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Archive for April, 2017

FHA – Energy Efficient Mortgage

Sunday, April 30th, 2017

Save Energy, Save Money

Want to qualify for a higher loan amount to fund energy improvements in order to bring down overall living expenses? Talk to the federal government. Its time to consider FHA’s Energy Efficient Mortgage (EEM) Program if you are remodeling your home.

Rising energy prices are pinching everybody and taking the cost of living up and away. Reduce your energy and utility bills by remodeling your house, like replacing leaky pipes and making windows more energy efficient. Making such an investment is easier than you think with the assistance of the Federal Government.

What is EEM or Energy Efficient Mortgage?

Fund energy efficient improvements in all aspect of your home with Energy Efficient Mortgage also known as EEM in short. There are multiple ways of doing this with varying qualification terms. If you choose federal backing, the improvements can be insured by the Federal Housing Authority (FHA). Alternately, approach the Veterans Administration (VA). These improvements could be made using the EPA (Environmental Protection Agency) program called ENERGY STAR or other standard channels.

Qualifying for EEM

Installing energy efficient windows, making the heating and air conditioning system efficient, upgrading water heating system to more efficient ones, upgrading the ducting systems to prevent energy leaks are few of the standard improvements that lead to substantial cost saving in the long run.

The objective of all EEM programs is to save utility costs in the long run. An important criteria of funding improvements is that the overall savings should be higher the amount invested upfront. To help you in determining the viability, the HERS or the Home Energy Rating System carries out a cost benefit analyses by measuring the current energy consumption and the possible savings. If the numbers are favorable, the house qualifies for an EEM.

Advantages of EEM

The key benefit of EEM stems out of the fact that an energy efficient house decreases costs of living and provide for better savings, hence an increased borrowing capacity. In the VA and FHA run programs, you could negotiate betters terms for the mortgage. Energy Efficient systems automatically increase the value of your property besides providing you with a better quality of life.

What Next?

The first step in acquiring an EEM would be to order an HERS survey and report thus ensuring the kind of refinancing scheme that you would qualify for. Shopping for EEM Refinancing scheme is very similar to conventional housing finance. It would do you good to with a lender who is experienced in such refinancing programs. Call for a few proposals and choose the one that suits your best.

Converting your home to a more energy efficient place could be quite an eye opener even prompting you to re-look at your trading in your car for a more efficient hybrid model.

Tax Deductions for Refinancing

Friday, April 28th, 2017

Tax deductions for Refinancing

The major benefit that any mortgage loan will give you as a homeowner is the advantage of tax deductions. Be it a primary mortgage, a second mortgage or a mortgage that you have refinanced, the tax deductions are yours for the taking! As a homeowner, you get three main kinds of tax deductions with your mortgage:

  1. Tax deductible mortgage interest payments
  2. Property Taxes
  3. Points paid on mortgage refinance

These three categories are discussed in detail below.

Tax deductible Mortgage Interest

In most cases, the interest payments on any mortgage are completely tax deductible. The only exceptions occur in cases wherein homeowners want to tap into their home equity to fund other financial needs like college education etc. In these refinancing cases, there is a limit to the interest payments which will be tax deductible i.e., interest on a maximum equity debt of $100,000.

Let’s illustrate the above limitation with an example. Homeowner XYZ had an original mortgage of $125,000. He refinances his mortgage for $300,000. The additional $175,000 is used for buying new cars, vacations and other such discretionary spending. In such a case, the entire interest related to the original $125,000 of the primary mortgage will of course be tax-deductible, and so will $100,000 of the refinanced equity debt. However, there will be no tax deductions on the interest payment of the remaining $75,000 which has been refinanced.

Property Taxes

In the year property taxes are paid to the collector of property tax, they are tax deductible. Future real estate taxes cannot be immediately deducted at the time of mortgage, but are deductible in the same financial year that the property tax becomes liable for payment.

Points Paid on refinance mortgage

Usually the points paid on a mortgage –primary or refinanced, are proportionately deducted over the entire tenure of the loan. However, if the refinance is being used for funding home improvements, all the points might be fully deductible in the first year itself. Your tax advisor will be better able to guide you regarding whether you meet the requirements for such a deduction.

So, consult a qualified tax advisor and discuss the specifics of the deductions that you can avail!

Refinancing Benefits

Friday, April 28th, 2017

Top Four Benefits of Refinancing

A few years ago, there was a boom in the mortgage refinance sector due to lowered interest rates. The significantly low rates made homeowners refinance without a second thought, Now that interest rates are going up, the decision to refinance may be tricky. However, there are still significant benefits to be reaped by refinancing your mortgage.

The mortgage on your home forms a significant part of your financial picture. Refinancing the mortgage can actually help you stabilize your financial outlook by providing you with appreciable savings over the life of your loan. Here’s a look at the top four benefits that refinancing your mortgage can yield.

1. Lower your interest rate

Traditional wisdom says it is time to consider refinancing if the market rate is two percentage points lower than the rate of your mortgage. However, in today’s competitive scenario, lenders are willing to offer deals on closing costs especially to homeowners with a good credit rating. You can take advantage of this scenario and refinance even for a smaller difference in interest rates. A lowered interest rate will mean a lower monthly mortgage payment which is the most common reason people opt for refinancing.

2. Lock-in your interest rate

An ARM or an adjustable-rate mortgage can sound very attractive initially in a low interest market but over a period of time, especially with rising rates, it can be counter-productive. You may have gone in for an adjustable-rate mortgage when you bought your home. But you are wiser with time and experience. Refinancing is one way to get out of an ARM and opt for the more sensible fixed-rate mortgage.

3. Lower other interest costs

Refinancing your home mortgage can provide a way of streamlining your other, more expensive debts like unsecured credit card debts. Credit card debt is significantly more expensive than mortgage debt. By refinancing, you can take the pressure off the credit card debts that may be choking your monthly cash flow situation. By opting for this, you can lower your overall interest cost and ensure a smoother monthly cash outflow.

4. Restructure your mortgage term

Even if you have carefully planned your initial mortgage, it is likely that your situation may have changed over time. Refinancing can allow you to adjust for such changes by changing the term of your payment. Loan length is usually determined by two variables: how much monthly payment you can afford and how long you plan to own your home. If you have a generous cash flow, you may choose a smaller mortgage period e.g., 15 years and save on the total interest. On the other hand if you intend to sell the house soon, you may not want to lock up too much cash and may choose a longer term. Whatever your considerations, the changed situation may warrant a new mortgage term that suits your new cash flow and plans better.

Check out the above list to determine if refinancing can benefit you in any way. Refinancing can truly ease your financial woes and allow you more money in the pocket.