Gimme Shelter, Tax Shelter

Your home is your shelter, your refuge from a busy world, and from a tax standpoint, represents one of the most significant tax shelters available to most Americans. Tax deductions for interest paid on credit cards, car, boat and personal loans, were eliminated in 1986 while mortgage interest, investment interest, and real estate taxes remain tax deductible within certain limitations.

Rent vs. Own

For most renters, there are few tax deductions available. This means that most likely, renters take only the “standard deduction” on their income tax returns. However, most homeowners are able to “itemize” their deductions, because of the amount of mortgage interest and real estate taxes paid exceeds the amount of the “standard deduction”. Once you itemize, can deduct:

Home mortgage interest paid

Real estate taxes

State and local income taxes

Investment interest paid

Charitable contributions

Medical and dental expenses that exceed 7.5% of your income

Certain moving expenses

Other miscellaneous deductions.

These itemized deductions will help cut your tax bill considerably.

If you are currently paying rent of $1,000 per month, you will spend over $120,000 in rent payments during the next ten years, and thatÕs assuming no rent increases. Compare that to owning a $130,000 home with 3% down and a total payment of $1,184 (principal, interest, taxes and insurance). As a homeowner you will build equity with each principal payment, take advantage of potential real appreciation, deduct all of the interest and real estate taxes, and switch to an itemized deduction. Assuming your home appreciates 3% annually, you would have over $64,000 equity after ten years in addition to over $9,000 in tax deductions each year!

Tapping Equity for Existing Homeowners

With todayÕs historically low interest rates and tax deductible interest, mortgage loans provide one of the “cheapest” forms of borrowing. Compare a 30 year fixed rate loan at 7.875% with an after tax effective rate of 5.67% to; personal loans, car loans, and credit cards rates, which still average in the high teens.

Homeowners should considering using their existing home equity for their borrowing needs, such a bill consolidation, home improvements, college tuition, or the purchase of an automobile. Home equity lines of credit or traditional closed-end second mortgages allow you to borrow against the equity in your home at favorable interest rates. Depending on the amount of equity that your are looking to access and the rate and term of your existing mortgage, you can also consider a “cash-out” refinance of your first mortgage. This will most often result in the lowest interest rate and provide the greatest number of financing options.

To Prepay or Not to Prepay

Many of us were raised under the notion that we should payoff our mortgage as quickly as possible and make large down payments when buying a home. While we may dream of the day when we have no mortgage, consider the financial benefits of leveraging the equity in your home to invest for a greater return. Before pre-paying your mortgage consider investing those extra dollars to earn a greater return. With the government subsidizing the interest on your mortgage, you would do better over the long term by investing in the a well run stock mutual fund, based on the average return of the Standard and PoorÕs 500 during the past twenty years.

Most importantly, think of your mortgage as a significant part of your overall financial plan. Evaluate how you can maximize your net worth with the most beneficial mortgage plan for your individual needs.

Jeffrey B. Harris

Residential Mortgage

Loan Officer

1 st Mariner Mortgage

(410) 218-0366

Mortgage-on-the-Net.com

By

, your refuge from a busy world, nd personal loanse interest, investment interestble within certain limitations.

, likely, renters take only the standard deduction r, most homeowners are able to itemize their deductions, becausepaid exceeds the amount of the duction percentOther miscellaneous deductions percent interest and real estate taxes percent,.

percent- percent personal loans, car loansHomeowners should considerquity for their borrowing needse improvements, college tuition

, - Jeffrey B. Harris is a rmortgage lofficer with Mariner Mortgage. He can be reached at 0-218-0366.you threethreeSys/App:Applications:Microsoft Word 6:Templates:NormalGimme Shelter, Tax Shelter

Your home is your shelter, your refuge from a busy world, and from a tax standpoint, represents one of the most significant tax shelters available to most Americans. Tax deductions for interest paid on credit cards, car, boat and personal loans, were eliminated in 1986 while mortgage interest, investment interest, and real estate taxes remain tax deductible within certain limitations.

Rent vs. Own

For most renters, there are few tax deductions available. This means that most likely, renters take only the “standard deduction” on their income tax returns. However, most homeowners are able to “itemize” their deductions, because of the amount of mortgage interest and real estate taxes paid exceeds the amount of the “standard deduction”. Once you itemize, can deduct:

Home mortgage interest paid

Real estate taxes

State and local income taxes

Investment interest paid

Charitable contributions

Medical and dental expenses that exceed 7.5% of your income

Certain moving expenses

Other miscellaneous deductions.

These itemized deductions will help cut your tax bill considerably.

If you are currently paying rent of $1,000 per month, you will spend over $120,000 in rent payments during the next ten years, and thatÕs assuming no rent increases. Compare that to owning a $130,000 home with 3% down and a total payment of $1,184 (principal, interest, taxes and insurance). As a homeowner you will build equity with each principal payment, take advantage of potential real appreciation, deduct all of the interest and real estate taxes, and switch to an itemized deduction. Assuming your home appreciates 3% annually, you would have over $64,000 equity after ten years in addition to over $9,000 in tax deductions each year!

Tapping Equity for Existing Homeowners

With todayÕs historically low interest rates and tax deductible interest, mortgage loans provide one of the “cheapest” forms of borrowing. Compare a 30 year fixed rate loan at 7.875% with an after tax effective rate of 5.67% to; personal loans, car loans, and credit cards rates, which still average in the high teens.

Homeowners should considering using their existing home equity for their borrowing needs, such a bill consolidation, home improvements, college tuition, or the purchase of an automobile. Home equity lines of credit or traditional closed-end second mortgages allow you to borrow against the equity in your home at favorable interest rates. Depending on the amount of equity that your are looking to access and the rate and term of your existing mortgage, you can also consider a “cash-out” refinance of your first mortgage. This will most often result in the lowest interest rate and provide the greatest number of financing options.

To Prepay or Not to Prepay

Many of us were raised under the notion that we should payoff our mortgage as quickly as possible and make large down payments when buying a home. While we may dream of the day when we have no mortgage, consider the financial benefits of leveraging the equity in your home to invest for a greater return. Before pre-paying your mortgage consider investing those extra dollars to earn a greater return. With the government subsidizing the interest on your mortgage, you would do better over the long term by investing in the a well run stock mutual fund, based on the average return of the Standard and PoorÕs 500 during the past twenty years.

Most importantly, think of your mortgage as a significant part of your overall financial plan. Evaluate how you can maximize your net worth with the most beneficial mortgage plan for your individual needs.

Jeffrey B. Harris

Residential Mortgage

Loan Officer

1 st Mariner Mortgage

(410) 218-0366

Mortgage-on-the-Net.com

By

, your refuge from a busy world, nd personal loanse interest, investment interestble within certain limitations.

, likely, renters take only the standard deduction r, most homeowners are able to itemize their deductions, becausepaid exceeds the amount of the duction percentOther miscellaneous deductions percent interest and real estate taxes percent,.

percent- percent personal loans, car loansHomeowners should considerquity for their borrowing needse improvements, college tuition