Homeownership comes with a lot of advantages, especially when it comes to tax time. Make sure you're not missing out on important home-related tax deductions. As always, please consult your tax advisor to find out which deductions apply to you.
Real estate taxes and the interest you pay on your mortgage are usually tax-deductible.
You may also be able to deduct the points you paid on your mortgage the year you purchase your home.
Please consult your tax advisor.
Deducting Mortgage Interest
The interest you pay on a home mortgage is usually tax-deductible. You are allowed to deduct interest on multiple mortgages, as long as they add up to less than $1 million. The one criteria being that the money was used for buying, building or improving a home.
Every year, you should receive a "Form 1098" from your lender which details how much mortgage interest you paid. To claim this deduction, you need to fill out "Schedule A", under "itemized deductions" to record your interest deduction.
Home mortgage interest deductions can also include
late payment charges and pre-payment penalties. The only requirement is that they were not for a specific service received in connection with your home loan.
Deducting Real Estate Taxes
Real estate taxes are also tax-deductible. Your interest statement should list the amount of real estate taxes you paid if your taxes and homeowners' insurance were placed in an escrow account when you closed on your mortgage. If your real estate taxes aren't included on the statement, review your cancelled checks to figure out the total amount of real estate taxes paid.
Deducting Loan Points Paid on a Purchase
The points you pay on a loan for a home purchase are tax-deductible for the year you made the purchase. You can deduct the points you paid as well as those a seller paid on your behalf (see next item) if you meet the following criteria:
* The loan is secured by your primary residence;
* The loan was used to buy, improve or build the home;
* Paying points is a common practice in the seller's geographic area;
* The points are calculated as a percentage of the loan principal ;
* The points are clearly outlined on the buyer's settlement statement; and
* The amount of cash you put into the purchase of your home
(down payment , closing costs , etc.) is at least equal to the amount you were charged for the points you paid on the loan.
Deducting Seller Concessions
Sometimes, the seller will contribute money to the buyer to help cover the buyer's loan closing costs. The average concession is 3% of the sales price (with less than a 10% down payment).
Seller concessions can go towards buying down the interest rate, closing costs, discount points, and pre-paid items such as per diem interest, escrows and tax pro-rations. Again, seller-paid points are tax-deductible.
Deducting Loan Points Paid on a Refinance
If you refinanced in the last year, you may be able to deduct any points you paid to buy down the mortgage rate. These points must be deducted proportionately over the life of the loan. For example, if you took out a 30-year mortgage, you would deduct 1/30th of the points each tax year.
Many homeowners have overlooked an important tax opportunity. If you have refinanced more than once, you can deduct unclaimed points from an earlier refinance. Let's take an example:
You refinanced in 2003 and paid points. You then deducted 1/30th of those points in 2003 and 2004. However, rates continued to drop, so you decided to refinance again in 2005, paying off the 2003 loan. The remaining points you have not yet deducted can now be deducted in 2005. You could also use this deduction if you sold the house in 2005, rather than refinancing.
Deducting Interest on a Home Equity Loan
Interest paid on a home equity loan or line of credit may be tax-deductible up to $100,000. However, the deduction may be limited if the combined amount of your second and first mortgages total more than the property's actual value. For example:
Your home is worth $150,000 and you have a first mortgage for $125,000 and a home equity loan of $40,000. The two mortgages combined equal $165,000—that's $15,000 more than the value of your home. That means you can only deduct the interest on your home equity loan up to the amount of $25,000 (the difference between your home's value and your first mortgage).
If you still have questions, please call us at 800-251-9080 to talk to a refinance expert today. We can help you determine which refinancing option is best for your situation.
http://www.quickenloans.com/refinance/articles/homeowner_tax_tips.html?lid=737
Tuesday, June 12, 2007
Home Improvements That Pay Off
In the housing market, some home improvements pay off by increasing your home's value , while others will do little to improve it. In general, updating your kitchen and bathrooms are always smart investments and offer the best home improvement value.
Remodeling Your Kitchen
The kitchen is the most important room in the house since it's where much of the family interaction occurs. The average return-on-investment for improvements to the kitchen ranges from about 80 percent to 93 percent with average costs at $15,000 and up. If you don't know where to start, try adding new tile flooring, re-facing old cabinets, and/or updating appliances to new energy efficient models.
Remodeling Your Bathroom
Bathroom renovations can yield a return of between 85 percent to 90 percent, with costs starting around $10,000. Adding a new bathroom can return as much as 85 percent, especially if you only have one bathroom to start with. And since it’s more difficult to sell a home with only one bathroom, adding a second bath can make your home significantly easier to sell. Some good improvements include installing double sinks, tile floors and new bath fixtures and faucets.
Other Good Home Improvements
Making home improvements can be a big undertaking. Larger improvements could include adding a fireplace, building a deck or patio, or adding a new heating or cooling system. However, you don't have to spend huge bucks to upgrade the look of your home. Smaller, less expensive improvements could include replacing old doors or installing a ceiling fan. Cosmetic improvements can also go a long way in the minds of prospective buyers.
Home Improvements to Avoid
There are some improvements that rarely pay off, such as adding a swimming pool. These improvements are fine if you and your family will enjoy them, but keep in mind that they rarely increase the value of your home. They may even make your home more difficult to sell.
You should also avoid making too many expensive improvements that go beyond what is typically found in your neighborhood. You don't have to cut corners, but owning the most expensive home on your block can be another obstacle when it comes time to sell your home.
One last piece of advice, avoid getting too fancy. Everyone's tastes are different, so choosing colors and materials that appeal to a broader range of people will make it easier when you need to sell.
Considering a new project to add to the value of your home? We can help you find the home improvement loan that is right for you. Call us at 800-251-9080 to talk to a refinance expert or click the button below and a refinance expert will contact you.
http://www.quickenloans.com/refinance/articles/pay_off_home_improvements.html?lid=739
Remodeling Your Kitchen
The kitchen is the most important room in the house since it's where much of the family interaction occurs. The average return-on-investment for improvements to the kitchen ranges from about 80 percent to 93 percent with average costs at $15,000 and up. If you don't know where to start, try adding new tile flooring, re-facing old cabinets, and/or updating appliances to new energy efficient models.
