Entries Tagged as ''

Tax Considerations When Re-Financing

For many homeowners the overall goals of re-financing are often paying less in interest overall and reducing monthly payments. When a homeowner is able to obtain a lower interest rate, there is usually the opportunity to re-finance the mortgage to capitalize on the lower interest rate. However, a lower interest rate does not automatically translate to a savings. The homeowner must carefully consider the amount of money they will be savings over the course of the loan in relation to the amount of money they will be spending to re-finance the mortgage. When the closing costs associated with re-financing are larger than the savings, re-financing may not be warranted. Re-financing can also have financial ramifications associated with tax options.

Paying Less Interest Equals Less of a Deduction

In most locations, homeowners are permitted to deduct the amount of taxes they pay on their mortgage when filing their tax forms. This is usually quite a substantial deduction for homeowners who owned the home for the entire tax year. Those who re-finance their mortgage will typically be paying less money each year in taxes on the mortgage. While this is great in the long run, it can adversely affect the homeowner’s tax return.

Consider a situation where a homeowner is located just below a major tax bracket which would be quite costly for the homeowner. As all ready discussed, re-financing may result in the homeowner paying less money in taxes each year. This means the taxpayer will be able to make a smaller deduction this year now fall above the tax bracket they previously fell below. When this happens the homeowner may find themselves paying significantly more in taxes.

Consult a Tax Preparation Specialist

Determining the exact ramifications of paying less interest on a home mortgage on a tax return can be a rather tricky process. There are a number of difficult equations involved which can make the apt to make mistakes while trying to determine the consequences of paying less in taxes on the mortgage. For this reason, the homeowner should consult a tax preparation specialist when determining whether or not re-financing is worthwhile because the tax specialist can provide information regarding the impact of paying less in interest.

In selecting a tax preparation specialist, the homeowner should seek out opinions from friends and family members if the homeowner does not employ a specialist to prepare their own taxes. This can be helpful because trusted friends and family members are only likely to recommend professionals they feel were knowledgeable, trustworthy and caring. A tax preparation specialists should have all of these qualities but should also be well versed in the area of tax preparation. This will enable the tax preparation specialist to make all of the right decisions when considering the needs of the homeowner.

Online Calculators

For homeowners who do not know a tax preparation specialist or for homeowners who are unable to afford the consulting services of these individuals, there are online calculators which homeowners might find very useful. These calculators are readily available throughout the Internet and can be used to determine the tax ramifications to re-financing. These calculators ask the user to input specific criteria then returns results regarding the amount the homeowner will pay in taxes during the year if he refinances.  Additionally the homeowner can run these equations several times to consider a number of different scenarios.

Tags: Uncategorized by admin
No Comments »

Seek Recommendations When Re-Financing

Homeowners who are re-financing their home for the first time may need a great deal of advice to assist them during the process. While homeowner can certainly research the process of re-financing by themselves, this can be a cumbersome task which is difficult, if not impossible. While it might be possible for a homeowner to educate himself enough to make informed decisions, it is unreasonable to expect a homeowner to be up to date on the most current information in the re-financing industry. It would also not be reasonable for homeowners to learn enough to make a definite decision regarding re-financing. The homeowner may still require some direction regarding which options are best suited for the needs of the homeowner.

Fortunately there are two simple steps homeowners can take to tips the odds of obtaining the most favorable re-financing in their favor. These simple steps include consulting with friends and family members who have recently financed and turning to industry experts for assistance.

Consult Friends and Family when Re-Financing

Believe it or not consulting with family and friends is one of the first steps a homeowner should take in the refinancing process. Those reading this article might be somewhat confused by this suggestion because in the previous section we stressed how it would be virtually impossible for a homeowner to thoroughly educate themselves on the re-financing process. Surely, we are not implying every homeowner has a friend or family member who is capable of given detailed financial advice in regard to re-financing. However, friends and family members can be helpful in a different capacity.

Friends and family members who recently re-financed their own home likely did a great deal of research and legwork before making their decision. They also likely formed useful opinions, either negative or positive, about the lender they used in the process. It is this information which can be very useful to homeowners who are considering their own re-financing. Homeowners can obtain information such as which lenders are currently offering the best rates as well as which lenders are easy to work with and responsive to the needs of the homeowners as well as which lenders do not take a vested interest in helping the homeowner to succeed.

