INVEST YOUR RENT: Why Pay Your Landlord’s Mortgage?

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1604 CrowsLand-0503The only one who benefits from a rent check is the landlord. Renters never see that money again, while homeowners usually profit when they sell. In addition, renters can’t use any of their rent payment as a tax deduction, like homeowners can. If you or someone you know is renting, it’s time to put that rent check to better use!The mortgage-interest deduction is probably the best financial argument for buying rather than renting. Consider this example:If you can afford a mortgage payment of $1,000 (principal and interest only), you can buy a house for $151,426 if you put 10% down on a 30-year mortgage at 8% interest. (Currently rates are 4%)  If your payments started in January, you would pay $10,862 in interest for the first year in the home. That entire amount is deductible on your federal income tax return! Assuming you are in the 27.5% tax bracket, you would save $2,989 in taxes, or $249 per month. So your $1,000 payment is really only $751 when you factor in the homeowner’s tax advantage.

Can A Renter Really Afford To Buy?

The real question is whether renters can afford not to buy. The tax savings alone make the purchase of a home a wise financial decision. But let’s go a step further.

Using the same example, a 10% down payment would create an immediate equity of $15,142. Assuming the $151,426 house grows in value by just 3% a year, in five years it would be worth $175,544. The original loan amount would then be down to $129,565, yielding an equity of $45,980. In addition, remember the nearly $3,000 tax savings every year. The total value of your equity and tax savings would be almost $61,000 after five years.

Pick A Loan

To take advantage of the financial benefits of homeownership, renters must first find out how much buying power they have. We can help. Call us for information about the whole range of mortgage options now available, including low- and no-down-payment loans, and programs that allow buyers wrap home-improvement costs and closing costs into the mortgage.

Plan Ahead

Although some lenders allow buyers to use up to 41% of monthly income to purchase a house, beware of becoming “house rich and cash poor.” Be sure to budget for homeownership costs beyond the mortgage, including expenses for:

moving
decorating and furnishing
homeowners insurance
property taxes
homeowners association fees (if any)
utilities-power, water, sewer, cable, trash pick-up
yard tools, supplies and general upkeep
home repairs, supplies, cleaning and upgrades.

Today, homeownership is a wonderful dream-come-true for more people than ever before. Let us help turn those dreams into a home to be proud of.

Categories: Purchase a home, Stop paying your landlords rent, Uncategorized, User friendly home designs, wilmington nc relocation

PUZZLING IT OUT Take Note Home Sellers: Tax-Free Gains

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Every year holiday dates come and go on the calendar. You’ve likely enjoyed celebrating a number of holidays with family and friends recently. Most everyone looks forward to these holidays.

There’s also one big, looming date, however, that isn’t a holiday—even though it’s marked in red on almost every calendar: Tax Day, April 15. If you’re like most taxpayers, you dread this date because it means you have to pull together a myriad of financial documents spanning the past year and make some sense of them, which isn’t a fun task.

If you own a home, you can relax because that home provides you with many financial advantages at tax time. You may not realize this, but it’s true. Homeownership is made affordable for many families because of how Uncle Sam’s tax deductions result in the federal government contributing from 10% to 39.6% (depending on your tax bracket) toward monthly home mortgage interest and property tax payments.

In this special TAXES edition of the newsletter, we have outlined some basic home-related tax facts you should be aware of. Be sure to consult a tax professional for complete information applicable to your specific situation.

 

taxTaxpayers who sell their principal residence can pocket—tax-free—as much as $500,000 in profit if they file federal taxes jointly or $250,000 if they file singly. The property must have been owned and used as their principal residence for any two of the prior five years. Homeowners can shelter the profits on the sale of a home as often as once every two years. If the two-year use and ownership tests are not met, but the home is sold because of special circumstances (i.e., health problem, job loss, etc.), the exclusion is prorated. Otherwise, gains above $500,000 or $250,000 are taxed at current capital gains rates plus may be subject to an additional 3.8% surtax, depending on income.

