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Mortgage Rates Reach Record Low…Again!

August 2nd, 2010 by Matthew C. Keegan | 1 Comment | Filed in Home Financing, Money Management

It’s a great time to finance a home.

The housing market is still ailing, but for consumers looking for a home and shopping for a mortgage or seeking to refinance, it may not get much better than this.

Save money on home financing right now.

Then again that is what we said several weeks back when mortgage rates dropped to new record low levels.

Record Lows

Last week, the average conforming 30-year fixed mortgage rate hitting a record low of 4.71 percent according to Bankrate.com. That change coincides with a rate of 4.17 percent for a 15-year fixed rate mortgage and 5.43 percent for jumbo mortgages, both record lows.

Mortgage rates were last above the 6 percent mark in November 2008. Back then the average rate was 6.33 percent, which meant that a $200,000 loan would have carried a monthly payment of $1,241.86. At 4.71 percent, the monthly payment for the same size loan would be just $1,038.48, offering a savings of $203 per month for a homeowner who refinances right now.

Stable Now

Though mortgage rates are low right now, how long rates will be sit at historic levels is a matter of debate. Housing demand is down and the economy remains weak, but any sort of volatility could push rates up sharply in a short amount of time.

Even adjustable rate mortgages (ARMs) have fallen with a 5/1 ARM averaging just 4.07 percent last week.

Save Thousands

For every .25 percent rate increase, a $200,000 loan would cost about $24 more per month. That equals an increase of $288 for a year or $8,640 over the life of a thirty-year loan. Clearly, refinancing or locking in a low rate for a home loan now certainly offers an advantage for consumers.

See Also — Federal Housing Finance Agency

Adv. — Are you considering selling your small business? Check out The Novars Group to get the guidance you need to expedite your sale. They list businesses for sale too!


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Last Minute Tax Filing Strategies

March 1st, 2010 by Matthew C. Keegan | 4 Comments | Filed in Money Management

My federal and state taxes are done and filed, completed weeks earlier than they were last year. I set out to do my taxes early, but I still had to wait on some forms and verify other information before I could complete my work.

tax calculatorLots of people wait until the final weeks before doing their taxes and that isn’t a bad thing especially if you owe. Why give the government money sooner than you have to?

I did notice some important changes for the 2009 tax year which showed up in my tax preparation software program. Whether you rely on H&R Block’s software, TurboTax, or some other tax program you should be on the look out for certain money saving deductions including the following:

Helping Haiti – Although the earthquake happened during the 2010 tax year, Congress has decided to allow Americans to declare their donations as a 2009 deduction. But your chance to donate and receive a deduction ended on February 28 so any deductions made from here on this year will need to be declared with your 2010 tax filing. (see IRS.gov: Haiti Relief Donations Qualify for Immediate Tax Relief)

Tax Free Unemployment – You pay unemployment insurance yet the federal government still taxes you for taking this benefit. What is the sense in that?! For 2009 and for 2009 only, the first $2400 of that is tax-free. If you and your spouse collected, then you can exclude $4800. (see The Wall Street Journal: Deducting Job Hunting Expenses)

Your New Home – Congress played around with a tax deduction for new home buyers last year, offering an $8000 tax credit for most of the year before amending the law later to include a $6500 tax credit for other buyers who bought a house after November 6, 2009. Confused yet? Wait, there is more! You may still be able to take the deduction on your 2009 returns even if you haven’t signed a contract yet (April 30 is the deadline), giving you until June 30 to close. Yes, you’ll have to file an extension or an amended return to benefit now, but it could save you a bundle of money later on. (see Kiplinger: FAQs on the New Home Buyer Tax Credits)

Home Energy Improvements – Making home improvements has never been so profitable! Well, at least deductible. Under the federal stimulus plan, various incentives were put in place to help homeowners update their abodes. We covered this information in detail last month so check out the link which follows for details. (see SayEducate.com: Enjoy Tax Credits For Energy Conservation)

Your New Car – Eager to stimulate the auto industry—after all the federal government now owns significant chunks of General Motors and Chrysler—you can deduct the state sales tax if your purchase took place on February 16 or later for a car costing as much as $49,500. That trade-in for last summer’s cash for clunkers program can also be deducted. (see Intuit.com: Deduct the Sales Tax Paid on a New Car)

These are only a sampling of what you should look out for when you prepare your 2009 taxes. Certain deductions such as those for investment losses, college tuition, moving, and disaster recovery may also apply. Check the IRS site for more information to confirm what is available to you.


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Short Selling May Not Resolve Your Problems

January 13th, 2010 by Matthew C. Keegan | 4 Comments | Filed in Home Selling, Money Management

Consumers seeking to save their homes from foreclosure and the resultant long term hit to their credit ratings will sometimes put their homes on the market and accept a price for less than what they owe on their mortgage. If the lender agrees to this deal, then the original homeowner can get out from underneath his mortgage and be free of further obligation.

