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Tax Deductions for Refinancing

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

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.

NYC Apartment Lending under pressure

September 9th, 2008
It looks like NYC commercial market may be under pressure after a long period of favored growth and development.
clipped from www.reuters.com

Trouble in NYC commercial mortgage market-Barron’s

NEW YORK, Sept 7 (Reuters) – A handful of Manhattan apartment deals appear to
be potential trouble spots for the U.S. commercial mortgage market, according to
Barron’s.

 

Banks have restricted lending as the credit crunch has tightened over the
past year-and-a-half, putting pressure on the U.S. residential home market, but
leaving the commercial real estate market relatively unscathed, Barron’s
said.

 

But some Manhattan deals are causing concern, the weekly said.

 

Barron’s said the Stuyvesant Town and Peter Cooper Village complexes, bought
at the height of the market for $5.4 billion in 2006 by Tishman Speyer and
BlackRock Realty Advisors was the “most prominent trouble spot.”

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