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Reasons to Refinance

Regardless of the reason to refinance a home, the basic question to ask is: “Do you plan to live in the home long enough to recapture the cost of refinancing?” There are always expenses involved in refinancing which can be paid in cash or rolled into the new mortgage.

From a strictly financial standpoint, the break-even point is achieved when the cost of refinancing has been recaptured by the monthly savings. It would take approximately 23 months to recapture $4,000 of refinance costs with a lower payment of $175 a month.

1. Lower the rate
2. Shorten the term so that the loan will build equity faster and be paid off sooner.
3. Lower your payment to reduce your monthly cost of housing.
4. Convert an ARM to a FRM to stabilize your payment due to…

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An Alternative to Paying Tax Today

The cartoon character Wimpy would say that he’d gladly repay you Tuesday for a hamburger today. Some real estate investors say a similar thing to Uncle Sam to be able to hold on to their proceeds from the sale of an investment and agree to pay the tax later.

The benefit of a 1031 exchange is that it allows the investor to defer the tax due from the sale into the replacement property. This allows more money to be reinvested. In the example shown, the investor has 27% more to invest now by deferring the tax into the future.

The property to be exchanged must be like-kind which means real estate for real estate.   Rental property can be exchanged for other rental or investment property.  Personal-use properties like a first or second home are not eligible…

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Before You Pay Cash for a Home

The National Association of REALTORS® reports in its 2016 Profile of Home Buyers and Sellers that 12% of all buyers paid cash for their home.

Before paying cash for a home, a buyer should decide if they might put a loan on the home in the near future.  It may affect the ability to deduct the interest on a mortgage placed on the home at a later date.

Homeowners can currently deduct the interest on up to $1 million of acquisition debt which are the borrowed funds used to buy, build or improve a home. Paying cash for a home establishes acquisition debt at zero. The only deductible interest to the owner would be home equity debt which is limited to $100,000 over acquisition debt.

Paying cash certainly seems like a simple decision but it may limit a…

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Mortgage Loans from Relatives

Occasionally, when dealing with close relatives who might also become heirs, signing a note and handling the paperwork properly may seem like a needless effort but it could mean the difference in being able to take a legitimate interest deduction.

Home mortgage interest is deductible only if the loan is a secured debt which involves the buyer signing an instrument like a mortgage or deed of trust that makes the ownership of the home security for the debt. That instrument must then be recorded or otherwise perfected according to state or local law and the home, in case of default, must be able to satisfy the debt.

In a family situation, a parent, grandparent or other relative may decide to loan a buyer the money to purchase a home because they have…

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Pay Off Your Mortgage?

Becoming debt free is as much a part of the American Dream as owning a home but there certainly can be conflicting circumstances that make the decision to pay off your mortgage early unclear.

The advantages of paying off debt early is increased cash flow, less interest paid and a higher credit score. The disadvantages are lower cash flow available as discretionary funds for meals, entertainment and other things. If the ultimate goal is financial security, is it worth the intermediate sacrifice?

Whether you pay off your mortgage early is a personal decision that may be right for one person and not for another. Consider the following before you get started:

Reasons you should

• Peace of mind knowing that you don’t have a mortgage
• You’ll save…

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Your Tenants Will Send Your Kids to College

Parents, with children getting closer and closer to entering college, may also be feeling stress because they haven’t saved enough for tuition and other expenses. It’s estimated that the average cost for the 2015-16 school year is $32,405 for private colleges, $9,410 for state residents of public colleges and $23,893 for out-of-state residents.

If you started saving the year your child was born, you’d have to save $4,608 per year for 18 years at 5% to accumulate $129,620. If you waited until they were 10 years old, you’d have to save $13,574 per year to have the right amount. Saving enough can be difficult if you have a lot of time but if you only have a short time to meet your goals, it can seem impossible.

Student debt is one way to handle the…

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Components of a Credit Score

Credit scores are used by lenders to measure the credit worthiness of borrowers. While there are several different companies that offer scores, the FICO, Fair Isaacson Corporation, is the model that is used most often.

There are five key components that determine the overall score or rating. The most emphasis, 35% of the overall score, is placed on payment history which reflects whether the borrower paid on time and as agreed by the terms of the credit. Being late, missing payments or going into default would have adverse effects on this part of the score.

The second largest component, 30%, is credit utilization or the amount owed in relation to amount available. A person might have a $4,000 outstanding balance on available credit of $20,000. This…

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Homeowner Advisory

Similar to an annual wellness physical, homeowners should consider an annual review of the financial elements of their home. It’s particularly valuable based on the fact that their home and its equity is generally, one of their largest assets

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• List of similar properties recently sold and currently available
• Information on challenging property tax assessment
• Refinance Analysis to:
  • lower your rate
  • shorten the term
  • make improvements
  • eliminate mortgage insurance
  • remove a person from the loan
  • eliminate credit card debt
  • combine loans
  • take cash out of the equity
• Equity Accelerator to retire the mortgage within a specific period of time
• Repairmen and contractors recommendations
• Information on rental…

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The Cost of Co-Signing

It seems fairly innocuous; a friend or family member wants you to co-sign on a loan because they don’t qualify. They assure that they’ll make the payments; they’re quite convincing and very appreciative. You don’t want to disappoint them and after all, it’s not like it’s going to cost you anything…is it?

Think of it this way. They couldn’t get a loan unless you co-sign for them. If they don’t make the payments, the lender is going to look to you to repay the loan plus late and collection fees. The lender may be able to sue you, file a lien on your home or garnish your wages.

And it’s not just money that you could be losing, it could be your credit too. Co-signing a loan is a contingent liability that could affect your debt-to-income ratio and your…

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Lower the Rate & Deduct the Interest

A home can easily be a person’s largest personal asset and it can be a powerful tool to increase financial stability also.

Since most mortgages are amortizing, the loan becomes a forced savings account that reduces the unpaid balance with each payment. The equity could be used to improve a homeowner’s financial position involving other loans.

While every homeowner recognizes that they can deduct the interest paid on their mortgage, it is surprising how many don’t know that they can write-off the interest on up to $100,000 of home equity debt assuming there is sufficient equity in the home.

The real advantage to a homeowner is that the money borrowed can be used for any purpose and the interest is still deductible. Homeowners could payoff…

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