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FAQ - Can Mortgage Interest Be Deducted?
Didier Malagies • Feb 15, 2022
Many people ask me, "can I deduct my mortgage?"
While this seems like a simple question, your monthly mortgage payment is actual going into an escrow account for taxes and insurance, going towards a principle payment, and going towards an interest payment. In some cases, your payment may also be going towards mortgage insurance. Interest & mortgage insurance can be deducted in some cases. However, you cannot deduct principle payments or homeowners insurance. So, what can and cannot be deducted?
Can my mortgage interest payment be deducted?
Yes, your interest payments can be deducted from your income if you received a 1098 form from your lender. You will also have to itemize deductions. Always consult a tax professional. Your circumstances my vary.
Can my insurance payment be deducted?
No, homeowners insurance cannot be deducted. Yes, premium mortgage insurance (PMI) can be deducted depending on your income.
Can my principle payment be deducted?
No, the portion of your payment that goes towards the principal is generally smaller in the beginning of your term and cannot be deducted.
Can my escrow payment be deducted?
No, the payment into your escrow is not deductible. However, a portion of the payments made from your escrow account are deductible. The IRS allows homeowners to deduct
loan origination fees, points purchased, and real estate taxes.
If you have been displaced by a hurricane and are currently renting, we have some good news for you. You may be eligible for an FHA 203H home loan . The FHA 203H home loan is available to renters who were displaced by a natural disaster and are looking to purchase a new home. The FHA 203H home loan is an excellent option for renters who want to become homeowners, and have been displaced by a hurricane or other natural disaster.
The short answer is Yes, you can sell your home or pay off your reverse mortgage. But here's what you need to know...
The answer is yes. If you take out a reverse mortgage, you are required to pay taxes and homeowner's insurance. Reverse mortgages are a way to convert your home equity into cash or a stream of payments. For seniors, they can be a great way to get the money they need without needing to liquidate other assets or sell their home.
Reverse mortgages are an increasingly popular way for seniors to get help with their bills and stay in their homes. But there are some misconceptions about how they affect Social Security and Medicare.
The short answer is yes, Condos, Villas, Townhomes, and Co-ops can qualify for reverse mortgages? But there are some important caveats.
Now is not the best time to refinance with rates going up. However, if you need cash to pay off high-interest adjustable debt that is climbing or if you want to take on a home project because of the increased equity of your home, cash-out refinancing is still a good option. Remember, you can always refinance again, when the rates are lower. If you don't need the money, I suggest waiting until rates come back down. Here's why. I've been in the mortgage industry for over 35 years. I've seen this cycle many times. The Fed is raising rates. Eventually, this will slow down the economy and lead to a recession. The Fed will lower rates to recover from the recession. Once this happens, it will be a good time to refinance, cash-out, pay down debt, and take on home projects. When rates drop, it will be a great opportunity to take advantage of all that equity you've built up. Rate drops are hard to predict for several reasons, but the cycle is consistent. Mortgage rates rise and fall based on a number of factors like: Changes In The Bond Market Affect Mortgage Interest Rates The bond market is a huge part of the mortgage rate equation. And that's because bonds are what most lenders use to fund their mortgages. When interest rates rise in the bond market, lenders have to pay more for their funds, which means they can't afford to offer as many mortgages at a lower rate as they could before. That makes it more expensive for borrowers to get a loan. Changes In The Secured Overnight Finance Rate Another factor that can affect mortgage rates is the Secured Overnight Finance Rate (SOFR). It's the rate banks charge each other overnight for short-term loans. The Federal Reserve sets this rate every morning and adjusts it throughout the day based on how well banks are doing financially. When SOFR rises or falls, so do other rates like LIBOR and T-bill yields — all of which impact mortgage rates. The Constant Maturity Treasury Rate Affects Rates This is another important factor that can affect your mortgage rate: The Constant Maturity Treasury Rate (CMT) is a benchmark used by lenders to determine how much interest they'll pay on bonds they buy from investors — such as those issued by Fannie Mae and Freddie Mac. When CMT rises or falls, so does your mortgage rate. The Health Of The Economy Affects Rates When the economy is strong and growing, it's likely that mortgage rates will decrease as well. This is because lenders are more willing to lend money when they're confident that they'll be repaid. In addition, homebuyers tend to have more job security when jobs are plentiful and salaries increase, so their ability to repay their loans is better than if they were unemployed or underemployed. The Health Of The Economy Affects Mortgage Rates When the economy is strong and growing, it's likely that mortgage rates will decrease as well. This is because lenders are more willing to lend money when they're confident that they'll be repaid. In addition, homebuyers tend to have more job security when jobs are plentiful and salaries increase, so their ability to repay their loans is better than if they were unemployed or underemployed. Inflation Affects Mortgage Rates Inflation is another factor that affects mortgage rates. Higher inflation leads to higher interest rates because lenders know that they will be paid back with less buying power than they lent if inflation continues at its current pace. The term structure of interest rates is another factor that affects mortgage rates. This refers to the difference between short-term interest rates such as three-month Treasury bills and long-term ones such as 30-year mortgages. The yield curve refers specifically to this spread between short-term and long-term yields on government bonds or home loans. When investors want higher returns from longer maturities, they usually require a higher yield on those investments. When all this will happen is hard to predict for several reasons, but the cycle is consistent. I'm Didier at DDA mortgage. I always want to give you options, so you can get the best loan with the best terms to fit your situation. If you have any questions about refinancing your home, call DDA Mortgage at (727) 784-5555 , or use the form below to send us your questions.
