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Is it good or bad to put taxes and insurance into the mortgage for a 2nd investment home?

Is it good or bad to put taxes and insurance into the mortgage for a 2nd investment home? Doesn't that just jack up the overall cost of the loan?
  • February 20 2013 - Lowry Park Central
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Answers (3)

Profile picture for bcapstone
Thanks Robert and Rusty. However, I still don't understand this.  It doesn't increase the cost of the loan, it just makes your payment higher. But you don't get the advantage of writing off the interest for taxes.
When do you get to write off the taxes and insurance off your taxes? When the bank pays them as part of your mortgage or when you pay them separately? If the bank pays them then I don't have to write checks and do that paperwork right? But if I pay them, what are the advantages?

  • February 22 2013
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Hello Bcapstone
There are two approaches to this, both financial. One aspect is cash flow: would you want to "save" for the tax and insurance bill for when they are due: this allows for greater cash flexibility before the payments are made. Second relates to taxes. There are instances when losses are characterized as passive losses and are limited. If there are years where your repairs to the home are a large amount, adding the tax payments to that year will only create a passive loss which will be counted when the rental unit sells. Seek your tax adviser's guidance for the answer based on your anticipated numbers and for specific to you advice based on other income attributes.
Robert Adams
Keller Williams South Tampa
robert296@aol.com
  • February 22 2013
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It doesn't increase the cost of the loan, it just makes your payment higher.
But you don't get the advantage of writting off the interest for taxes.
  • February 20 2013
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