Remodeling Your Bathroom
Bathroom renovations can yield a return of between 85 percent to 90 percent, with costs starting around $10,000. Adding a new bathroom can return as much as 85 percent, especially if you only have one bathroom to start with. And since it’s more difficult to sell a home with only one bathroom, adding a second bath can make your home significantly easier to sell. Some good improvements include installing double sinks, tile floors and new bath fixtures and faucets.
Other Good Home Improvements
Making home improvements can be a big undertaking. Larger improvements could include adding a fireplace, building a deck or patio, or adding a new heating or cooling system. However, you don't have to spend huge bucks to upgrade the look of your home. Smaller, less expensive improvements could include replacing old doors or installing a ceiling fan. Cosmetic improvements can also go a long way in the minds of prospective buyers.
Home Improvements to Avoid
There are some improvements that rarely pay off, such as adding a swimming pool. These improvements are fine if you and your family will enjoy them, but keep in mind that they rarely increase the value of your home. They may even make your home more difficult to sell.
You should also avoid making too many expensive improvements that go beyond what is typically found in your neighborhood. You don't have to cut corners, but owning the most expensive home on your block can be another obstacle when it comes time to sell your home.
One last piece of advice, avoid getting too fancy. Everyone's tastes are different, so choosing colors and materials that appeal to a broader range of people will make it easier when you need to sell.
Considering a new project to add to the value of your home? We can help you find the home improvement loan that is right for you. Call us at 800-251-9080 to talk to a refinance expert or click the button below and a refinance expert will contact you.
http://www.quickenloans.com/refinance/articles/pay_off_home_improvements.html?lid=739
How Do Option ARM Mortgages Work?
Option ARM mortgages give you flexibility that is unmatched by virtually any other home loan product available in today's market. Option ARM mortgages offer low adjustable interest rates with the security of a fixed minimum payment. In fact, you have four different payment options each month with an Option ARM, allowing you to choose the payment that best fits your needs at anytime.
If your budget is a bit tight, you can choose to make the interest–only payment or the minimum payment––two payments that are lower than a standard mortgage payment. In months when your budget is not so tight, you can use the extra money toward saving for retirement, paying off high–interest debt, making home repairs, or financing college expenses. The choice is yours.
Option ARM Mortgages — Your Month–to–Month Flexibility
Minimum Payment
The minimum payment on Option ARM mortgages is the lowest of the four payment options, since it is less than the amount needed to cover the interest for the month. This is known as deferring your interest.
Generally speaking, with most Option ARM mortgages, your minimum payment may change each year, it can only increase a certain percentage of the previous year's minimum payment amount. Then every five years, your minimum payment is recalculated to help you stay on track to pay off your loan. After each recalculation, your new minimum payment will be based on your current interest rate, your unpaid principal balance and your remaining loan term. However, the payment cap will not apply.
Interest–Only Payment
The interest–only payment on an Option ARM mortgage is the second lowest payment option and is the amount needed to repay the full interest due each month. No principal is paid down unless you choose to include an additional amount. Any additional amount on top of the amount needed to cover the interest will be applied to your principal.
30–Year Amortization Payment
The 30–year amortization payment is higher and pays down the loan faster than the minimum or interest–only payments. If you decide to make the 30–year amortization payment on your Option ARM, you're paying an amount equal to what is needed to pay off your loan in 30 years, based on the initial fixed interest rate and current loan balance.
15–Year Amortization Payment
If you decide to make the 15–year amortization payment, you're paying an amount that is needed to pay off your loan in 15 years based on the initial fixed interest rate and current loan balance. This is the highest payment available and is designed to pay down your loan faster than any other option.
Who May Benefit From Option ARM Mortgages
Flexibility alone makes an Option ARM mortgage an excellent choice for borrowers who don't have a fixed income or for people with fluctuating income-like people who work on commission or self–employed borrowers; even people who are serious investors who want to channel their money into their investments, rather than their mortgage.
Without a fixed income, it can be hard to meet a mortgage payment on time during slow months at work. Say you have a bad month of commission-sales are down; you have to fix your car; and finances are pretty tight. With an Option ARM loan, you can choose to make just the minimum payment to get you through the month, and then make a larger payment when things pick up. Having a safety net like this is much less stressful than falling behind on your mortgage payments.
But keep in mind, this type of loan is not for everyone. This is the kind of loan that is for clients that can soundly manage their finances––people who are at least somewhat knowledgeable when it comes to things like managing and investing their money. For instance, this loan might be perfect for someone who is in sales and works on commission and who knows how to get by when sales are down. This is not the kind of loan for people who may have lots of debt and are looking to only pay the minimum payment all the time.
Here's why: Your minimum payment on Option ARM loans may not fully cover the interest that accrues monthly. This is known as "deferred interest." If the minimum payment doesn't cover the entire interest owed, it gets tacked onto your loan balance which means you can get into trouble very quickly, if you don't know what you're doing. Your loan balance can actually increase as you make these low payments. You can elect to use the minimum payment as often as you like, but if used too often without making some larger payments in between, you could end up with a mortgage balance that is higher than the value of your home. Quicken Loans offers an option ARM mortgage with a minimum payment that limits how much interest is deferred. Our option ARM program calculates your minimum payment based on your interest rate minus a percentage for the first five years until it reaches the maximum deferred interest level of about 115 percent (New York 110 percent). During the first five years, your rate is fixed. After that, it becomes a six–month fully–amortizing ARM. When that happens, the loan loses its potential to be a negatively amortizing loan. If you're looking into getting an option ARM, look for one that limits the potential for deferred interest or negative amortization.
Learn More About Option ARM Mortgages
Our home loan experts can help you determine whether an Option ARM is right for your financial situation. For more information on Option ARM mortgages, call 800-251-9080 to talk to a Refinance Expert at Quicken Loans or read more about our Secure Advantage loan. You may also download the Consumer Handbook on Adjustable Rate Mortgages.
http://www.quickenloans.com/refinance/articles/option-arm.html?lid=3898
If your budget is a bit tight, you can choose to make the interest–only payment or the minimum payment––two payments that are lower than a standard mortgage payment. In months when your budget is not so tight, you can use the extra money toward saving for retirement, paying off high–interest debt, making home repairs, or financing college expenses. The choice is yours.