When shopping for a reverse mortgage, there are some things you need to know. First, many lenders offer reverse mortgage loan products but few specialize in them. You want someone who will work with you and guide you through the process so that you can get the best terms possible on your reverse mortgage. Always look for a reverse mortgage specialist.
Buying A Home Vs Renting A Home In An Inflationary Market In an inflationary market, buying a home is usually better than renting. Here's why: Inflation is not transitory, it is going up, but for homeowners, their mortgage principal and interest payments will never change. Renters on the other hand will see rent increase with inflation. It doesn't matter if you are renting a house or apartment, your rent will go up. Mortgage Expense And Your Budget Most renters understand this concept; however, they believe mortgages are more expensive and they can't afford one. In general, this isn't true. However, you do need to compare your rent payment to your potential future mortgage payment. The monthly payment on a mortgage is usually lower than the monthly rent payment for the same house or apartment, but not always. Try our mortgage calculator to see if your payments will be higher or lower, and compare your potential mortgage payments to your rent.
The proceeds from a reverse mortgage are not taxable. This can be very beneficial for seniors who are on a fixed income. But, please remember, your payments are not income. You are still borrowing money that will be paid back when your estate is settled, and you are still responsible for paying your property taxes.
With a Home Equity Conversion Mortgage (HECM) loan, you cannot outlive the loan. The loan will become due when you pass away. If the house still has equity, your heirs can sell the home, pay off the balance of the loan, and disperse the proceeds. If the balance of the loan is greater than the equity of the home, your heirs and your other assets are NOT responsible for the difference. If you are married and apply for a joint HECM, the reverse mortgage isn't due until the last borrower passes. Here's what you need to know according to HUD.gov as of the publication of this article.
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The Federal Reserve ’s Federal Open Markets Committee (FOMC) maintained its short-term policy interest rate steady at a range of 5.25% to 5.5% for a sixth consecutive meeting on Wednesday. “The Committee does not expect it will be appropriate to reduce the target range until it has gained greater confidence that inflation is moving sustainably toward 2%,“ the FOMC said in a statement. “In addition, the Committee will continue reducing its holdings of Treasury securities and agency debt and agency mortgage‑backed securities.“ During their last meeting in March , policymakers indicated that they still envisioned three interest rate cuts in 2024. But with inflation remaining sticky and unemployment staying below 4%, these expectations are becoming less likely. Recent economic data hasn’t given the Fed confidence that inflation will continue to decline. Strong inflation data in the first quarter, coupled with a robust labor market , have postponed expectations for the first Fed rate cut. In April, Fed Chairman Jerome Powell, speaking at the Washington Forum , made it clear that rate cuts were not imminent due to the strength of the economy. The economy has maintained surprising momentum despite the current level of short-term rates. With the unemployment rate below 4%, companies are steadily adding workers and real wage growth is observable as inflation eases. Although upward movements in inflation are noteworthy, considerable progress toward the Fed’s 2% target has been made. “It’s unlikely that the next policy rate move will be a hike,” Powell told journalists on Wednesday during the FOMC’s press conference. “In order to hike the rates, we would need to see persuasive evidence that our policy stance is not sufficiently restrictive to bring inflation sustainably down to 2% over time. That’s not what we are seeing at the moment.” While Powell emphasized the unlikelihood of future rate hikes, he also remained vague about the Fed’s future interest rate trajectory. “We didn’t see progress in the first quarter. It appears that it will take longer for us to reach that point of confidence,” Powell said. “I don’t know how long it will take. … My personal forecast is that we will begin to see progress on inflation this year. I don’t know that it will be enough to cut rates; we will have to let the data lead us on that.” In a new development, the Fed announced an easing of its quantitative tightening policy. Starting in June, the rate-setting body will lower the roll-off rate of its Treasury securities from $60 billion to $25 billion per month. This means that while the Fed will not begin selling Treasurys in June, it will allow fewer of them to mature. It will not alter its roll-off rate for mortgage-backed securities (MBS), which will remain at $35 billion per month, according to Xander Snyder, senior commercial real estate economist at First American. “The FOMC did not change the ongoing passive roll-off of its MBS holdings but did note that any prepayments beyond the continuing $35 billion cap would be reinvested in Treasuries,” Mike Fratantoni, senior vice