Wednesday, April 23, 2014

Deducting Mortgage Interest On Your 2013 Tax Return

Recently I heard a real estate guy preach about how keeping mortgage debt is good because you don't lose the mortgage interest deduction. This is very misleading to a new investor who may not have a grasp on taxes and tax deductions and how they work.
First let me advise that I am not a tax professional. I would recommend talking to Maria Cerda if you have tax questions, she is a licensed professional. Let me explain why the mortgage interest deduction is not a good justification for not paying off debt:
1. Mortgage interest is a DEDUCTION not a credit. A tax credit reduces the taxes due....after you've run your tax calculation if you owe $1000 and you have a $100 tax credit, the tax bill is reduced to $900. This is a direct $1 for $1 write off. Great. Too bad mortgage interest is not a credit, it is a deduction. This means it only reduces your taxable income. Assuming your tax rate is 20% and you pay in $1 of mortgage interest, the deduction would reduce your taxable income by $1. The $1 deduction in taxable income X 20% = $0.20 savings on your tax liability. You're still down $0.80 for that dollar, it's not a wash as some people make it sound.
This next part does not really apply to a properly run rental business because if you're treating it as a separate business, the mortgage interest is an expense of doing business.
2. The small benefit is only received if you itemize your deductions. If you claim the standard deduction ($11,600 for married couples) then you receive no tax benefit for your mortgage interest paid. What this means is your itemized deductions MUST be more than the default $11,600 deduction to receive any benefit (if married, $5800 if single). If your only itemized deduction is $12,000 in mortgage interest, you think you are all clear. Sure, you are itemizing, however are you really receiving $12,000 in true deduction? Without itemizing, you get $11,600 deduction by default, with itemizing you're getting $12,000 worth of deductions. The true felt benefit is only $400 INCREMENTAL deduction ($12,000 itemized - $11,600 standard) .Take that $400 and multiply it by the above 20% tax rate and you only save an incremental $80 on your tax liability over the standard. You must ask yourself, is that worth $12,000 in interest paid?
If you want to talk to a seasoned tax professional that we recommend, email Maria by clicking here.

Tuesday, April 22, 2014

New Home Equity Conversion Mortgage Available Now


New Open-End Hybrid HECM

Are you looking to replace the Freedom of your Fixed Rate HECMs? Introducing the Open-End HYBRID HECM

 The Hybrid HECM is an FHA-insured Open-End Reverse Mortgage that gives borrowers the ability to access 100% of the principal limit within guidelines with all payment plan options available, with an interest rate that is fixed for the first year and adjusts annually thereafter.

The interest rate uses the 1-year LIBOR index plus a margin similar to the monthly HECM with the principal limit calculations being calculated the same as the monthly product. This rate is capped at the maximum of 5% APR above the initial rate over the life of the loan. This means the Hybrid HECM with a 2.5% APR initial rate could only raise to a maximum interest rate of 7.5% APR. Annual rate increases are further limited by a 2% APR cap, also protecting borrowers from interest rate volatility.

The HECM Hybrid Reverse Mortgage  gives brokers the flexibility to provide borrowers with closing cost credits by having control over the originates fee and back-end premium.

KEY PRODUCT FEATURES

ü  Product is Open-End financing (Rare Niche)
ü  Product allows for 100% principal limit utilization within guidelines
ü  Low Initial Interest rate locked for the first year
ü  Maximum interest rate increase is 2% APR annually
ü  Maximum life time interest rate increase is only 5% APR
ü  Fully compliant, FHA-insured HECM product

ü  If the principal balance is paid down the line of credit is retained for future use

Friday, April 11, 2014

We Protected Our Clients From Heartbleed Vulnerability

You're protected from the Heartbleed vulnerability because we have CloudFlare on our website. They fixed the flaw on March 31 for all CloudFlare customers, a week before it was publicly announced.

Heartbleed (CVE-2014-0160, http://www.openssl.org/) is a flaw in OpenSSL, encryption software used by the vast majority of websites to protect sensitive information. This vulnerability in OpenSSL allows an attacker to reveal up to 64KB of memory to a connected client or server. This flaw could expose sensitive data such as passwords or usernames - even when you thought it was encrypted.

Another reason to use companies like us, because we care and put the extra effort into protecting our clients in this modern age.