Option ARM Mortgages — Your Month–to–Month Flexibility
Minimum Payment
The minimum payment on Option ARM mortgages is the lowest of the four payment options, since it is less than the amount needed to cover the interest for the month. This is known as deferring your interest.
Generally speaking, with most Option ARM mortgages, your minimum payment may change each year, it can only increase a certain percentage of the previous year's minimum payment amount. Then every five years, your minimum payment is recalculated to help you stay on track to pay off your loan. After each recalculation, your new minimum payment will be based on your current interest rate, your unpaid principal balance and your remaining loan term. However, the payment cap will not apply.
Interest–Only Payment
The interest–only payment on an Option ARM mortgage is the second lowest payment option and is the amount needed to repay the full interest due each month. No principal is paid down unless you choose to include an additional amount. Any additional amount on top of the amount needed to cover the interest will be applied to your principal.
30–Year Amortization Payment
The 30–year amortization payment is higher and pays down the loan faster than the minimum or interest–only payments. If you decide to make the 30–year amortization payment on your Option ARM, you're paying an amount equal to what is needed to pay off your loan in 30 years, based on the initial fixed interest rate and current loan balance.
15–Year Amortization Payment
If you decide to make the 15–year amortization payment, you're paying an amount that is needed to pay off your loan in 15 years based on the initial fixed interest rate and current loan balance. This is the highest payment available and is designed to pay down your loan faster than any other option.
Who May Benefit From Option ARM Mortgages
Flexibility alone makes an Option ARM mortgage an excellent choice for borrowers who don't have a fixed income or for people with fluctuating income-like people who work on commission or self–employed borrowers; even people who are serious investors who want to channel their money into their investments, rather than their mortgage.
Without a fixed income, it can be hard to meet a mortgage payment on time during slow months at work. Say you have a bad month of commission-sales are down; you have to fix your car; and finances are pretty tight. With an Option ARM loan, you can choose to make just the minimum payment to get you through the month, and then make a larger payment when things pick up. Having a safety net like this is much less stressful than falling behind on your mortgage payments.
But keep in mind, this type of loan is not for everyone. This is the kind of loan that is for clients that can soundly manage their finances––people who are at least somewhat knowledgeable when it comes to things like managing and investing their money. For instance, this loan might be perfect for someone who is in sales and works on commission and who knows how to get by when sales are down. This is not the kind of loan for people who may have lots of debt and are looking to only pay the minimum payment all the time.
Here's why: Your minimum payment on Option ARM loans may not fully cover the interest that accrues monthly. This is known as "deferred interest." If the minimum payment doesn't cover the entire interest owed, it gets tacked onto your loan balance which means you can get into trouble very quickly, if you don't know what you're doing. Your loan balance can actually increase as you make these low payments. You can elect to use the minimum payment as often as you like, but if used too often without making some larger payments in between, you could end up with a mortgage balance that is higher than the value of your home. Quicken Loans offers an option ARM mortgage with a minimum payment that limits how much interest is deferred. Our option ARM program calculates your minimum payment based on your interest rate minus a percentage for the first five years until it reaches the maximum deferred interest level of about 115 percent (New York 110 percent). During the first five years, your rate is fixed. After that, it becomes a six–month fully–amortizing ARM. When that happens, the loan loses its potential to be a negatively amortizing loan. If you're looking into getting an option ARM, look for one that limits the potential for deferred interest or negative amortization.
Learn More About Option ARM Mortgages
Our home loan experts can help you determine whether an Option ARM is right for your financial situation. For more information on Option ARM mortgages, call 800-251-9080 to talk to a Refinance Expert at Quicken Loans or read more about our Secure Advantage loan. You may also download the Consumer Handbook on Adjustable Rate Mortgages.
http://www.quickenloans.com/refinance/articles/option-arm.html?lid=3898
How Mortgage Interest Rates Are Affected
Generally speaking, interest rates are influenced by supply and demand. When the economy is robust and borrowing is strong, interest rates rise. When the economy softens and there is less borrowing, interest rates go down.
But interest rates are also influenced by what the Federal Reserve, also known as “the Fed”, does and where the fed funds rate is set.
Short-Term & Long-Term Rates
The federal funds rate, also known as the “fed funds” rate, is the interest rate charged when banks lend funds to one another. This is a short-term rate, or a rate that is two years or less in maturity. When the Federal Open Market Committee (FOMC) raises or lowers the Fed funds rate, it affects mortgage rates that are tied to short-term interest rates, such as home equity rates and adjustable rates. When short-term rates fall, borrowing and spending usually increase. This can cause inflation, something the Federal Reserve wants to keep in control.
Long-term interest rates, or rates that are 10 years or more in maturity such as for 30-year mortgages, are influenced by short-term rates in a round-about way because they can rise when concerns about inflation increase. To keep inflation under control, the Fed started raising short-term interest rates in 2004. Because of this, people who have adjustable rate mortgages have been refinancing into longer-term fixed-rate mortgages to avoid rising rates, especially since long-term rates have remained historically low for quite some time.
The Fed funds rate is currently at 5.25 percent. However, it's almost impossible to accurately predict the future of something as complex as the U.S. economy, so no one is ever really sure if or when the rate will change. In any case, it is important to understand some of these market dynamics because a lack of understanding can sometimes cost you a lot of money.
If you are would like to learn more about mortgage interest rates, call us at 800-251-9080 to talk to a refinance expert or click the button below and a refinance expert will answer all your questions.
http://www.quickenloans.com/refinance/articles/market_conditions_affect_rates.html?lid=733
But interest rates are also influenced by what the Federal Reserve, also known as “the Fed”, does and where the fed funds rate is set.
