Recent tax code changes could potentially affect the financial aspects of buying and owning a home. Several of the revisions impact areas likemortgage interest deductions and home equity loan deductions. To help clarify the updates, we’ve created a chart that shows the changes.
Exclusion of Gain on the Sale of a Primary Residence
Under the original proposed changes, homeowners would be required to live in a home for a minimum of five out of eight years to claim the capital gains exemption. It was decided however, that the current tax framework would remain the same: a homeowner who had lived in a home for a minimum of two of the previous five years wouldn’t pay anything in capital gain taxes if they sold their home.
How It Could Affect You: There are no major changes. The two of previous five years requirement will stay unchanged.
Mortgage Interest Deduction (MID): Under the initial proposal, the limit on the mortgage interest deduction (MID) would be reduced from $1,000,000 to $750,000.
How It Could Affect You: This proposal reduces the limit on deductible mortgage debt to $750,000 for new loans taken out later than December 14, 2017. Assuming a 20% down payment, reduction in the MID will only impact buyers who are purchasing a home in the price range between $938,000 and $1,250,000. Experts have mixed reactions, with some feeling that it will have little impact on the market and others feeling it could be potentially detrimental having a limit on the MID raising taxes for those who itemize.
State and Local Taxes (SALT)
The original proposal includes the elimination of the state and local tax deduction (including property taxes). Under the new tax code, itemized deductions of up to $10,000 for state and local property taxes and income or sales taxes.
How It Could Affect You: Experts agree that higher taxed regions will be primarily impacted, as those homeowners now have a cap on these deductions. Some people might choose to live in one state over another because of taxation. This could impact demand on housing in some states.
What Does It Mean for Buyers?
Many families consider homeownership an essential part of the American Dream, and don’t necessarily purchase a home simply for the tax advantages. So even with the tax code changes, the main reasons people purchase homes (stability, freedom, building equity) are unlikely to be affected. If you are considering purchasing a home, speak with your McGlone Loan Originator to review how the new code will impact you.
The Federal Reserve’s (the Fed) actions indirectly impact the prices you pay for gas, rent and even your groceries. For years, the prospect of a higher national interest rate has loomed over prospective homebuyers. Now that the Fed has decided to increase the federal interest rate in December of 2017, something that had not happened since the 2008 financial crisis, it’s important to understand how recent and future rate increases will affect mortgage rates.
Mortgage Interest Rates
We’ve already begun to see an increase in residential mortgage interest rates. The rate for a 30-year fixed mortgage hit 4% in 2017. Some analysts are projecting we could reach the 4.5-5% range in 2018. In other words, the longer buyers wait, the more expensive it may become to purchase a home.
There are several reasons for this, but one of the biggest is the federal funds rate. If the Fed thinks prices are rising too quickly, they raise interest rates. The Fed lowered the federal funds rate to stimulate the economy during the 2008 recession. That lowered interest rates and propped up the economy.
Whether you’re looking to purchase or refinance a mortgage, rates are relatively low at this point, historically speaking. If you’re on the fence, this is a great time to lock in a rate.
Refinancing and Adjustable Rate Mortgages (ARMs)
Many homeowners with adjustable rate home equity lines of credit may be affected. Unlike an adjustable rate mortgage, home equity loans will reset immediately rather than once each year. While it won’t be a drastic change in 2018, those concerned with the escalation of rates might want to consider converting the balance into a fixed rate option will rates are still relatively low.
Mortgage rates are not directly impacted by the federal funds rate, but the interest rate you can obtain on a home equity line of credit (HELOC) is. However, there are ways to manage home equity debt in an environment of rising rates. One option is to refinance into a fixed-rate home equity loan.
We understand that every financial situation is unique. No matter your situation, you can speak with a Licensed Loan Originator who can go over your scenario and give you the best possible options to help you out in 2018.
This delicious cheesecake is the perfect size for two people to share after a Valentine’s Day meal. It is made in a 4-inch spring form pan. If you don’t have one, feel free to skip the crust and just use the filling to make individual cheesecakes with already made pie crusts.
For the Cheesecake
- 8 oz cream cheese (room temperature)
- 1/3 cup granulated sugar
- 1 egg (room temperature)
- 1 tsp vanilla
For the Crust
- ¼ cup graham cracker crumbs (you could also use biscotti, chocolate wafer cookies, or whatever you like)
- ½ tbsp melted butter
For the Strawberry Syrup*
- ½ cup water
- ¼ cup granulated sugar
- 1 tbsp corn starch
- 1/8 tsp vanilla extract
- 1 cup frozen strawberries (thawed)
- Preheat the oven to 350 degrees.
- Press graham cracker mixture into bottom of 4 inch springform pan and bake for 5 – 7 minutes.
- While the crust is baking, beat the cream cheese until smooth. Beat in the sugar, then the vanilla, and then the egg. Make sure to scrape the sides so everything is incorporated.
- Pour into 4 inch springform pan. Bake for 20-25 minutes until the edges are lightly golden and the middle still has a wiggle to it. Turn the oven off and leave the cheesecake in with the door closed for a half hour. Take the cheesecake out and leave it on the counter 10 minutes. Before putting it in the refrigerator, gently run a thin knife between the edges of the pan and the cheesecake. Cover and refrigerate for at least four hours before serving.
- Before serving the cheesecake, combine the water, sugar, and corn starch in a small saucepan over medium low heat. Stir continuously until fully combined.
- Add the vanilla extract and strawberries. Continue to cook, breaking up the strawberries slightly until the sauce is the consistency you want.
- Remove from the heat and allow to cool slightly before topping the cheesecake and serving.
*You can also buy strawberry syrup at the store to save time, or just top instead with fresh strawberries.
If you or someone you know is looking for a first home, knowing where to start might seem a little intimidating. But don’t be discouraged! There are lots of ways to make sure you can find (and own!) a home that is perfect for your needs. Here are five great tips on for how you can find a starter home in a hot housing market!
Click the image below to see the full infographic!
At Mcglone Mortgage Group, we are always looking for new ways to help potential clients finance their dream homes. As part of our goal to help provide financing solutions for all borrowers, we offer an FHA product designed for people with less than perfect credit. Mcglone now welcomes FICO scores as low as 560 for both purchases and refinances. This is great news for anyone who thinks their credit score might prevent them from getting a loan!
In addition to the liberal credit score requirements, this product has many other beneficial features! If you have limited funds, you may be need as little as 3.5% for a down payment.* As an extra bonus, gift funds are allowedᶧ and seller concessions can be made.‡ The program also has competitive interest rates and can be used for primary 1-4 unit homes, townhouses, condos, or PUDs.
As an FHA approved mortgage lender, Mcglone Mortgage Group has helped thousands of families finance their dream homes. If you or someone you know could benefit from this product, Mcglone can help! Contact us today to learn more about this program!
*LTV varies based on credit score. Loan limits vary based on county
ᶧ Gift funds may be used for the down payment, closing costs and prepaids if the donor is a relative of the borrower, a close friend or employer.
‡Seller concessions not to exceed 6% of the sale price, which may be applied to closing costs, prepaids, points and buydown subsidies. (3% for HUD homes used toward closing costs only).