Massachusetts Real Estate and Community News

May 25, 2016

Your Best Homeowner Tax Return: How To Deduct Mortgage Points

If you itemize your deductions and can take the mortgage interest deduction on your federal income tax, you may be able to deduct the points you paid on your home mortgage, too.

Points are prepaid interest, so they get reported as home mortgage interest on Form 1040, Schedule A .

The total deductible points you paid during the year (along with the interest you paid) show up on the Form 1098 your lender sends to you.

You can typically deduct points in full in the year they’re paid, if you meet all these requirements:

  1. The mortgage was for your primary home.
  2. Paying points is an established business practice in your area.
  3. The points you paid were typical for your area.
  4. You use the cash method of accounting (you report income in the year you receive it and deduct expenses in the year you pay them).
  5. The points you paid didn't cover services or products that show up on your loan settlement sheet such as appraisal fees, inspection fees, title fees, attorney fees or property taxes.
  6. The points you paid at or before closing, plus the points the seller paid, were at least as much as the points charged. You didn't borrow money from your lender or mortgage broker to pay the points.
  7. You used your loan to buy or build your primary home.
  8. The points were computed as a percentage of the principal amount of your mortgage.
  9. The amount is clearly shown as points on your settlement statement.

If You Don’t Meet The Requirements

If you don’t meet the IRS’ requirements (and this typically happens in a refinance), you may still be able to deduct your points over the life of your new mortgage rather than in a single year.

You can deduct the rest of the points over the life of the loan if you meet these requirements:

  • You use the cash method of accounting (you report income in the year you receive it and deduct expenses in the year you pay them).
  • Your loan is secured by a home. The home does not need to be your main home.
  • Your loan is for not more than 30 years.
  • If your loan period is more than 10 years, the terms of your loan are the same as other loans offered in your area for the same or longer period.
  • Either your loan amount is $250,000 or less, or the number of points is not more than:
    • 4 points, if your loan period is 15 years or less.
    • 6 points, if your loan period is more than 15 years.

Other Pointers On Points

When a seller pays points for you as a buyer, you have to subtract the amount of those points when you calculate your basis or cost of the residence. You’ll likely do that capital gains calculation when you sell the home many years from now, so be sure to file your settlement sheet where you can find it in the future.

Points you pay on second home loans can generally be deducted only over the life of the loans.

You may be subject to a limit on some of your itemized deductions, including points. For more information on the adjusted gross income limitations, please refer to the Form 1040 Instructions.

If the mortgage you got to acquire your home was for more than $1 million, or your home equity debt exceeds $100,000, you probably can’t deduct all your mortgage interest or all your points. Read Publication 936, Home Mortgage Interest Deduction, to figure out how to deduct your points.

Tax laws and tax rules are constantly being updated and interpreted. This article contains general information, so please discuss your individual situation with a trusted tax adviser before making tax decisions.

Posted in Real Estate News
May 25, 2016

Home Architectural Style Moving Toward Clean Lines

Through the decades, home styles and design preferences have changed from colonial to ranch, and most recently, craftsman, which has gone up in popularity by a whopping 25 percent the last six months, according to data from Houseplans.com, a website offering 40,000 stock home plans.

What will homes and neighborhoods look like in the next five, 10 or even 20 years? In a recent interview, designer Marianne Cusato, author of The Just Right Home: Buying, Renting, Moving -- or Just Dreaming -- Find Your Perfect Match! says three trends are shaping the home of the future:

1. A return to traditional home styles with cleaner lines.

Spacious homes with two-story ceiling heights and a patchwork of exterior finishes (think brick, stone and siding) have been popular since the mid-1990s, she says.

“We’re at the end of that trend,” she predicts. “Homes are being simplified with cleaner lines. It’s pulling away from the up and down, in and out patchwork of exterior finishes.”

??2. Open, but defined, floor plans.

The design pendulum has swung toward open but defined floor plans. Rather than having four different places to eat, a home might have a dining nook that’s right off the kitchen, or a peninsula where you can pull up dining chairs or stools.