Short-Term & Long-Term Rates
The federal funds rate, also known as the “fed funds” rate, is the interest rate charged when banks lend funds to one another. This is a short-term rate, or a rate that is two years or less in maturity. When the Federal Open Market Committee (FOMC) raises or lowers the Fed funds rate, it affects mortgage rates that are tied to short-term interest rates, such as home equity rates and adjustable rates. When short-term rates fall, borrowing and spending usually increase. This can cause inflation, something the Federal Reserve wants to keep in control.
Long-term interest rates, or rates that are 10 years or more in maturity such as for 30-year mortgages, are influenced by short-term rates in a round-about way because they can rise when concerns about inflation increase. To keep inflation under control, the Fed started raising short-term interest rates in 2004. Because of this, people who have adjustable rate mortgages have been refinancing into longer-term fixed-rate mortgages to avoid rising rates, especially since long-term rates have remained historically low for quite some time.
The Fed funds rate is currently at 5.25 percent. However, it's almost impossible to accurately predict the future of something as complex as the U.S. economy, so no one is ever really sure if or when the rate will change. In any case, it is important to understand some of these market dynamics because a lack of understanding can sometimes cost you a lot of money.
If you are would like to learn more about mortgage interest rates, call us at 800-251-9080 to talk to a refinance expert or click the button below and a refinance expert will answer all your questions.
http://www.quickenloans.com/refinance/articles/market_conditions_affect_rates.html?lid=733
Is it Time to Refinance Your Mortgage?
There are times when it makes sense to refinance your mortgage. It's important to have a clear financial objective in mind so that you're more able to choose the most appropriate loan. Ultimately, the decision is up to you to decide when it's best for you to refinance, based on your individual financial situation.
Refinance from an Adjustable Rate Mortgage (ARM) to a Fixed-Rate
It's important to consider what mortgage rates are doing. Since mid-2004, the Federal Reserve has raised interest rates several times and is expected to keep raising rates in the near future. This means that if you have an adjustable rate mortgage (ARM), it may adjust to a rate that's higher than a fixed-rate mortgage . Now might be a good time to consider refinancing to a fixed-rate loan.
However, you must also consider the amount of time you plan on being in your home. If you're only going to be in your home for a few more years, it may make sense not to refinance out of your ARM. If you're going to be in your home longer than seven years, it might be a smart move to refinance to a fixed-rate mortgage.
Refinance from a Fixed-Rate Mortgage to an ARM
Again, you need to consider how long you plan on being in your home. Many people move within nine years so it may not make sense to pay a higher interest rate for a 30-year fixed-rate mortgage when you're not going to be in the home that long. Doing so may be costing you money. Consider refinancing to an ARM instead — you'll get a lower rate and lower your monthly mortgage payment.
Lower Your Monthly Mortgage Payment
SmartChoice Refinance Loan
A drop of just one half to three quarters of a percentage point in interest can lower your monthly payment. If you don't refinance, you may be paying too much every month for your loan, and that's never a good financial move. There are a few different ways you can lower your monthly mortgage payment.
First, you can simply refinance to a lower interest rate. A lower rate generally means a lower monthly payment.
Second, you can change the term of your mortgage. For instance, if you have a 15-year mortgage, you can lengthen the term to 30 years. Since the balance of your mortgage is spread out over a longer period of time, your payment is lower. However, if you have a 30-year mortgage and one of your financial goals is long-term savings, you may want to consider shortening your term to 20 or even 15 years. Your payment will be higher, but you will pay much less in interest over the life of the loan, saving you thousands of dollars in the long run.
The third way to lower your payment is to refinance to an interest-only loan. Basically, with an interest-only loan, the minimum amount you are required to pay is the amount of interest for a certain period of time, though you can pay as much principal as you like. But you get the flexibility to pay less if you need or want to divert your money elsewhere, such as contributing to your 401k or saving for your child's college tuition.
Use our refinance calculator to see how you could lower your monthly mortgage payment.
Getting Cash from Your Home
The equity you have in your home can act like a savings account that you could access through a home equity loan or a cash-out refinance. This is usually done when you want to finance an important home improvement, pay for college or pay off high-interest credit card debt. Whatever your reason, this may be the right option for you.
Consolidating High-Interest Credit Card Debt
The difference between credit card debt and a mortgage can, financially speaking, mean thousands of dollars. Why? Because unlike your mortgage, the interest you pay on a credit card is not tax-deductible and you pay a higher rate than you would on your mortgage. Because of this, credit card debt is often referred to as "bad debt" whereas your mortgage is considered "good debt." Using your home equity to pay off your high-interest credit card debt can save you money in the long run. Using your home equity, rather than your credit cards, to finance expensive purchases can also be a smart move. Be sure to consult your tax advisor.
Deciding on when to refinance your mortgage will depend on the circumstances of your situation: how long you'll be in the home, what your financial goals are, whether interest rates are dropping, etc. It's up to you to decide if it's right for you.
If you still have questions, please call us at 800-251-9080 to talk to a refinance expert today. We can help you determine which refinancing option is best for your situation.
http://www.quickenloans.com/refinance/articles/refinance_reasons.html?lid=186
Refinance from an Adjustable Rate Mortgage (ARM) to a Fixed-Rate
It's important to consider what mortgage rates are doing. Since mid-2004, the Federal Reserve has raised interest rates several times and is expected to keep raising rates in the near future. This means that if you have an adjustable rate mortgage (ARM), it may adjust to a rate that's higher than a fixed-rate mortgage . Now might be a good time to consider refinancing to a fixed-rate loan.
However, you must also consider the amount of time you plan on being in your home. If you're only going to be in your home for a few more years, it may make sense not to refinance out of your ARM. If you're going to be in your home longer than seven years, it might be a smart move to refinance to a fixed-rate mortgage.
Refinance from a Fixed-Rate Mortgage to an ARM
Again, you need to consider how long you plan on being in your home. Many people move within nine years so it may not make sense to pay a higher interest rate for a 30-year fixed-rate mortgage when you're not going to be in the home that long. Doing so may be costing you money. Consider refinancing to an ARM instead — you'll get a lower rate and lower your monthly mortgage payment.