president and chief economist for the Mortgage Bankers Association, said in a statement. “We expect mortgage rates to drop later this year, but not as far or as fast as we previously had predicted.” In addition, Powell reiterated the Fed’s commitment to carrying forward the Basel III endgame regulations in a way that’s faithful to Basel and also comparable to what the jurisdictions in other nations are doing. Since the March FOMC meeting, Freddie Mac’s average 30-year fixed mortgage rate has increased from 6.74% to 7.17%. Before the next FOMC meeting on June 12, two additional inflation readings are expected. “While it’s a possibility, I don’t think that we’ll see much change in mortgage rates following this Fed meeting, because the Fed has been willing to let the data lead at this stage in the cycle,” Realtor.com chief economist Danielle Hale said in a statement. “In order to see mortgage rates drop more significantly, the Fed will need to see more evidence that inflation is slowing.” For homebuyers and sellers, this suggests that housing affordability will remain a top consideration, possibly driving home purchases in affordable markets, predominantly in the Midwest and South, according to Hale.
Depending on where you live there is an opportunity in certain areas that you can get $2,500 towards the closing costs. You also get a lower rate and monthly PMI. Programs open up to you where there is down payment assistance and also the 1% down program available. The Gov't is printing 1 trillion every 100 days, and the costs of everything are out of control. The time will come when they will be printing a trillion every 30 days. Credit cards, car loans, and student loans are at unprecedented levels is it time to refinance your home to save money and then do another refinance as a rate term when the pivot happens at some point in the future the cost of everything is going up and not stopping and you will see inflation continue to gain ground once again. Time to put the house in order with a refinance to consolidate debt. A phone call or an email away to go over your present situation and see what makes sense with the present home values tune in and learn https://www.ddamortgage.com/blog didier malagies nmls#212566 dda mortgage nmls#324329
Retirement at 65 has been a longstanding norm for U.S. workers, but older investors believe that not only is such an outcome unfeasible, but they’re likely to face more challenging retirements than their parents or grandparents. This is according to recently released survey results from Nationwide , with a respondent pool that included 518 financial advisers and professionals, as well as 2,346 investors ages 18 and older with investable assets of $10,000 or more. The survey follows other ongoing research into the baby boomer generation as it approaches “ Peak 65 .” The investors included a subset of 391 “pre-retirees“ between the ages of 55 and 65 who are not retired, along with subsets of 346 single women and 726 married women, Nationwide explained of its methodology. Seven in 10 of the pre-retiree investors said that the norm of retirement at age 65 “doesn’t apply to them,” while 67% of this cohort also believe that their own retirement challenges will outweigh those of preceding generations. Stress is changing the perceptions of retired life, especially for those who are closest to retirement, the results suggest. “Four in 10 (41%) pre-retirees said they would continue working in retirement to supplement their income out of necessity, and more than a quarter (27%) plan to live frugally to fund their retirement goals,” the results explained. “What’s more, pre-retirees say their plans to retire have changed over the last 12 months, with 22% expecting to retire later than planned.” Eric Henderson, president of Nationwide Annuity , said that previous generations who observed a “smooth transition” into retired life do not appear to be translating to the current generation making the same move. “Today’s investors are having a tougher time picturing that for themselves as they grapple with inflation and concerns about running out of money in retirement,” Henderson said in a statement. The result is that more pre-retirees are changing their spending habits and aiming to live more inexpensively. Forty-two percent of the surveyed pre-retiree cohort agreed with the idea that managing day-to-day expenses has grown more challenging due to rising costs of living, while 27% attributed inflation as the key reason they are saving less for retirement today. Fifty-seven percent of respondents said that inflation “poses the most immediate challenge to their retirement portfolio over the next 12 months,” while 41% said they were avoiding unnecessary expenses like vacations and leisure shopping. Confidence in the U.S. Social Security program has also fallen, the survey found. “Lack of confidence in the viability of Social Security upon retirement (38%) is a significant factor influencing pre-retirees to rethink or redefine their retirement planning strategies,” the results explained. “Over two-fifths (43%) are not counting on Social Security benefits as much as previously expected, and more than a quarter (27%) expect to receive less in benefits than previously anticipated.” The survey was conducted by The Harris Poll on behalf of Nationwide in January 2024.
