Honolulu Real Estate: The Coconut Wireless

IRS allows taxpayers the option to take the standard deduction or the itemized deduction.  The astute taxpayer will compare to see which one will result in the greatest deduction and the election can be made each year. The 2013 standard deduction for a married couple filing jointly is $12,200 and $6,100 for a single taxpayer.  It doesn’t require any proof of actual expense and has no requirement for home ownership. Items that can be included on Schedule A for itemized deductions include:  Certain taxes paid for state and local income tax, general sales tax, real estate property taxes, personal property taxes or other taxes paid Qualified home mortgage interest, investment interest or possibly, mortgage insurance premiums Charitable contributions Casualty or theft losses Medical and dental expenses that exceed 7.5% of adjusted gross income if born before 1/2/49 or 10% if born after 1/2/49 Job expenses and other miscellaneous ...

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 treat...

The Qualified Mortgage Rule came into effect on January 14, 2014 as one of the results to the Dodd Frank Reform Act to protect consumers from predatory lending practices.  This will affect the underwriting standards that the majority of lenders will use to qualify borrowers. The ability to repay rule states that financial information must be supplied by the borrower and verified by the lender.  The borrower must have sufficient assets or income to pay back the loan which limits the maximum debt-to-income ratio of 43%.  In an effort to present a more accurate picture of the costs to the borrower, teaser rates can no longer hide a mortgage’s true cost. A maximum of 3% in upfront points and fees can be paid on behalf of the borrower.  There can be no negative amortization, interest-only or balloon payments and the loan term limit cannot exceed 30 years. While there are more requirements, most deal with good underwriting practices that are followed by reputab...

A water meter key is like insurance; buy it before you need it. Imagine a pipe has burst and there is water flowing like a river through your home.  There may a cut-off valve to each sink if it works and if that’s where the leak is coming from. Your home may have a master cut-off valve but if you haven't used it before, you might not know where it is. The last resort is to cut off all the water to your house at the meter. In most cases, you'll need a key to get into the meter.  With water starting to rise in your home, concern over the damage being done may add to your anxieties.  You don’t have time to call a plumber or even go the store to buy a water meter key. Emergencies are handled much better when you plan for them in advance and practice, even though you hope you’ll never need it. 1. Determine what kind of key you need to open your water meter. 2. Purchase it at the home improvement or hardware store. 3. Practice opening the meter to ...

Coffee should be hot. Beer should be cold. Mexican food should be spicy.  However, if these things are less than the standard that you expect, there are not any lasting consequences. As the value of the object in question rises, either in price or gravity, the expectations usually increase and decisions become progressively more important.  Marriage, children, health and careers are certainly a few of the more important items that bear careful consideration. The sale of the largest asset that most people own, their home, also merits having reasonable expectations.  A homeowner should expect to get the market value for their home in a reasonable period of time with as few inconveniences as possible. According to the latest Home Buyers and Sellers Survey, more homeowners are entrusting the sale of their home to real estate professionals.  Owners can increase the likelihood of a favorable outcome by sharing their expectations with agents prior to listing their hom...

The more things you have, the more you have to take care of.  And in this case, the more that you have to store that gets in the way of finding the things that you actually use.  Periodically, you need to go through every closet, drawer, cabinet and storage area to get rid of the things that are just taking up space in your home and your life. Every item requires the decision to retain or remove.  Consider these questions as you examine each item: • When was the last time you used it? • Do you believe you’ll use it again? • Is there a sentimental reason to keep it? You have four options for the things that you’re not going to keep.  If you know someone who needs it or will appreciate it, you can give it to them.  You can sell it in a garage sale or on Craig’s List.  You can donate it to a charity and receive a tax deduction or you can discard it to the trash. Start with your closet. If you haven’t worn some...

A ½% increase in interest rate may not sound like much but it is roughly equivalent to a 5% increase in price.  It becomes obvious when you compare the payments. If you financed 100% of the cost of a $250,000 home at 4.5% interest for 30 years, the payment would be $1,266.71 per month.  If the mortgage rate went up to 5%, the payment would be $1,342.05.  If the home increased 5% in value, the $262,250 loan at the lower 4.5% rate would have payments of $1,330.05. The two payments are close enough to justify the statement that a ½% change in interest is approximately equal to 5% change in price. Each time interest rates go up, fewer people can qualify to buy a seller’s home.  The mortgage rules that went into effect this year require buyers to meet specific payment to income ratios.  As demand picks up for the seasonal market, most experts expect rates to increase. Buyers will be doubly challenged in the current market because prices ar...