Monday, 20 April 2009

Learn About Refinancing




Home Value Estimating


Overview:

Figuring out how much your home is worth can be tricky if you don't know where to start. Several factors impact your home value.

Make sure to have your home appraised by a professional. Look at listings of homes for sale in your area, and those that have recently sold. Your home value should fall in line. Try using a home value calculator; it can give you a good idea of what your home is worth in minutes.

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What's the difference between an appraisal and a comparative market analysis? Good question!

An appraisal is a certified appraiser's calculation of the value of your home at a given point in time. In order to get the approximate value of your home, the appraisal takes into consideration such things as:

  • Your home's square footage
  • Construction quality
  • Home design
  • Your home's floor plan
  • The neighborhood your home is located in
  • Availability of transportation, shopping and schools
  • Lot size, topography, view and landscaping

Where can I get the approximate value of my home?

A comparative market analysis is more of an informal estimate of your home's market value. A real estate agent makes an analysis based primarily on sales of comparable homes in the neighborhood. Compared to home appraisals, which typically cost between $200 and $300, a comparative market analysis may be obtained at no cost.

What's the difference between the estimated value of my home and my house worth?

While a home's "estimated value" is most commonly determined by either an appraisal or a comparative market analysis , its "worth" is ultimately established by what prospective buyers are willing to pay for it.

Can I find the value of my home through the Internet?

Use our Home Value Calculator to get home value estimates. There are also a number of other websites and services that can crunch the numbers and calculate your home's estimated value.

While these calculators rely on recent home sales and refinance transactions in your area to produce a value estimate, an appraisal or comparative market analysis may still provide you with the most accurate assessment.

If you still have questions, please call us at 800-251-9080 to talk to a refinance expert today. We can help you determine which refinancing option is best for your situation.



Homeowner Income Tax Deductions

Overview:

Home owners have many perks, especially around tax time.

Home-related tax deductions, real estate tax benefits and home loan deductions, such as mortgage interest, are all ways to save you money when it comes time to pay taxes. Make sure you visit your financial advisor to learn which deductions match your tax situation.

What's your Quizzle Score? - Your home & money in one place: Get a credit report, home valuation and budget tool - FREE. Get started now!

Homeownership comes with a lot of advantages, especially when it comes to tax time. Make sure you're not missing out on important home-related tax deductions. As always, please consult your tax advisor to find out which deductions apply to you.

Deducting Mortgage Interest

The interest you pay on a home mortgage is usually tax-deductible. You are allowed to deduct interest on multiple mortgages, as long as they add up to less than $1 million. The one criteria being that the money was used for buying, building or improving a home.

Every year, you should receive a "Form 1098" from your lender which details how much mortgage interest you paid. To claim this deduction, you need to fill out "Schedule A", under "itemized deductions" to record your interest deduction.

Home mortgage interest deductions can also include
late payment charges and pre-payment penalties. The only requirement is that they were not for a specific service received in connection with your home loan.

Deducting Real Estate Taxes

Real estate taxes are also tax-deductible. Your interest statement should list the amount of real estate taxes you paid if your taxes and homeowners' insurance were placed in an escrow account when you closed on your mortgage. If your real estate taxes aren't included on the statement, review your cancelled checks to figure out the total amount of real estate taxes paid.

Deducting Loan Points Paid on a Purchase

The points you pay on a loan for a home purchase are tax-deductible for the year you made the purchase. You can deduct the points you paid as well as those a seller paid on your behalf (see next item) if you meet the following criteria:

  • The loan is secured by your primary residence;
  • The loan was used to buy, improve or build the home;
  • Paying points is a common practice in the seller's geographic area;
  • The points are calculated as a percentage of the loan principal ;
  • The points are clearly outlined on the buyer's settlement statement; and
  • The amount of cash you put into the purchase of your home (down payment, closing costs, etc.) is at least equal to the amount you were charged for the points you paid on the loan.

Deducting Seller Concessions

Sometimes, the seller will contribute money to the buyer to help cover the buyer's loan closing costs. The average concession is 3% of the sales price (with less than a 10% down payment).

Seller concessions can go towards buying down the interest rate, closing costs, discount points, and pre-paid items such as per diem interest, escrows and tax pro-rations. Again, seller-paid points are tax-deductible.

Deducting Loan Points Paid on a Refinance

If you refinanced in the last year, you may be able to deduct any points you paid to buy down the mortgage rate. These points must be deducted proportionately over the life of the loan. For example, if you took out a 30-year mortgage, you would deduct 1/30th of the points each tax year.

Many homeowners have overlooked an important tax opportunity. If you have refinanced more than once, you can deduct unclaimed points from an earlier refinance. Let's take an example:

You refinanced in 2003 and paid points. You then deducted 1/30th of those points in 2003 and 2004. However, rates continued to drop, so you decided to refinance again in 2005, paying off the 2003 loan. The remaining points you have not yet deducted can now be deducted in 2005. You could also use this deduction if you sold the house in 2005, rather than refinancing.

