you claim no ownership stake in the property in question.

Remember: You Don’t Get To Claim Mortgage Interest

Mortgage interest payments are usually a tax-deductible expense – if you’re the homeowner. But if you’re paying someone else’s mortgage, you’re not eligible to deduct the interest on your taxes – only the homeowner can do that. Even if you feel a personal obligation to assist the homeowner in paying the mortgage, it’s not your debt to pay – and that means you can’t claim interest on your taxes.

Paying off a relative’s mortgage is a fantastic gift that will help your relatives to get out of debt and pursue their life goals. And although it’s a fairly straightforward process, you still need to take the time and care to ensure you process the gift properly. Contact your local mortgage professional to learn how you can give the gift of a mortgage.

If you have a mortgage, you’re probably looking for the best option to pay it off. Monthly mortgage payments are an easy-to-manage way to pay for your house – in fact, they’re the most common form of mortgage payment  but now, many homeowners are discovering that biweekly payments offer them better results.

So is a biweekly payment the better option for you? Which payment strategy best fits your individual circumstances? Here’s what you need to know.

Biweekly Payments: Pay Off Your Mortgage Faster and Save on Interest

Biweekly payments are becoming increasingly popular for a variety of reasons. With a biweekly payment, you’ll pay less money in total interest payments over the course of the whole mortgage, and you’ll pay your mortgage off faster. Biweekly payments also make it easier to budget for your mortgage because they coincide with your paycheck, and the biweekly payment system forces you to make extra payments toward your principal.

That said, biweekly payments also have some disadvantages. If you’ve bought a home at the very top tier of what you can afford, you might not have the budget flexibility for extra payments. Your lender may also force you to pay a $300 setup fee or a processing fee for each payment.

Monthly Payments: Easier to Afford for Large Homes

Paying your mortgage off on a monthly basis has long been the standard, for a variety of reasons – for instance, most homeowners are typically more comfortable with monthly payments as they were the norm during the owner’s years as a renter. It may also be easier to manage monthly payments if you work as an independent contractor and don’t always get paid every two weeks.

Monthly mortgage payments are more affordable for owners of larger homes, which typically come with larger mortgages. A monthly payment schedule also means you make one less payment per year, and for those on a strict budget, this can help to make the daily necessities of life more affordable.

Monthly mortgage payments were once the expected norm, but now, a lot of homeowners are choosing to make biweekly payments in order to pay off their mortgages faster and better budget their money. Monthly payments still remain popular, though, for a variety of reasons.

So which one is better for you? A qualified mortgage advisor can help you determine your best course of action. Call your local mortgage professional to learn more about your mortgage payment options.

Buying a new home is an exciting time, but excitement can easily turn to stress if there isn’t enough money to pay the monthly mortgage bill. The added expense can take some time to get used to, but there are ways to make the payments easier, especially in those first few months when money is the tightest.

Prioritize The Mortgage Bill And Pay It Immediately

This may seem like a counterintuitive tip for anybody looking for help making mortgage payments, but it is easily the best one and the one that provides the most trouble for homeowners.

Late mortgage payments come with hefty fees that make it harder and harder to pay the next mortgage bill in full and on time. It’s a slippery slope that can end in foreclosure if the mortgage bills go unpaid for too long.

Don’t Get Carried Away With Household Spending

What’s the first thing most couples do after finally purchasing their first home? If they moved in from a smaller apartment then filling in the empty space will probably be at the top of their list.

Spending sprees are all too common after moving into a new home. There are extra rooms that need to be furnished and extra space that needs to be filled in with a larger television or another sofa.

These purchases will severely limit the mortgage budget and could lead to late payments right from the start for anybody who gets carried away. Put a budget in place for new furniture and stick to it so that there is always money for the mortgage.

Limit Spending In The First Few Months

The biggest change for anybody moving into a new home is the extra expenses they aren’t used to paying. Water, power, heat, air conditioning, internet and cable are all things that could be included when renting and once those bills start coming in it can be alarming.

It doesn’t matter how careful they are, budgeting can take a huge hit if new homeowners are expecting to pay the same as they were in their previous home. Always wait the first few months before making any purchases to get used to the new monthly bills that will be waiting.

Making mortgage payments starts with getting a mortgage you can actually afford. Make sure you consult with a professional who will be able to help you find the best deal and get a mortgage that won’t break the bank each month.