Jan
1
New Credit Card Minimum Payments
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Consumers who have just been paying minimum credit card payments should prepare for an increase. The new regulations for the minimum payments are starting to be felt by many consumers. If you are having trouble making your payments you may want to consider consolidating those debts by refinancing your home.
Credit card payments have been typically between 1.5 - 2% of the balance of the credit card and now the payments are upwards to 4% of the balance of the credit card.
With the minimum payments adjusting how they are its even more reason to consolidate your debt.
Keep in mind the new bankruptcy laws that went into effect October 2005. It will be much harder to just file bankruptcy and eliminate credit card debt. Your best alternative to high credit card payments would be to consolidate them into your mortgage.
You should see a significant change in your credit score for the positive when you pay your credit cards down with a mortgage refinance.
The increase in the credit card minimum payment is generally bad news for consumers who don’t own their own homes, however for homeowners this is an excellent reason to take advantage of the power of their home’s equity and finally consolidate those high interest rate credit cards and car loans and roll them into a 30 or 40 year mortgage, spreading out the payments at a very low rate of interest by comparison, and reducing the total monthly spend for your family in the process. And you’ll be even happier when you speak to your tax professional about how much money this will allow you to potentially deduct on your tax returns!
The new regulations on the minimum credit card payments will have a dramatic affect on many credit card users. People who typically have a payment of around $150, can now expect that payment to be as high as $350.
Under the pressure of federal regulators, banks are starting to announce that they are increasing minimum monthly payments on credit card balances. Obtaining a 2nd mortgage(HELOC, 2nd Trust Deed) can be a valid option to consolidate credit card debt and comes with the added benefit of deducting mortgage interest expenses.
Credit card debts just got harder to deal with. Since the new change in minimum monthly payments went into effect consumers across the board are feeling the pinch. This is one more reason to consolidate and reduce your monthly outgo. Stop paying such high interest rates and free up your cash.
The federal government had nothing but the best of intentions in mind when requiring these new credit card minimum monthly payments. Under the old minimum payment structure, many consumer credit cards with high balances would take 25 years or more to pay off by just making the minimum payment. The amount of interest that the card holder would pay in such a scenario would be astronomical. The one thing the government didn’t fully consider is that making such larger monthly payments will prove very difficult, cash flow wise, for many Americans. If you find that making these higher credit card payments is creating cash flow difficulties for your household, speak with me to see if a debt consolidation refinance might make sense for you situation. What you want to avoid at all costs is falling behind on the credit card payments because once behind it becomes very difficult to get current. This will also lower your credit score making refinancing more difficult and expensive. You can see that it is always better to act before the situation gets out of control.
The average American household with one or more credit cards carries a balance of approx. $9500 dollars. An increase to the minimum monthly payment can impact one’s budget severely. It is wise to seek advice from a mortgage professional if this is the case.
The way things stand now aren’t a whole lot different then before. If you charge your credit card and make the minimum payments its just like taking a 20 year loan.
Interest rates on mortgages are much lower than those on credit cards. The interest on mortgages is also tax deductible which means you save even more when comparing to the interest on credit cards.
Also if you choose to consolidate your bills you typically will have a savings each month and sometimes you can save hundreds of dollars. Now if you take this amount or even a portion of the savings and apply it to the principle of your new loan you can pay that loan down much faster. One extra payment per year can shave almost 10 years off of a 30 year mortgage.
Jan
1
Homeowner Tax Tips
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Deducting Mortgage Interest. Mortgage interest on a primary residence is usually fully tax-deductible, unless your mortgage balance exceeds $1 million or you took out a mortgage for reasons other than buying, building or improving a home. To claim this deduction, you should fill out Schedule A, labeled “itemized deductions.” Your lender should send you a “Form 1098” that tells you how much mortgage interest you paid for the year. You should record your interest deduction on line 10.Late payment charges also may be deducted as home mortgage interest if not for a specific service received in connection with your home loan. The same is true for mortgage prepayment penalties - if you pay off your mortgage early and incur a prepayment penalty, you can deduct that penalty as home mortgage interest (subject to the same requirements for late payments).
Deducting Loan Points Paid on a Purchase. The points you pay on a purchase mortgage are deductible the year you made the purchase. You can deduct any points you paid — and that a seller paid on your behalf* — if you meet the following criteria: * The loan is secured by your primary residence and the loan was used to buy, improve or build the home. * Paying points (and the amount of points paid) is not an irregular practice in the seller’s geographic area; * The points are computed as a percentage of the loan principal; * The points are clearly delineated on the buyer’s settlement statement; and * You put cash into your home purchase in an amount at least equal to the points you were charged.
As always, you should check with your tax advisor to determine which of these deductions apply to you!
Your tax professional may advise you that interest on the amount of your loan exceeding 100% of the value of your home will not be deductible on your tax return.
When you obtain a lower interest rate, you will have less to deduct on your income tax return. That may increase your tax payments and decrease the total savings you might obtain from a new, lower-interest mortgage.
Deducting Interest on a Home Equity Loan. The interest on a home equity loan may be tax deductible up to $100,000. However, if your home equity loan when combined with your first mortgage amount, increases the debt on your home to an amount more than the property’s actual value, there may be deductibility limits. Usually, you can deduct the smaller of interest on a $100,000 loan or your home’s value less the amount of your existing mortgage.
Many borrowers elect to have impound or escrow accounts. In this case, the borrower’s payment exceeds the amount necessary to pay the principal and interest. The amount over this goes into an account used to pay property taxes, homeowner’s insurance and possibly mortgage insurance. When calculating your property tax deduction, do not deduct what you pay into the impound account. You are allowed only to deduct what is paid from the impound account to the property taxing authority.
*Seller Paid Points are Deductible by the Buyer. When a seller pays points for the buyer (or in other words, buys the mortgage rate down) the buyer gets a lower mortgage rate.
Have you refinanced more than once in recent years? Many homeowners have and may have overlooked an important opportunity. Say, for example, you refinanced in 2001 and paid points. You can deduct 1/30th of those points in that tax year. However, rates continued to drop, so you refinanced again in 2003, paying off that 2001 loan. The remaining points from the 2001 refinance — that is, those that haven’t yet been deducted — can now be deducted in full since that loan has been paid off.
Deducting Loan Points Paid on a Refinance. If you refinanced last year, you may be able to write-off any points you paid to buy down the mortgage rate. To do so, you deduct the points proportionately over the life of the new loan. For example, if you took out a 30-year loan, you would deduct 1/30th of the points you paid each year.
Deducting Real Estate Taxes. Real estate taxes, which are annual taxes based on the assessed value of a property, also are tax deductible. Your mortgage interest statement may list the amount of real estate taxes you paid if your taxes and homeowners’ insurance were placed in an escrow account when you closed on your mortgage. If real estate taxes aren’t included, you could review your cancelled checks to determine your total real estate tax deduction.