Deducting Interest on a Home Equity Loan

Interest paid on a home equity loan or line of credit may be tax-deductible up to $100,000. However, the deduction may be limited if the combined amount of your second and first mortgages total more than the property's actual value. For example:

Your home is worth $150,000 and you have a first mortgage for $125,000 and a home equity loan of $40,000. The two mortgages combined equal $165,000-that's $15,000 more than the value of your home. That means you can only deduct the interest on your home equity loan up to the amount of $25,000 (the difference between your home's value and your first mortgage).

If you still have questions, please call us at 800-251-9080 to talk to a refinance expert today. We can help you determine which refinancing option is best for your situation.


Refinance Your Mortgage: 5 Really Good Reasons

Overview:

What are your financial goals? Know those, and you'll know if and when you should refinance your mortgage.

When interest rates change in your favor, you may want to refinance. More importantly, what's your situation? How long will you be in your home? What are your financial goals? What kind of mortgage do you have now? Read on to learn more.

What's your Quizzle Score? - Your home & money in one place: Get a credit report, home valuation and budget tool - FREE. Get started now!

There are times when it makes sense to refinance your mortgage. It's important to have a clear financial objective in mind so that you're more able to choose the most appropriate loan. Ultimately, the decision is up to you to decide when it's best for you to refinance, based on your individual financial situation.

Refinance from an Adjustable Rate Mortgage (ARM) to a Fixed-Rate

It's important to consider what mortgage rates are doing. Are mortgage rates rising or falling? If you have an adjustable rate mortgage (ARM), it may adjust to a rate that's higher than a fixed-rate mortgage. Now might be a good time to consider refinancing to a fixed-rate loan.

However, you must also consider the amount of time you plan on being in your home. If you're only going to be in your home for a few more years, it may make sense not to refinance out of your ARM. If you're going to be in your home longer than seven years, it might be a smart move to refinance to a fixed-rate mortgage.

Refinance from a Fixed-Rate Mortgage to an ARM

Again, you need to consider how long you plan on being in your home. Many people move within nine years so it may not make sense to pay a higher interest rate for a 30-year fixed-rate mortgage when you're not going to be in the home that long. Doing so may be costing you money. Consider refinancing to an ARM instead - you'll get a lower rate and lower your monthly mortgage payment.

Lower Your Monthly Mortgage Payment

A drop of just one half to three quarters of a percentage point in interest can lower your monthly payment. If you don't refinance, you may be paying too much every month for your loan, and that's never a good financial move. There are a few different ways you can lower your monthly mortgage payment.

First, you can simply refinance to a lower interest rate. A lower rate generally means a lower monthly payment.

Second, you can change the term of your mortgage. For instance, if you have a 15-year mortgage, you can lengthen the term to 30 years. Since the balance of your mortgage is spread out over a longer period of time, your payment is lower. However, if you have a 30-year mortgage and one of your financial goals is long-term savings, you may want to consider shortening your term to 20 or even 15 years. Your payment will be higher, but you will pay much less in interest over the life of the loan, saving you thousands of dollars in the long run.

The third way to lower your payment is to refinance to an interest-only loan. Basically, with an interest-only loan, the minimum amount you are required to pay is the amount of interest for a certain period of time, though you can pay as much principal as you like. But you get the flexibility to pay less if you need or want to divert your money elsewhere, such as contributing to your 401k or saving for your child's college tuition.

Use our refinance calculator to see how you could lower your monthly mortgage payment.

Getting Cash from Your Home

The equity you have in your home can act like a savings account that you could access through a home equity loan or a cash-out refinance. This is usually done when you want to finance an important home improvement, pay for college or pay off high-interest credit card debt. Whatever your reason, this may be the right option for you.

Consolidating High-Interest Credit Card Debt

The difference between credit card debt and a mortgage can, financially speaking, mean thousands of dollars. Why? Because unlike your mortgage, the interest you pay on a credit card is not tax-deductible and you pay a higher rate than you would on your mortgage. Because of this, credit card debt is often referred to as "bad debt" whereas your mortgage is considered "good debt." Using your home equity to pay off your high-interest credit card debt can save you money in the long run. Using your home equity, rather than your credit cards, to finance expensive purchases can also be a smart move. Be sure to consult your tax advisor. Trust us on this. Don't deduct and just cross your fingers for good luck. Know what you are doing before you mess with your taxes!

Deciding on when to refinance your mortgage will depend on the circumstances of your situation: how long you'll be in the home, what your financial goals are, whether interest rates are dropping, etc. It's up to you to decide if it's right for you.

If you still have questions, please call us at (800) 251-9080 to talk to a refinance expert today. We can help you determine which refinancing option is best for your situation.


Why Refinance?

Breadcrumb Trail:


Reasons to Refinance - Reasons to refinance: lower your mortgage payment, pay off debt, consolidate bills, get a better interest rate, or get a fixed-rate home loan instead of an adjustable rate.


Posted by Jonathan A. Wagner at 22:19
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