Archive for Mortgage Interest

Homeownership: A New Year’s Resolution That Lasts

Posted in Homeownership, I Wish I'd Thought About That, Manors of Deerwood, New Homes with tags , , , , , , , on February 12, 2014 by Pat Hansen

Why not make this year’s resolution one that will last long into the future — long after you’ve stopped bothering to set the alarm an hour early to go for a run. Deciding to become a home owner is possibly the best resolution you can make.

According to a 2012 nationwide poll, 96 percent of home owners are happy with their decision to own, and 74 percent say that owning a home is the best long-term investment they can make.

Lot 389DW (Manors of Deerwood | Clarkston, Michigan)
Here are some tips
to help you make good decisions for your homeownership resolution:

  • First, figure out how much you can afford. This depends on factors including your credit rating, your current expenses, cost of a down payment and interest rates. Don’t forget that you will need a down payment up front and money to make monthly mortgage payments.
  • Check your credit report carefully. Inaccurate information on your credit report could result in lenders offering you loans with higher-than-market interest rates or denying your application altogether.
  • Then find a lender you trust and work well with. Ask your friends, family and neighbors who own their homes for recommendations. Work with a qualified lender on getting together a budget and collecting helpful advice before buying a home.
  • When shopping for a mortgage, consider all of your options. There are many choices in terms of a loan and not everyone is right for every buyer. Don’t forget to research Federal Housing Administration (www.fha.com) programs that offer loans with lower down payments. They are often a good option for first-time buyers.
  • Keep in mind that there are tax advantages to being a home owner that can help offset costs. Depending on your specific situation, often the closing costs and some other first year costs of purchasing a home are deductible. And the mortgage interest deduction (MID) enables many home owners to reduce their taxable income by the amount of interest paid on their mortgage loan each year. More than 70 percent of home owners with a mortgage are able to claim the MID in a given year.
  • The U.S. Housing and Urban Development website (portal.hud.gov) has loads of information for home buyers, including tools to help you figure out how much you can afford, how to shop for a loan, information on how to avoid predatory lending and an explanation of the settlement process.
  • Finally, learn about the neighborhoods where you are interested in buying. Visit areas you are interested in at different hours, talk to people who live there, and find a real estate agent that you trust and knows the neighborhoods you like.

With careful and thorough planning, you will be moving into your new home before you know it. If you have questions about the home buying process, visit nahb.org/timetobuy.

This article is courtesy of the National Association of Home Builders.

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The Economic and Emotional Value of Homeownership

Posted in Homeownership, Housing News, Lifestyle, Local News, New Homes, Sell your Home with tags , , , , , on July 2, 2013 by Pat Hansen

In good times or bad, there is one constant: Homeownership remains the American Dream for millions of American families. And there are many reasons why, both economic and emotional.

Robert R. Jones HomesMost Americans consider homeownership to be their single best long-term investment and a primary source of their wealth and financial security. Generations of families have counted on and used the equity in their homes for their children’s education, their own retirement and other milestone expenses.

Individual household budgets are helped by tax incentives that are designed to make owning a home more affordable. Deductions for mortgage interest and property taxes can result in thousands of dollars of tax savings, especially in the early years of the mortgage when interest makes up most of the payment. Home owners save nearly $100 billion annually on mortgage interest and property deductions alone.

And when home owners sell their primary residence, they get an enormous tax break. A couple who owns and lives in their home for two years and then decides to sell can keep up to $500,000 of the profit tax-free, and a single owner can keep $250,000.

A healthy housing industry means more jobs and a stronger U.S. economy. In fact, fully 15 percent of the U.S. economy relies on housing.

Most of the products used in home construction and remodeling are manufactured in the United States. Constructing 100 new homes creates more than 300 full-time jobs, $23.1 million in wage and business income and $8.9 million in federal, state and local tax revenue. New home owners spend money on decorations and furnishings, to enhance the landscaping and to become members of the community by patronizing local businesses and service providers.

Robert R. Jones Homes (interior photo)Yet a home is so much more than an investment. In good times and in bad, the opportunity to own a home has been a cherished ideal and a source of pride, accomplishment, social stability and peace of mind.  Homeownership strengthens communities as well as families.