Lower Your Monthly Mortgage Payment
SmartChoice Refinance Loan
A drop of just one half to three quarters of a percentage point in interest can lower your monthly payment. If you don't refinance, you may be paying too much every month for your loan, and that's never a good financial move. There are a few different ways you can lower your monthly mortgage payment.
First, you can simply refinance to a lower interest rate. A lower rate generally means a lower monthly payment.
Second, you can change the term of your mortgage. For instance, if you have a 15-year mortgage, you can lengthen the term to 30 years. Since the balance of your mortgage is spread out over a longer period of time, your payment is lower. However, if you have a 30-year mortgage and one of your financial goals is long-term savings, you may want to consider shortening your term to 20 or even 15 years. Your payment will be higher, but you will pay much less in interest over the life of the loan, saving you thousands of dollars in the long run.
The third way to lower your payment is to refinance to an interest-only loan. Basically, with an interest-only loan, the minimum amount you are required to pay is the amount of interest for a certain period of time, though you can pay as much principal as you like. But you get the flexibility to pay less if you need or want to divert your money elsewhere, such as contributing to your 401k or saving for your child's college tuition.
Use our refinance calculator to see how you could lower your monthly mortgage payment.
Getting Cash from Your Home
The equity you have in your home can act like a savings account that you could access through a home equity loan or a cash-out refinance. This is usually done when you want to finance an important home improvement, pay for college or pay off high-interest credit card debt. Whatever your reason, this may be the right option for you.
Consolidating High-Interest Credit Card Debt
The difference between credit card debt and a mortgage can, financially speaking, mean thousands of dollars. Why? Because unlike your mortgage, the interest you pay on a credit card is not tax-deductible and you pay a higher rate than you would on your mortgage. Because of this, credit card debt is often referred to as "bad debt" whereas your mortgage is considered "good debt." Using your home equity to pay off your high-interest credit card debt can save you money in the long run. Using your home equity, rather than your credit cards, to finance expensive purchases can also be a smart move. Be sure to consult your tax advisor.
Deciding on when to refinance your mortgage will depend on the circumstances of your situation: how long you'll be in the home, what your financial goals are, whether interest rates are dropping, etc. It's up to you to decide if it's right for you.
If you still have questions, please call us at 800-251-9080 to talk to a refinance expert today. We can help you determine which refinancing option is best for your situation.
http://www.quickenloans.com/refinance/articles/refinance_reasons.html?lid=186
Refinance Questions & Answers
Q. Should I refinance?
If you're in an adjustable rate mortgage, you may want to think about getting a fixed-rate mortgage.
Sometimes it makes sense to refinance . Sometimes it does not. It depends greatly on your individual situation and what your financial goals are. For instance, you may want to lower your interest rate and/or monthly payment, but you need to ask yourself some questions:
* How long do you expect to be in your home?
* How much equity do you have in your home?
* Are you willing to pay points to get a lower rate?
* Will having lower payments more than make up for the closing costs , fees and points if any?
Q. Should I refinance from an adjustable rate to a fixed rate?
Generally, it's a good idea to get the lowest fixed rate possible, but you also have to consider your situation. If you're in the first year of an adjustable rate mortgage (ARM) and you plan on moving in three years, it probably doesn't make sense for you to refinance. However, if the rate on your ARM is about to adjust and you think the rate will go up, then it may make sense to get a long-term fixed-rate mortgage, especially if you don't plan on moving in the next seven years or so.
Q. Are interest rates higher for a cash-out refinance?
The interest rate you pay on a cash-out refinance loan will generally be the same as what you pay on a mortgage where you don't take cash out. There may be an incremental fee associated with a cash-out refinance loan depending on the specific loan you choose and the loan-to-value ratio. Using the equity in your home to pay off other bills can be a smart thing. Consider taking some money out to pay off high-interest credit cards bills, auto loans and any other debts you have that have non-tax-deductible interest. Please consult your tax advisor to find out whether you may be able to deduct the interest on your new loan.
Smart30 Refinance Loan
Q. When should I "lock in" an interest rate?
Nobody can predict what interest rates will do. But historically, rates rise faster than they come down. So if you're thinking about buying a home or refinancing your mortgage, lock in your rate now—you can always refinance later if rates drop again. Any near-future drop in interest rates may not be drastic enough to impact your monthly mortgage payment. Of course, every situation is different, so it's important to consider all of your options.
Q. Should I pay points to get a lower rate?
Paying points may or may not be your best option, depending on what you're doing. Points paid on a loan you've refinanced can be deducted from your taxes only in small increments—1/30th a year for a 30-year mortgage, for example. This means it could be several years before your lower rate makes up for the points you pay. However, if you're buying a home, points paid are a tax-deductible expense for that year. Please consult your tax advisor.
Q. Are there really loans with no closing costs?
There are few loans that truly have no closing costs. Sometimes lenders may not charge application fees and agree to pay the appraisal and title fees, but they may increase the interest rate in return. Lenders can also roll the costs into the amount of your loan. So, because you're not paying costs up front, it's called a "no closing cost" loan. While slightly increasing your mortgage might be acceptable to you, keep in mind that it's not really a cost-free loan.
Q. How long does it take to refinance?
With Quicken Loans, refinancing normally takes between two and four weeks, depending on a few things:
* Do you have a recent home appraisal?
* Are you in an area that appraisers can get to easily?
* Are there plenty of other comparable homes in your neighborhood?
Usually, getting the home appraisal is what slows the process down the most. During refinancing booms, appraisers can be difficult to schedule. Also, having your paperwork ready helps to speed the process along much faster.
Q. How much money will I need to bring to the closing?
A general guideline is that you'll need two percent of the home's purchase price for prepaid interest to cover the time between the date you close your loan and the date you make your first mortgage payment. Some states may also require pre-payment of property taxes . When refinancing however, your old mortgage will most likely have money in an escrow account that can cover these costs. Some borrowers get short-term loans while their escrow transfers back to them, but most pay the money at the closing knowing they'll get it back when their escrow is returned.
