Mortgage Refinance Guide

According to a recent survey many homeowners in the United States do not understand their home mortgage and are stumped by industry jargon. Six out of ten Americans surveyed had no idea what APR stands for. (Annual Percentage Rate) Furthermore, almost half surveyed did not know the interest rate on their mortgage loan.

To educate homeowners in the United States a national mortgage company has launched a new website RefiAdvisor.com. According to the website, homeowners looking to refinance a mortgage need to arm themselves with information.

This website offers homeowners tips and information on shopping for the best mortgage deal. There is information on the different loan options and calculators to help determine how much mortgage a homeowner can afford.

Intense competition among mortgage lenders is a great thing for homeowners; however people need to do their homework in order to take advantage of this competion and this is where the website can help.

There is nothing surprising about the fact that President Bush is receiving strong criticism for his advisory panel recommending removal of the tax deduction for home mortgage interest. The President’s advisory panel is a nine-member board that is recommending the following in its report next week:

First, they recommend lowering the mortgage interest deduction cap; this is the amount of a mortgage for which individuals would receive a tax deduction for interest paid on the loan. Presently this cap is set at one million dollars. They will lower this to levels in line with regional housing prices. This is estimated to be between $172,000 and $312,000 depending on the area of the country.

Second, they want to change the deduction to a credit that equals roughly fifteen percent of what you paid in mortgage interest up to the cap. A tax deduction claimed will reduce the taxable income on your return; credits on the other hand, are a dollar for dollar deduction from the taxes you pay. This is being touted as a benefit to the proposed recommendations.

For the most part, the larger your home mortgage and the higher your income the more you have benefited from the previous interest deductions on your tax return. Under the tax credit you will see less of a benefit. For example, a person who owes $20,000 each year on a $350,000 mortgage loan that itemizes their tax return each year was able to reduce their taxable income by $20,000 each year. With the proposed system this person would only save approximately $3,000 each year opposed to nearly $5,000 under the old system.

This change may cause many homeowners to stop itemizing their tax returns completely, opting for the standard tax deduction along with the mortgage credit if they qualified. It may be some time before any of the panel’s recommendations are implemented. The last time the government overhauled the tax code was 1986; this was 10 process before the changes were implemented.

The mortgage interest deduction you claim on your taxes is under attack and has been since the days of the Reagan administration. This deduction allows homeowners to deduct the interest paid on their home mortgage loan from income tax. It also allows for the deduction of Property taxes on your home. There are many loopholes in this deduction that even cover things like boats and residential vehicles that function as homes.

This deduction is believed to cost the IRS nearly sixty three billion dollars in tax revenue every year. Lawmakers in Washington are greedy…especially the ones that come from Texas. This month the President’s Advisory Panel for Federal Tax Reform committed to eliminate the deduction if your mortgage is from $250,000 to $313,000. They also recommended eliminating the deduction for property taxes on your home.

Limiting the mortgage interest deduction would create much needed capital for the Treasury; the deficit has ballooned astronomically due the war, poor Medicare legislation, and natural disasters from Hurricanes in the Gulf. This recommendation would greatly hinder homeownership in America. It would mostly affect poorer Americans; this is par for the course of this President’s administration.

Another possible effect of this recommendation is a recession in the economy due to slowing of the housing and construction industry; which subsequently have been driving our economy for some time. This proposal might bring the red hot housing industry to a halt; this would seriously damage the overall economy. This proposal has been around since the 80s and has always meet strong opposition in Congress. Hopefully this President’s lame duck days will be here sooner than later.

If you need to take out a loan, home equity lines are an easy source for credit. In the beginning a home equity line can provide lots of cash at fairly low rates and even give you tax deductions you can’t get with other loans.

On the other hand, a home equity line of credit will use your home as collateral. This could place your home at risk if you are unable to keep up on your monthly payments. Some loans require a large balloon payment when the loan term ends that may force you to borrow more in order to pay the loan. When this happens you may not qualify for refinancing which would force the sale of your home. In a soft market where you cannot sell your home you could lose everything to foreclosure. When you do decide to sell your home many lenders require that you pay off the home equity line at that time. Another risk to consider is easy access to your money these loans offer; you may borrow more money from your home equity than you would otherwise, doing this forfeits the equity you have built up in your home.

Keep in mind there may be other options to get the money you need. One option is a second mortgage installment loan. These loans add additional mortgage to your home; however, second mortgages pay you a lump some rather than a series of cash advances. Home equity lines typically have you write checks on a line of credit. Another advantage to a second mortgage is they typically offer fixed interest rates and fixed monthly payment amounts. There may also be additonal avenues of borrowing that do not require your home for collateral. Credit cards and unsecured lines of credit may let you write checks like a home equity line. There are also other types of loans for specific purposes: student loans and car loans for example.

To learn more sign up for our free guide: “Five Things You Need to Know Before Refinancing Your Mortgage.”

Mortgage interest rates for the 30 year fixed rate loan rose again, finishing the week at 6.1 percent, according to a national mortgage lender. The 30 mortgage interest rates has not been this high since July of 2004, when mortgage interest rates averaged 6.21 percent. Last week the 30 year mortgage averaged 6.03 percent.

Fifteen year mortgage loans also rose this week to 6.65%; this is up from 5.62 percent the week before. One year adjustable rate mortgages (ARM) are up to 4.89 percent this week from 4.85 last week. Last fall at this time the 30 year fixed rate mortgage was 5.69%, the one year adjustable rate mortgage (ARM) was 4.02%, and a 15 year mortgage ran 5.07%.

Despite the jump in mortgage interest rates, mortgage applications are up along with construction of new homes. Home construction is up 3.4% last month, and the rate of permits being issued for new building is at a 30 year high according to the Commerce Department. A survey of national lenders this week stated the volume of mortgage applications this week increased 6.1%. Mortgage lenders typically charge an additional .5% in lender fees on a 30 year mortgage. This is down from .6% the week before. Fees and points on a 15 year mortgage loan remain at .6% which is unchanged from last week. Lenders fees for the one year adjustable rate mortgage (ARM) also increased to .7%; this is up from .6% the last week.