Real or Chattel

[John]

We are in the process of of purchasing a PH home to replace a 1976 DW we have at a lake. In discussions with PH we were quoted a good interest rate which would be about 1% above what I could get from a bank but it would be a chattle loan. I plan to pay off the home in three to five years and the savings on the closing costs plus the interest deduction would come very close to making both about equal in cost ad less hassle for the closing. Is there a disadvantage to a chattel loan that I don't see?

[AndrewS/RHLending]

Hi John,

Normally I would argue that a mortgage is better for the tax write-off, lower rate, etc.

But, if you are paying the loan off in 3-5 years, you are fine. You would have closing costs with the mortgage and if it is only 1% difference, that sounds acceptable.

Good luck,

Andrew Scott

[jgn]

I am not sure what you mean that a mortgage is better for tax write-off. Isn't the interest on any type of loan for a home a write-off be it a conventional real estate mortgage or a chattel loan? I will have to put hard numbers to it to see if paying the closing costs on a real estate closing make sense or not because they are not deductable.

[rmurray]

You are right...the type of loan does not matter..even credit card interest for the purchase of a home would be deductable....

[rmurray]

All thing considered..the home only loan would be much better...you have already figured the savings for the closing costs..time is another benefit...plus rates can be locked in longer for the construction period..For that matter construction loans are not necessary with home only loans..where as construction loans are almost always required for mortgage loans..this savings can be an additional 5%...

Go for it...Enjoy your new home..

[AndrewS/RHLending]

Hello,

Just wanted to clarify about interest write offs on personal income taxes -
you can deduct interest from real estate loans. You cannot write off chattel loan interest. Chattel loans are personal property. The interest paid on chattel loans is like the interest you pay on credit cards, auto loans, etc.

You can also deduct your origination paid on your closing costs, but not discount points.

You might check with your CPA to verify. This is per our resident CPA.

[rmurray]

Actually you have a very conservative CPA...All the IRS says is that the loan must be secured a home...The type of security instrument does not matter....Actually you can deduct the interest on second homes...which can include house boats...campers..motorhomes...homes in mobile home parks..there is no real estate mortgage for these homes...BUT thier interest IS deductable...

Where we differ is the purpose of the loan..Your CPA is correct..that if I use a second mortgage (or cash out refi) to buy a car..the interest is deductable since my home is the security...my auto loan would not be deductable..This is a common selling technique of mortgage brokers..and valid too..

I am pretty sure I am right about this...check with him for futher information..

[dennis white]

I want to refinance my 2003 caviler, belmont home, 32x64 on 33x65 concrete slab with 4.21 acres of land which appraised at 90000. I owe 54000 and want to consolidate debt. Are there any lenders that will go LTV of 90%? I currently have a 6% rate with countrywide on the 54000.

[Juan/MHLoanFinder]

Dennis, what state are you in? We have lenders that could do up to 95%, but the interest rates would higher. To get a rate like that you'd have to go with a conventional lender, which the max LTV I am familiar with is 85%.

[mateo]

Does anyone know of anyone who does chattel loans in Las Vegas?