“We’re seeing semi-defined spaces so you feel like you’re in a room versus a giant open space,” Cusato says. “The giant mud room may not be there, but there’s a well fitted-out drop zone. Storage is getting a little smaller.”

3. Reasonable smart home automation.

We’re seeing a lot more smart technology and new homes that include products like the Nest thermostat that can learn from you and adapt to your needs. There’s also a lot of silly stuff being marketed as smart home must-haves, Cusato says.

“Everyone is trying a whole bunch of automation products because they can,” she explains. “The house of the future won’t include all the things that we can do because it doesn’t make sense.”

We want to be able to turn on a light switch without getting up, but we also want to see how much time is left on the dishwasher cycle by looking at a display on the appliance instead of having to check a smartphone.

Does Cusato make you worry your home is going out of style? Don’t. Decades from now buyers will see your style choices as character that defines your home!

Posted in Real Estate News
May 25, 2016

Want To See Your Credit Score For Free? Look Here

A growing number of credit card issuers are betting you’ll open an account if they offer to show you your credit score. Consumers can always buy a copy of their FICO credit score. It costs about $60 to purchase your FICO credit score and a copy of your full credit report from the three credit bureaus.

You can get a free copy of your credit report from each of the three bureaus once a year. To order, visit annualcreditreport.com. Type carefully. Impostor sites set up on similar sounding and misspelled versions of that website. You can instead call (877) 322-8228, or complete the Annual Credit Report Request Form and mail it to: Annual Credit Report Request Service, P.O. Box 105281, Atlanta, GA 30348-5281.

A credit score is a number that sums up all the information in your credit histories. It isn’t included in the once-a-year free copy of your credit report that you can order from the bureaus.

Where To Get Free Credit Score

Several credit card issuers, including Discover, Barclaycard US and First Bankcard, now include free access to your credit score. Several more lenders say they will do the same:

  • Bank of America (credit card customers)
  • USAA (credit card customers)
  • JPMorgan Chase (Slate credit card)
  • Citigroup
  • Ally Financial (auto-loan customers)

Some of those lenders will restrict who gets the free score. Ally, for example, will only share a free credit score with its online customers and those who use its apps.

You don’t have to open a new credit card account to see your credit score.

Credit.comCreditSesame.com and CreditKarma.com will give you a credit score (without making you pay for credit monitoring services as some other sites do). CreditKarma offers Equifax credit scores and reports from two of the three bureaus.

The score you get on those sites can be different from your FICO score and from the credit scores used by mortgage companies, auto dealers and other types of lenders.

Need help boosting your credit score so you can buy a home or refinance your current mortgage at the best possible rate? Contact me and I’ll refer you to an excellent loan officer who can help.

Posted in Real Estate News
May 25, 2016

Smart Home Devices Can Put Your Privacy At Risk

Smart home thermostats, connected kitchen appliances and the fitness monitors we're all wearing offer many amazing benefits, but all those connected devices can also create privacy risks, a report from the Federal Trade Commission says.

FTC Chairwoman Edith Ramirez predicts 2015 will be the year we start hearing about smart home hacking.

"Connected devices that provide increased convenience and improve health services are also collecting, transmitting, storing and often sharing vast amounts of consumer data, some of it highly personal, thereby creating a number of privacy risks," Ramirez said in a recent speech.

The connected devices we use also leave behind a digital trail. "That data trove will contain a wealth of revealing information that, when patched together, will present a deeply personal and startlingly complete picture of each of us – one that includes details about our financial circumstances, our health, our religious preferences and our family and friends," Ramirez said.

Connected device makers may use the data your devices collect to predict your behavior and influence your conduct, much in the same way as store discount cards now allow your grocer to foresee what you’ll buy next week.

"This pervasive collection of data inevitably gives rise to concerns about how all of this personal information will be used," Ramirez said. "Will the data be used solely to provide services to consumers? Or will the information flowing in from our smart cars, smart devices and smart cities just swell the ocean of "big data," which could allow information to be used in ways that are inconsistent with consumers’ expectations or relationship with a company?"

