Mortgage Interest Deductions
Posted at 6:09 PM, Nov. 10, 2006
Current Law: In order to take mortgage interest deductions (MID), taxpayers must comply with the following
rules, where applicable.
1. Debt on a principal residence and a second home, combined, may not exceed $1 million. (If mortgage debt exceeds $1 million, interest on the increment above $1 million is not deductible.)
2. Debt on home equity loans (or lines of credit) may not exceed $100,000.
3. All debt (mortgage debt and home equity debt) must be secured by the principal residence or the second home for which the deduction is claimed.
4. Only debt used to acquire, construct or substantially improve a residence qualifies for a deduction. (This debt
is referred to as acquisition indebtedness.)
5. MID on refinancings is allowed only to the extent that the amount of debt on the refinancing does not exceed the amount of outstanding debt that is refinanced.
6. Points (or prepaid interest) on refinanced debt is not deductible but must be amortized over the term of the loan.
7. Interest on acquisition debt is deductible for purposes of computing both the regular income tax and the alternative minimum tax (AMT). Interest on home equity debt, however, is not deductible in computing the AMT.
Take a look at number 5 above.
Do you know anyone who refinanced their home in the last few years...not for improvements, but just to pull
out cash at favorable interest rates, taking advantage of the appreciation in the market? If you know anyone
who falls into this situation, and there are many who do, are they taking a mortgage interest deduction in an amount that they are not entitled to take?
Interest deductions on loan amounts exceeding the acquisition loan payoff plus $100,000 are not allowable.
Example:
Buy a house for $200,000 and finance $150,000. Loan paid down to 125,000.
Appreciation and low interest rates allows owner of this property torefinance and new loan amount is $350,000.
Interest on what amount of the $350,000 loan is tax deductible?
Answer: $225,000
I know that there are many who are taking interest deductions they are not entitled to take.
Saul Klein (Internet Crusade)
Consider a Fixed Rate Mortgage
Posted at 7:30 PM, Mar. 15, 2006
The recent real estate boom was fueled by low interest rates. Many homebuyers took advantage of the Federal Reserve's aggressive monetary policy by getting variable rate mortgages at very low interest. These borrowers are now watching with dismay as the inflation worried Fed continues to raise its federal funds rate with no end in sight. However, an opportunity for mortgage holders is developing.
In 2005, the Dow Jones Average finished the year with a loss. As investors turned their backs on stocks and moved into bonds, securities yields dropped in the face of increased demand. This has led to an unusual situation. The interest on adjustable rate mortgages, dependent on the rate set by the Federal Reserve, has risen, while interest on fixed rate mortgages, backed by mortgage-backed securities, has fallen. This paradox is called an inverted yield curve. For many mortgage holders it makes sense to lock in a guaranteed payment on a fixed mortgage instead of coping with the uncertainty of an adjustable rate loan. Call (702-451-1040) or e-mail Mark Baker with Meridias Capital to discuss your options
Conforming Loan Limit Raised
Posted at 6:36 AM, Mar. 10, 2006
Since Fannie Mae and Freddie Mac dominate the market, they have a major hand in setting mortgage rates. Specifically, they determine the ceilings for what they consider to be conforming loans. Because Fannie Mae and Freddie Mac only buy conforming loans to repackage into the secondary market, the demand for larger loans is far less. As a result, these jumbo loans typically have a higher interest rate.
Each year the conforming loan limits are raised, reflecting the rise in the median cost of housing in the US. For 2006, in the contiguous 48 states, the new cut off has been set at $417,000 for a single unit home. Fanny Mae predicts that nearly half a million additional homeowners can now save on their mortgages with the redefined loan ceiling. This is more than good news for new home buyers. This is a great opportunity to see how much interest you can now save by consolidating previously borrowed "piggy back" or home equity loans.
Need a good lender? Call Mark Baker with Meridias Capital at 702-451-1040 or e-mail him at Mark@MarkABaker.com
Interest Rates
Posted at 7:03 PM, Jan. 15, 2006
Are you aware that interest rates have been going down again? With excellent credit you can get a mortgage in the high 5% or low 6%, the lowest in over 2 months.
Need a good lender to just talk to about mortgages, or maybe refinancing? Call my good buddy Mark Baker with Merida's Capital. He's awesome...has done several loans for me and manages to get done what he promises in a more than timely manner. Last loan he did for me was a refinance.The application was taken on 12-15-05 and the job was done and funds in clients hands on 12-29-05. Mark's phone number is 702-451-1040 or e-mail him at
Mark@MarkABaker.com Need a good REALTORŪ to help you find a home after checking the mortgages out? Give me a call...702-360-8165 or e-mail me at
Mary@MaryW.com
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