Mortgage Debt Forgiveness Act

Mortgage Debt Forgiveness Act - Extended Through 2013

 

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Good news for those who are contemplating or completing a short sale, the Mortgage Debt Forgiveness Act has been extended through 2013.

If you had mortgage debt forgiven this past year, whether it was through a short sale or perhaps mortgage modification then you may be able to claim special tax relief and exclude the debt forgiven from your income.

That is because the Mortgage Debt Forgiveness Debt Relief Act of 2007 allows for owners of primary residences to avoid paying taxes on this forgiveness under certain circumstances. Here are 10 facts directly from the IRS in regard Mortgage Debt Forgiveness.

This act was set to expire at the end of 2012. However, as mentioned, the forgiveness act has been extended through December 31, 2013.

1) Normally, debt forgiveness results in taxable income. However, under the Mortgage Forgiveness Debt Relief Act of 2007, you may be able to exclude up to $2 million of debt forgiven on your principal residence.

2) The limit is $1 million for a married person filing a separate return.

3) You may exclude debt reduced through mortgage restructuring, as well as mortgage debt forgiven in a foreclosure.

4) To qualify, the debt must have been used to buy, build or substantially improve your principal residence and be secured by that residence.

5) Refinanced debt proceeds used for the purpose of substantially improving your principal residence also qualify for the exclusion.

6) Proceeds of refinanced debt used for other purposes -- for example, to pay off credit card debt -- do not qualify for the exclusion.

7) If you qualify, claim the special exclusion by filling out Form 982, Reduction of Tax Attributes Due to Discharge of Indebtedness, and attach it to your federal income tax return for the tax year in which the qualified debt was forgiven.

8 ) Debt forgiven on second homes, rental property, business property, credit cards or car loans does not qualify for the tax relief provision. In some cases, however, other tax relief provisions -- such as insolvency -- may be applicable. IRS Form 982 provides more details about these provisions.

9) If your debt is reduced or eliminated you normally will receive a year-end statement, Form 1099-C, Cancellation of Debt, from your lender. By law, this form must show the amount of debt forgiven and the fair market value of any property foreclosed.

10) Examine the Form 1099-C carefully. Notify the lender immediately if any of the information shown is incorrect. You should pay particular attention to the amount of debt forgiven in Box 2 as well as the value listed for your home in Box 7.

For more information about the Mortgage Forgiveness Debt Relief Act of 2007, please visit http://www. IRS.gov and as always consult a tax professional with specific questions you may have.

 

Mortgage Debt Forgiveness Act

Invest Your Rent

Why Pay Your Landlord's Mortgage?

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Invest your rent. It makes financial sense because the 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! We can help make that happen for you, just call or email us at Luxury Valley Homes. We have some special programs for  veteran loans, so if your a veteran, talk to a veteran that has already been through the process and has helped dozens of others find a house they could call home.

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. 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

Invest your rent means investing in yourself. Keep in mind that 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 home ownership 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, home ownership 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.

Article: Invest your rent, is brought to you be the Luxury Valley Homes team.

Invest Your Rent

Too Much Installment Credit can Hurt your Credit Rating

Many homeowners are shocked when they get a look at their credit reports. Even those who pay their bills on time and maintain low credit-card balances can have a less-than-perfect rating. How is that possible?

Your credit picture reflects a number of different aspects of your borrowing behavior. For example, you may have several open credit-card accounts with high limits. That means you could borrow a lot of money in a short period of time, which might worry a new lender who's thinking about extending you still more credit. It's best to keep just one or two credit-card accounts open and to keep their balances low.

MOVE UP

You may need to move and buy another home sooner than you think. Make sure your credit is up to the challenge and read our special online report, MOVE UP: 4 Smart Strategies For Purchasing Your Next Home. For more savvy tips, feel free to read our monthly online newsletter too. Click here. E-Newsletter.

Article:  Too much installment credit can hurt your credit rating is brought to you by: Luxury Valley Homes

Too Much Installment Credit can Hurt your Credit Rating

Residential Consumer Loan Changes in 2013 Will Cost More

With the Dodd-Frank bill having no chance for repeal, it appears their new proposed rule changes will be enforced. Most of these new rules affecting our industry revolve around Owner Occupied residential consumer loans. These changes will begin in January 2013. Some of the changes that will impact the “Hard money” space are listed below.

NO financing any lender or broker points within the loan! This means the borrower will have to pay the origination fees out of their savings or finance it on a credit card.

NO Prepay protection will be allowed to the lender! This willeliminate the ability to offer ZERO points for a residential loan, a feature that has allowed the majority/total of points to go to the broker.

No Balloon payments will be allowed! This will likely force lenders into 30 year fully amortized loans. With the current loan rates this is a good thing but in the future it may prohibit short term loans at reduced interest rates.

All borrowers that want to get Hard Money/Alternative loans on their home will be FORCED to attend Consumer counseling set up by HUD.

Considering selling your home using a Contract for Deed? There are considerable risks for the homeowner in choosing this option. We would encourage getting legal advice from a real estate attorney before implementing this option.

The end results of these pending changes will affect the cost of capital to the consumer.

Residential Consumer Loan Changes in 2013 Will Cost More