Mortgage Interest Tax Deduction

 

 

Navigating the Mortgage Interest Deduction: A Comprehensive Guide

Homeownership is a significant financial milestone, often accompanied by a mortgage loan. Mortgage interest payments can constitute a substantial portion of a homeowner's annual expenses. However, the Internal Revenue Service (IRS) offers a tax deduction to alleviate the burden of mortgage interest payments. The mortgage interest deduction provides homeowners with tax benefits.

Eligibility for the Mortgage Interest Deduction

To qualify for the mortgage interest deduction, homeowners must meet specific criteria. The mortgage must be secured by a primary residence or a second home, and the funds must be used to purchase, build, or substantially improve the property. Additionally, the mortgage amount cannot exceed $750,000 for married couples filing jointly ($375,000 for married couples filing separately).

Itemized Deduction vs. Standard Deduction

Homeowners can claim the mortgage interest deduction only if they itemize their deductions on Schedule A of their Form 1040. Itemizing involves listing all allowable deductions, such as charitable contributions, medical expenses, and state and local taxes. If the total itemized deductions exceed the standard deduction, itemizing is beneficial. Otherwise, the standard deduction, a fixed amount based on filing status, is more advantageous.

Calculating the Mortgage Interest Deduction

The amount of mortgage interest deductible depends on the mortgage amount, interest rate, and property taxes paid. Homeowners typically receive a Form 1098 from their mortgage lender, detailing the mortgage interest paid during the previous tax year. This form simplifies the deduction calculation.

Limitations and Exceptions

The mortgage interest deduction is subject to certain limitations and exceptions. For mortgages originated after December 15, 2017, the deduction is limited to mortgage debt of $750,000 or less. Additionally, interest on home equity loans is deductible only if the borrowed funds are used to buy, build, or substantially improve the taxpayer's home that secures the loan.

Impact of Tax Reform on the Mortgage Interest Deduction

The Tax Cuts and Jobs Act of 2017 made significant changes to the mortgage interest deduction. The deduction is still available, but the limitations have been tightened. Additionally, the standard deduction has been increased, making it more likely for homeowners to benefit from the standard deduction rather than itemizing.

Maximizing Tax Benefits

Homeowners can maximize their tax benefits by carefully considering their deduction options. Itemizing may be beneficial for those with substantial expenses beyond mortgage interest, such as charitable giving or medical expenses. However, for many homeowners, the standard deduction may offer a more straightforward and advantageous approach.

Conclusion

The mortgage interest deduction can provide significant tax savings for homeowners. However, understanding the eligibility requirements, limitations, and impact of tax reform is crucial to determining its applicability and potential benefits. Homeowners should consult with a tax advisor to assess their individual situation and make informed decisions regarding their tax deductions.

 

Thirty Year Mortgage Wins Over

Choosing a Thirty Year Mortgage Over an Five Year Every Time.

Case study on borrowers purchasing a $3,8 million dollar house choosing a five year rate. I didn't even talk with them about a five year as they told me this is their forever home. Dueling other loan officer convinces them they have secret sauce.

I had a young couple chose a 5-year mortgage at 6.875 no points over 7 percent 30-year loan no points. They were convinced that rates will soon go down. The competing loan officer promised a free refinance which is a fairy tale. No one can guarantee in the future that they qualify, that the loan officer is still at same company, that a super jumbo loan will ever be available at a lower price. What the borrowers didn't understand is that in the past lenders offered rebate pricing, or points as credit with a bump up in rate to cover costs. This rebate credit pricing isn't available much today, and maybe never available in the next sixty months. I told them I can match the five year but I didn't offer it with my other options because I believe it is an inferior choice.

The only difference in the .125% of rate was an interest only option which allows a slightly lower monthly payment. Sixty months is a short window of time. There is no guarantee rates will in fact decrease to allow refinancing. The margin on the five year loan is prime plus 3. The prime rate today is 8.5 + 3 = 12.5% rate today. Huge risk if rates increase or if they even stay the same.

It's important to consider the potential risks associated with a shorter-term mortgage. One major risk is that interest rates could rise instead of fall. If this happens, the couple would be locked into a higher rate for the remaining term of their loan, which could increase their monthly payments and overall interest costs.

Another factor to consider is the potential for refinancing. With a 30-year mortgage, the couple would have more opportunities to refinance their loan in the future if rates decline. This flexibility could allow them to take advantage of lower rates and potentially save even more money over the life of their loan.

Ultimately, the decision of whether to choose a 5-year or 30-year mortgage is a personal one that should be based on the individual circumstances of the borrowers. It's important to carefully weigh the potential risks and benefits of each option before making a decision.

The global economic landscape is currently navigating a period of heightened uncertainty, with inflation rates reaching multi-decade highs and central banks worldwide grappling with the delicate task of reining in prices without stifling economic growth. In this context, the prospect of rising interest rates has become a prominent topic of discussion among economists and policymakers.

