Apr 13, 2018 | Mortgage
US homeowners now have over 5 trillion dollars in home equity which is a very large amount of money! So this year may be the year for a lot of cash out refinances and other home equity mortgage products. Most often, when you are purchasing a home, you are buying at or below the appraised value and you are making a down payment.
The good news is this means you have “instant equity” in your home. And over time you build more equity as you make your monthly mortgage payments as well as any potential home price appreciation.
This build up of equity gets some homeowners thinking about taking cash-out from your home to pay off credit card bills, purchase a car or pay for college expenses. However, it is important understand, there are rules as to what can and can’t be done.
Cash out refinance, equity loan or second mortgage
There are three basic ways to access the equity in your home which are common these include:
- Cash out refinance – you refinance your current mortgage and you request cash-out for the equity. For example, if your home is worth $200,000 and you have a current mortgage of $100,000 you may be able to access an additional $60,000 to $70,000 in cash depending on your lenders requirements
- Home equity loan – a home equity loan is typically a line of credit that you take out with your local bank. These loans are typically what are known as “revolving” where you can access the funds over and over again as you make payments. Home equity loan interest payments are not tax deductible after the recent tax reform plan
- Second mortgage – in order to qualify for a second mortgage on your home, the lender would require you to meet specific credit requirements as well as certain debt-to-income ratios.
In most cases, lenders will require borrowers to have had their mortgage at least one year before they are allowed the option of any type of cash-out refinance. However, Ginnie Mae (GNMA), the investor for FHA and VA home loans allow cash out transactions after 6 monthly payments and a minimum of 210 days in the home.
While you may already have a substantial amount of equity in your home, lenders are taking an additional risk if you are allowed to “tap into” that equity. Before you make the decision to access the equity, talk to your trusted real estate professional regarding possible restrictions.
Apr 12, 2018 | Mortgage
When the chatter was at its peak on the 2018 tax law changes being proposed, one of the big areas of concern for homeowners was the elimination of the mortgage interest deduction. Right behind that issue was a similar treatment with regards to property tax deductions.
As the rumors swirled and Congress moved, many feared both deductions had finally met their day and were going to be entirely eliminated, resulting in a major financial hit that many homeowners and particularly those in high real estate cost states would have felt painfully. As it turned out, there’s no reason to panic or suddenly dump titled real estate just because it has been bought with a mortgage.
Yes, both issues were impacted by the 2018 tax law changes, but neither the mortgage interest deduction nor the property tax deduction were eliminated entirely. Instead, they were modified.
The changes include:
- Mortgage interest deduction – the new laws cap the eligible debt to $750,000. While old loans originated prior to the law change date are still eligible up to $1 million, new mortgages created after the enactment date are caught in the lower universe. However, being realistic, most homebuyers are not in the bracket that afford a $750,000 plus priced home except maybe in a few communities such as New York City or the San Francisco/Bay Area in California. So the change basically means business as usual for 9 out of 10 homeowners in the U.S.
- Real estate property taxes – total state and local taxes eligible for deduction are now capped at $10,000. This is where some homeowners could feel a pinch as a typical home in higher cost states easily generates property tax levels of $5,000 to $7,000 for a $300,000 home. So those units assessed a higher value by tax auditors will likely feel this new limitation take effect.
- The standard deduction increase – remember, the above items are only useful to the extent that a tax filer itemizes his deductions. With a standard deduction now at $12,000 for an individual and $24,000 for a married couple, filing jointly, the option to itemize could go away entirely if the standard deduction provides a higher level of tax savings overall. And then that makes the above two deductions entirely moot and useless. Of course, it’s not entirely a plus since the personal exemption is also eliminated, thus reducing the benefit of the higher standard deduction by as much as $4,150 per person. In essence, the change is a wash, but could be enough to bar use of itemization, which would hurt greatly.
So the changes did not wipe out any benefit entirely (except the personal exemption). Instead, the real impact depends on which change applies to a specific taxfiler’s situation.
This is why two homeowners in the same town with the same house and market value could end up having very different tax results with the 2018 changes. Because there is so much variance.
As always, work with a trusted tax professional in order to understand how these changes will affect your personal tax situation.
Apr 11, 2018 | Real Estate
The digital age has changed the way buyers browse for and purchase goods and services, including real estate. While home buyers still can check out property listings via a print newspaper or by driving through desired neighborhoods in hopes of finding a “for sale” sign, digital sources offer more options and can make the home buying process easier.
The National Association of REALTORS® (NAR) states in their 2017 Report: Real Estate in a Digital Age, that 44-percent of home buyers look online when beginning their search.
Social Media As Sources For Home Buyers
According to the Pew Research Center, 68-percent or two-thirds of U.S. adults use Facebook. In addition to that popular social media site, American adults regularly use Twitter, Instagram, Pinterest, and YouTube on a daily basis for entertainment, social engagement, shopping, and news. These sites also can be excellent sources for home buyers.
Home buyers now have instant, easy access to a wide variety of property listings beyond those featured on an individual real estate agency’s website. Many real estate agents post listings on social media with interior/exterior photos and some with virtual tours. Sites like YouTube offer valuable resources particular for first-time home buyers, from tips to how-to’s.
Real Estate Apps
More than 90-percent of all real estate firms have a website. Visiting these sites are a great starting point and ideal way to connect with an agent that knows the local market. However, home buyers may also consider real estate apps to enhance the process. Even if not tech savvy, these apps are easy to use.