Note: In effect since January 1, 2013, the Net Investment Income Tax (NIIT) applies a 3.8% surtax to certain types of net investment income of individuals, estates and trusts that have modified adjusted gross income (MAGI) exceeding certain thresholds. For individuals, the MAGI threshold for a single filer or a person filing as head of household (with qualifying person) is $200,000; for married filing jointly or for a qualifying widow(er) with dependent child, $250,000; for married filing separately, $125,000.

The 3.8% tax is applied to whichever amount is less—your net investment income or the amount your income exceeds the applicable threshold. For example, if a couple’s net investment income is $200,000 while their MAGI is $300,000 ($50,000 above the applicable threshold), the 3.8% tax would be applied to the $50,000 in excess of the threshold.

For home sellers with MAGI above the applicable threshold, the 3.8% tax may be applied to your home-sale gains that exceed your home-sale gain exclusion ($500,000 for married joint filers, $250,000 for single filers). If your MAGI amount above the threshold is less than your un-excluded home-sale gains plus net income from certain other investments, you would only owe the 3.8% tax on the excessive MAGI amount (NIIT applies to the lesser of extra income or extra gains). You can still take either $250,000 or $500,000 in profits from your home sale tax-free.

TAX TIP: Income from rental property, gains from the sale of a second home and gains from the sale of an investment property would be considered part of net investment income (and possibly subject to the NIIT) to the extent that gains are not otherwise offset by capital losses. Browse to http://bit.ly/IRSNIIT for further details.

We are here to help.  Text us 910-617-0309 or 910-520-5090

kaybakerassociates@ec.rr.com

Categories: #Spring Time To Sell, Real Estate Tax Tips 2016, Uncategorized, wilmington nc real estate, wilmington nc relocation

Giving Tuesday | Dollars and Sense | Wilmington NC

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Tomorrow is Giving Tuesday, after black Friday etc etc…. Tuesday  is the most important day.  There are many organizations locally that would love your support.  Check out http://wilmingtongivesback.org/ for ideas.  Here are some ideas to think about while looking for charities to give too.

Check Out Your Charities Before Being Generous

 

Although most charities are honest and accountable to their donors, CharityWatch (formerly the American Institute of Philanthropy) says the holiday season often brings out a few “fly by night” operators ready to take advantage of your goodwill. To help you choose wisely and give more effectively, CharityWatch offers the following tips:

1. Know your charity. Charities are obligated to provide detailed information, including a mission statement and recent audited financial statements to interested donors. If a charity does not provide you with the information you request, you may want to think twice about giving to it.

2. Don’t be misled by familiar names. Some questionable charities use names that closely resemble the name of a respected, legitimate organization. Check out the charity with CharityWatch (www.CharityWatch.org) or other watchdog organizations before making a contribution.

3. Find out where your dollars go. Determine how much of your donation goes for general administration and fundraising expenses and how much is left for the program services you want to support. CharityWatch’s Rating Guide recommends that in most cases, 60% or more of your charitable donation should go to program services.

4. Do not respond to pressure. It’s your money, so don’t let yourself be pressured into contributing on the spot — or more than you want. You can always say no.

5. Beware of charities offering gifts. Direct-mail solicitations are often accompanied by address stickers, calendars or other “gifts” designed to increase donations. You do not have to make a contribution to keep these gifts, and it is against the law for a charity to demand payment for any unordered merchandise.

6. Avoid giving cash. Also, do not give your credit card number to a telephone solicitor or Internet site that you do not know. Always be sure to obtain a receipt or printed copy of your donation so you will have a record for tax purposes.

7. “Tax exempt” does not always mean “tax deductible.” Not all charities are eligible to receive tax-deductible contributions even though they may have tax-exempt status (for example, political organizations). Tax exempt means the organization does not have to pay taxes. Tax deductible means donors can deduct contributions to the charity on their federal income tax returns. Request the charity’s tax exempt letter to determine whether the organization qualifies for tax-deductible contributions. Or, use the IRS “Exempt Organizations Select Check” online tool — at www.TinyURL.com/a72f74x — to see if donations to a particular organization are deductible.