Factors Driving the Potential for Higher Rates

Several factors are contributing to the possibility of interest rate hikes in the near future. One key driver is the persistent surge in inflation, which has eroded purchasing power and strained household budgets. Central banks, particularly the Federal Reserve in the United States, have signaled their commitment to taming inflation, and raising interest rates is a primary tool at their disposal.

Another factor influencing interest rates is the ongoing war in Ukraine, which has disrupted global energy and food supplies, further exacerbating inflationary pressures. Additionally, supply chain bottlenecks and strong consumer demand have also contributed to price increases.

Potential Impacts of Rising Interest Rates

An increase in interest rates can have a ripple effect across the economy, affecting individuals, businesses, and financial markets. For consumers, higher rates can translate into increased borrowing costs, making loans for cars, homes, and other expenses more expensive. Businesses may also face higher borrowing costs, potentially impacting their investment and expansion plans.

In financial markets, rising interest rates can lead to a shift away from riskier assets, such as stocks, towards safer investments like bonds. This shift can result in volatility in stock prices.

Considerations for Policymakers

Central banks face the challenge of balancing the need to curb inflation with the risk of stifling economic growth. Raising interest rates too aggressively could trigger a recession, while inaction on inflation could erode public trust and lead to expectations of even higher prices in the future.

Policymakers must carefully weigh the potential benefits and drawbacks of interest rate hikes, considering both economic data and market conditions. They must also communicate their decisions clearly and effectively to manage market expectations and minimize disruptions.

<sic> Steven Romagnolo "I have bad news for those who believe that the Fed is going to cut rates anytime soon: Santa is not coming down the chimney.
Core inflation is twice the target level and core is the toughest dragon to slay.
Come June of 2024 the yield curve will realize a full 2 years of inversion which is the historical time period before a recession would start.
The yield curve will un-invert either because the 10 year climbs above the 2 year or the fed cuts bringing the 2 year below the 10.
Powell has stated publicly that he believes that the market will help the fight against inflation and for those that understand "fed speak" that translates into the fed will stay out and let the 10 year climb above the 2.
Watch the yield curve and look for it to un-invert before calling for cuts from the Fed...."

The prospect of rising interest rates remains a focus of attention in the global economy. While higher rates may be necessary to combat inflation, they also carry potential risks for economic growth and financial stability. Policymakers face a delicate task of navigating these uncertainties in their efforts to promote a stable and prosperous economic environment.

Caroline Gerardo

NMLS 324982

( 949 ) 784 - 9699

ADU List

ADUs: A Small Solution to a Big Problem

A growing number of cities across the United States are embracing accessory dwelling units (ADUs), also known as granny flats or in-law units, as a way to address the housing shortage and affordability crisis. ADUs are smaller, independent residential units located on the same lot as a single-family home. They can be attached to the main house, built over a garage, or stand alone in the backyard.

ADUs offer a number of benefits, including:

• Increased housing supply: ADUs can add much-needed housing units to communities without requiring the development of new land.
• Affordable housing: ADUs are typically smaller and less expensive than traditional single-family homes, making them more affordable for renters and buyers.
• Housing for seniors: ADUs can provide seniors with a place to live near family and friends while maintaining independence.
• Housing for multigenerational families: ADUs can allow extended families to live together while maintaining privacy.
• Income potential for homeowners: Homeowners can rent out ADUs to generate additional income.

As a result of these benefits, ADUs are becoming increasingly popular. In California, for example, the number of ADU permits issued increased by over 500% between 2019 and 2021.

However, there are still some challenges to ADU adoption. Some cities have restrictive zoning regulations that make it difficult or impossible to build ADUs. Additionally, some homeowners may be concerned about the impact of an ADU on their property values.

Despite these challenges, ADUs are a promising solution to the housing shortage and affordability crisis. They offer a number of benefits for both individuals and communities. As more cities embrace ADUs, we can expect to see a significant increase in the number of these units being built in the years to come.

One problem with ADU's is that the valuation or appraisal value of comparable house with ADU is not the same as duplex. There are few resales, yet and the cost to build is often higher than the appraised value for a mortgage.

Building an ADU include

• Site work: You may need to demolish an existing structure or remove trees to clear space for the ADU.
• Foundation: All prefabs require a poured cement foundation.
• Cost: The cost per square foot can vary depending on the size of the ADU.
• Zoning: You may need to consider property setbacks, topography, easements, and other zoning issues.
• Prefab homes can be more affordable and efficient to build than traditional site-built homes. 