It’s possible that one day big data companies will combine information from different devices. For example, they might combine data about what you’re watching on TV with data from your heart rate monitor or data showing when you’re using your parking lot security card to enter your condo garage.

“Will this information be used to paint a picture of you that you will not see, but that others will – people who might make decisions about whether you are shown ads for organic food or junk food, where your call to customer service is routed and what offers of credit and other products you receive?” Ramirez asked.

What The FTC Wants

The FTC has called on businesses that make Internet-connected devices to do a better job of protecting your privacy and security, so you don’t put yourself at risk when you install devices to improve your home’s energy efficiency or wear a fitness band to improve your health.

The FTC wants companies to:

  • Build security into devices.
  • Manage security at a high level within their organizations.
  • Check that outside service providers maintain security standards.
  • Find ways to keep unauthorized users from accessing your device, data or personal information stored on a network.
  • Monitor connected devices and provide security patches as needed.

As you purchase connected devices, you may want to ask:

  • How is this device secured to prevent hackers from accessing my information?
  • What data is collected and how long is it kept?
  • How do you use the data you collect about me?
Posted in Real Estate News
May 25, 2016

Make Your Own Green Spring-Cleaning Solutions

Three basic green cleaners will help you tackle your two biggest jobs – your kitchen and bathrooms.

 

All Purpose Spray:

 

All you need here is a spray bottle (you can pick up plastic ones at the dollar store) and these four ingredients:

 

1 gallon hot water

 

½ cup white vinegar

 

½ cup liquid castile soap

 

1 Tbsp borax

 

Combine all ingredients, pour into the spray bottle, and you’re done!

 

 

 

Glass and Mirror Cleaner:

 

This two-ingredient mix is easy to make and works great.

 

½ cup white vinegar

 

½ cup water

 

Pour into a spray bottle. That’s it.

 

 

 

Stainless Steel Cleaner:

 

Does anything need more frequent wiping than a stainless steel appliance? Luckily, this recipe only has two ingredients.

 

1 Tbsp olive oil

 

1 Tbsp white vinegar

 

Just drip olive oil onto a rag, rub the surface to get rid of smudges and then drip white vinegar on the other side of the rag. Wipe, let dry and you’re done.

 

 

 

Before You Green Clean

If you've been using a traditional cleaning product in the past, you might not know that they tend to leave behind a waxy residue. Before you start going green, make a quick 5 percent rubbing alcohol-to-water solution to remove it, and then use your new green cleaner

Posted in Real Estate News
May 25, 2016

Reverse Mortgages Woes Abound: Here's How To Protect Yourself

The Consumer Financial Protection Bureau says reverse mortgage borrowers are frustrated with their loan terms, service runarounds and foreclosure problems.

A reverse mortgage is a special type of home loan that allows older homeowners to access the equity they have built up in their homes and defer payment of the loan until they pass away, sell or move out.

The loan proceeds are generally provided to the borrowers as lump-sum payments, monthly payments or as lines of credit.

The Bureau studied 1,200 reverse mortgage complaints it got over the past three years and found:

Distress about the inability to add new borrowers to an existing loan.

Reverse mortgages prohibit spouses, heirs and dependents from taking over the loan. This is because loan amounts are, in part, calculated using a borrower’s age and the loan repayment is triggered when the last borrower moves out or dies.

Frustration with runarounds when trying to pay off the debt.

When the borrower dies, heirs can sell the home, repay the loan balance or pay 95 percent of the property’s assessed value.

Consumers complained that the loan servicer didn’t provide a clear process to allow them to settle the debt, used inaccurate appraisals and didn’t respond to written requests for payoff information.

If you need a quick property value estimate, call me and I’ll pull comparable sales for you to help you judge the validity of the reverse mortgage lender’s estimate.

Struggles with foreclosure due to issues with property taxes and homeowners’ insurance.

