Mortgages and IRAs

I am trying to get more info on a proposal I heard about which, in a nutshell, said that you could use your IRA rollover assets (without premature distibution penalty or taxes) to purchase your mortgage and then lend the funds back to yourself. Has anyone any info on this? Specifically concerning how to avoid taxes on the IRA “distribution” –

I’ve heard of being able to use your IRA to invest in paper (mortgages, options etc). You just have to roll the assets to an IRA account that allows it.

Now, if you have a traditional mortgage its not likely you IRA will be able to buy it because Mortgages are bought and sold in large blocks. There is not likely a mechanism in place for your mortgage company to sell just your mortgage.

Sorry I don’t have any info on IRA accounts which allow for these types of investments.

IRAs cannot conduct transactions with the IRA owner. The IRS considers the IRA distributed and you owe income taxes and penalties on the IRA value.

eodgss - your IRA can buy investment properties. The challenge is that you need to keep it completely separate from your own transactions. Your IRA would need to be able to pay for the mortgage, pay for the repairs, management, taxes, insurance, etc, etc, of the property. And any profit/cash flow your IRA gets stays with the IRA. You need to be sure your IRA will be able to support the property with its own money.

My understanding is that one of the challenges would be to get a lender to loan money to your IRA without your personal guarantee. I don’t think this would happen. So you would still need to garantee the loan personally.

In any case I would recomment you do a lot of research and talk with people that are actually doing it. Just my 2 cents. Good luck!

Uh Oh… I just realized that this was a very old post… probably the person that asked the question is already gone… :O(

BLL - have you noticed that you are answering to some very old postings? :O)

Yes, I do. I’m very bored and have been trolling the old posts for relevant questions. My answers are more for current readers in similar situations than the original poster.

Hey BLL - I hear you. Today I had several conference calls - boring stuff - I was able to browse through some old posts here also… :O) the problem is that I can read and listen at the same time. However I can’t write and listen concurrently… :O)

have a nice evening!