Mortgage Insurance? What’s that?

July 29, 2008

My colleague, Mike Marshall (aka Home Buyer Advocate Mike) has written about the mortgage insurance tax break extension in his blog. He includes some links and a video with excellent background information. Worth checking out.


11 things NOT to do if you need a loan to buy a home

January 29, 2008

Boston Exclusive Buyer Agent Ronn Huth offers some great advice for potential home buyers in his recent blog post, “Applying for a Real Estate loan? 11 things NOT to do…

Lenders like stability, continuity and consistency. Avoiding the pitfalls cited in Ronn’s post will improve your chances of obtaining the loan that will help you buy the home of your dreams.

As Red Green says, “We’re pullin’ for you.”

Pols Extend Mortgage Insurance Tax Deductibility Beyond 2007

December 21, 2007

Our good friend and a frequent client choice for home loans, Andy Deutschle of Strategic Mortgage, brought the passage (December 19, 2007) of this legislation to our attention. It extends the tax deduction for mortgage insurance beyond the end of 2007 when it was scheduled to expire.

This is how he tells it…

 At a time when homeowners need relief most, Congress has taken another big step to help by extending legislation that makes mortgage insurance payments tax deductible for many homeowners. The tax legislation, originally approved in December 2006, pertained only to loans closed in the 2007 calendar year. With this renewal, there are three important points to note:

  1. The tax deductibility extension is for three more years (through 2010). After that, it will have to be renewed again for existing homeowners to continue to deduct premiums and for new borrowers to take the deduction.
  2. The specifics of the legislation will remain the same. Borrowers whose annual adjusted gross income is $100,000 or less can deduct their MI premiums from their 2007-2010 federal income tax returns for homes purchased or refinanced during this timeframe. Those with incomes between $100,000 to $109,000 are eligible for a reduced tax break under the law.
  3. Deducting the cost of MI on federal tax returns is estimated to save borrowers $200-$400 each year. 


Thanks, Andy! And Merry Christmas to you all!

The Subprime Mortgage Mess Begins With Outfits Like this

October 8, 2007

This item in the Charlotte Observer chronicles how perfidy, ignorance, greed and naiveté combine to smash the dreams of financially fragile home buyers and send destructive repercussions throughout financial markets. There is plenty of blame to go around but you can trace the origins to outfits like this.

Your Home Mortgage: Build Equity Faster (Save Thousands in Interest)

April 12, 2007

Even a small amount ($25, $50, $100) added to your mortgage payment each month when applied to the principal can have a significant impact on the total amount of interest you pay as well as how long you pay it.

For example, if you divide your monthly mortgage payment by 12 and add that amount to your monthly payment each month by the end of the year you will have paid the equivalent of an extra mortgage payment for the year—a 13th payment—all invested in principal reduction!

That 13th payment can make a big difference. For example, let’s say you borrowed $200,000 at 6.5 percent interest with a 30 year term. Your monthly payment would be a shade over $1,264 a month for principal and interest. By adding an extra $100 per month ($1,200 per year) you would pay off your mortgage in just over 23 years, knocking almost seven years off the loan and saving over $73,000 in interest.

Contact your lender to find out how they apply extra payment money from you. Some lenders may apply your extra money that you pay above your monthly payment amount automatically to your principal.

However some may appy it to your escrow account to pay taxes or insurance which is NOT what you want them to do! Make sure you read the fine print, and call (or write) your lender to confirm what they will do, or how you can assure that the extra money goes to reducing your principal balance.

Tip: Sending a separate check and clearly marking the “memo” field with your loan account and the phrase, “Apply to Principal”will help assure proper credit and provide strong documentation of your extra payments. Again, check with your lender.

Tip: Don’t bother with offers from your lender or 3rd party companies that offer to charge you money (often as much as $200-$300) to set up a bi-weekly payment program—you can accomplish the same thing yourself without their help—for free.

IMPORTANT NOTE: Although this is a great strategy to accomplish the twin goals of saving money and increasing equity in the capital asset that is your home, this may not be the best use of your financial resources.

Interest rates for home mortgages tend to be lower than most other consumer loans and your financial profile may suggest a better use for this money—like paying off higher interest consumer loans first.

Anytime you pre-pay extra money on any installment loan it has the same effect as investing your money at that interest rate. So if you had an extra $100 should you pre-pay it on a home loan at 6.5% or a consumer loan at 10%, for example? And don’t forget that mortgage interest is usually fully tax deductable, whereas other consumer interest is not.

Therefore, we recommend consulting a qualified financial advisor for a proper evaluation of your total financial picture before proceeding with this strategy.