Good Morning, I read a great article the other day in the Wall Street Journal Markets section about how the current strength of the Dollar and the stronger U.S. economic data impacts the market that I would like to share with you. Here’s the link to the article, http://online.wsj.com/article/ahead_of_the_tape.html,  I hope you find it as interesting as I did.

 

Would you like to pay off your mortgage early? At a time when just about everyone knows someone who is unemployed or who owes more on a home loan than the house is worth, keeping extra cash someplace more liquid than a mortgage seems like a safer approach.

So is the case against extra payments closed for good, given that so many people have locked in rock-bottom mortgage rates for the long haul?

The answer depends on two things: how likely you are to leave the extra money in savings and how good it would feel to wipe your debt out years earlier than your mortgage requires. Read more…

 

IRS tells homeowners how to get tax relief if a lender forgives part of their debt. Generally, the Internal Revenue Service (IRS) treats debt forgiveness by a creditor as taxable income.  However, under federal legislation that took effect in 2007, certain home mortgage debt cancellations—such as loan modifications, short sales, or foreclosures—may be exempted from federal taxes.  Other exemptions are also available.

MAKING SENSE OF THE STORY FOR CONSUMERS

  • Homeowners considering a loan modification, short sale, or Foreclosure should note that the federal tax exclusion under the Mortgage Forgiveness Debt Relief Act of 2007 only applies to mortgage balances on a qualified principal residence and not on second homes, rental real estate, or business properties.
  • The maximum amount of forgiven debt eligible under the 2007 law is $2 million for married taxpayers filing jointly and $1 million for single taxpayers.
  • The debt reduction only can be for loan amounts used to buy, build, or substantially improve a principal residence, including refinance loans as long as  an increase in the total mortgage debt if any is attributable to renovations and capital improvements of the house.  However, if refinance proceeds were used for other personal purposes, such as paying off credit card bills, purchasing cars, or investing in stocks, then the mortgage debt attributable to those expenditures is not eligible for tax exclusion under the 2007 law.
  • California homeowners who sold their house in a short sale or were foreclosed upon in 2009 still may have to pay state taxes on forgiven mortgage debt.  The California legislature did not extend the tax exemption for mortgage debt forgiveness for state taxes.  However, lawmakers are working on a bill that would provide the same tax relief on state taxes as the federal government currently offers. Read more…

Getting a home loan is a necessary part of the process of buying a home for most people. It can take extra work to get a good loan, but if you're familiar with the process and know what to look for, you can improve your prospects. 

Choosing a Mortgage 

  • 30-year fixed rate: While a traditional mortgage typically has a slightly higher interest rate than an ARM to start with, it will not change over the life of the loan.<
  • 15-year fixed rate: Identical to a 30-year fixed rate mortgage except for length, a 15-year fixed rate mortgage typically has a higher payment than a 30-year loan — but you'll pay less interest in the end.
  • ARM: With an ARM, loans start off at a low interest rate which remains stable for a certain period of time and then is regularly adjusted until the mortgage is paid off. A 5/1 loan, for example, has a fixed interest rate for 5 years and a rate that is adjusted every year from then on out.
  • Option ARM: Payments on an option ARM can vary by your personal preference. You can pay the full interest and principal due each month, pay just the interest or pay just a part of the interest. If you opt for the partial payment, the unpaid interest is added to the principal you owe.
  • Interest Only: For the first five years of an interest only mortgage, you pay only the interest. Payments are low in the first five years and significantly more in the following 25. Read more…