Categories: #Giving Tuyesday, volunteer in wilmington NC, wilmington nc relocation, wilmington real estate stats, Wrightsville Beach NC

MOVE UP: 4 Smart Strategies For Purchasing Your Next Home

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kingarthur3If you’ve decided it’s time to move up to a bigger home, a better home or a home in a more coveted area, your next challenge will be getting there financially. It’s likely you’ll need more cash, a larger income and, perhaps, better credit than you had when you purchased your current home. Putting all the pieces in place for the move up could take some time and detailed planning. Here are some ideas when buying Wilmington NC real estate.

1. Credit Clean-Up

Although your credit rating may have been sterling as a first-time home buyer, years of credit-card and utility accounts, car payments and consumer loans may have scuffed up that financial image a bit. Late or missed payments have a negative effect on your credit profile, as do large, long-term balances on your accounts. Your credit score, a rating system many lenders use to evaluate your financial situation, may prevent you from borrowing as much as you’d like for your next home or getting the lowest interest rate currently available.

The wise move-up buyer will take stock of his or her credit standing and debt status well before attempting the next home purchase. You may need some time to reduce your debt, catch up on any delinquent accounts, remove inaccuracies and blemishes from credit reports and make other adjustments to increase your credit score.

2. Loan Shopping

A quick way to sift through these issues is to contact a lender who can pull a credit report to see if there are any glaring spots on your record. If nothing needs immediate attention, you can continue on with a complete application, providing the financial information needed for loan pre-approval. The loan officer will determine the maximum loan amount you qualify for based on your income and debt profile.

You may want to shop around at this point, comparing loan programs and interest rates. Consider how well your current loan has worked for you and remember that rates aren’t everything. The lowest rate may be accompanied by high points. If so, you’ll have to keep the mortgage long enough to justify paying the steep up-front cost of the loan.

Consider whether a non-traditional mortgage program could meet your needs. An adjustable-rate mortgage may be a good choice if it looks as though interest rates will be falling. A 40-year mortgage might reduce the monthly payment enough so you qualify for a larger loan.

3. Collecting Cash

An important factor in the equation that determines your buying power will be how much cash you have for a down payment and closing costs. The best mortgage interest rates are available to buyers with down payments of 20% or more. If you make a smaller down payment, you may have to take a higher interest rate or pay for private mortgage insurance, both of which will reduce your buying power.

Unless you’re a prodigious saver, chances are the equity you have in your current home will provide the largest source of cash for your next home purchase. Equity, of course, is the difference between the market value of the home and the balance on any mortgages secured by the home.

We would be happy to conduct a comparative analysis of your home to determine the right sales price — at no obligation to you, of course. By determining the value of your home and subtracting out selling costs (paying off the old mortgage, marketing fees and settlement expenses), you’ll have the basis for a down payment on your move-up property.

4. Fine Tuning

After taking stock of your financial situation, you may find it necessary to delay your move in order to get the type of home you’ve targeted. Perhaps you need to save more cash for down payment and settlement costs. You may need to pay down outstanding debts to improve your credit score and qualify for a larger mortgage or a lower interest rate. Remember, it’s likely your home’s value and your equity in it will continue to grow as you get yourself in a position to move up successfully.

Categories: Move Up Homes, Waterfront Wilmington NC, waterfront wrightsville beach, wilmington nc real estate, wilmington nc relocation

WHY WAIT? Contingencies Designed To Move A Sale Forward

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When you buy or sell a Wilmington NC home, there may be some delays before you can close and load up the moving van to say goodbye to your current neighborhood. These delays happen for a variety of reasons.

Sometimes a buyer is not able to make a decision to purchase. Contingencies are typically used to smooth acceptance of a contract without delaying the buying decision. Most contracts, for example, are contingent upon financing. This is for the protection of the seller as well as the buyer, because a seller doesn’t want to be tied to a buyer who can’t deliver.

Here are some common types of contingencies found in sales contracts:

Home inspection: Placed by the buyer, this type of contingency usually requires that a “satisfactory” home inspection must be conducted, before the buyer will go through with the purchase of a home. Somewhat related is buyer approval of required repairs, such as painting or roofing.

