President Bush’s Tax Reform Commission agreed to limit the amount of mortgage interest a homeowner may deduct from their taxes.
The cap and how it would be determined has not yet been decided. One possibility is basing it on FHA’s current mortgage cap, which, is now at $312,895. I don’t know how they’ll use that but the details will be finalized in a meeting scheduled for October 18, 2005.
Currently a homeowner can deduct mortgage interest on a loan up to $1,000,000. A lower limit could affect many homeowners in California because we have the most over 1 mil homes.
As Vince Malta put it, “Real estate has been driving the economy, but it won’t much longer” if mortgage deductions are curtailed.
Read the full text of the latimes.com article here, latimes.com.
Thursday, October 13, 2005
Tuesday, October 11, 2005
Long Beach Property Tour
Dixie and I are going on a Property Hunt today. We've got 20 or so houses to look at in Long Beach. If you'd like to come along, call my cell phone, 562-449-8421 or e-mail Mobile E-mail
Monday, October 10, 2005
Refi Refi Refi
In the Los Angeles Times’ Business Section today, there is an item about the apparent mortgage refinance boom. Essentially, we’re talking about Adjustable Rate Loans and Interest Only Loans that have created a potentially dangerous situation for borrowers who may see their payments skyrocket over the coming months or years.
As interest rates increase so too will monthly payments. On interest only loans, the payment will increase to include both principal & interest in the monthly payment once the fixed term of the interest only payment ends. This can be anywhere between 3-5 years.
There is somewhat of a panic among these borrowers who chose these creative finance options, and, perhaps rightfully so. If the loan is getting near the end of its term, where the interest rate may increase if a variable rate loan, or interest only payment now includes principal, in an interest only loan, then they should definitely refinance out of those loans.
For the rest of us, we need to change the way we think about these Creative Finance Options. Sometimes we consider these things a way to get a cheap mortgage. I like to consider them, a Finance Tool. A tool that enables us to leverage our investment. Basically, lower investment, lower monthly payment, higher return.
These loans also, are probably the only way some buyers will ever be able to afford a home. But there are some considerations to take into account with these loans.
First off, you should condition yourself into paying more than the minimum payment all the time, on time. If you don’t expect your income to increase drastically within the next couple of years or if you don’t plan on moving anytime soon, perhaps these loans aren’t for you. It is necessary to refinance out of or sell the house in order to avoid increases in payments which you might not be able to afford. Also with these types of financing, if the property value drops, you might end up owing more on the house than its worth. So, to avoid a disaster should a drop in value happen, it is highly advisable to get equity built up to help cushion a slight drop in value.
For more information regarding the creative finance options available to home buyers, please e-mail TeamResults@Century21.com
As interest rates increase so too will monthly payments. On interest only loans, the payment will increase to include both principal & interest in the monthly payment once the fixed term of the interest only payment ends. This can be anywhere between 3-5 years.
There is somewhat of a panic among these borrowers who chose these creative finance options, and, perhaps rightfully so. If the loan is getting near the end of its term, where the interest rate may increase if a variable rate loan, or interest only payment now includes principal, in an interest only loan, then they should definitely refinance out of those loans.
For the rest of us, we need to change the way we think about these Creative Finance Options. Sometimes we consider these things a way to get a cheap mortgage. I like to consider them, a Finance Tool. A tool that enables us to leverage our investment. Basically, lower investment, lower monthly payment, higher return.
These loans also, are probably the only way some buyers will ever be able to afford a home. But there are some considerations to take into account with these loans.
First off, you should condition yourself into paying more than the minimum payment all the time, on time. If you don’t expect your income to increase drastically within the next couple of years or if you don’t plan on moving anytime soon, perhaps these loans aren’t for you. It is necessary to refinance out of or sell the house in order to avoid increases in payments which you might not be able to afford. Also with these types of financing, if the property value drops, you might end up owing more on the house than its worth. So, to avoid a disaster should a drop in value happen, it is highly advisable to get equity built up to help cushion a slight drop in value.
For more information regarding the creative finance options available to home buyers, please e-mail TeamResults@Century21.com
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