minimum interest rate

Author Message
jim hawkes

Guest







Post Posted: Sat Oct 03, 2009 8:46 pm    Post subject: minimum interest rate
Like
Dislike

Is ther a minimum interest rate you can charge on a owner contract note?

Thank You!

[Email address deleted as per forum rules]

_________________
Need help choosing the right loan? Get free consultation from community lenders/consultant
Icon Mini Profile sunnyca2009





Joined: 04 Aug 2009

Posts: 1731

35.55 Dollars($)
Post Posted: Sun Oct 04, 2009 9:26 am    Post subject:
Like
Dislike

That would depned on the person who islending the money

Minimum would be 0%
Icon Mini Profile manoj_gopale
manoj_gopale




Joined: 16 Feb 2009

Posts: 488

0.00 Dollars($)
Post Posted: Sun Oct 04, 2009 9:42 am    Post subject:
Like
Dislike

this is speculative one... there is certainly a cap for maximum ...but I agree with sunny that minimum will be 0 %.

keep in touch.....
Arrow Arrow Arrow
Icon Mini Profile gmakerley
gmakerley
Community Mentor
Community Mentor

best lender badge

Joined: 09 Nov 2007

Posts: 12377
Location: bloomfield, ct
58.69 Dollars($)
Post Posted: Mon Oct 05, 2009 9:25 am    Post subject:
Like
Dislike

i don't understand why the question comes up. there's no reason for there to be a legal minimum. if someone chooses not to charge interest on a loan, that's perfectly legal in any event.
_________________
George M. Akerley
Mortgage Consultant
Word of Excellence- Writing/Editing/Proofreading
Icon Mini Profile jveenstra
jveenstra
Community Expert
Community Expert

best lender badge

Joined: 10 Nov 2008

Posts: 1478
Location: River Edge, NJ 07661
31.04 Dollars($)
Post Posted: Mon Oct 05, 2009 10:53 am    Post subject: Interest
Like
Dislike

If an owner is holding a note (mortgage) the interest rate on that mortgage is supposed to be a rate that is available in the market place for other mortgages.

There is a penalty for charging less.

_________________
John Veenstra, Mortgage Banker
Approved Funding Corp.
41 Grand Avenue
River Edge, NJ 07661
W: 201-833-0123
NMLS ID 178140
Icon Mini Profile gmakerley
gmakerley
Community Mentor
Community Mentor

best lender badge

Joined: 09 Nov 2007

Posts: 12377
Location: bloomfield, ct
58.69 Dollars($)
Post Posted: Mon Oct 05, 2009 11:13 am    Post subject:
Like
Dislike

well, that's funny to me still, john. according to the state of connecticut department of banking (i just called), there is no minimum rate in connecticut. a 0.00% rate is perfectly acceptable.

i would hope, frankly, that other states would be as liberal in this policy. for example, how many sales are made each year in which a parent or other family member holds a zero percent mortgage...or charges interest and then gives it back to the borrower (son, daughter, etc.) after a period of time?

you cite "an owner" holding the mortgage, john - i didn't indicate who the holder of the mortgage would be in speaking with the banking department, but my thought, of course, is what would it matter? if i don't want a return on my investment, shouldn't i have the right to forgo it?

_________________
George M. Akerley
Mortgage Consultant
Word of Excellence- Writing/Editing/Proofreading
Icon Mini Profile jveenstra
jveenstra
Community Expert
Community Expert

best lender badge

Joined: 10 Nov 2008

Posts: 1478
Location: River Edge, NJ 07661
31.04 Dollars($)
Post Posted: Mon Oct 05, 2009 12:53 pm    Post subject: Minimum Rate
Like
Dislike

I just called the IRS. I do not know state regulations. Actually, I do not know federal government regulations. I was taught about 20+ years ago that any private individual could hold a mortgage and there was a minimum rate. I could not find what I was looking for, so, I called.

