Sunday, January 18, 2009
Friday, September 26, 2008
In Depth Look at the $7,500 tax credit
The $7,500 tax credit for first time homebuyers was signed into law as part of the 2008 American Housing Rescue and Foreclosure Act. To qualify for this tax credit, you must close on your new house between April 9, 2008 and July 1, 2009.
Now this sounds like a great incentive to help stimulate home buyers into jumping into the real estate market and helping to dry up some of this excess housing we are floating in. I see this tax credit being plastered all over Florida mortgage broker and home builders marketing materials. There are some very important aspects of this "tax credit" that is not being disclosed to buyers. If you don't do some homework on your own you may be in for a big surprise when you find out it's not so much a tax credit as it is an interest free loan that must be PAID BACK!
Now before we get into how this payback is structured, let’s first see how much you qualify for. That's right the law says you can qualify for "up to" $7,500, but that is not necessarily how much you will get.
Here is a breakdown of how it works:
The “first-time home buyer credit” is a temporary refundable, repayable tax credit equal to 10% of the purchase price of a home, up to $7,500 for singles and married couples filing jointly. (Singles who buy a house together get only $3,750 each, as do married couples filing their tax returns separately.)
The income limit is $75,000 for a single and $150,000 for joint borrowers. If your income is above those limits there is a convoluted formula that can be used to determine the diminished amount of tax credit you will qualify for.
Confused? Here's an example...
Just as an example, assume that a married couple has a modified adjusted gross income of $160,000. The applicable phase-out to qualify for the tax credit is $150,000, and the couple is $10,000 over this amount. Dividing $10,000 by $20,000 yields 0.5. When you subtract 0.5 from 1.0, the result is 0.5. To determine the amount of the partial first-time home buyer tax credit that is available to this couple, multiply $7,500 by 0.5. The result is $3,750.
Now lets learn about how you repay this government loan (oops... we meant tax credit)
Home buyers will be required to repay the credit to the government, without interest, over 15 years or when they sell the house, if there is sufficient capital gain from the sale. For example, a home buyer claiming a $7,500 credit would repay the credit at $500 per year. The home owner does not have to begin making repayments on the credit until two years after the credit is claimed. So if the tax credit is claimed on the 2008 tax return, a $500 payment is not due until the 2010 tax return is filed. If the home owner sold the home, then the remaining credit amount would be due from the profit on the home sale. If there was insufficient profit, then the remaining credit payback would be forgiven.
So be prepared that two years after you claim your "tax credit" you will begin repaying the loan back annually at $500 per year until the loan is repaid or you sell that home.
This is some of the detailed information that you should be aware of prior to claiming your tax credit. We are not suggesting anyone NOT claim the credit merely that you be aware so you are not shocked in two years time when the Gov. begins requesting their money back. Hey... it's still an interest free loan! Oops, we meant tax credit :)
Now this sounds like a great incentive to help stimulate home buyers into jumping into the real estate market and helping to dry up some of this excess housing we are floating in. I see this tax credit being plastered all over Florida mortgage broker and home builders marketing materials. There are some very important aspects of this "tax credit" that is not being disclosed to buyers. If you don't do some homework on your own you may be in for a big surprise when you find out it's not so much a tax credit as it is an interest free loan that must be PAID BACK!
Now before we get into how this payback is structured, let’s first see how much you qualify for. That's right the law says you can qualify for "up to" $7,500, but that is not necessarily how much you will get.
Here is a breakdown of how it works:
The “first-time home buyer credit” is a temporary refundable, repayable tax credit equal to 10% of the purchase price of a home, up to $7,500 for singles and married couples filing jointly. (Singles who buy a house together get only $3,750 each, as do married couples filing their tax returns separately.)
The income limit is $75,000 for a single and $150,000 for joint borrowers. If your income is above those limits there is a convoluted formula that can be used to determine the diminished amount of tax credit you will qualify for.
Confused? Here's an example...
Just as an example, assume that a married couple has a modified adjusted gross income of $160,000. The applicable phase-out to qualify for the tax credit is $150,000, and the couple is $10,000 over this amount. Dividing $10,000 by $20,000 yields 0.5. When you subtract 0.5 from 1.0, the result is 0.5. To determine the amount of the partial first-time home buyer tax credit that is available to this couple, multiply $7,500 by 0.5. The result is $3,750.