If you are wondering whether refinancing your loan is right for you, try using our Refinance Calculator or call us at 800-251-9080 to talk to a refinance expert or click the button below and a refinance expert will contact you.
http://www.quickenloans.com/refinance/articles/refinance_questions_answers.html?lid=188
If you're in an adjustable rate mortgage, you may want to think about getting a fixed-rate mortgage.
Sometimes it makes sense to refinance . Sometimes it does not. It depends greatly on your individual situation and what your financial goals are. For instance, you may want to lower your interest rate and/or monthly payment, but you need to ask yourself some questions:
* How long do you expect to be in your home?
* How much equity do you have in your home?
* Are you willing to pay points to get a lower rate?
* Will having lower payments more than make up for the closing costs , fees and points if any?
Q. Should I refinance from an adjustable rate to a fixed rate?
Generally, it's a good idea to get the lowest fixed rate possible, but you also have to consider your situation. If you're in the first year of an adjustable rate mortgage (ARM) and you plan on moving in three years, it probably doesn't make sense for you to refinance. However, if the rate on your ARM is about to adjust and you think the rate will go up, then it may make sense to get a long-term fixed-rate mortgage, especially if you don't plan on moving in the next seven years or so.
Q. Are interest rates higher for a cash-out refinance?
The interest rate you pay on a cash-out refinance loan will generally be the same as what you pay on a mortgage where you don't take cash out. There may be an incremental fee associated with a cash-out refinance loan depending on the specific loan you choose and the loan-to-value ratio. Using the equity in your home to pay off other bills can be a smart thing. Consider taking some money out to pay off high-interest credit cards bills, auto loans and any other debts you have that have non-tax-deductible interest. Please consult your tax advisor to find out whether you may be able to deduct the interest on your new loan.
Smart30 Refinance Loan
Q. When should I "lock in" an interest rate?
Nobody can predict what interest rates will do. But historically, rates rise faster than they come down. So if you're thinking about buying a home or refinancing your mortgage, lock in your rate now—you can always refinance later if rates drop again. Any near-future drop in interest rates may not be drastic enough to impact your monthly mortgage payment. Of course, every situation is different, so it's important to consider all of your options.
Q. Should I pay points to get a lower rate?
Paying points may or may not be your best option, depending on what you're doing. Points paid on a loan you've refinanced can be deducted from your taxes only in small increments—1/30th a year for a 30-year mortgage, for example. This means it could be several years before your lower rate makes up for the points you pay. However, if you're buying a home, points paid are a tax-deductible expense for that year. Please consult your tax advisor.
Q. Are there really loans with no closing costs?
There are few loans that truly have no closing costs. Sometimes lenders may not charge application fees and agree to pay the appraisal and title fees, but they may increase the interest rate in return. Lenders can also roll the costs into the amount of your loan. So, because you're not paying costs up front, it's called a "no closing cost" loan. While slightly increasing your mortgage might be acceptable to you, keep in mind that it's not really a cost-free loan.
Q. How long does it take to refinance?
With Quicken Loans, refinancing normally takes between two and four weeks, depending on a few things:
* Do you have a recent home appraisal?
* Are you in an area that appraisers can get to easily?
* Are there plenty of other comparable homes in your neighborhood?
Usually, getting the home appraisal is what slows the process down the most. During refinancing booms, appraisers can be difficult to schedule. Also, having your paperwork ready helps to speed the process along much faster.
Q. How much money will I need to bring to the closing?
A general guideline is that you'll need two percent of the home's purchase price for prepaid interest to cover the time between the date you close your loan and the date you make your first mortgage payment. Some states may also require pre-payment of property taxes . When refinancing however, your old mortgage will most likely have money in an escrow account that can cover these costs. Some borrowers get short-term loans while their escrow transfers back to them, but most pay the money at the closing knowing they'll get it back when their escrow is returned.
If you are wondering whether refinancing your loan is right for you, try using our Refinance Calculator or call us at 800-251-9080 to talk to a refinance expert or click the button below and a refinance expert will contact you.
http://www.quickenloans.com/refinance/articles/refinance_questions_answers.html?lid=188
What You Should Know about Interest-Only Refinancing
An interest-only loan gives you the option of paying just the interest , or paying interest and as much principal as you want in any given month. The interest-only option is available in the initial years of the loan for a fixed number of years. After the interest-only period, all payments will then include principal and interest. Interest-only loans can be either traditional fixed-rate or adjustable-rate mortgages. Quicken Loans offers interest-only refinance options that are interest-only for the first 10 years.
How Interest-Only Loans Work:
If you choose to make the interest-only payment one month, that month's payment is lower than it would be had you made the principal and interest payment. Your interest rate may or may not be lower than a traditional mortgage, but you will have the option of choosing your payment. Sophisticated homeowners know that having this type of payment flexibility is one of the smartest ways to manage your personal finances.
Refinancing from a traditional home loan to an interest-only loan has become popular because it gives you control over your cash flow. This example illustrates the payment flexibility of refinancing a $150,000 mortgage to an interest-only loan.
$150K @ 7.5% Interest-Only Payment..........$745.00
$150K @ 7.5% Principal and Interest Payment....$1,050.00
Cash flow difference is $305.00 a month.*
It's this simple: with an interest-only loan, in months when you need more cash, you don't have to pay principal and interest. You can just pay the interest.
Who Is an Interest-Only Refinance For?
Refinancing to an interest-only loan is a good choice for anyone looking to make their money work harder for them. For instance, making interest-only payments and putting the difference into an investment which brings a higher rate of return. Traditional mortgages offer no such option. That's something to think about if you're not maximizing your yearly 401(k) and IRA contributions.
But there are other things you can do with the extra cash you can have every month:
* You could pay down high-interest credit card debt.
* Save for your children's college tuition.
* Buy or lease a second family vehicle.
* Increase your home's value by making home improvements.
* Set aside money for a rainy day.
Depending on your existing loan balance , refinancing to an interest-only loan could get you access to thousands of dollars over the course of several years to put to use as you think best.
Interest-only refinancing may also be a good option for people who expect move again before the end of the interest-only period of their home loan.