ADU Companies:

ADU Works 

ADU.Works — Affordable ADU Builder in California

Plus Hus ADU

Home - prefabADU Backyard Home Experts

ADU Wholesale

Bay Modular

Blu Homes

Clayton Homes

Cityspace Studios

Commodore Homes

connect homes

Champion Homes

Dvele 

DVELE | Modern Prefab & Modular Homes

Impresa Modular, 

Deer Valley Homebuilders 

Deltec Homes

Skyline Champion Corporatio

Ecocor

Studio of Grandma

Hidden Gem

Painter's Studio  expensive

Plant Prefab  

Plant Prefab

US Modular

 Indoor- Outdoor Escape

EarthAdvantage Earth Advantage

Spacial  

ADU

https://live-work-play.net/

https://www.inspiredadus.com/

ThatADUGuy.com

 InspiredADUs.com

Plus Hus ADU

Villa  Villa Homes

Hacking Fidelity Title

Fidelity National Title Hacked and Held 

For Ransom 11/19/2023

How to Protect Your Organization from 

AlphV/BlackCat Ransomware

Ransomware attacks are becoming increasingly common and sophisticated, and AlphV/BlackCat is one of the most dangerous ransomware groups operating today (I posted this 11/22/2023).

This ransomware group has targeted a wide range of organizations, including businesses, government agencies, and healthcare providers. They were doing healthcare, then casinos, now it looks like financial services- mortgage, title, banks, oh my. Citrix bleed is one of the weaknesses they employed. Fidelity Title was warned about this system vulnerability.

Citrix known to be leveraged by LockBit 3.0 affiliates, allows threat actors to bypass password requirements and multifactor authentication (MFA), leading to successful session hijacking of legitimate user sessions on Citrix NetScaler web application delivery control (ADC) and Gateway appliances. You know the little box that asks you to check all the boats or bikes, it bypasses this with ease.

Fifteen years ago title work was done on paper in metal file cabinets, with a runner to the county recorder office. Will this instill lack of confidence that returns us to the dark ages? Digital has risks. Borrowers still today have EMD funds wired to the title company's bank held in suspense. Also some funded loans will need to be backed out as they didn't record. Borrowers will incur additional costs, lenders will re-disclose the extension fees, and this still is a big mess.

Fidelity is not commenting and competitors also silent. Stock price holding. 

They have been known to demand millions of dollars in ransom payments, and they often steal sensitive data before encrypting it.

What is AlphV/BlackCat Ransomware?

 

AlphV/BlackCat is a type of ransomware that encrypts an organization's files and demands a ransom payment in exchange for the decryption key. The ransomware group is known for its use of sophisticated attack methods, and they are constantly evolving their tactics to evade detection.

How Does AlphV/BlackCat Ransomware Work?

AlphV/BlackCat ransomware typically gains access to an organization's network through phishing emails or social engineering attacks. Once the ransomware is inside the network, it spreads to other computers and encrypts files. The ransomware group then demands a ransom payment in exchange for the decryption key.

How to Protect Your Organization from AlphV/BlackCat Ransomware

There are a number of things that organizations can do to protect themselves from AlphV/BlackCat ransomware. These include:

• Educating employees about ransomware: Employees are often the first line of defense against ransomware attacks. It is important to educate employees about the dangers of ransomware and how to identify and avoid phishing emails and social engineering attacks.
• Implementing strong security controls: Organizations should implement strong security controls, such as firewalls, intrusion detection systems, and endpoint security software. These controls can help to prevent ransomware from gaining access to the network.
• Patching software vulnerabilities: Software vulnerabilities can be exploited by ransomware attackers to gain access to systems. Organizations should patch software vulnerabilities promptly.
• Backing up data regularly: Organizations should back up their data regularly and store the backups offline or in a secure cloud storage location. This will allow them to restore their data in the event of a ransomware attack.
• Having a ransomware incident response plan: Organizations should have a ransomware incident response plan in place so that they know what to do in the event of an attack. The plan should include steps for isolating the affected systems, eradicating the ransomware, and restoring data from backups.
• Have core contact

Additional Tips for Avoiding AlphV/BlackCat Ransomware

In addition to the steps above, organizations can also take the following steps to avoid AlphV/BlackCat ransomware:

• Use strong passwords and enable multi-factor authentication (MFA): Strong passwords and MFA can help to prevent unauthorized access to systems.
• Segment the network: Segmenting the network can make it more difficult for ransomware to spread.
• Disable remote desktop protocol (RDP) unless it is absolutely necessary: RDP is a common attack vector for ransomware.
• Monitor network activity for suspicious behavior: Organizations should monitor network activity for suspicious behavior that could indicate a ransomware attack.
• Train employees about advanced phishing attacks these bad buys can now duplicate and replicate co-workers and websites

By taking these steps, organizations can significantly reduce their risk of being attacked by AlphV/BlackCat ransomware.

Update 12/21/2023 some EMD accounts and wired accounts are still held up on closing transactions. 

FBI took down ONE OF Alpha/BlackCat websites 12/19/2023  https://therecord.media/alphv-black-cat-ransomware-takedown-fbi

AlphV/BlackCat blames Fidelity for employing Google's Mandiant Unit. They stated the intention is to ruin any company in their way. Alpha/BlackCat can access every Fidelity Title client information in the cloud. Your bank account is not safe. Google Ads seems to be disrupted. 

Notice none of this is in our news media? Competitor Title Companies refuse to make any public comments.

Class action lawsuits filed 12/20 against Fidelity and five against related case with Mr. Cooper

Lock down your bank accounts. DO NOT open attachments.