Reverse mortgages require no monthly mortgage payments but borrowers are still responsible for property taxes and homeowners insurance. Nearly 10 percent of reverse mortgage borrowers are at risk of foreclosure because they can’t pay these expenses.

Consumers who complained to the Bureau described unsuccessful attempts to halt foreclosure proceedings by paying overdue taxes. Others insisted that their loan servicers had determined incorrectly that their taxes were overdue. Sometimes these inaccuracies were due to a failure by loan servicers to keep accurate records.

If your or your loved ones are struggling to pay property taxes and insurance, contact me. I can help you sort through the options.

Protect Your Loved Ones From Financial Hardship

The Bureau suggests doing three things to help make sure your surviving heirs aren’t harmed by a reverse mortgage that you take out:

1. Verify who is on the loan.

If two borrowers take out the reverse mortgage, check with the reverse mortgage company to make sure its loan records show two borrowers on the loan.

2. Plan ahead for the non-borrowing spouse.

If you got a HECM reverse mortgage in the name of only one spouse before Aug. 4, 2014, contact your loan servicer now to find out if the non-borrowing spouse may qualify for a repayment deferral in the future. If not, decide how you’re going to manage if the borrowing spouse passes away first.

If you have enough remaining equity, the surviving spouse could take out a new reverse mortgage, but they will incur new loan fees. Some surviving spouses may also be able to pay off the reverse mortgage, or take out a traditional mortgage, perhaps with another family member.

Many will need to plan for where they will live after the home is sold to repay the loan, the Bureau warns.

If you got your reverse mortgage after Aug. 4, 2014, chances are your non-borrowing spouse, subject to meeting certain conditions, will be able to remain in the home. Check with your lender to be sure.

3. Plan ahead for other family members living in the home.

Make sure your children or other family members living in the home know what will happen when the reverse mortgage is due. If those members want to keep the home, you can contact your reverse mortgage company and ask them to send information explaining the options family members will have.

Posted in Real Estate News
May 25, 2016

Does Your Homeowners Insurance Cover All The Stuff In Your Storage Unit?

If you rent a storage space or are planning to rent one, these four steps will make sure you understand what is, and isn’t, covered by your homeowners policy:

1. Ask your insurance professional about off-premises coverage.

Some standard homeowners’ insurance policies include coverage for personal possessions kept off-premises, including the items you put in a storage unit. Off-premises coverage includes theft and damage from fires, tornadoes and other perils listed in the policy.

However, it does not cover damage caused by flooding, earthquakes, mold and mildew, vermin or poor maintenance. And check the coverage limits, as these vary by company.

2. Find out what type of financial protection the storage facility provides.

Most facilities provide reimbursement based on the square footage of the unit. Check both the coverage limits and whether it is provided on an actual cash value or replacement cost basis.

Most storage facilities will also offer a variety of supplemental insurance packages. Compare the cost of these policies to the cost of adding more coverage to your homeowners insurance.

3. Consider special insurance or storage for expensive items.

If you intend to store valuable property, such as art, antiques, jewelry or furs, there may be a dollar restriction under your standard homeowners insurance policy for theft.

Ask your insurance professional about adding a floater or endorsement to your policy in order to fully cover these items.

There are also specialized storage facilities available for these types of items, as they often need to be kept at specific temperature and humidity level.

Small items such as jewelry will cost less to insure if you keep them in a bank safe-deposit box. Keep in mind, contents in a safe-deposit box are not insured by the bank.

4. Create an inventory of items to be kept off-premises in storage.

Add the items you’re moving to the storage unit to your home inventory so that you can keep track of your belongings and make sure you have the right amount of insurance to protect them.

To make creating your inventory as easy as possible, the Insurance Information Institute has a free home inventory tool, Know Your Stuff®, which includes secure online storage so you can access your inventory anywhere, anytime.

