Many people are very focused on interest rates these days and are wondering where they are headed next and how it may affect their mortgage payment. Interest rates have been historically low for a very long time, and people are starting to fear that they may increase and have an outsized impact on the cost of purchasing a home.
You can see a chart of the long-term history of interest-rates by clicking here. This chart shows that we are definitely near the bottom of where interest-rates have been over a long period of time. On the other hand, if interest-rates start to go up does it have as much of an impact as people think? Read the rest of this entry »
When buying a home in Washington, D.C. you should work with a lender familiar with Mortgage Credit Certificates (MCC’s) and who is participating in the MCC Program. A Mortgage Credit Certificate allows eligible borrowers to claim a Federal Tax Credit of 20% of the mortgage interest paid on the mortgage during each calendar year. The remaining 80 percent of the mortgage interest paid for that year may still be claimed as a tax deduction.
You can click here to get Read the rest of this entry »
Is it a good idea to borrow against your 401(k) to get the down payment to buy a home? If your employer allows you to borrow from your 401(k) plan, and most do, you can take the lesser of 50% of your vested balance or $50,000. The typical repayment Read the rest of this entry »
I had a client who was buying a property via a 1031 tax-free exchange. First of all, it’s actually a tax-deferred exchange, not tax-free. You might hear someone call it a like-kind exchange or a Starker exchange. A 1031 tax exchange is one where investment property is being sold and a replacement investment property is being purchased, and you use pertinent IRS tax code to defer the capital gains. Under Section 1031 of the United States Internal Revenue Code (26 U.S.C. § 1031), the exchange of certain types of property may defer the recognition of capital gains or losses due upon sale and hence defer any capital gains taxes otherwise due. Read the rest of this entry »
I often have people ask me if they can lend their son or daughter money instead of giving it as a down payment gift. Or some want to lend the money and then forgive the loan over time to avoid the gift tax. It seems many want to help their family but avoid taxes while they do it.
First, from an underwriting and mortgage guideline standpoint, this is not an option. Read the rest of this entry »
OK, it is time to fight. I am sure this will cause some anger, and possibly a heated exchange or two. But yes, I do think some accountants don’t live in the real world. They live in a fantasy tax world where taxes and tax decisions are the sole determining factor in all of the life decisions they encounter. I can see it now, when told by clients who were expecting a child, an accountant having a stern response around the costs and tax implications of said child. Want to get married? Better consider the tax ramifications first! And one of my all time favorites related to housing, is that Read the rest of this entry »
If you are going to be in your house long term, or forever, prepaying your mortgage is a great idea if you can afford to pay extra. The best way to save money on debt is to not have it! But many people do not realize that prepaying a fixed rate loan does not reduce the monthly payment. Prepaying a loan simply shortens the term. So prepayment builds equity faster, and ends the loan sooner, so you save money by having the loan for a lesser amount of time. Read the rest of this entry »
Many of us feel that property taxes have not mimicked the course of real estate values. According to an April study by the National Association of Home Builders, the most recent available, property taxes across the U.S. have increased by nearly 20% from 2005 to 2009. But wasn’t 2005 when the real estate bubble burst? How could property taxes have gone up from 2005 to 2009? And over the same period, home prices in major urban markets decreased 31% Read the rest of this entry »
For quite a while I have heard rumors that so-called “Obamacare” was partly being paid for by a 3.8% increase in the capital gains tax on real estate. This is mostly not true. If you dig deep into the issue you will find it will not apply to most people. However, in principle, there is an increase in the capital gains tax on real estate for some wealthier folks. Read the rest of this entry »
The tax credit of up to $8,000 for qualified first-time home buyers purchasing a principal residence has been extended through April 30, 2010. There is also a new tax credit of up to $6,500 for qualified repeat home buyers.
First-time home buyers purchasing a new construction or resale home are eligible for the 1st time home buyers tax credit. To qualify for this tax credit the settlement must occur on or after January 1, 2009 and on or before April 30, 2010. The date when closing occurs is the important date, not the “contract” date.
A “first-time home buyer” is defined as a buyer who has not owned a principal residence during the 3 year period prior to the purchase. For married taxpayers, the law tests the home ownership history of both the home buyer and his/her spouse. Read the rest of this entry »