Ask Experts for Advice when Re-Financing

One piece of advice which cannot be overlooked when re-financing a home, is asking an expert in the re-financing industry for advice. These experts may have costly consulting fees associated with their assistance but most homeowners would agree these fees are certainly worthwhile especially if the result in a significant cost savings for the homeowner.

We previously stressed how the issues associated with re-financing can be quite complex and difficult for those outside of the industry to fully understand, however, those in the industry spend their days devoted to learning more about re-financing, keeping up to date with changes in the industry as well as new developments and figuring out how to best serve the customers. All of these characteristics make it clear that homeowners should really consider employing the services of a financial planner with a great deal of experience in re-financing when they are making decisions regarding the best re-financing option for their situation.

Again, friends and family members who previously consulted with an industry professional can supply candid opinions about those they met. This can save the homeowner a great deal of time by eliminating potential candidates who friends and family members thought performed poorly.

Tags: Re-Financing by admin
No Comments »

Re-Financing with Shorter Loan Terms

For some homeowners there is the possibility of making a sound re-financing decision even when interest rates are stagnant, the homeowner does not have a great amount of equity in the home and the homeowner’s credit score has not increased significantly. You might wonder how this is possible. It certainly isn’t an option for every homeowner but those who can afford to pay significantly more each month can yield huge financial benefits by refinancing their loan terms from 30 years to 15 years. The benefits which may result from this type of re-financing include a significant overall savings, the ability to gain equity quicker and the ability to repay the balance of the loan quicker.

Higher Monthly Payments Increase Overall Savings

Re-financing with shorter loan terms is definitely not an easy option but homeowners who have a large monthly cash flow or who receive a sizable promotion at work might be able to consider the possibility of re-financing by decreasing the loan terms from 30 years to 15 years.

The result of this type of re-financing will be a significantly higher monthly payment which is not conventional but can be worthwhile if it meets the needs of the homeowner. In particular this type of re-financing option is a viable solution if the homeowner can afford the increase in monthly payments and has an overall goal of reducing the amount of interest they will pay over the course of the entire loan.

Reducing the amount of interest is critical to the overall savings plan because the homeowner does not have the option of reducing their original debt but they can drastically reduce the amount of interest paid over the course of the loan. Consider two loans with a 5% interest rate. One loan is to be repaid over a period of 15 years while the other loan is to be repaid over a period of 30 years. It is clear that in this example, the homeowner with the 30 year mortgage will pay more during the course of the loan.

Equity Gained Quicker

Another major advantage to re-financing by reducing the loan terms from 30 years to 15 years is the ability to gain equity in the home at a significantly faster rate. The amount of the equity in the home is equal to the amount of the principal loan which has already been repaid by the homeowner. Under a conventional loan, the homeowner typically pays a combination of principal and interest with their monthly payments. The amount of the principal which is repaid on two mortgages for the same amount and with the same interest rate will be different if one loan is a 30 year term and the other is a 15 year term. The homeowner with the 15 year mortgage will be paying more of the principal each month and will therefore be accumulating more equity each month. Gaining equity in the home quicker is ideal because it gives the homeowner greater flexibility. The equity in the home can be used for a number of purposes including home improvement projects, travel, educational pursuits and small business ventures.

Loan Repaid Quicker

One advantage of shortening the loan terms, which cannot be denied by some homeowners, is the ability to repay the loan quicker by re-financing to shorten the loan terms from 30 years to 15 years. In this case the homeowner will have completely repaid the home loan a full 15 years earlier than they would have under the conventional loan. This is advantageous because it can enable the homeowners to enjoy living mortgage free a full 15 years earlier. Once the mortgage is fully repaid, the homeowner may be able to make significantly more sizable contributions to his retirement plan. Some homeowners may even be able to afford to retire once their mortgage is repaid in full. This ability can have a significant impact on the quality of life for the homeowner. Homeowners may find themselves with the financial means to travel, assist family in educational pursuits or invest in a small business.

Tags: Re-Financing by admin
No Comments »

Now the Obama Administration is proposing big changes

Ambition is a wonderful thing when it pays off. How many times have we watched a slugger walk up to the plate, look the pitcher in the eye, and lift an arm to point where the ball is going to land somewhere in the next state, only to strike out? Well, the new President has just stepped up to the plate. We have the TARP bailout plan carried over from the last Administration. The new Stimulus Package has been passed. Now comes the budget. Anyone doing the math will find the number of zeros adding on to the deficit reaching epidemic proportions. It seems the country is proposing to plunge even deeper into debt when it’s already in a recession, fighting two wars - one in Iraq and the other in Afghanistan - and facing a meltdown in the banking and car industries. Unemployment is at historic highs and, if the trend continues, the amount of tax collected will fall. Yet, the President is proposing major reform of the health care service. Is he biting off more than he can chew?

