1ParkPlace Newsletter

January 2012

Tax Tips: Make your home work for you

Few people look forward to the beginning of tax season. However, like it or not, we are faced with it every year. When you next meet with your tax advisor, be sure to ask about the tax benefits of home ownership.

There are numerous federal and state tax policies and programs designed to encourage homeownership by providing tax relief. For full details on these programs you will want to speak with a tax advisor; however I have included some ideas in order to get you asking the right questions.

Sellers - The Taxpayer Relief Act of 1997 allows couples who sell their home to keep up to $500,000 in profits tax-free and let’s single filers keep up to $250,000. In order to qualify for this break the home must have been the filer’s primary residence for two of the past five years.

Buyers and Sellers – If you meet certain qualifications you could deduct direct moving costs from your income tax. In order to be eligible you must have changed job locations and your new job site to be at least 50 miles further from your old home than was your old job location. Also, you must have worked full time for at least 39 weeks of the 52 weeks after the move.

For more information on how your home can save you money you should speak to your accountant or let me know and I will point you to a source for more information.

Refinancing: Do’s and Don’ts

Low mortgage rates have prompted most of us to at least think about refinancing our home. Locking in an interest rate below 6 percent could end up saving you big money if interest rates begin to rise in the future. The following tips should help you get the best deal possible if you do decide to refinance.

Do talk to your own lender first. You may be able to skip some expenses, like an appraisal, if your mortgage is fairly new.

Do compare fees and closing costs as carefully as interest rate. These can vary widely.

Do see whether your lender is able to switch your escrow from the old mortgage to the new one, so you don't have to prepay. This isn't common, but it's very handy.

Do make sure to get the loan you want. There are numerous accounts of borrowers who sign up for a loan guaranteed to lower their payments, only to learn their payments are lower because they do not include taxes and insurance.

Don't refinance for small gains. Mortgages cost money. It would be counter productive to pay $4,000 in closing costs to lower your payment by $35.

Don't believe "no closing costs." If they are advertising no closing costs it is likely that they make their profits with higher interest rates.

Don't dismiss an adjustable rate if you know you'll move -- for example, a 5/1 ARM. Today with good credit and no points, you could lock in about 4.5 percent interest for five years. Your rate will move after that, probably up.

Creating Extra Storage Space

One common complaint that is often expressed by homeowners is that their home does not have enough storage space. As a lack of space has more to do with how space is utilized, this problem is extremely easy to fix.

Extend upper cabinets all the way to the ceiling. Many kitchens waste valuable space when they stop 6 inches below the ceiling.

Make your closets more accessible. Low closet doors complicate access to the top shelf of a closet. Oversize doors - even ceiling high models - make it easier to store bulky items on high shelves.

Go to the garage. Even in garages where parking is a tight fit there is room in the space above a cars hood for wall mounted cabinets to store little used items - closed cabinets are recommended.

Annex the back of a closet to create built in storage for an adjacent room. A shallow cabinet wedged between the wall studs can serve as an extra kitchen cupboard or a family room bookcase.

Existing-Home Sales Continue to Climb in November

Existing-home sales rose again in November and remain above a year ago, according to the National Association of Realtors®. Also released today were periodic benchmark revisions with downward adjustments to sales and inventory data since 2007, led by a decline in for-sale-by-owners.

Lawrence Yun, NAR chief economist, said more people are taking advantage of the buyer's market. "Sales reached the highest mark in 10 months and are 34 percent above the cyclical low point in mid-2010 – a genuine sustained sales recovery appears to be developing," he said. "We've seen healthy gains in contract activity, so it looks like more people are realizing the great opportunity that exists in today's market for buyers with long-term plans."

According to Freddie Mac, the national average commitment rate for a 30-year, conventional, fixed-rate mortgage fell to a record low 3.99 percent in November from 4.07 percent in October; the rate was 4.30 percent in November 2010; records date back to 1971.

NAR President Moe Veissi, broker-owner of Veissi & Associates Inc., in Miami, said housing affordability conditions have set a new record high. "With record low mortgage interest rates and bargain home prices, NAR's housing affordability index shows that a median-income family can easily afford a median-priced home," he said.

"With consumer price inflation rising by more than 3 percent this year, consumers are looking to lock-in steady payments by taking out long-term fixed-rate mortgages. However, the problem remains that some financially qualified families who are willing to stay well within their means are being denied the opportunity to buy in today's market by the overly restrictive mortgage underwriting situation," Veissi said.

Source: National Association of Realtors