Home building increases the property tax base that supports local schools and communities. When a family owns their home, it is an asset that has a direct impact on their financial security and future. People are more likely to take care of things they own so they remain valuable. And a home’s value is determined by how well it is maintained as well as by the condition of the neighborhood it is located in. So home owners have incentive to spend their time and resources improving their neighborhood, even if it is just to protect the value of their investment.

Homeownership builds stronger communities, provides a solid foundation for family and personal achievement and improves the quality of life for millions of people. The Bipartisan Policy Center’s Housing Commission has said that homeownership can “produce powerful economic, social, and civic benefits that serve the individual home owner, the larger community and the nation.”

Keys in DoorIt is important to know that despite the fact that housing and homeownership policies over the last century have contributed to the growth of the middle class and helped the United States become the most dynamic economy the world has ever seen, homeownership is under attack. Policymakers are proposing radical changes, including ending the mortgage interest deduction and mandating minimum 20 percent downpayments, that would threaten the dream of homeownership for millions of Americans.

The National Association of Home Builders’ website, www.ProtectHomeownership.com, has more information about the threats to homeownership and how to take action to protect it.

To learn more about homeownership in the metropolitan Detroit area, visit www.RobertRJonesHomes.com.

This article is courtesy of the National Association of Home Builders.

Is Now The Time to Refinance Your Mortgage?

Posted in Housing News, I Wish I'd Thought About That with tags , , , , , on February 8, 2012 by Pat Hansen

With interest rates at a historic low, many homeowners are thinking about the prospect of refinancing. Savings depend on what the new loan costs as well as how long you plan to stay in your home. Here are some important issues to consider:

  • Costs: You will need to add up all the costs, including application fees, points, loan origination, appraisal, credit report, extra insurance, inspections, private mortgage insurance, recording, survey, title insurance and underwriting.
  • Monthly savings: Figure out your monthly savings by subtracting your current monthly payment from your refinanced monthly payment.
  • Tax costs: Multiply your monthly savings by your combined state and federal tax rate.
  • Net savings: Subtract your tax cost from your monthly savings. The cheaper loan gives you less of a tax benefit than your present loan
  • Break-even point: Divide your total costs by your net savings to determine how many months it will take to pay off the cost of refinancing.

For example, if you will save $100.00 per month on the refinanced mortgage and the refinanced mortgage costs you $2,500, it would take you just over two years, or 25 months to break even and start enjoying that savings.  If you plan to move within two years, that loan might not be for you.

  • Hidden costs: If your current loan contract includes a pre-payment penalty, you have to factor it in too.  Some penalties can be as high as six months interest on 80 percent of your balance, but diminish the longer you hold the loan.

Generally, lower points (each point is 1 percent of the amount financed) produce a higher interest rate. If you plan to stay in your home for only a few years, a zero-point loan would most likely be a better option because you may not have the opportunity to recoup those costs. If you are staying longer with more time to recoup the costs, consider a cheaper interest rate with points.

Beware of no pointers. They can be useful if you are cash poor, but in addition to the higher interest rate, some come with pre-payment penalties that kick in if you refinance again too soon.

To find the best deal, start with your current mortgage lender. Some lenders have marketing options designed to keep their current borrowers by offering them special low rate or no-cost refinance packages.

8 Reasons to Invest in Your Home

Posted in Around Your Home, Worth Repeating with tags , , , , on February 17, 2011 by Kevin Fox

(from MONEY Magazine, By Josh Garskof) — Not long ago, you could have your big remodeling project and get your money back too. Owners recouped an average of 87% of home improvement costs at resale in 2005, according to Remodeling magazine.

But by 2010 the magazine had pegged the typical payback at just 60%. Hardly the right time to tackle the new kitchen or master bathroom you’ve been dreaming of, right?

Not so fast, says Kermit Baker, senior research fellow at Harvard University’s Joint Center for Housing Studies.

“In many cases, these projects make more sense now than they did at the height of the market,” he said.

Assuming you like what you can’t change about your home — the neighborhood, the school district, the proximity to things that matter to you — and you’re planning on staying for five or more years, improving your home is a smart move. Here’s why.

1. Funding is cheap

The current economic climate sweetens the pot for people on solid financial footing.

Should I spend $60,000 to renovate my house?

“The Fed doesn’t want you to save — it wants you to put your dollars into circulation,” said Keith Gumbinger, mortgage market analyst at HSH.com.