The minimum mortgage rate that an individual can establish if holding a mortgage is the Applicable Federal Rate (AFR)

Go to the IRS website: www.irs.gov

In the SEARCH box type: AFR

The AFR tables come up. The minimum rate a private mortgage holder can use is shown in the table by month for short and medium and long term loans. Long term is over nine years.
Use the rate published for the month the loan closes. So, if a private person were holding a 30 year mortgage this month, the minimum rate would be 4.03%.

Section 7872 if the IRS code discusses Below Market Rates. If a note holder charges below market rates, the note holder is charged with the interest income for the minimum rate that should have been charged and pays taxes on that intereest income.

So, if a zero interest rate was established by the note holder, the note holder would pay taxes on the interest income that would have been generated by the 4.03% rate even thogh no interest was actually paid by the terms of the zero interest note.

How would anyone be caught doing a zero ineterst rate mortgage note? I have no idea, but, there is a legal minimum.

_________________
John Veenstra, Mortgage Banker
Approved Funding Corp.
41 Grand Avenue
River Edge, NJ 07661
W: 201-833-0123
NMLS ID 178140
Icon Mini Profile gmakerley
gmakerley
Community Mentor
Community Mentor

best lender badge

Joined: 09 Nov 2007

Posts: 12377
Location: bloomfield, ct
58.69 Dollars($)
Post Posted: Mon Oct 05, 2009 1:27 pm    Post subject:
Like
Dislike

see, john, that's why we get along...you and i are similar in that we'll look up our information instead of just spewing it out like we see all too regularly. i don't have the time today to go through the irs' myriad regulations, but i did start to do so. it's too hard to navigate while i'm also trying to work, so i'll pass for now.

it's kinda hard to swallow - the thought that an interest-free loan would be taxable on the lender. you'd think that doing a good deed would at least be ignored, if not rewarded.

your last point, of course, is well-said. how does a non-reported 0% loan get tagged? who knows...i have to check with a guy i know who works for the irs to see if he can shed some light.

thanks for doing all the digging, john...this is an interesting topic.

_________________
George M. Akerley
Mortgage Consultant
Word of Excellence- Writing/Editing/Proofreading
Guest









Post Posted: Mon Oct 05, 2009 1:35 pm    Post subject: Minimum Interest
Like
Dislike

George, I find most of the subjects interesting. There are far too many subjects for which I have no answer, so, I read the responses and try to learn--especially about other state regulations. Except, I read too many answers I do not trust, so, not learning as much as I hope to.

There is an obvious reason that you are a Mentor.
Icon Mini Profile sunnyca2009





Joined: 04 Aug 2009

Posts: 1731

35.55 Dollars($)
Post Posted: Mon Oct 05, 2009 8:59 pm    Post subject:
Like
Dislike

John and George, you discussion was really helpful

Thanks for taking time to do the research
bankofmom

Guest







Post Posted: Tue Dec 01, 2009 3:45 pm    Post subject: Can kids use parents line of credit on new home?
Like
Dislike

Can parents loan kids money from their home equity account to fund their home at the same rate that the bank charges which would mean no income for the parents. Just a pass through. Is this legit?
Icon Mini Profile gmakerley
gmakerley
Community Mentor
Community Mentor

best lender badge

Joined: 09 Nov 2007

Posts: 12377
Location: bloomfield, ct
58.69 Dollars($)
Post Posted: Wed Dec 02, 2009 8:28 am    Post subject:
Like
Dislike

bankofmom - a great appellation i must say...you can certainly do what you wish on that type of transaction. essentially, what you're doing is just having the "kids" pay back the loan itself, and you're just a pass-through. i think it's a wonderful idea, frankly.
_________________
George M. Akerley
Mortgage Consultant
Word of Excellence- Writing/Editing/Proofreading
Frank Cornacchione

Guest







Post Posted: Fri Apr 16, 2010 11:22 am    Post subject: Mortgage Interest etc.
Like
Dislike

Thanks
All times are GMT - 7 Hours
Page 1 of 1

 

Page loaded in 0.482 seconds.