The most used real estate apps are available for both Android and iOS. Digital Trends offers a breakdown of several of the most popular. Ask a real estate agent if they have one that’s specific to their firm.
These apps can help:
- Customize a search by location, property type, features, and price
- Reveal the worth or rental value of a property
- Show floor plans and exterior/interior photos
- Provide details about neighborhoods
- Offer lending institution information
- Directly connect buyers with a real estate agent
Stay Connected With A Real Estate Agent
Cell phones appear to be everywhere today and research shows that 77-percent of Americans own a smartphone. With that smartphone it’s easier than ever to stay connected with a real estate agent when buying a home. An agent can text or email potential listings to the phone, schedule open house meetings, and send updates regarding the offer just made on the perfect home.
Home buyers that can embrace the digital age have the opportunity to take advantage of the multiple platforms and tools available for making a real estate purchase.
Apr 10, 2018 | Mortgage, Real Estate
When you are a homeowner looking to reduce your carbon footprint, there are a number of steps you can take to make your home earth-friendly. From passive solar heating to solar panels, you can make a difference in the impact your home has on the environment.
Even when you aren’t building a new home, changes can be made to an existing property to increase efficiency and reduce reliance on utility systems.
Invest In Solar Power
Solar panels are one of the most popular ways to reduce your carbon footprint, and with good reason. Solar panels often produce enough electricity so that you have energy to sell back to the energy grid every month. Over time, solar panels on your property can earn you money instead of costing money in utility bills.
Consider Passive Solar Designs
Passive solar is heating your home with the sun by using the right design. For example, certain materials such as slate holds heat. If you have a room that gets plenty of sunlight during the day, a slate floor can help keep the room warmer once the sun sets. If the floor is made from a material that dissipates heat, such as ceramic tile, your home won’t benefit from the sun once it sets.
Radiant Floor Heating Saves On Energy Costs
Heat rises, and those that invest in radiant floor heating find that it is easier to heat up a room. Radiant floor heating uses coils below the surface of your floor, creating heat. The heat rises into the room instead of getting blown in through a heating vent. This reduces the amount of energy you need to heat your home.
Invest In Energy Efficient Appliances
Every appliance that you use in your home has an impact. Consider investing in energy efficient appliances when you are trying to make your home more earth friendly. You will save money on utility costs and help the environment at the same time.
Consider a Clothesline
The energy used to heat your clothes and dry them can be eliminated if you simply hang everything outside to dry. While this adds to your workload, it is a free way to reduce your carbon footprint.
When you have a home, there are a number of ways you can help reduce your impact on the environment. Set up a recycling area in your home, have a vegetable garden if possible, and use electricity only when necessary.
Enjoy your space and don’t be afraid to try new ideas to reduce waste within your home.
Apr 9, 2018 | Financial Reports
Last week’s economic reports included readings on construction spending, mortgage rates and weekly jobless claims. Other labor-related claims included ADP payrolls, Non-Farm Payrolls and the national unemployment rate.
Construction Spending Rises in February
Construction spending was higher in February according to the Commerce Department. Spending on building projects rose by 0.10 percent in February Reuters reported that construction spending rose 0.10 percent as compared to expectations of an 0.40 percent increase and January’s unchanged reading. Seasonal weather conditions typically cause lulls in building. Analysts said that residential construction spending increased by 0.10 percent to its highest level since January 2007.
Real estate analysts have consistently indicated that building more homes is the only solution to lingering shortages of available homes in the U.S. Recent news about tariffs on foreign building materials may cause builders to wait and see how tariffs will impact business before going all-out on building homes.
Mortgage Rates Fall as New Jobless Claims Rise
Freddie Mac reported lower mortgage rates last week; the average rate for a 30-year fixed rate mortgage was four basis points lower at 4.04 percent.15-year fixed rate mortgage rates averaged 3.87 percent, which was three basis points lower than the prior week. Rates for a 5/1 adjustable rate mortgage averaged 3.62 percent and were four basis points lower than for the prior week. Discount points averaged 0.50 percent for 30-year fixed rate mortgages and 0.40 percent for 15-year fixed rate mortgages and 5/1 adjustable-rate mortgages.
Weekly jobless claims rose to 242,000 new claims filed as compared to 225,000 new claims expected and 218,0000 claims filed the prior week.
Labor Reports Show Mixed Results
ADP reported fewer private-sector jobs created in March with 241,000 jobs created as compared to February’s reading of 246,000 new private-sector jobs. The Labor Department reported a sharp drop in Non-Farm payrolls, which measures public and private-sector job growth. 103,000 jobs were added in March as compared to February’s revised reading of 326,000 jobs added. Jobs added in March were at their lowest level since fall 2017.
Analysts put the low Non-Farm payrolls reading in perspective; on average 202,000 jobs were added monthly during the first quarter of 2018 and jobs growth was faster than during first quarters of 2016 and 2017. The national unemployment rate was unchanged at 4.10 percent; this was the lowest rate in 17 years. Low unemployment rates typically indicate few layoffs and suggest strong economic growth.
What‘s Ahead
This week’s scheduled economic releases include readings on inflation, core inflation and consumer sentiment. The Federal Open Market Committee of the Fed will release minutes from its last meeting. Weekly readings on mortgage rates and new jobless claims will also be released.