According to the latest figures, there are around 306 million people in the US and nearly 15%, that’s about 45 million, do not have any kind of medical insurance. What do they do? Well, when they fall ill, they crowd into the emergency rooms and seek help from the underfunded public hospital system. There are two results. The first is that people wait too long before they go to hospital and, when they get there, receive an inadequate level of care. The second is that it places a serious financial burden on everyone. The emergency room in a conventional hospital has to cover its costs but, when the uninsured patients have no money, the only option is to increase the charges to the insured patients. This burden has been particularly hard on the employers’ health plans and, to offset the increased premiums, employers have been passing some of the cost on to their employees - a forced pay cut. The public hospitals must beg for increased funding from local, state and federal bodies where budgets are already in deficit.

There is a new mood in government to do something about health insurance. In effect, the ideal plan would be to move to a single-payer plan which is the norm in the rest of the world, but that would upset too many vested interests. So the current plan is to go for a major safety net for all currently uninsured. There is already a plan for uninsured children. The Administration is proposing an element in the new budget to move all uninsured adults on to a national plan. If this can pass through into law, which is not certain given the opposition of the Republican party, it will provide a bolt hole for all currently insured. If the premiums on private health insurance continue to rise, more will move on to the national plan which, over time, could produce a single-payer system in the US. Now that would be an interesting social experiment.

Tags: Uncategorized by admin
No Comments »

Life for drivers in Massachusetts stays fair

When you live in a capitalist country, it’s easy to think that free market competition keeps the consumer safe. If anything goes wrong, the consumer can simply change to another supplier and, at a stroke, the problem is solved. Except life does not have to work in a fair way. When large insurance corporations are looking to make a profit to keep their shareholders happy, they do not think of their customers as people with problems. The policy holders are just the means to make a profit. So, government has to step in with regulations to strike a balance. The idea is to limit the companies to a reasonable profit and reduce the risk that consumers will be gouged. Although the GOP is against the idea of any regulation, every state in the union has a licensing system for insurance companies. Only companies with a licence can sell policies in each state, and the condition of getting and keeping a licence is accepting some degree of regulation. How much regulation varies from state to state, but the essence is to offer some protection for the consumers.

In Massachusetts, there has been a rumbling dispute about the extent to which the local insurers should be regulated. Until last year, the state imposed quite strict rules on the type of policies that could be sold and the premium rates. The current system is one of managed competition with the companies having more freedom on the new products and the premium rates at which they can be sold. The problem focussed on the Board of Appeals run by the Insurance Commissioner Nonnie Burnes. If a driver is involved in a collision, the insurer is allowed to decide which driver is at fault and to add a surcharge to the premium payable by the driver in the wrong. This surcharge can be up to 50% of the original premium. Obviously, an insurance company has a direct interest in holding its driver to be at fault so the premium can be increased. Hence the need for an appeal system. The current Board finds that the surcharge is not justified in more than half the cases referred to it.

The people of Massachusetts were therefore shocked when the Commissioner announced the Board would be shut down. This would leave surcharged drivers with nowhere to go. Strangely, when consumers shop round for a change, the other companies tend to rely on the current company’s finding of fault, rate the driver as more of a risk and only offer auto insurance at higher rates. What should be fair competition between the companies producing lower premiums is the sharing of information about drivers resulting in higher premiums. The state legislature was therefore quickly into action to propose legislation ordering the Commissioner to retain the Board. After a stand-off with the bill moving through the legislature, the Commissioner gave in and announced the Board will be retained. Lacking confidence, the legislators are continuing with the passage of the bill. The interests of the consumer must come first when it comes to auto insurance.

Tags: Blessed, Uncategorized by admin
No Comments »

When does gender matter behind the wheel?