Now lets learn about how you repay this government loan (oops... we meant tax credit)
Home buyers will be required to repay the credit to the government, without interest, over 15 years or when they sell the house, if there is sufficient capital gain from the sale. For example, a home buyer claiming a $7,500 credit would repay the credit at $500 per year. The home owner does not have to begin making repayments on the credit until two years after the credit is claimed. So if the tax credit is claimed on the 2008 tax return, a $500 payment is not due until the 2010 tax return is filed. If the home owner sold the home, then the remaining credit amount would be due from the profit on the home sale. If there was insufficient profit, then the remaining credit payback would be forgiven.
So be prepared that two years after you claim your "tax credit" you will begin repaying the loan back annually at $500 per year until the loan is repaid or you sell that home.
This is some of the detailed information that you should be aware of prior to claiming your tax credit. We are not suggesting anyone NOT claim the credit merely that you be aware so you are not shocked in two years time when the Gov. begins requesting their money back. Hey... it's still an interest free loan! Oops, we meant tax credit :)
Tuesday, January 8, 2008
Countrywide woes
Countrywide Financial Corp. reportedly denied bankruptcy rumors after it was said to have had fabricated documents.
"The rumor is that the mortgage lender will announce something this week. However, the company is out with comments this afternoon saying that there is no substance to the rumor," said Frederic Ruffy, an analyst for Optionetics.
"The financials are dragging everything down. This is the largest mortgage originator in the country, trading like it wants to go out of business," said Peter Boockvar, equity strategist at Miller Tabak.
Texas Commercial Loan companies continue to try to offer low rate alternatives and curb the negative press on the lending industry that Countrywide casts.
"The rumor is that the mortgage lender will announce something this week. However, the company is out with comments this afternoon saying that there is no substance to the rumor," said Frederic Ruffy, an analyst for Optionetics.
"The financials are dragging everything down. This is the largest mortgage originator in the country, trading like it wants to go out of business," said Peter Boockvar, equity strategist at Miller Tabak.
Texas Commercial Loan companies continue to try to offer low rate alternatives and curb the negative press on the lending industry that Countrywide casts.
Thursday, December 20, 2007
Trichet Forced to Drop Focus on Inflation
ECB policy makers have kept their benchmark rate unchanged even as the collapse in assets backed by U.S. subprime mortgages makes banks reluctant to lend to each other. The central bank first offered extra cash on Aug. 9, when it lent 95 billion euros ($137 billion) of emergency funds. On Dec. 18, the ECB pumped a record 349 billion euros into the banking system. Trichet said the coming weeks may be ``challenging'' for investors.
``The ECB had a good start in addressing the problems in the money markets, but I think there's a risk of falling behind the curve on monetary policy,'' said Thomas Mayer, chief European economist at Deutsche Bank in London. ``I don't think this is a technical problem confined to the money markets.''
The Bank of England's Monetary Policy Committee this month backed a rate reduction in the first unanimous decision to cut since the Sept. 11, 2001, terrorist attacks, minutes of the Dec. 6 decision showed yesterday. Chairman Ben S. Bernanke and his team at the Fed have lowered their overnight rate three times since September, while the Bank of Canada unexpectedly trimmed its rate on Dec. 4.
Texas bad credit mortgage Loans.
``The ECB had a good start in addressing the problems in the money markets, but I think there's a risk of falling behind the curve on monetary policy,'' said Thomas Mayer, chief European economist at Deutsche Bank in London. ``I don't think this is a technical problem confined to the money markets.''
The Bank of England's Monetary Policy Committee this month backed a rate reduction in the first unanimous decision to cut since the Sept. 11, 2001, terrorist attacks, minutes of the Dec. 6 decision showed yesterday. Chairman Ben S. Bernanke and his team at the Fed have lowered their overnight rate three times since September, while the Bank of Canada unexpectedly trimmed its rate on Dec. 4.
Texas bad credit mortgage Loans.
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