Financing: With today’s pre-approval for mortgages and all-cash buyers, this contingency is not as ubiquitous as it was in the past. However, some buyers will write a contract first, then determine if they can get the loan.

Home of choice: This is a seller’s contingency placed on a buyer’s contract. The seller may want to find another home and write a contract on it before agreeing to sell the home they live in. The buyer who agrees to this contingency will have to delay closing until the seller has purchased a new home.

Home sale: For financial or other reasons, some buyers may have to include this contingency, which gives them the opportunity to sell an existing home first, before completing a sales contract.

Contingencies can raise questions and need to be fulfilled before a contract can be settled. As your local real estate experts, we can give you more information on real estate transactions and what you might encounter in today’s market. Contact us to find out more.

Categories: home contingency, Move Sale of Home Forward, Uncategorized, wilmington nc, wilmington nc foreclosures, wilmington nc real estate, wilmington nc relocation

FAMILY MOVE: Tips For House Hunting With The Kids

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Parents Carrying Child

Child experts agree it’s a good idea to involve the children when a family makes relocation plans. You may have mixed feelings about taking the kids house-hunting, however. (It’s hard enough for just two people to decide on a new home!) Here are a few pointers that may help:

Narrow The Field First

The kids don’t need to visit every potential Wilmington NC house on the list. If possible, wait until you’ve selected two or three serious prospects before bringing the children along. In any case, limit your kid-accompanied tours to three houses or less per day.

Provide Behavioral Guidelines

{short description of image}Remind the kids to treat the owners and their property with respect. Make sure the kids stay in the same room with you at all times and that they “keep their hands to themselves.”If the owners are present, your family members should also keep their thoughts about the house to themselves until after you leave the property. Making positive comments in the presence of the owners could work against you when negotiating the price, while negative comments could spark a hostile reaction, causing the owner to sell to another buyer.

Make The Kids Your Secretaries

If they’re old enough, your children can each keep a log of the homes you look at, including detailed information about the house — location, size, types and numbers of rooms, etc. Have them describe they’re feelings about the house, too, particularly what they think it would be like to live there.

Locate The Nearest Playground

A post-tour trip to the park (or local mall, if you have teenagers) can be a great motivator for good behavior and a nice way to get to know the area. Walking the streets in the neighborhood will also give you and the kids a better feeling for the local lifestyle and whether there are other children the same age as yours in the area.

Offer Entertainment

Bring along books or games to help your kids through the “I’m bored” stage. If you’ll be driving for extended periods, bring some audio books or favorite music.

Time Your Tours For Success

Plan to look at houses early in the day or just after (certainly not during) nap time. Be prepared with snack foods and drinks to keep energy levels up.

Let Them Know Their Input Counts.

Although the final decision is yours, your children will feel better about the move if they know you value what they think about their potential new home and neighborhood.

 

Categories: Buying House with Kids, wilmington nc, wilmington nc real estate, wilmington nc relocation

Special Tax Issue | Wilmington NC real estate

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The Taxes IssueJust like clockwork, tax time hits us right after some of the mwilmington nc real estateost enjoyable times of the year where we spend time with family and friends, perhaps enjoy a few days off work, and just relax. Then reality hits: Resolutions must be made! You need to eat better, exercise more, and (gasp!) get control of your finances. Now. In the new year.

Relax. If you own a house, your home is helping you out big time financially at tax time. You may not realize this, but it’s true. Homeownership is made affordable for many families because of how Uncle Sam’s tax deductions result in the federal government contributing from 10% to 39.6% (depending on your tax bracket) toward monthly home mortgage interest and property tax payments.

In this edition, we have outlined some basic home-related tax facts you should be aware of to make the most of available tax savings. Be sure to consult a tax professional for complete information applicable to your specific situation.

Work it Out.

Is your home office deductible?

If you keep records, schedule appointments and carry other such activities from your home office, some common home-office expenses, such as utilities, insurance, repairs, cleaning and depreciation, may qualify for a deduction, even if you do the actual work in another location. Be aware, however, any depreciation claimed after May 6, 1997, will be taxed at 25% if the residence is sold for a gain, whether or not the property has been converted to personal use.

