What's the Point?

Prepaid interest, sometimes called “points”, is generally tax deductible when a person pays them in connection with buying, building or improving their principal residence.  When points are paid on a refinance, they are not a current deduction but have to be taken prorata over the life of the mortgage.

For instance, if $3,000 in points were paid on refinancing a 30 year mortgage, a deduction of $100 per year is allowed.  When the loan is paid off or replaced by refinancing again or the home is sold and the mortgage paid off from the proceeds, the balance of any un-deducted points may be taken in that tax year.

Your tax professional needs to be made aware of any of these situations so that he or she can accurately reflect the deductions in your return.  Currently, the most common situation is homeowners may be refinancing their home for the second, third or even, fourth time. If there are points that have not been completely deducted, they need to be treated in the year of refinancing.

For more information, see points in IRS Publication 936; there is a section on Refinancing in this publication. For advice considering your specific situation, contact your tax professional.

Onwing x Renting...making an important decision

A Home is More Than an Address

A home is a place to call your own, raise your family, share with your friends and feel safe and secure. It is also one of the largest investments most people have.
Leverage is the ability to control a larger asset with a smaller amount of cash through the use of borrowed funds. It has been described as using other people’s money to increase your yield and it applies to homeowners and investors alike. Positive leverage causes the yield to increase as the loan-to-value increases.
Even a modest amount of appreciation combined with the amortization of a loan can cause a substantial rate of return on the down payment and closing costs.
Homes build equity as the price goes up due to appreciation and the unpaid balance goes down due to amortization.







The example above indicates the yield on a home considering 3% acquisition costs on the home with a 4.5% mortgage rate and the resulting equity at the end of five years. The different down payments will affect the yield based on the leverage effect.
Whether you rent or buy the home you live in, you pay for what you occupy. The question a person is faced with is whether they are going to buy it for themselves or their landlord. Take a look at the cost of Renting vs. Owning.

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Maintain Your Home Foundation

3 Tips to Maintain the Well-Being of Your Home's Foundation

When was the last time you took a close look at your home’s foundation? If you find yourself racking your brain trying to determine whether it was last spring, or two summers ago, it’s definitely been too long. From simple tasks to time-consuming projects, homeowners often don’t have the time—or the space on their to-do list—to add yet another item. However, when it comes to your home’s foundation, there’s no time like the present. 

A pro-active approach to caring for your home’s foundation is not only economical, it can also save you a lot of money—and headaches—down the road. 

1. Check the drainage around your home by ensuring that gutters and spouts drain away from the foundation.

2. While plumbing leaks under the house foundation are not uncommon, homeowners can have a plumbing pressure test done to make sure there are no leaks under the slab. 

3. The ground moisture around the home's perimeter should remain as constant as possible. Periodic use of a sprinkler system and soaker hoses in the summer time is recommended, but can also be done in the winter if the weather is dry.

If you’re pressed for time, contact a reputable foundation repair company to have an inspection conducted inside and outside the house. Most of the solutions are affordable and extremely important to the well-being of the structure. 

Source: www.premierfoundationrepair.comTips for Home Owners

Don't Do It!

You’ve seen lists telling buyers what to do to find the right home but knowing what not to do can be just as important.  After finding the right home, negotiating a contract, making a loan application and inspections, buyers, understandably, start making plans to move and put their personal touches on the home.

In today’s tenuous lending environment, little things can derail the process which isn’t over until the papers are signed at settlement and funds distributed to the seller. Verifications are made by a lender at the beginning of the loan process to determine if the buyer qualifies for the mortgage. The verifications are usually done again just prior to the closing to determine if there have been any material changes to the borrower’s credit or income that might disqualify them.

Simply stated:

1. Don’t make any new major purchases that could affect your debt-to-income ratio
2. Don’t apply, co-sign or add any new credit
3. Don’t quit your job or change jobs
4. Don’t change banks
5. Don’t open new credit accounts
6. Don’t close or consolidate credit card accounts without advice from your lender
7. Don’t buy things for your new home until after you close
8. Don’t talk to the seller without your agent

Your real estate professional and lender are working together to get you into your new home. It’s understandable to be excited about one of the biggest decisions you’ll make and that you feel you need to be getting ready for the move.

Planning is smart but don’t do anything that would affect your credit or income while you’re waiting to sign the final papers at settlement.

Equity Dynamics

Equity is the difference in what your home is worth and what you owe. Ideally, as the value goes up and the unpaid balance goes down with each amortized payment made, the equity grows from two directions.

This dynamic leads to increasing a person’s net worth much faster than many other investments.

A homeowner has minimal control over value. It is necessary to maintain the property to avoid depreciation and make good decisions on capital improvements. After that, appreciation is generally controlled by supply and demand and the economy.

Mortgage management is something that the homeowner does have control. Making the decision to select a shorter term mortgage at a lower interest rate can have an impact on equity build-up. Lower interest rates amortize faster than higher interest rates which will also affect equity growth. Currently, it is possible to get a 1% lower rate on a 15 year mortgage than a 30 year mortgage.

Compare two alternatives of a 30-year and a 15-year mortgage. The payments will definitely be higher on the shorter term because it pays off quicker. However, if a person can afford the higher payments of $362.53 more per month in this example, the equity will be greater. Even after you take into consideration the higher payments, the increased equity is $17,236 at the end of the seven year holding period.

Another decision that can affect equity build-up is making additional principal contributions along with the regular payments. Whether you’re making an occasional lump sum payment toward principal or regular monthly contributions, it will save interest, build equity and shorten the term on a fixed rate mortgage. Estimate your personal savings with this Equity Accelerator.

Who is my agent?

More often than you’d expect, homeowners refer to the person they bought their insurance from as their agent. It sounds reasonable but it’s definitely not accurate. That person is the agent of the insurance company and they legally represent the company, not the customer. Even an independent agent who can place a policy with different companies is still an agent of the company.

A mortgage officer, in most cases is an employee and represents the company. And the same is true for a title or escrow officer. It’s important to understand the actual relationship to know what you can expect from them.

Any business person who wants to stay in business must treat their customers fairly and with a high degree of service. As a customer, you should be able to reasonably expect honesty and accountability. The difference is that employees owe their loyalty to their employer and agents owe their loyalty to their principal.

An agent owes more than just honesty and accountability. The principal can expect complete disclosure, obedience, loyalty, reasonable skill and care and confidentiality from their agent.

This advocacy is very beneficial during the buying or selling process to coordinate all aspects of the transaction. The agent can bring valuable experience to your side of the transaction to provide confidence that your best interests are being represented from start to finish.

Most states have a recognized procedure for the real estate professional to create a formal relationship between themselves and a buyer or seller. This requires a fiduciary/statutory responsibility that places the principals’ interests above the agent’s own personal interests.