Interest Only Mortgage

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Hi,

My wife and I have bought a house for retirement. We are planning to move next year, and so we took out an interest only mortgage which we will pay off in full when we sell our current home. In Mortgages screen of the Real Estate folder, I have entered the balance on the loan, our monthly payment, and 2 years for the years remaining on the loan (as 1 or 2 years is the period we intend to have the mortgage). It doesn't appear to matter whether I enter 1 or 2, or a much higher number of years. When I click 'Add', ESPlanner objects, and tells me 'Your mortgage payments do not cover your balance'. We can't be the only ESPlanner users who have taken out an interest only mortgage, but I can't figure out how to deal with it in ESPlanner.

Best,

David

Comments

dan royer's picture

You need to calculate your payments on the side and enter them as special expenditures with the appropriate tax consequences (i.e., deductible). Enter your mortgage as having no payment and the value of the home net of mortgage. Then enter a first sale of home when regular payments will begin. But adjust the default 6% sale charge in Assumptions since you won't be paying a sales commission.

I don't know

Unless FSBO, why would they not pay the sales charge? In fact, since you're suggesting recording the equity as the value, perhaps the sales charge should be calculated based on the gross value and recorded as a special expense in the year of sale?

Thanks,

David

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