Starting in 2013, there is a simplified home office deduction calculation to bypass maintaining detailed expense records. Simply deduct $5 for every square foot of home office space used, up to a maximum of 300 square feet or $1,500. This simplified expense is recorded on Schedule C rather than Form 8829 which allows you to separately deduct mortgage interest and real estate taxes on Schedule A.

SMART TIP: If you (or your family) use your home office for non-business purposes, it cannot be claimed on your tax return. To claim home-office deductions, the space must be used exclusively for business purposes.

 

Categories: home tax, tax advantage, Taxes 101, wilmington nc real estate, wilmington nc relocation

“LITTLE” HOUSEHOLD PROBLEMS CAN EVENTUALLY COST A LOT

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www.wilmingtonnc-realestate.com

Sometimes a $1,000 disaster can be prevented with a $4 hose. That’s the finding of many homeowners who end up paying a lot for repairs that could have been prevented with just an ounce of inexpensive prevention.

One of the best places to check first is any place in your home that can be damaged by water. A survey by the American Society of Home Inspectors found that 40% of home maintenance problems are related to water. Water seeping into the basement or crawlspace, leaks from neglected washer and dishwasher hoses, and leaking pipes can leave you wet and poor.

Pay attention to the following items in your home regularly:

Water Threats
• Check for leaks from appliance hoses (washer and dishwasher), connections to the hot water heater and humidifier, outside spigots, exposed plumbing. Tighten all connections.

• After a heavy rain, check for water in attics, basements and crawlspaces. Make repairs as soon as the area is dry.

• Backed-up gutters can cause water to seep back up into the attic. The solution is simple, though: regularly remove leaves and debris from the gutter system.

Electrical System
• Check the circuit breakers about every six months.

• Check switches when lights seem to blink when the switch is touched.

• Keep wall-socket plates secure and replace broken ones.

A/C and Heating System
• Check these systems at least once a year; have them cleaned and serviced. You could save thousands in repair/replacement bills later, and improve operating efficiency thereby lowering monthly costs.

• If you have a fireplace, make sure it is professionally inspected and cleaned annually. Wood-burning fireplaces can cause creosote to build up in their chimneys–a dangerous fire hazard.

For more information please visit www.cbbaker.com

Categories: Wilmington NC homes, Wilmington NC Market Statistics, wilmington nc real estate, wilmington nc relocation

We’re a little tight on cash. How can we shift some settlement costs to reduce out of pocket expenses?

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Piggy BankSome buyers reduce the cash needed at settlement by scheduling closing at the end of the month. But there are several other ways to save on closing costs that may work better in the long run.

  • Skip late-month settlement

      Since interest on the loan is paid to the end of the month at settlement, the interest payment gets lower as you get closer to the end of the month. But another approach is to wait a few days until the beginning of the next month. That way, you’ll need to pay more up front at settlement, but you’ll gain a whole month’s delay before the first full mortgage payment is due, because mortgage interest is paid in arrears, after the month has passed.

 

  • Reduce out-of-pocket cash

      Another way to reduce the cash needed at settlement takes some advance planning. By negotiating with the seller, the buyer may be able to pay more for the home and finance it, while the seller puts an equal amount toward out-of-pocket settlement costs.

 

  • Finance closing costs

      A third option is to find a lender who will finance closing costs by wrapping them into the mortgage. This method may, however, cost more over the long run, as lenders often will then charge a higher interest rate for a “no closing costs” loan.
Categories: closing on a home, homes, wilmington, Wilmington NC homes, wilmington nc real estate, wilmington nc relocation, Wilmington nc schools

MONEY DIET :: 7 Easy Ways To Reduce Your Loan Payment And Increase Your Savings

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There are many ways to reduce the amount of money you send each month to your mortgage company. You just have to know where to cut the fat. Check out these seven money-diet tips to discover how you can slim down your monthly mortgage payment.

1. Refinance to a lower interest rate. Even a half-percent drop in your interest rate could save you hundreds of dollars a year. Drop a whole percentage point, say from 6% to 5% on a $150,000 mortgage for 30 years, and you’ll save more than $1,100 annually. Get a lower rate and save even more! Remember, though, you may have to pay closing costs to refinance. Make sure you’ll live in your home long enough to recoup those costs.