Source: Insurance Information Institute

Posted in Real Estate News
May 25, 2016

5 Home Upgrades That Make You Feel Like A Movie Star

Hollywood interior designer James Blakeley has the inside track when it comes to movie stars. Growing up in a four-generation film family that includes Oscar and Emmy winners, he specializes in creating home interiors with the luxurious comforts that movie stars crave. His design clients include Kiefer Sutherland, Tom Selleck, David Giler, Donald P. Bellisario and Dino De Laurentiis.

You, too, can have a star-worthy home, by following Blakeley’s five strategies for upgrades that make you feel like a movie star:

1. Pamper yourself with opulent bathrooms.

Hollywood stars lead hectic, scattered lives. “They’re pushed all day long and when they’re making a movie, they might work 18 or 20-hour days,” Blakeley confides.

When they come home, they want creature comforts including a spa-like bathroom where they can zone out. You can get that feeling by installing heated floors, a big tub and a shower with multiple jets.

2. Oversize furniture makes for a relaxing environment.

Stars like oversize furniture because they’re all about relaxing and putting your feet up. “Instead of having a club chair that would be 32” x 32” they want things that are 42” x 42” or a sofa that’s 46” deep that you can get in and curl up,” Blakeley says. “It goes back to creature comforts. They want to sit in a big chair, push a button and watch a big TV.”

3. Trust your designer to get a good deal on furniture, fixtures and decorative items.

Give your designer your budget and then don’t worry about how much any one item costs, Blakeley says.

You might think you can find a good deal on the Internet, but your designer is going directly to the manufacturer and will usually get it for less, he says. “I’m going to mark it up 20 percent above cost, but I guarantee that 20 percent is still going to be less you can find it for on the Internet,” he says.

4. Splurge on fresh flowers.

Stars do like flowers in the house all the time, it’s part of their desire to totally relax when they’re home.

“They have people putting flowers out every single day even when they’re not there – in case they decide to come home,” Blakeley says. “Everyone can afford flowing houseplants or flowers for $6.95 from the farmers market. What it does is amazing to your psyche.”

5. Invest in a big screen television and a top-notch sound system.

Since they’re in the industry, stars want a big television with surround sound and music throughout the house.

Blakeley likes Sonos products“Most clients don’t want to see the speakers,” he says. “We have them buried in the wall and cover them with a membrane that’s like drywall and paintable so it blends into the wall. “

Looking to spice up your home décor? Contact me and I’ll put you in touch with a talented local designer.

Posted in Real Estate News
May 25, 2016

How To Tell If It's Time To Refinance Your Home Loan

To determine whether you should consider refinancing your home loan, you can compare the costs of getting a new mortgage with the savings you would get from a reduced interest rate.

You may also want to consider refinancing to a different type of mortgage, such as switching from a 5-year balloon to a 15-year fixed rate mortgage.

Here is an example and a work sheet that will help you determine if refinancing makes sense for you. You may want to print this article and use the worksheets.

Refinancing Example

Rick and Carol have a home they bought three years ago for $300,000 and they have five years remaining on balloon mortgage of $200,000 with an interest rate of 4.25 percent.

Their monthly payments are $983.88.

They intend to live in their home for several years and would like to lock in a 30-year mortgage with a 3.5 percent fixed rate.

Rick and Carol
New Mortgage Costs
Discount Points (in $) $ -
Origination Points (if any) $ 1500
Application Fee $ 475
Credit Check Fee $ -
Attorney Fees (yours) $ -
Attorney Fees (lender's) $ -
Title Search Fee $ -
Title Insurance Fee $ -
Appraisal Fee $ -
Inspections $ -
Local Fees (taxes, transfers) $ -
Other Fees $ 360
Total cost of new mortgage $ 2335
Calculating the Savings
Monthly payment on current mortgage $ 983.88
Monthly payment on new mortgage $ 898.09
Difference between two mortgage payments $ 85.79
Divide total fees on new mortgage by monthly savings - This is the number of months to recover your costs 27 months

 

 

 

 

 

 

 

 

 

 

In this example, Rick and Carol would save almost $1,030 annually in mortgage payments and lock in a 30-year fixed rate mortgage. Over the course of the mortgage they would pay about $31,000 less in total interest.

