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Help With Wrap Arounds

who_me profile photo
  • Thursday, October 23, 2003 @ 12:03 PM EDT
  • 3 Comments

Wrap arounds…question.

I buy a $100,000 house @ 6% 30yr.
P/I are roughly $600/mo

I then sell it on an installment land contract for $120,000
w/ 10K down with $110,000 @ 8%
P/I are roughly $800/mo

Who gets to write off the interest? Both?
Could the original loan get called in for transfer of title?
What am I missing here? Is this going to show as an asset or liability on my credit? Will it effect how much I can get in the future?

Thanks in advance

Comments(3)

  • no photo
    myfrogger23rd October, 2003

    I'll try to explain the parts of this I do understand.

    Interest you pay (existing mortgage) is tax deductible for you. Interest paid to you (what you receive) is INCOME for you and must be taxed.

    Loan could be called due but unlikely.

    The loan is not in your name so it won't show up on your credit report. The property is an asset but your obligation to the seller is a liability.

    This will only help you in the future because a local bank will look at more than just credit. If you still have decent credit and experience now, you'll find more banks willing to help you.

    I've been told by several banks to come back to them for my next project after I sell this rehab house. Problem is that I paid too much for it so I have to sell it at exactly market value and in Iowa it is the slow RE season.

    Hope this answers more questions. Feel free to PM me.

    GOOD LUCK

  • no photo
    clear2close23rd October, 2003

    Is this hypothetical or a real situation?

    There are many things that need to be considered here, so instead of going through it without the inf, I'll answer each of your questions...generally.


    1.) I would say that both of you get the write off, you both have mortgages.
    2.) Could the DOS clause be called in, yup! Will it? probably not.
    3.) Asset or Liab on credit? Well, it will show as both, but you will have a payment on your credit that will be included in all DTI(debt to income) calculations. Don't forget that on the other side of the table, you can claim 75% of your monthly incoming mortgage payment as income to offset the debt ratio issue and therefore help you borrow in the future.

    hope this helps,
    clear2close
    [addsig]

  • no photo
    who_me23rd October, 2003

    Thanks everyone.

    Right now this is just an example. I'm trying to understand some of my options.

    Right now I have 2 properties, 1 possible rental, and the property I'm living in (another possible).

    Trying to decide the best way to handle the 1 condo....rent/sell/hold paper.

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