Legal to mortgage in a self-directed IRA? - Posted by Paul

Posted by Tim (Atlanta) on May 11, 2000 at 14:59:09:

Using your self-directed funds to put a down payment on a property is possible. The problem would be getting the mortgage company to understand the situation. I also don’t think you can personally guarantee the mortgage, so the mortgage company would have to get a larger down payment than 10%. Also, mortgage payments and other expenses of the property would come from your IRA. If this is not a money-making opportunity, I don’t see why you would want to do it.

Now as for using the property yourself, that is NOT allowed. You cannot occupy or use the property for your own means. The IRS frowns on that. You also cannot hold title in your name, it must be in the name of your IRA. You also cannot buy or sell any property that you own or have owned to the IRA.

Hope this helps.

Legal to mortgage in a self-directed IRA? - Posted by Paul

Posted by Paul on May 11, 2000 at 12:39:56:

Can anyone give me a definitive answer regarding the legality of mortgaging a real estate purchase using ira money for the downpayment and setting it up as a self-directed ira? I’ve read varying opinions on this. The only way it would be a long-term financial benefit would be if I can leverage.

Here’s what I’d like to do…buy a shore condo with 10% down using ira money, and mortgaging the balance. I’d like to use the shore condo myself on a limited basis (I also need to make sure this would be legal with limitations similar to “investment r.e.” occupancy limitations). I realize the annual cash flow will be nominal, but my goal is long-term equity build-up and the side benefit of using it myself.


Find yourself an investor - Posted by Bud Branstetter

Posted by Bud Branstetter on May 12, 2000 at 21:35:55:

Why don’t you find an investor friend that could put the 10% down for you. Maybe as an unrelated transaction he has a property that you could do a mortgage on out of your IRA.

Re: Legal to mortgage in a self-directed IRA? - Posted by Steve-Atl

Posted by Steve-Atl on May 11, 2000 at 18:41:41:

I agree with Tim. Your plan sounds like you would directly benefit by the investment and that’s self dealing; something that has harsh IRS penalties. The power of tax deferred growth in an IRA is too valuable to risk by operating in the gray zone of self dealing.

The key is to clearly understand the rules and operate within them. Seek info on this site in the articles and go to custodian’s like Mid-Ohio’s website for information.