YOUR HOME
MORTGAGE INTEREST DEDUCTION ON THE CHOPPING BLOCK?
As the politicians look for ways to get more tax revenue the once sacred mortgage interest deduction seems destined to change. Only 26 percent of taxpayers take the mortgage interest deduction, but those who do say it's something they depend on. Most lower income taxpayers do not benefit by itemizing and taking the mortgage interest deduction. Only 8 percent of people making less than $50,000 claim the deduction.
In states with high cost housing like California, Hawaii, Virginia, Maryland and Nevada, the average interest deduction is about $12,000 or more than the standard deduction of $11,900. In those areas, some say the mortgage interest deduction was a factor in buying a home. The deduction is a rich source of possible tax revenue. Homeowners keep $108 billion using the deduction.
HOW TO MAKE A SUCCESSFUL MORTGAGE REFINANCE DEAL
The mortgage refinance boom is in full swing again as homeowners take advantage of record low rates by refinancing their home loans. But it's more complicated than it was a few years ago say experts at Bankrate.com. Home values are lower and paperwork requirements are higher.
What you should know:
- The most common factor in a refi denial is an appraisal that comes in too low. Don't overestimate the value of your home says Dale Robyn Siegel, author of the book "The New Rules for Mortgages."
- Avoid starting a renovation of your home before the appraiser visits. The appraiser delivers an estimate of the home's value on the day of the inspection. The house will be worth less on that day if the bathroom fixtures have been ripped out. That's the case even if the renovations will enhance the home's value upon completion.
- Don't disappear or go on vacation without telling the lender who will be calling to ask for various documents. Stay in contact and respond quickly to requests for more documentation.
- Don't start over with another 30 year term. At least do a 25 year, so you're not back at square one.
- A 20 year is even better because you'll save tens of thousands of dollars in interest and your payment will not be a great deal more.
- Once approved be sure you understand the rate lock. If you don't lock in an interest rate you take the risk that mortgage rates will go up so it's no longer worth the time and expense of refinancing, says Bob Walters, chief economist for Quicken Loans.
Rate locks have expiration dates so build in a cushion of a few days in case there's a delay in the loan closing. If you have a 30 day rate lock set the closing date for the 27th or 28th in case there's a snag that delays the closing
HOUSING IS BRINGING A MUCH NEEDED BOOST TO THE ECONOMY
While uncertainty about taxes and government spending has kept businesses from expanding and the Gross Domestic Product at a low level, one area of the economy is projected to grow at a level not seen in years. The housing market is raising consumers' confidence and spurring the spending that gives the economy a boost. Home buyers seem to be unaffected by the uncertainty that has kept the GDP from growing.
While the real estate recovery is essentially in its early stages, its steady improvement is offsetting some of the slowdown in manufacturing. Home prices are on course to outpace even the most optimistic forecasts of last year, say economists reporting in the Wall Street Journal.
Home sales are boosting the economy in other ways as well. Retailers are seeing homeowners who are there to buy materials for redecorating and to refurnish and upgrade their homes. At the same time, banks are seeing mortgage profits, high refinance volumes and a stronger demand for new loans. The chief U.S. economist at Deutsche Bank says, "Housing's share belies its importance to the economy. The confidence effects are massive."
Rising prices are driving the market as buyers work to zero in on a deal before prices rise again. Additionally, high rents and the formation of new households have ignited demand. The housing market is moving in the right direction with rising prices, up 7.6 percent from a year ago, but smart consumers realize that homes are still an amazing bargain. During the recession prices fell by 30 percent. Though they are rising, little by little, they still offer great opportunities, says The National Association of Realtors.
Don't forget that the advantage of home ownership involves more than just money. It gives the owner a feeling of pride and control. He or she knows what the payment will be for years to come, and they can redecorate or improve their homes whenever they decide to do it.
MORE FRONT PORCHES, FEWER DECKS, PATIOS AND GARAGES
Construction companies are pleased to see the current increase in new home orders. They also notice that buyers ordering a home are focusing mainly on living quarters.
The percentage of homes built without a garage or carport hit 13 percent in 2010 and 2011 and is rising again.The National Association of Home Builders says skipping the garage is often about using public transportation if the new construction is built closer to employment centers and public transit.
The Census also shows that the number of new homes built with decks and patios has flattened. They are expensive and take up space, usually behind the house. If the building lot is large enough to accommodate them people think the deck or patio can be added later.
There is a current trend toward smaller homes that have a front porch. The porches have social appeal, and with plantings, lighting and porch posts, they enhance the entrance to the home. Two-thirds of new homes built in 2011 had a porch, a percentage that has been rising for about 10 years.
One Philadelphia developer says he specializes in townhouses with porches because that's what people want.
THE RENT ON OUR APARTMENT HAS RISEN FOR THE FOURTH YEAR IN A ROW. IS THIS STILL A GOOD TIME TO BUY A HOME?
Yes, now is the best time to buy because homes will never cost less than they do right now, at least within the next decade or two. Home prices fell by up to 30 percent since their 2006 peak. Though they are rising by a few percentage points a year now, homes are still a big bargain.
Apartment rentals are not. Nationwide, rents rose by an average of 4.6 percent this year after rising by 4.1 percent in 2011. But that's certainly not the end of rent increases. The National Association of Realtors predicts that apartment rent will continue to rise by 4 percent or more, at least in 2014 and 2015, and maybe for years after that. In California, 8 percent increases are common.
Nationwide, one cause of lease and rent increases is the shortage in rentals and the very limited number of apartment units under construction according to MPF Research. Add to that, household formations are rising and will continue to grow slightly faster next year. And with a stronger economy more people are moving away from shared homes and looking for an apartment of their own.
Landlords say rent increases are necessary because of their rising expenses. The pendulum, however, has definitely swung back in their favor, say economists at market researcher Reis.com as quoted in The Wall Street Journal. The rising economy and high apartment rents are prompting people to make the wise move to home ownership. Many say they have no problem paying their rent, they just want to get their money's worth just as they do when they shop at a store.
If you have a stable job and savings for a down payment go ahead and buy a home. Financial wisdom is just one of the benefits of having your own place.
DOUBLING UP: FEWER ADULTS ARE LIVING IN SOMEONE ELSE'S HOME
The number of adults living under someone else's roof has shown a slight decline. Living with someone else or "doubling up" has been common among young adults and seniors since the recession began in 2007. It hit its apparent peak in 2010 when 22.2 million or 19.4 percent of households were shared. In 2011 the number dropped to 22 million or 19.2 percent. However, in high rent areas of California, Florida, Hawaii, Maryland, New Jersey and New York, more than 30 percent of adults ages 25 to 34 lived in someone else's home in 2011.