There’s a sobering saying, “The female of the species is more deadly than the male.” It first surfaced in a poem by Rudyard Kipling and achieved international recognition through the “shock shock horror” song by Space. Taken literally when applied to humanity, it suggests women are more likely to kill you than men. Except, when it comes to driving, this is almost certainly not true. There’s a myth put about by men that women are bad drivers. Talk to the average male driver and they will pour scorn on women, telling tall stories about dangerous behavior on the roads. Yet this sexist view is not supported by the accident statistics. When you add up all the numbers from around the world, men are three times more likely to die on the roads than women. The truth seems to be that men may have better spatial awareness and so slightly better control of their vehicles. But women have better self-control which makes them safer drivers. The result in the gender stakes is that men, particularly when young, are more reckless than women, driving faster with less attention. Women are more cautious, driving more slowly and causing fewer serious accidents. Even more importantly, women have fewer emotional hang-ups about the cars they drive. Whereas men prefer to be seen in fast, sleek sporty cars, women tend to have more modest (and cheaper) tastes.

Let’s put the big picture together. For now, we’ll assume that women are as good as male drivers and both sexes have the same number of accidents. The cars driven by women will be traveling more slowly when they collide. That means there will be less impact and so a reduced risk of injuries. Now add in the fact that women tend to be driving less expensive cars and the total loss of damage to the vehicles and injuries to the people inside will always be lower. The rest of the statistics from law enforcement complete the picture. When it comes to tickets issued and convictions, women are rarely caught exceeding the speed limit, do not drive recklessly and are less likely to drive while drunk or incapacitated by drugs. Finally, men love their cars and prefer to drive them over long distances. Women make shorter commuter journeys and take the plane or train over longer distances.

This means lower premiums for women drivers. They are more careful, have fewer accidents and cause less damage. Men are less likely to obey the law, and more likely to be injured and cause injuries. Auto insurance premiums are therefore significantly higher for younger male drivers and, on average, higher than the equivalent female drivers over their lifetimes. So, when women go online to use the search engines for the best insurance rates, they are likely to be pleasantly surprised. The only strategy that men can adopt is to build up a trouble-free driving record over time. The longer male drivers go without picking up a ticket, the better. Savings will also flow from buying cheaper, less powerful cars and driving them less. Accepting mileage restrictions saves dollars on auto insurance premiums. In fact, men save money when they drive like women.

Tags: Blessed, Uncategorized by admin
No Comments »

Summer on the road

Americans are well known for their traditional road trips. But the ever rising gas prices force many drivers to consider various options of optimizing their gas mileage and get the most out of the least. Here are some useful tips you might follow that will help get the most out of your summer driving marathons and stay on top of it.

Fluid level check is a must

Your cooling system should be checked, cleaned and re-filled if necessary before you hit the road. Other fluids like engine oil, brake and transmission fluids, power steering and so on also require a thorough check. Having problems with them while driving in the summer heat is not the best way of enjoying a good road trip.

Check for leaks

See if your car has any leaks before going to a trip. Finding out that there are any while you’re good into your vacation is definitely the least pleasant thing you might expect. Remember that even the smallest leak in your gas tank will lead to a substantial leak in your wallet. And who wants to spill out money like that?

Air filter condition

An air filter with much dust in it will result in a 10% fuel efficiency drop. If you want to make the most out of your fuel, replacing your air filter is a very good idea.

Schedule your trip before leaving

Make sure to take your time with the map before hitting the road. This way you’ll be able to find the best way to your destination and avoid battles with the map during the trip. Don’t forget to browse the U.S. Department of Transportation Federal Highway Administration’s website before leaving, if you don’t want to run into closed roads or construction traffic jams.

Keep the speed limit in sight

Driving below 60 mph is not only a good safety measure of avoiding traffic accidents but actually helps get the best gas mileage, as it usually increases substantially when this speed limit is exceeded. Make sure to check state speed limits by visiting the National Motorists Association’s site.

Rush hour is your enemy

Try driving during non-peak hours as much as possible. Rush hours decrease your gas mileage substantially and also contribute to wear and tear of your auto.

Buy a GPS system or a road map

It’s very easy to make a mistake or make a wrong turn, especially when driving in an unfamiliar area. Having an atlas or a GPS system in your will save you a lot of nerves and time.

Update your auto insurance

The longer is your trip the higher is the risk of running into an accident and having good and cheap auto insurance coverage in such situation is a must. Check your auto insurance before leaving home and make sure it’s adequate to your insurance needs. Different states have different minimum coverage amounts so be aware of that when reading trough your policy before the trip.

Tags: Uncategorized by admin
No Comments »