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First Time Home Buyer Tips - Tax Benefits of Owning Your First Home
Owning a home has many benefits, especially in the world of taxes. From points, to interest, to real estate tax breaks, the government finds a multitude of ways to make owning a home an advantage during tax time.
Property Tax Advantage
Property taxes, otherwise known as real estate taxes, are fully deductible.
Mortgage advantage
The most notable tax break is that all mortgage interest, up to a maximum of $1 million dollars, can be deducted on your taxes. If you are married taxpayers filing jointly, make that $500,000.
Interest Advantage
Your total home equity debt is limited to the smaller of $100,000 (or $50,000 for each member of a married couple if they file separately), or the total of your homes fair market value, less certain other outstanding debts against it.
Point Advantage
You can fully deduct points associated with a home purchase mortgage. A point equals 1% of the loan principal. One to three points are common on home loans, which in the end, turns out to be thousands of dollars. Refinanced mortgage points are also deductible, provided they are amortized over the life of the loan. Homeowners who refinance can write off the balance of the old points and start to pay off the new.
Home Equity Advantage
If you take out a loan to make considerable home improvements, you can deduct the interest on this loan. There is no dollar limit on this deduction; nonetheless, the work must improve the value of your home, such as a new driveway, an extra room or a pool, and not simply be minor cosmetic improvements, such as painting, fixing broken windows or wallpapering.
There are also many tax advantages after the initial purchase of your home, such as using a room for a home business, capital gains, selling, capital improvements, moving costs, and other home owning tax advantages. Consult a professional to educate yourself further and learn in-depth about your specific tax situation. If you own your home, there are many tax advantages that can be afforded to you.
Mortgage Brokers and Lenders - Understand The Different Types of Mortgage Lenders
If youre thinking about taking out a mortgage loan, you may want to educate yourself on the different types of lenders before you take those first steps. There are many types of lenders to choose from, including banks and savings and loans associations, as well as mortgage bankers and mortgage brokers. Before you lock yourself into the first viable opportunity, here are a few of your options.
Obtaining Home Loans from Banks
Banks can be a great option due to their flexibility. Often times they can customize their loan packages to meet your specific needs. A mortgage banker is large enough to originate loans and sell directly to jumbo loan investors, such as Fannie Mae, Freddie Mac, Ginnie Mae, and others. Banks can vary greatly in size and most mortgage bankers have wholesale lending divisions.
Home Loans from Savings and Loans Associations
A savings and loan association is a financial institution specializing in savings deposits and mortgage loans. Like commercial banks, they take in and pay interest on deposits from individual savers, and in turn, they lend these funds out to borrowers. They are often mutually held, although if your particular savings and loan association is stock-based or publicly traded, then it is no longer an association and depositors and borrowers do not have any managerial control. Recent changes in US regulations allow them to refer to themselves as banks or savings banks.
Home Loans from Mortgage Brokers
Mortgage Brokers are companies that originate loans with the intention of brokering them to wholesale lending institutions. Mortgage brokers can take the form of an individual or company that brings borrowers and lenders together for the purpose of loan origination. Unlike a mortgage banker, brokers do not fund the loan, but instead work on behalf of several lenders. Brokers typically require a fee or a commission for their services and usually deal with lending institutions that have a wholesale loan department.
Obtaining Loans from Mortgage Companies
Mortgage companies are the principal sources for mortgage loans. Mortgage companies sell the loans to investors, secondary market agencies and other lenders. In the end, it makes little difference to the borrower whether the loan is held by the lender or sold in the market. In most cases, the originator will continue to collect payments and manage the escrow account.
Fixed Interest Rate Mortgages - Getting The Best Fixed Rate Loan
If you are purchasing your home and plan on staying rooted for a very long period of time, say forever, and you are financially stable and standing on firm solid ground with a flexible budget, then you might want to explore the option of a fixed-rate loan. A fixed rate loan is best for folks who plan on staying in their home at least 15 or 30 years and has many advantages over other loan options.
A fixed-rate loan is just as it sounds, the interest rate that you accept is fixed, meaning it will not fluctuate with the whims and fancies of the open market. Forevermore, your rate is set in stone and your payments are laid out in an easy to understand fashion that leaves no room for surprises. The most common fixed-rate loans are the 15 and the 30-year loan. The 30 year loan is the choice for most, offering lower monthly payments than the 15-year, but the 15-year loan can offer lower rates and interest, as well as quicker home equity. Although the 15-year loan is an option, it comes with higher payments for paying your loan off twice as fast as with a 30-year. In the end, it depends on your budget for payments and how long you think you will stay before desiring a move.
Advantages of a Fixed Rate MortgageThe advantages of deciding on a fixed-rate loan over other options are fixed monthly payments over the entire life of the loan and non-changing interest rates, which offers protection from rate increases and the ability to choose to refinance if the rates decrease. All in all, the advantages are quite straightforward and allow room for cheaper rates without the risk of climbing interest rates. If you are buying when rates are low, this is definitely the best option for locking in your rate.
Disadvantages of a Fixed Rate MortgageThe disadvantages of a fixed-rate loan are minimal, but include the possibility of locking in a high interest rate, accepting non-changing high monthly payments, and the commitment to a certain interest rate, even if the interest rates on the market improve and decline.
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