The Truth About Interest-Only Refinancing
A big misconception about interest-only mortgage refinancing is that if you're not paying down your loan's principal every month, you're not building home equity. That's not necessarily true. Homes in the U.S. have been appreciating between five and six percent a year. Chances are that even if you're not paying down principal, appreciation is building equity in your home for you.
You should also know that with any Quicken Loans interest-only loan, there are never any pre-payment penalties. And you can refinance again at any time if mortgage rates or your financial situation changes.
If you still have questions, download the Consumer Handbook on Adjustable Rate Mortgages or call us at 800-251-9080 to talk to a refinance expert today. We can help you determine which refinancing option is best for your situation.
http://www.quickenloans.com/refinance/articles/interest-only-loans.html?lid=1621
How Interest-Only Loans Work:
If you choose to make the interest-only payment one month, that month's payment is lower than it would be had you made the principal and interest payment. Your interest rate may or may not be lower than a traditional mortgage, but you will have the option of choosing your payment. Sophisticated homeowners know that having this type of payment flexibility is one of the smartest ways to manage your personal finances.
Refinancing from a traditional home loan to an interest-only loan has become popular because it gives you control over your cash flow. This example illustrates the payment flexibility of refinancing a $150,000 mortgage to an interest-only loan.
$150K @ 7.5% Interest-Only Payment..........$745.00
$150K @ 7.5% Principal and Interest Payment....$1,050.00
Cash flow difference is $305.00 a month.*
It's this simple: with an interest-only loan, in months when you need more cash, you don't have to pay principal and interest. You can just pay the interest.
Who Is an Interest-Only Refinance For?
Refinancing to an interest-only loan is a good choice for anyone looking to make their money work harder for them. For instance, making interest-only payments and putting the difference into an investment which brings a higher rate of return. Traditional mortgages offer no such option. That's something to think about if you're not maximizing your yearly 401(k) and IRA contributions.
But there are other things you can do with the extra cash you can have every month:
* You could pay down high-interest credit card debt.
* Save for your children's college tuition.
* Buy or lease a second family vehicle.
* Increase your home's value by making home improvements.
* Set aside money for a rainy day.
Depending on your existing loan balance , refinancing to an interest-only loan could get you access to thousands of dollars over the course of several years to put to use as you think best.
Interest-only refinancing may also be a good option for people who expect move again before the end of the interest-only period of their home loan.
The Truth About Interest-Only Refinancing
A big misconception about interest-only mortgage refinancing is that if you're not paying down your loan's principal every month, you're not building home equity. That's not necessarily true. Homes in the U.S. have been appreciating between five and six percent a year. Chances are that even if you're not paying down principal, appreciation is building equity in your home for you.
You should also know that with any Quicken Loans interest-only loan, there are never any pre-payment penalties. And you can refinance again at any time if mortgage rates or your financial situation changes.
If you still have questions, download the Consumer Handbook on Adjustable Rate Mortgages or call us at 800-251-9080 to talk to a refinance expert today. We can help you determine which refinancing option is best for your situation.
http://www.quickenloans.com/refinance/articles/interest-only-loans.html?lid=1621
How To Determine A Home's Value
Get Home Value Questions Answered Here
What's the difference between an appraisal and a comparative market analysis ? An appraisal is a certified appraiser's calculation of the value of your home at a given point in time. In order to get the approximate value of your home, the appraisal takes into consideration such things as:
* Your home's square footage
* Construction quality
* Home design
* Your home's floor plan
* The neighborhood your home is located in
* Availability of transportation, shopping and schools
* Lot size, topography, view and landscaping
Where can I get the approximate value of my home?
You can get the approximate value of your home at...
A comparative market analysis is more of an informal estimate of your home's market value. A real estate agent makes an analysis based primarily on sales of comparable homes in the neighborhood. Compared to home appraisals, which typically cost between $200 and $300, a comparative market analysis may be obtained at no cost.
What's the difference between the estimated value of my home and my house worth?
While a home's "estimated value" is most commonly determined by either an appraisal or a comparative market analysis , its "worth" is ultimately established by what prospective buyers are willing to pay for it.
Can I find the value of my home through the Internet?
Use our Home Value Calculator to get home value estimates. There are also a number of other Web sites and services that can crunch the numbers and calculate your home's estimated value.
While these calculators rely on recent home sales and refinance transactions in your area to produce a value estimate, an appraisal or comparative market analysis may still provide you with the most accurate assessment.
If you still have questions, please call us at 800-251-9080 to talk to a refinance expert today. We can help you determine which refinancing option is best for your situation.
http://www.quickenloans.com/refinance/articles/determine_homes_value.html
What's the difference between an appraisal and a comparative market analysis ? An appraisal is a certified appraiser's calculation of the value of your home at a given point in time. In order to get the approximate value of your home, the appraisal takes into consideration such things as:
* Your home's square footage
* Construction quality
* Home design
* Your home's floor plan
* The neighborhood your home is located in
* Availability of transportation, shopping and schools
* Lot size, topography, view and landscaping
Where can I get the approximate value of my home?
You can get the approximate value of your home at...
A comparative market analysis is more of an informal estimate of your home's market value. A real estate agent makes an analysis based primarily on sales of comparable homes in the neighborhood. Compared to home appraisals, which typically cost between $200 and $300, a comparative market analysis may be obtained at no cost.
What's the difference between the estimated value of my home and my house worth?
While a home's "estimated value" is most commonly determined by either an appraisal or a comparative market analysis , its "worth" is ultimately established by what prospective buyers are willing to pay for it.
Can I find the value of my home through the Internet?
Use our Home Value Calculator to get home value estimates. There are also a number of other Web sites and services that can crunch the numbers and calculate your home's estimated value.
While these calculators rely on recent home sales and refinance transactions in your area to produce a value estimate, an appraisal or comparative market analysis may still provide you with the most accurate assessment.