Today’s historically low interest rates mean that most home-equity lines of credit are charging their floor rates (your HELOC’s probably is around 3% if you’ve held it for a couple of years, 4% or 5% if the loan is more recent).

And with the typical bank account and money fund paying far less than 1%, drawing down your savings barely costs you anything in lost income — just don’t jeopardize your safety cushion.

2. Eager contractors are discounting

Although the construction industry rebounded somewhat last year, business is still slow. Remember when getting a contractor to call you back was a challenge?

Now the best pros in town will happily bid on your job — and they’ll probably offer you prices that are 10% to 20% below what you would have paid when real estate was going gangbusters, according to Bernard Markstein, senior economist for the National Association of Home Builders.

3. Materials have come down

The cost of building supplies has tumbled too. Plywood is down 23% since its peak in the mid-2000s. Drywall is off 29%, framing lumber 35%.

Not all raw materials prices have fallen that much: Asphalt roofing, which is made from a petroleum byproduct, is down only 7% over the past two years. Insulation — which has been in high demand because of energy rebates and high fuel prices — is down a mere 2% since 2006. Still, on the whole, construction supplies are bargains right now.

4. You’ll cut your energy costs

You don’t have to hire a green builder to see energy savings from a renovation. In a prewar house in the high-energy-cost Northeast, for example, a standard kitchen remodel could cut your utility expenses by $400 a year thanks to new insulation, windows, and appliances.

Even years of such savings will never come close to covering the project’s price tag, but think of your lower electric and heating bills as an annual dividend.

5. Fixing up costs less than trading up

With the median home price down 22% since 2006, you might think this is an opportune time to trade up for the new master bathroom or other modern feature you want. After all, why not buy somebody else’s remodeling headache at a discount.

But you can’t assume that you’ll easily sell your house in this tough market and then find a new place that has the exact features you want (and not a bunch of stuff you don’t want). And moving remains far costlier than improving, said John Ranco, past president of the Greater Boston Association of Realtors.

For starters, commissions and fees to sell a $400,000 home could run $25,000.

“You can get a lot of remodeling done for that kind of money,” said Ranco. “And that doesn’t even include the higher price you’re paying for the new house, the moving costs, or the inevitable painting and window treatments the new place will need.”

6. You can keep that sub-5% mortgage

As long as you’re not underwater and haven’t wrecked your credit, you’ve been able to take advantage of recent rock-bottom interest rates to lock in a fixed-rate mortgage below 5%.

Move several years from now, and you’ll have to give up that loan, probably for something in the sixes or sevens, said Harvard’s Baker. That’s not bad, but it could mean hundreds a month in added interest costs.

“If you can remodel your way into staying put long term, you can hold on to that once-in-a-lifetime rate,” says Baker.

7. Smart projects still add value

In the post-boom era, the rule of thumb for gauging the potential payback from a home improvement is simple: If you’re bringing your house in line with similar homes in the area, you’ll most likely earn back the lion’s share of the cost when you sell. If you’re surpassing the neighborhood, you probably won’t.

“Remodeling a 10-year-old kitchen because you don’t like its style doesn’t pay anymore,” says Thomas Collimore, director of investor education for the CFA Institute. “But replacing a 1960s kitchen is a different story.”

At least for the foreseeable future, buyers will either lowball their bids or pass on your house entirely unless you’ve already tackled this kind of deferred renovation.

8. You get to enjoy the results

When it comes time to sell your place, chances are you’ll probably wind up having to do the sorely needed renovations you didn’t take care of earlier. Not only does that add a huge amount of stress to the process of putting a house on the market, but you still end up spending the money (quite possibly when contractor, materials, and borrowing costs are higher).

Why not get the benefits of a new furnace or an updated powder room for you and your family instead of buying them for the house’s next owners? And why not do the projects soon so you get as much time as possible to enjoy the results?

Unlike vacations, luxury cars, or other discretionary expenditures, your remodeling project might recoup a significant chunk of its cost someday.

Even so, home improvements aren’t purely investment decisions — you shouldn’t redo a kitchen or bathroom in the hopes of making a profit. But if you want to upgrade the quality of your home life and you can afford the cost, it’s money well spent.