Work Sheet for You to Use
New Mortgage Costs
Discount Points (in $) $
Origination Points (if any) $
Application Fee $
Credit Check Fee $
Attorney Fees (yours) $
Attorney Fees (lender's) $
Title Search Fee $
Insurance Fee $
Appraisal Fee $
Inspections $
Local Fees (taxes, transfers) $
Other Fees $
Total Cost of New Mortgage $
Calculating your Savings
Monthly payment on current mortgage $
Monthly payment on new mortgage $
Difference between two mortgage payments $
Divide total fees on new mortgage by monthly savings - This is the number of months to recover your costs $

 

 

 

 

 

 

 

 

 

 

 

Other Considerations

When you’re thinking of refinancing, you may also wish to consider refinancing a larger or smaller amount than the current balance of your mortgage.

If you have excess funds available and believe you will have a hard time earning a return from your investments that’s greater than the mortgage rate you’re paying, you may want to pay down your mortgage and get a new mortgage that is smaller.

If you need cash for other things, like college tuition or a new car, you may want to refinance a larger amount to cash out some of the equity in your home.

Remember that mortgage interest may be tax deductible if you itemize your deductions on your tax return. Consult your tax adviser to see how this may apply to your situation.

Final Thoughts

No interest rate environment lasts forever. Unfortunately there is no crystal ball that will tell you when rates have reached their lowest level.

Take action now to evaluate whether refinancing makes economic sense. Evaluating the type of mortgage you want, can help you be in control of one of your largest household expenses.

A good loan officer can show you several refinance options. Contact me if you need a referral.

Posted in Real Estate News
May 25, 2016

3 Ways To Leave Your House To Your Kids (Or Anyone Else)

Passing along real estate to your children or other heirs can be done with a minimum of stress, hassle and cost, as long as you’re willing to do a little planning. Here are three of the most popular ways to leave your home to your heirs:

1. Include your home in your will.

When you draft your will, you can include your home in the assets you distribute. For example, you can leave it to multiple children and direct them to sell it and split the proceeds.

Pros:

It’s easy for you to include your home among the assets distributed after your death. All you have to do is ask your attorney to include it in your will.

If they sell the property, they’ll likely pay capital gains taxes based on what the home was worth when they inherited it.

Cons:

Your heirs will have to go through the probate process, which can be expensive and time consuming.

Your will may be a public record that anyone can view.

2. Put your home in a revocable living trust.

A revocable living trust is a trust that you can change or cancel (revoke). In the trust, you name a trustee (that’s usually you) and a successor trustee (the person you want to inherit your home). Once you set up the trust, you transfer your home into it and when you pass away, your successor trustee takes control of the trust, and therefore, your home.

Pros:

Your heirs get your home upon your death without having to go through the expense and time of the will probate process.

If they sell the property, they’ll likely pay capital gains taxes based on what the home was worth when they inherited it.

Cons:

Setting up a living trust can cost thousands of dollars.

If your children are young, you’ll have to have a trustee manage the trust and home until they’re old enough to manage it on their own.

3. Add your children to the title of your home while you’re still alive.

You can give your home to your children by adding them to the title of your property as joint tenants (or joint tenants with rights of survivorship).

Pros:

When you die, your heirs automatically own the property without going through the probate process.

Cons: 

There are often significant tax consequences when you give someone a valuable property.

If your heirs sell the property, they’ll likely pay capital gains taxes based on what you paid for the property back when you first bought it.

You can’t change your mind and take back your home.

Your heirs will have to agree if you want to refinance or take out a mortgage.

Need help considering your options? I can refer you to an attorney who can explain these (and other) options. Tax laws and tax rules are constantly being updated and interpreted. This article contains general information, so please discuss your individual situation with a trusted tax adviser before making tax decisions.

Posted in Real Estate News