Mortgage Insurance loses tax deduction benefit in 2014

mortgageporterraiseOver the past few years, home owners have enjoyed deducting private mortgage insurance (pmi) premiums from their income tax. This is also true for government forms of mortgage insurance (aka funding fee or guarantee fee) with FHA, VA and USDA mortgage loans. This benefit is coming to an end effective on 2014 tax returns.

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Mortgage Insurance is Tax Deductible for 2013

Home owners who acquired their home after 2006 and who have mortgage insurance may be able to treat the mortgage insurance premiums as they would their mortgage interest deduction when they file their 2013 income taxes. This is per IRS Publication 936.

Here are some basic requirements:

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Happy Birthday, Son!

scanToday is my son’s birthday. Although to me, it seems like just  yesterday he was toddling around in his Barney slippers, he is now entering his third year of college. I simply could not be more proud of him.

The one piece of advice that I would offer anyone with children is to start saving for your child’s education NOW if having your son or daughter attend college is important to you. I’m thankful that I’m able to help my son out with his tuition. He does have student loans…however I’m at least able to help contribute. I set up an auto-payment into a 529 account years ago and before that, bought savings bonds.  I didn’t miss what was taken from my checking account. Of course it did take a hit in recent years – but I’m still so glad I’ve been able to save some money for him.

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Which mortgage is best for you? Consider your retirement and savings accounts.

On my recent post, Comparing 15 and 20 Year Fixed Rates, a reader asks how do I decide which program is best for my clients?  The short answer is: I don’t. The decision of what type of mortgage to select is up to my client (assuming they qualify for the shorter term mortgage with the higher payment, of course). I feel it is my duty to help my clients understand the mortgage programs, so they can make an educated decision and to provide them with various scenarios to consider. [Read more…]

Financing a “Kiddie Condo” for your College Student

2015-05-21_0706EDITORS NOTE: Mortgage programs change often. Family Opportunity Mortgage is sadly no longer available… who knows…maybe lenders will bring this back and I’ll be having to update this post again! There are updated underwriting guidelines that may work for your situation. If you are interested in this product for a home located in Washington state, please contact me and we’ll see if it’s available or if another mortgage program will work for your scenario. 

I will be writing a new post soon on more options for buying a kiddie condo… stay informed by subscribing to my blog in the upper right corner.

A few weeks ago, I helped a Kent couple purchase a condominium located in Seattle for their daughter to live in while she attends college at Seattle University. They were prequalifed with their credit union, however the credit union was treating the transaction as if it were an investment property even though the couple (we’ll call them Mr. and Mrs. Kent) were not going to rent the property.

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Student Loans: Subprime Financing of the Future?

My son is getting ready to start college this fall and although I've done my best to plan and save to help out for his education, I'm not able to foot the entire cost. Like many parents, the 529 I've been religiously plunking away at was butchered when our markets crashed… I've continued plunking every month to this account but it's really a drop in the bucket. I'm very proud of him and he has earned a nice academic scholarship that will help go towards the expense.  He's going to have to take out some student loans and it's something I'm not thrilled about. 

I recently watched a show on CNBC about the student loan crisis and it has me very very concerned.  It's appalling how much it smacks of the subprime crisis.  Some of the stories on the show revealed how predatory some of the student loan companies and some colleges can be when they have a young student wanting "the American dream" and I'm not talking about home ownership, I'm referring to a college education.  Many justify the huge expense because payments are deferred and they believe they'll graduate with employers knocking down their doors.  Some students use their student loan money to buy pizza, beer…even go on a shoe shopping spree.  I understand that students need money for food, but should this be financed?  If they are receiving "student loan money" for essential food, should they only be allowed to use credits on campus?   I'm rambling….

I plan on sharing some of my personal thoughts, experiences and opinions as I venture down this road with my son.  I'll also address how student loans can impact borrowers when they on obtaining a mortgage: first time home buyers.

Any tips from parents of college grads?

The Importance of Having a Will

My father passed away last December after a battle with skin cancer and COPD.  He was not a financially wealthy man.  He was rich with love from his daughters, grandchildren, family and friends.  I'm not sure if he was being optimistic or was in denial about his health, he never created a will despite his failing health.

A few weeks after we buried Dad, I went to his bank to see what I was suppose to do.  At the very least, I wanted them to know that he was no longer living and to close the account to prevent any charges or activity that should no longer be happening.  The person who "helped" me wouldn't even speak to me without a will.  In fact, he hinted that if I opened an account, it might be easier to assist me.  I was so upset and emotional that I stormed out.  I was looking for guidance and received nothing…silly me.

If you don't create a will, then the State of Washington has specific laws as to what will happen with any real or personl property and who will be the beneficiary of the estate.  This is referred to as "intestate".   Dad's "estate" is probably is not enough to hire an attorney over.  If there's anything to help reimburse the cost of his burial, we'll be pleasantly surprised.   

By the way, this site has been the most helpful that I've found so far with trying to figure out what to do: This site has been probably the most helpful that I've found so far regarding Dad's estate:  http://www.wa-probate.com/

If you're drafting or updating your will, you may want to consider an estate planner or attorney who specializes in this matter to help you determine if you need a trust and to avoid possible death taxes. 

Please take time to create a will for you and your loved ones.  Make sure your wishes are honored and let someone know where your will is.  If you have a will, when was the last time you updated it?   Please don't leave this matter up to Washington State laws.  If my Dad would have had a will, I believe this issue would have been easily resolved by now.

Are Mortgage Points Tax Deductible?

It's that time of year when people are thinking about their income taxes and many who bought a home last year are wondering what the can deduct on their income taxes.  Let me start by stating:  I am not a tax advisor;  I am a NMLS Licensed Mortgage Originator.  Please review your tax scenarios with your CPA or professional tax advisor.

A mortgage point is a percentage of the loan amount and is used to reduce the mortgage interest rate.  A mortgage priced with zero points has a higher rate than a mortgage priced with a point.  Typically, but not always, one point (1 percent of your loan amount) equates to 0.25% in interest rate.  Points are prepaid interest, and like the interest your pay on your home mortgage, are currently deductible for your primary residence.   

If you paid points to purchase the home you live in (owner occupied/primary residence), you may deduct the full point on your itemized 1040.  If you paid points for a refinance, the point must be deducted over the term of the loan.   However if your refinance was for home improvement, you may be able to deduct the full point instead of spreading over the life of the loan. 

If you purchased a second home and paid points, the points may be deducted over the life of the loan (similar to a refi that was not obtained for home improvement). 

If the seller paid for your points when you purchased your home, you may be able to deduct them as well as long as the transaction meets IRS guidelines.

For more information on what is required for points to be deductible, see IRS Publication 936: Mortgage Interest Deductions page 5.

In order to claim these deductions, you will need to itemize your tax return.  Tax Form 1098 will disclose the mortgage interest paid and the deductible points paid.  You may also want to review your HUD-1 Settlement Statement to see an itemized list of closing costs and points paid. 

Don't forget, the due date for your 2010 Federal Income Tax Returns (and requests for extensions) is on April 18, 2011 this year.