Fixed Rate Mortgage Refinance Loan TULARE CA
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In this Article we shall focus on answering some common queries of Tulare CA mortgage borrowers:
Tax implication of foreclosure and short sale for Tulare CA mortgage borrower
As home owners we make effort to pay our mortgages on time but there are circumstances which are not in control of the mortgage borrowers and as a result we accept either to foreclose upon our property or request the bank to accept a short sale.
A short sale is a sale where if the borrower owes $ 300,000 on his mortgage and is unable to make the payment requests the bank to sell the property and the borrower be exempted to make any payments.
In case of foreclosure we are asking the bank to take possession of our home because the borrower cannot make his payments.
In the two of the above cases. It depends upon the terms a mortgage borrower has with the bank. If the terms requires the mortgage holder to pay for the complete amount taken as mortgage. The tax implication would be different and if the terms of the mortgage are set up in such way that the bank can only take the home for it is worth at the time of foreclosure or short sale. The tax implication would be different.
What that means is if the borrower is only liable to the amount the home can fetch at the time of short sale or foreclosure. Then any amount differential that is left. The borrower shall not be taxed on it. Meaning, if the mortgage balance is $ 300,000 and the property got sold for $ 100,000. The bank would send the borrower with form 1099-C and the $ 200,000 differential may not be taxed.
The reason being IRS treats short sale or foreclosure similar to normal sale. Since in most of the cases the property generally gets sold for lesser price. It doesn’t attract Capital Gains. However since IRS considers the differential as ordinary income and requires to be included as income. The borrower may not be taxed as long as the terms with the bank say that the borrower is not liable for the balance of the mortgage at the time of short sale but the home shall be considered by the bank for whatever it gets sold for.
If this term doesn’t exist then most likely the differential would be considered ordinary income and the borrower may be liable for tax.
Consult your tax advisor for more information.
Call Tulare CA mortgage expert below to get you the lowest mortgage rate on your refinance.
For more information visit www.affordable-payment.com or call 323-705-3191 if you are a California Mortgage borrower.
30 yr fixed refi 3.807% APR 3.775%Rate | At 0 pts
20 yr fixed refi 3.500%APR 3.500% Rate | At 0 pts
15 yr fixed refi 3.044%APR 3.000% Rate | At 0 pts
10 yr fixed refi 2.940%APR 2.875% Rate | At 0 pts
Artical by Roger Shanker
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