Todd's Tax Service LLC
Mortgage rates continue to remain at record lows.
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A good or bad mortgage can make the difference between success or failure when it comes to home ownership.
New consumer protection laws make it easier to read mortgage related documents. Fees, interest rates, and terms are all things borrowers need to pay attention to. The mortgage industry is highly competitive which works in the favor of the borrower. The financial crisis of 2008 was primarily caused by missteps in the mortgage lending marketplace. Hopefully banks, governments, mortgage brokers, realtors, and homeowners haven't forgotten the lessons learned in the wake of the 2008 crisis.
Shopping around for "the best deal" often pays off. Borrowers with good credit and money down or equity in their home will often get the best deal.
FAQ - Home Mortgages
Should I take money out of my retirement account(s) to payoff my mortgage? 2 things have happened as a result of the financial crisis - clients are more doubtful about their investment (401K) accounts and also have a desire to be debt free. These responses are understandable, however, taking distributions from tax deferred retirement accounts to pay off any type of debt is usually not advisable. Instead, consider refinancing to a shorter term and at a lower rate and also adding extra principal payments to your monthly payments.
What term should I choose when taking out a mortgage? A 30 year mortgage offers the lowest payment but will obviously take longer to pay off than a shorter term loan (15 or 20). The interest rate charged will be less if you can afford the payment on a 15 or 20 year loan.
Should I take out a "HELOC" or home equity line of credit when I buy my home? A HELOC is basically a credit card that uses your home as collateral. It is not uncommon to run up a big debt that takes years to payoff using the HELOC. Nonetheless, it can sometimes make sense to use as it usually has a lower interest rate associated with it, although the rate can often be variable. Caution is advisable in connection with HELOCs.
What are the advantages and disadvantages of escrowing my real estate taxes and homeowner's insurance? Many homeowners have both real estate taxes and insurance included in their monthly payment which makes household budgeting easier. Some lenders charge a fee to process the escrow payments. With an escrow account, the lender gets the benefit of the "float" - money sitting in an account until the taxes or insurance premium are due.
My home is paid off however I am considering refinancing it so I can use the proceeds to help my children out. Retirees can best help their children but making sure their own finances are secure and that they will not become a financial burden on their children. We do not recommend borrowing money unless it is absolutely necessary.
Do you have car or truck payments? Consider taking the payment amount after you payoff your vehicle loan and adding it to your mortgage payment to payoff the mortgage more quickly.
Where can I get the best deal on a new mortgage? If you are a first time homebuyer, check out the Neighborhood Assistance Corporation at naca.com. Pay attention to the fees and interest rate that will apply to your mortgage. Fees paid to obtain or refinance a mortgage vary widely from one situation to another. Good credit will open up more doors in terms of getting the "best deal".
Wells Fargo Bank is the largest lender in the US and posts it's rates on their website, as do many other lenders. Shop around! Many local lenders offer good rates and terms as well.
What will happen to my tax situation if I pay off my mortgage (or pay it down more quickly)?
The mortgage interest deduction only provides a small benefit to the average homeowner who could otherwise take a generous standard deduction. In general, taxpayers and homeowners will be better off if they pay down their mortgage faster rather than slower. No client has ever reported to me that they were unhappy with a mortgage free home!
What about reverse mortgages?
In limited circumstances, a reverse mortgage may make sense. For a retiree with limited resources who wants to stay in their home but is having financial issues, a reverse mortgage may enable that individual to take equity out of their home and live in the home for a longer period of time. A reverse mortgage involves substantial fees and the debt associated with the mortgage which will mean that the homeowner will receive monthly statements showing an amount due with interest added to the bill. (This may make some seniors uncomfortable and should be carefully considered before taking out a reverse mortgage).
Should I co-sign a mortgage for my child?
The fact that someone is in need of a co-signer indicates that their own financial situation is precarious and co-signing on a loan for anyone is not advisable in most circumstances.