10 Reasons To Buy A Home, NOW

Posted in Housing News, Worth Repeating with tags , , on January 27, 2011 by Kevin Fox
  1. You can get a good deal.  This is a buyers’ market.  Prices on average have come down about 30% from their peak according to the Case-Shiller Index.
  2. Mortgages are cheap.  You can get a 30-year loan for around 4.3%. As recently as two years ago, they were about 6.3%.  That drops your monthly payment by 25% or more.  When inflation picks up, and it will, you won’t see these mortgage rates again in your lifetime.
  3. You’ll save on taxes.  You can deduct the mortgage interest rate from your income taxes and you’ll get a tax break on capital gains when you sell.
  4. The home will be yours. You can have the kitchen and bathrooms as you want. You can move the walls, build an extension or paint everything bright orange. These types of changes are impossible for renters.
  5. You’ll get a better home.  In many parts of the country it is really hard to find a good rental.  Many of the best places have been sold as condos.  Generally speaking, if you want the best home, in the best neighborhood, you’re better off buying.
  6. It offers some inflation protection.  Studies by the Case-Shiller Index suggest that, over the long term, housing has beaten inflation by a couple of percentage points a year.
  7. It is risk capital.  No, your home isn’t the stock market and you shouldn’t view it as the way to get rich.  Sooner or later the economy is going to grow and real estate prices will head up again, too.
  8. It is a forced savings.  Part of a mortgage payment goes towards the principle repayment.  You are just paying yourself by building equity.  As a forced monthly savings, it is a good discipline.
  9. There is a lot to choose from.  Builders are sitting with inventory.  They have also introduced new model homes that are more energy efficient, and in many cases more affordable to own.  That means great choices, as well as great prices.
  10. Sooner or later, the market will clear.  Demand and supply will meet. As hard as it may be to believe, demand will exceed supply, the price of labor and materials will increase leading to higher prices.Now is the perfect time to buy if you qualify for a mortgage, especially if you don’t have a home to sell.

The preceeding article was written by Richard Elkman, President of Group Two Advertising.  This is part of Richard Elkman’s eNewsletter entitled:  My Two Cents.

Visit the Manors of Deerwood in Clarkston, MI – MAP

NAHB’s Effort on Preserving the Mortgage Interest Deduction

Posted in Housing News with tags , , on December 3, 2010 by Kevin Fox

As you have heard, the National Commission on Fiscal Responsibility and Reform has released its final report recommending a number of significant changes to federal spending, entitlements and the tax code.  This report will serve as a starting point for congressional discussions on tax reform next year, and therefore, the recommendations it contains should be taken very seriously.

The overall proposal would eliminate nearly every tax break, with the revenue from this being used to lower marginal tax rates and reduce the deficit.  However, the plan does recommend retaining a few targeted provisions to promote jobs, homeownership, health care, charity, and savings.

While the lower marginal tax rates may look appealing, the devil is in the details.  The proposal shows that taxes would increase across the board for all Americans at all income levels; in fact, the highest percentage increase would fall on those in the lower-income range.

The plan would convert the mortgage interest deduction into a 12% non-refundable tax credit available to all taxpayers, not just those who itemize. The current $1 million mortgage cap would be lowered to $500,000.  No deduction/credit would be permitted for second homes, home equity or state and local taxes.  Further, the capital gains exclusion on the first $500,000 of gain on a home sale, as well as the Low Income Housing Tax Credit, would be eliminated.

New Website a Key Resource to Engage Consumers and Media

NAHB has launched a new website at SaveMyMortgageInterestDeduction that provides NAHB members and consumers with up-to-date information on the threat to the mortgage deduction and engages the public in defense of this cornerstone of American housing policy. The site debunks the myths about the deduction and contains fact sheets, frequently asked questions, press releases, media stories, statistics, reports, and more. Most importantly, SaveMyMortgageInterestDeduction tells visitors how to stay informed and make sure their opinions are heard on this crucial issue by connecting to NAHB’s Facebook and  Twitter social networking communities and our Eye on Housing Blog.

I strongly encourage you, your family, friends and business associates to visit the website, join in the discussion on Facebook.com/SaveMyMID and Twitter.com/SaveMyMID, and spread the word about what this proposal would mean to consumers, communities, and the overall housing industry.