If you still have questions, please call us at 800-251-9080 to talk to a refinance expert today. We can help you determine which refinancing option is best for your situation.
http://www.quickenloans.com/refinance/articles/determine_homes_value.html
Refinance Your Investment Property
Long-term interest rates have been at near historic low levels for quite some time and thus, more people are looking for places to rent, making it easy to benefit from these investments. Your investment property loan may have terms that were very attractive when you first made the purchase, but due to changing market conditions may no longer be as favorable as they could be today. When interest rates fall, refinancing the mortgage on your investment property becomes very attractive because refinancing offers ways to leverage the equity in your property, lower your monthly payment and increase your cash flow.
Increase Your Cash Flow
You can drastically increase your cash flow by refinancing the mortgage on your investment property. If you've built up considerable equity in the property, you could turn that equity into cash by doing a cash-out refinance. If you refinance to a lower rate and/or increase the term of your loan, that could also lower your monthly mortgage payment and increase your cash flow even more. Using the Quicken Loans Rate and Payment Calculator can help you find out how much equity you have to borrow against and give you suggestions on what loan may work best for you.
Upgrade Your Property and Raise the Rent
The home equity in your investment property can be used to fund improvements to your property and boost your cash flow. The great benefit of refinancing and making home improvements to your investment property is that it increases its market value, thereby allowing you to increase the amount of rent you charge to your tenants. With a Home Equity Line of Credit, you could:
- Build an addition to increase living space
- Upgrade the floors, doors, kitchen appliances and cabinetry
- Remodel the bathroom(s) with nicer fixtures
- Upgrade the furnace or central air
- Replace the roof
- Paint or re-side the house to enhance the exterior appearance
Buy An Additional Investment Property
You can use a home equity loan out of your primary residence or cash-out refinance out of your investment property to invest further in real estate. Equity in your property increases each year as the mortgage loan is paid down. Any increase in the value of the property will increase your equity in addition to the principal paid. To capitalize on that return, you can tap into that added equity, turn it into cash by refinancing and then apply it toward funding further investment properties. A Quicken Loans home loan expert can help you determine how to use a home equity loan to finance other properties.
Spend Your Money in Other Ways
The opportunity to use equity you have earned in your investment property is a major benefit of home ownership. The beauty is that you can refinance and convert the home equity into cash and then use it for whatever you choose. Making improvements to your property or purchasing additional investment properties are good examples of how refinancing can work to your advantage. The cash from your home equity can also be used to:
- Boost your retirement savings
- Invest in stocks or other markets
- Take the vacation of your dreams
- Buy a new car or boat
- Consolidate debt
- Help fund your children's college tuition
Home equity loans provide an easy source of cash and can be a valuable tool for those who invest in real estate. Using the equity in your investment property can help you increase your investment power and increase your long-term wealth. A Quicken Loans home loan expert can help you determine which refinancing options are best for you. Call us at 800-251-9080 to speak with home loan expert or fill out our short application online and a home loan expert will contact you.
http://www.quickenloans.com/refinance/articles/refinancing-investment-property.html
Cash-Out Refinance Versus Home Equity Loans
Let's say you have a home that's worth $150,000 and you owe $100,000 on the mortgage. That means you have $50,000 of equity in your home, which is like having $50,000 in a savings account. A cash-out refinance allows you to access that equity. For instance, if you need $10,000, you can refinance your mortgage so that you owe $110,000 and the lender then gives you $10,000 in cash at closing.
With a home equity loan, you keep your original mortgage and take out a second mortgage for the amount of equity you are tapping into.
Since every homeowner's situation is different, your best option will depend on your specific circumstances. Quicken Loans has several mortgage options to choose from. When you compare home equity loans and cash-out refinance further, there are four things you should consider in order to determine what's best for you:
Speed
How fast do you need the money? Home equity loans close considerably faster than a refinance – in as little as five days. That might be important to you.
Cost
Home equity loans typically require minimal fees. Refinancing, on the other hand, may carry higher loan fees and possibly points .
Rate
Because a home equity loan is a second mortgage , it typically has a higher rate than a cash-out refinance (a reflection of its higher risk to the lender). But if you already have a great rate on your mortgage, it may be worthwhile to get a home equity loan — even at a higher rate — rather than refinance and lose the low rate you already have on your first mortgage.
Term
When refinancing, you are generally limited to a term of 15 or 30 years. With a home equity loan, you have more flexibility and can take advantage of a shorter term — greatly reducing your overall interest costs.
A Quicken Loans mortgage expert can help you compare a cash-out refinance or a home equity loan. With your own personal mortgage expert to guide you, you'll have no trouble determining which type of loan is right for you.
If you still have questions, please call us at 800-251-9080 to talk to a refinance expert today. We can help you determine which refinancing option is best for your situation.
http://www.quickenloans.com/refinance/articles/cash_out_refi_vs_home_equity_loan.html
With a home equity loan, you keep your original mortgage and take out a second mortgage for the amount of equity you are tapping into.
Since every homeowner's situation is different, your best option will depend on your specific circumstances. Quicken Loans has several mortgage options to choose from. When you compare home equity loans and cash-out refinance further, there are four things you should consider in order to determine what's best for you:
Speed
How fast do you need the money? Home equity loans close considerably faster than a refinance – in as little as five days. That might be important to you.
Cost
Home equity loans typically require minimal fees. Refinancing, on the other hand, may carry higher loan fees and possibly points .
Rate
Because a home equity loan is a second mortgage , it typically has a higher rate than a cash-out refinance (a reflection of its higher risk to the lender). But if you already have a great rate on your mortgage, it may be worthwhile to get a home equity loan — even at a higher rate — rather than refinance and lose the low rate you already have on your first mortgage.
Term
When refinancing, you are generally limited to a term of 15 or 30 years. With a home equity loan, you have more flexibility and can take advantage of a shorter term — greatly reducing your overall interest costs.
A Quicken Loans mortgage expert can help you compare a cash-out refinance or a home equity loan. With your own personal mortgage expert to guide you, you'll have no trouble determining which type of loan is right for you.
If you still have questions, please call us at 800-251-9080 to talk to a refinance expert today. We can help you determine which refinancing option is best for your situation.
http://www.quickenloans.com/refinance/articles/cash_out_refi_vs_home_equity_loan.html
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