Re: Questions on Residences

From: ldavis@ix.netcom.com (Lynn R Davis)
Subject: Re: Questions on Residences
Date: Thu, 23 Jul 1998 14:05:56 -0500 (CDT)

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>Date: Wed, 22 Jul 1998 10:20:35 -0500
>From: trinh@anywhereusa.com
>Subject: Questions
>
>           
>
>I bought a house recently, and am now living with my parent 
>and relatives.  If I move out (may be out of state) say, for 
>a new job, I will most likely need to pay at least $300 out 
>of my pocket each month to cover the mortgage because they 
>can't afford it. I don't think i can kick them out without 
>breaking the relationships, so this isn't an option for me.
>
>My questions are:
>1. Will I still be eligible for getting a tax break if I
>   don't live there ?

Yes, and you have two choices.  You can charge those who do live there 
"rent" (which you have to recognize as income) and then take ALL 
expenses (including insurance, depreciation, repairs) as deductions 
(and possibly have a net loss to charge against other income).

Or, you are allowed to deduct mortgage interest which you owe and pay 
for both your PRIMARY residence (where you would be living) and a 
SECOND residence (which would be this one).  You do not get as many 
deductions, but if your relatives give you some gifts in gratitude for 
living there or pay the non-deductible expenses, you do not need to 
count that as income, just as contribution to keeping up this second 
residence.

>2. Will my lender closes the loan because I broke the agreement 
>   that the property will be used as my primary residence ?

This depends upon what the agreement itself says.  In California, most 
loans I know of simply require that you have had a good faith intention 
to live there and actually do live there for a while.  They do not as a 
matter of course try to collect on the loan if you move out, as long as 
the payments are still made.  

>3. If I save enough money in the future, how much do i need
>   to put for down payment, percentage-wise ?  Can one have
>   more than one residents ?

You can own as many residences as you desire and can afford.  However, 
you can only deduct mortgage interest for up to two residences, one of 
which I believe must be your primary residence.  Property taxes are 
likely a different matter, and can probably be deducted for more 
residences or properties than just two.

>4. I've heard that by making one extra payment each year to the 
>   mortgate will pay off the loan quicker, does it matter if
>   you make the extra payment at the beginning of the year or 
>   the end of the year ?

Making the payment at the BEGINNING of the year saves you the interest 
that would have accrued during that year.  So, it is about 7 to 8% 
better than the end of the year.
>

Lynn R. Davis
Fremont California



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