Going Forward

We anticipate that debate on this issue will begin in earnest when the new Congress convenes in January, and at that time we will be reaching out to you, our members, for your help in our grassroots efforts to defend the mortgage interest deduction and respond to the other housing-related proposals in this report.

Of course, the impact of the proposals in the commission’s report extends far beyond the mortgage interest deduction and the consumer per se. Everyone in our industry – remodelers, multifamily builders, large builders, small builders, green builders, our associates, and everyone in between – has a tremendous stake in what Congress decides going forward. While the focus of our new website is on the mortgage interest deduction (a topic that clearly resonates with consumers), rest assured that the thrust of our advocacy agenda in Congress will, and does, encompass the preservation of all of the key housing incentives in our nation’s tax code.

A Final Note

I realize that other coalitions and organizations have contacted you regarding their websites and advocacy efforts related to the mortgage interest deduction. You should know that, since this issue first appeared in the news, NAHB has been highly engaged on Capitol Hill and in the media, and has proactively developed cutting edge research and polling data to ensure that all of our members’ interests are fully represented as the debate unfolds.

Once again, we find our industry in a fight that will require every member of the NAHB federation to unite with a common voice and common purpose.  I know I can count on you to stand shoulder-to-shoulder with your fellow NAHB members to stop this attack on the American Dream.

Should you have questions regarding the commission’s report or the above communication, please feel free to send them to publicaffairs@nahb.org and our staff will respond as quickly as possible.
 
Thank you,
Bob Jones
2010 NAHB Chairman of the Board

Mortgage Interest Deduction Under Attack

Posted in Housing News with tags , on December 1, 2010 by Kevin Fox

American voters have a clear message for Congress:  “Don’t touch my mortgage interest deduction!”  However, a recent draft proposal released by the co-chairs of the National Commission on Fiscal Responsibility and Reform (NCFRR) threatens this deduction that often provides thousands of dollars of tax savings each year to American home owners.

The NCFRR — a bipartisan commission created by President Obama to help address the nation’s budget deficit — recommends either eliminating the mortgage interest deduction altogether or severely limiting it among many other changes. This means many home owners could have a much higher tax debt each year than they are used to, which could have a serious negative impact on their family’s financial situation.

Currently, the mortgage interest deduction allows home owners to reduce their taxable income by the amount of interest paid on their home loan each year.  Home owners can deduct the interest for up to $1 million of mortgage debt and up to $100,000 of home equity loan debt on both primary and secondary homes that aren’t rented out.

A recent nationwide survey of 800 likely voters commissioned by the National Association of Home Builders (NAHB) shows that no matter their political party affiliation or homeownership status, Americans don’t want their mortgage interest deduction to be taken away.

Here are some important results of the survey:

  • Homeownership status: Even people who aren’t able to claim a mortgage interest deduction support it. Eighty-two percent of renters and 72 percent of owners think tax incentives to promote homeownership are reasonable.
  • Political party affiliation: 69 percent of Republicans, 83 percent of Democrats and 70 percent of Independents think it is reasonable for the federal government to provide tax incentives to promote homeownership.
  • Comparison to other tax credits: An overwhelming majority of Americans — 81 percent — feel that the mortgage interest deduction should remain in the tax code. This compares to 82 percent for medical expenses, 76 percent for state/local taxes, and 66 percent for charitable deductions.

Critics of the deduction argue that it favors high-income taxpayers over lower to moderate income earners who need it most.  But according to the Joint Committee on Taxation, 89 percent of taxpayers benefitting from the deduction make less than $200,000 annually.

Research by NAHB economists — using the Internal Revenue Service Statistics of Income data — also shows that as a share of household income the biggest beneficiaries are younger households, who typically have large mortgages, small amounts of equity in their homes and growing families.  A copy of the report can be found at Tax Incentives Report

Current home owners rely on the mortgage interest deduction to help offset the costs of homeownership each year and prospective buyers take the deduction into consideration when choosing homeownership over renting.  Any change to the tax code that limits or eliminates the deduction will negatively affect homeownership in America.

Learn more about the threat to the mortgage interest tax deduction and connect with others on Facebook at Save My MID or contact Michael Stoskopf , Executive Officer of the Building Industry Association of S.E. Michigan

This article is courtesy of the National Association of Home Builders

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