Well, not so fast.

housing crisisTheoretically, a short sell (short sale) should be final, a transaction whereby the lender forgives the loan deficiency, choosing to swallow a comparatively small loss up front, rather then a sizable loss that would probably be incurred had the house passed through foreclosure.

According to The Wall Street Journal (A Short Sale May Not Mean You’re Home Free), that theory isn’t always meeting reality. Sometimes lenders will go after the first homeowner in a bid to recoup some or all of the deficiency.

For example, let’s say you are behind on your mortgage and just a month or two away from foreclosure. You owe $295,000 on your home, but it is worth a bit more even though you have owned it for several years. A crummy real estate market is pushed down home values, yet you believe that you could get close to that amount for your home and pay off your mortgage.

Well, the tough market proves two things: buyers are tough too and are looking for bargains. You listed it for $320,000, but the best offer received was just $280,000 which you accepted pending your lender’s approval which you need in order to be released from your obligation. You see, when you seek to sell for less than what you owe in effect you are putting your lender in a position to take it or leave it. If this lender believes that your short sell is the best deal, then they may reluctantly accept the deal.

This is where things can get complicated.

Whenever performing any real estate transaction, you want to have a lawyer representing your interests. A real estate attorney will ensure that your short sell is up to snuff and includes one important provision: that the bank will not go after you for the deficiency.

If that provision is not in place, then guess what? Your lender can go after you for the loan deficiency, costing you thousands of dollars. And you thought that it was too expensive to get a lawyer!

Oh, by the way, if you think that short selling your home means you can automatically turn around and buy a new home within the coming months or year, think again. On future credit applications you will be required to state whether you have been involved in a short sale which is sometimes also called a deed in lieu of foreclosure.

Lying about it can cause serious legal problems for you. Telling the truth will keep you from getting a home loan. Regardless, a short sale is a serious matter, one that should be done as a last resort.

In fact, some lenders say that there is no credit advantage in a short sale versus a foreclosure, which means that your credit will likely reflect that information. (see MSN Money: Use a short sale to escape foreclosure)


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Drowning In Debt? A DIY Lifeline For You!

December 1st, 2009 by Matthew C. Keegan | 4 Comments | Filed in Money Management

Tens of millions of consumers today are facing financial difficulties ranging from late payments on their utility bills to foreclosure on their homes. Job loss, illness, overspending, and other problems can weigh in, putting untold pressures on the American family.

credit cardsNot every financial situation should mean imminent ruin, although taking action sooner rather than later can go far in turning your condition around. Smart budgeting, credit counseling, debt consolidation, and bankruptcy are four do it yourself (DIY) avenues for you to explore; chances are you’ll be taking one or more paths in order to improve your financial condition.

Smart Budgeting

What is smart budgeting? Essentially, it is a budgeting plan that makes sense for you. This means being realistic and developing a plan that works. That doesn’t mean setting pie-in-the-sky goals, near impossible requirements whereby you think you’ll correct many years of financial problems in twelve months or less or pay off your mortgage quicker when you’re still on the brink of foreclosure.

Step by step changes can bring about real results, helping your conquer your problems gradually. This also means negotiating payments with creditors or finding out a way to work with bill collectors. Print out a money tip road map to help you get back on track.

Credit Counseling

Although a “do it yourself” method can work for some people, others may find that professional assistance can go far in helping them conquer the debt monster. Credit counseling organizations can help you develop a repayment plan with your creditors, help you track your bills, an develop a workable budget for you.

A few things to keep in mind: not all credit counselors are on the up and up, some charge very high fees, while others may promise more than what they can deliver. For example, when a creditor says you can pay just pennies on the dollar for your debt, be suspicious. Learn about fees and other costs before agreeing for assistance and check references!

Debt Consolidation

One way to reduce your credit costs is to consolidate your debt, oftentimes by taking out a second mortgage or a home equity line of credit. You’ll be putting your home up as collateral which means that if you stop making payments or make them late you could lose your home.

Certain tax advantages exist when consolidating a loan; check with your financial adviser to learn more.

Personal Bankruptcy

One way to discharge all or some of your debt is to file for personal bankruptcy. Chapter 7 bankruptcy is liquidation of your assets, whereby mostly everything you own is sold off except for exempt assets, which vary from state to state. You’ll be required to take a “means test” to ensure that your income does not exceed a certain amount.

Chapter 13 bankruptcy is less drastic, allowing you to keep a car or your home as long as you keep up payments, while discharging some if not all of your unsecured debt. Changes to the US Bankruptcy Code in 2005 has made personal bankruptcy a less desirable option as some previously forgiven obligations remain in place. Contact an attorney familiar with tax law who can advise you.

Financial Resolution

There is no magic solution to financial problems which means patience and adjusting as you go are important attributes for the person who wants to get back on his feet again. Creating a sensible plan and sticking with it is a good start; seeking professional guidance may be the best choice that you make.


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