2. Refinance to two loans. If you took out a jumbo loan (one that is larger than local conventional loan limits in your area) when you purchased your home, you probably paid a higher rate than what was then available for conforming loans. Currently, a non-conforming jumbo loan is anything higher than $417,000 in most parts of the country. If you want to refinance above that amount, you can get around the higher jumbo rate by taking out two mortgage loans instead.

For example, say you want to refinance $500,000. You could take out a first mortgage for $400,000 at the lower conforming-loan rate. Then, you would take out a second mortgage or home equity loan for $100,000. Although the rate on the second may be higher than rates available for a jumbo, you’ll be paying that rate on a comparatively small amount of money. Overall, your rate for the entire $500,000 in loans will be lower than for a jumbo. That will mean a lower total monthly payment.

3. Double up on a small down payment. Refinancing to two loans also makes sense if you put a small down payment on your home. If you paid just 10% down on a $150,000 property, for example, you’re probably paying a private mortgage insurance (PMI) premium with your monthly mortgage payment. Once you have 20% equity in your home, you can drop that payment (as we’ll discuss later). But with less than 20%, it might pay to refinance to a 75/15 mortgage. Under this scenario, you would take out a first trust for 75% of the home’s value and a second trust for 15% of its value. With neither loan showing less than 20% equity in the home, PMI won’t be required.

4. Review your ARM calculations. Industry experts say consumers can lose money to calculation errors lenders sometimes make when re-computing adjustable-rate mortgage payments as they change year to year. Dust off your closing papers and look up the current rate to find out what you’re supposed to be paying according to the adjustments and caps stipulated for your loan. If you find a mistake in your favor, contact your mortgage company to have your payment changed to the lower amount.

5. Drop Private Mortgage Insurance (PMI). If you bought your home with less than a 20% down payment, you probably have private mortgage insurance. PMI can cost hundreds of dollars monthly on some loans. The Homeowners Protection Act of 1998 says your lender must automatically cancel PMI when your equity reaches 22% on the loan pay-down schedule. But you can also drop your PMI once your equity reaches 20% through market appreciation and payments. If your home has been appreciating, and you think you owe less than 80% of its current value, contact your lender. Chances are you’ll have to pay for an appraisal (about $300 to $400) to prove your home’s current worth. But after that, you’ll see monthly savings in a lower mortgage payment without the PMI premium.

6. Get a longer term. Although this method may not suit everyone, if you need to increase cash flow by reducing your monthly payment, you could extend the term of your current loan. For example, if your balance is down to $100,000 on a $150,000 30-year mortgage that you took out 18 years ago at 7.5% interest, your monthly principal/interest payment would be $1,048.82. If you refinanced the $100,000 12-year balance with a 30-year loan at even the same interest rate, the longer term would lower your principal/interest payment to $699.21. That’s a big drop in payment, but it also means you’ll be paying on your home 12 years longer than before refinancing. And, of course, your total interest expense on the purchase of that home will be much higher.

7. Correct an outdated tax assessment. You’re probably paying a portion of your annual real estate taxes with your monthly payment to your mortgage holder. Have you checked your tax assessment to make sure you’re not paying too much? The taxing authority could be calculating taxes on your house with incorrect information, e.g., counting an extra bedroom, bathroom or finished basement that you don’t actually have. This would increase your tax bill and your monthly payment. Keep track of your tax assessment and challenge it if it doesn’t reflect actual property values in your area.

 

Categories: Mortgage ideas, Wilmington NC Neighborhoods, wilmington nc relocation


Kay Baker Associates | 1001 Military Cutoff | Ste 101 Wilmington, NC 28405 | kaybakerassociates@ec.rr.com | 910-202-3607 | Fax 910-338-2428

Copyright © 2017 Wilmington NC Real Estate Guide. All rights reserved. Disclaimer: All content on this blog is my own opinion and should not be treated as fact or relied upon when purchasing or selling real estate.