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Showing posts from January, 2019

Is a Home Equity Loan an Option?

Here's the scenario: you have a project and need to borrow some money, but you want to do it in the most economic manner.You've got a low rate on your existing first mortgage and don't want to do a cash-out refinance and pay a higher rate.Is a home equity loan an option?Prior to 2018, homeowners could have up to $100,000 of home equity debt and deduct the interest on their personal tax return.The Tax Cuts and Jobs Act of 2017 eliminated the home equity deduction unless the money is used for capital improvements.Regardless of the deductibility, lenders will still loan money to owners who have equity in their home and good credit.The most common reasons people borrow against their home equity are:Consolidate debt with higher interest ratesMake improvements on their homeRefinance an existing home equity line of creditDown payment for another home or rental investmentCreating reserves or available access for potential needsOne available loan is a fixed-rate home equity loan, c…

Home Inventory

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Generally speaking, when you need an inventory of your personal belongings, it is too late to make one.Sure, you can reconstruct it but undoubtedly, you'll forget things and that can cost you money when filing your insurance claim.Most homeowner's policies have a certain amount of coverage for personal items that can be 40-60% of the value of the home.Homeowners who have a loss are usually asked by the insurance company for proof of purchase which can come in the form of a receipt or current inventory of their personal belongings.The most organized people might find it difficult, if not impossible, to find receipts for the valuable things in their home.Think about when you're rummaging around a drawer or closet looking for something else and you discover something that you had totally forgotten that you had.An inventory is like insurance for your insurance policy to be certain that you list everything possible if you need to make a claim.Systematically, make a list of the …

Standard or Itemized Deductions

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The Tax Cuts and Jobs Act of 2017 increased the standard deduction to $24,000 for married couples.There will be some instances that homeowners may be better off taking the standard deduction than itemizing their deductions.In the past, homeowners would most likely be better off itemizing but the $10,000 limit of state and local taxes (SALT) adds one more issue to consider.Let's look at a hypothetical homeowner to see how a strategy that has been around for years could benefit them now even though they haven't used it in the past.The strategy is called bunching; by timing the payments in a tax year so that they can be combined to make a larger deduction.Let's say that the married couple filing jointly has a $285,000 mortgage at 5% for 30 years that has about $14,000 in interest being paid.The property taxes are $6,000 and they have $4,000 a year in charitable contributions for a total of $24,000 of allowable itemized deductions on Schedule A.Since that deduction amount is t…

Eliminate FHA Mortgage Insurance

Mortgage insurance premium can add almost $200 to the payment on a $265,000 FHA mortgage.The decision to get an FHA loan may have been the lower down payment requirement or the lower credit score levels, but now that you have the loan, is it possible to eliminate it?Mortgage Insurance Premium protects lenders in case of a borrower's default and is required on FHA loans.The Up-Front MIP is currently 1.75% of the base loan amount and paid at the time of closing.Annual MIP for loans with greater than 95% loan-to-value is .85% per year.For loans with FHA case numbers assigned before June 3, 2013, when the loan is paid down to 78% of the original loan amount, the MIP can be cancelled.The borrower may need to contact the current servicer.However, for loans greater than 90% with FHA case numbers assigned on or after that date, the MIP is required for the term of the loan.Most homeowners with FHA mortgages are not eligible to cancel the MIP because they either originated their loan after …

Year End Tax Newsletter

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One of the first steps in a good outcome is knowing a little bit about what you're about to undertake.By being aware of some of the areas regarding homes that may not come up every year in a tax return, you'll be able to point them out to your tax professional or seek more information from IRS.gov.Look through this list of items for things that could affect your tax return.Even if you have relied on the same tax professional for years to look out for your best interests, they need to be aware that there could be something different in this year's return.If you bought a home for a principal residence last year, check your closing statement and identify any points or pre-paid interest that you or the seller paid based on the mortgage you received.These can be deducted on your Schedule A as qualified home interest if you itemize your deductions.See Home Mortgage Interest Deduction | IRS Publication 936(2018 version not released as of this newsletter).Keep track of all money y…