75% of Renters Have Been Misinformed in Hunterdon and Somerset Counties

75% of Renters Have Been Misinformed in Hunterdon and Somerset Counties

Recently, multiple headlines have been written asserting that homeownership is less affordable today than at any other time in the last decade. Though the headlines are accurate, they lack context and lead too many Americans to believe that they can’t partake in a major part of the American Dream – owning a home.

In 2008, the housing market crashed and home values fell by as much as 60% in certain markets. This was the major trigger to the Great Recession we experienced from 2008 to 2010. To come back from that recession, mortgage interest rates were pushed down to levels that were never seen before.

For the last ten years, you could purchase a home at a dramatically discounted price and attain a mortgage at a historically low mortgage rate.

Affordability skyrocketed.

Now that home values have returned to where they should be, and mortgage rates are beginning to increase, it is less affordable to own a home than it was over the last ten years.

However, what is not being reported is that it is MORE AFFORDABLE to own a home today than at any other time since 1985 (when data was first collected on this point).

If you take out the years after the crash, affordability today is greater than it has been at almost any time in American history.

This has not been adequately reported which has led to many Americans believing that they cannot currently afford a home.

As an example, the latest edition of Freddie Mac’s Research: Profile of Today’s Renter reveals that 75% of renters now believe it is more affordable to rent than to own their own homes. This percentage is the highest ever recorded. The challenge is that this belief is incorrect. Study after study has proven that in today’s market, it is less expensive to own a home than it is to rent a home in the United States.

Thankfully, some are starting to see this situation and accurately report on it. The National Association of Realtors, in their 2019 Housing Forecast, mentions this concern:

“While the U.S. is experiencing historically normal levels of affordability, potential buyers may be staying out of the market because of perceived problems with affordability.”

Bottom Line

If you are one of the many renters who would like to own their own homes, let’s get together to find out if homeownership is affordable for you right now.

 

 


Presented as a public service by:

<

 

 

There Are Tax Benefits With Home Ownership

There Are Tax Benefits With Home Ownership

Homeownership has always been the “great American dream”. And Congress — with one exception — did not take it away when it passed the tax reform bill last December.

To foster and encourage this dream, Congress has consistently enacted — or preserved — tax legislation which favors homeowners. Indeed, much has been written that our tax laws discriminate against renters, by giving unfair and unequal tax benefits to those who own homes.

Every four years, some candidate for high political office tries to focus our attention on equalizing the tax laws, and repealing the homeowner benefits, but these arguments have consistently fallen on deaf ears.

For those of us who own homes, here is a list of the itemized tax deductions available to the average homeowner. Every year, you are permitted to deduct the following expenses:

Taxes. Real property taxes, both state and local, can be deducted. The one exception referenced above: tax filers can deduct on Schedule A any combination of state and local property taxes and income or sales taxes but only up to a total of $10,000. Interestingly, married couples who file their own separate tax return can only deduct up to $5000.

However, it should be noted that real estate taxes are only deductible in the year they are actually paid to the government. Thus, if in year 2018, your lender held in escrow moneys for taxes due in 2019, you cannot take a deduction for these taxes when you file your 2018 tax return.

.Mortgage lenders are required to send an annual statement to borrowers by the end of January of each year, reflecting the amount of mortgage interest and real estate taxes the homeowner paid during the previous year.

Mortgage Interest. Interest on mortgage loans on a first or second home is fully deductible, subject to the following limitations: acquisition loans up to $1 million, and home equity loans up to $100,000. If you are married, but file separately, these limits are split in half. But note that for new loans taken out after December 14, 2017, the limit on deductible mortgage debt is reduced to $750,000. Loans in existence prior to that date are grandfathered.

You must understand the concept of an acquisition loan. To qualify for such a loan, you must buy, construct or substantially improve your home. If you refinance for more than the outstanding indebtedness, the excess amount does not qualify as an acquisition loan unless you use all of the excess to improve your home. However, any other excess may qualify as a home equity loan.

Let us look at this example: Several years ago, you purchased your house for $150,000 and obtained a mortgage in the amount of $100,000. Last year, your mortgage indebtedness had been reduced to $95,000, but your house was worth $300,000.

Because rates were low last year, you refinanced and were able to get a new mortgage of $175,000. Your acquisition indebtedness is $95,000. The additional $80,000 that you took out of your equity does not qualify as acquisition indebtedness, but since it is under $100,000, it qualifies as a home equity loan.

Several years ago, the Internal Revenue Service ruled that one does not have to take out a separate home equity loan to qualify for this aspect of the tax deduction. However, if you had borrowed $200,000, you would only be able to deduct interest on $195,000 of your loan — the $95,000 acquisition indebtedness, plus the $100,000 home equity.

One more caveat: the proceeds of a second mortgage — or a home equity loan — are still deductible but only if the money is used to substantially improve the property.

The remaining interest is treated as personal interest, and is not deductible.

Points. Because mortgage rates are still considerably low, not too many borrowers are paying points. When you obtain a mortgage loan, in order to get a lower rate mortgage, you would pay one or more points. Whether referred to as “loan origination fees,” “premium charges,” or “discounts,” these are still points. Each point is one percent of the amount borrowed; if you obtain a loan of $170,000, each point will cost you $1,700. And the interest rate on your loan will be lowered.

The IRS has also ruled that even if points are paid by sellers, they are still deductible by the homebuyer. Points paid to a lender when you refinance your current mortgage are not fully deductible in the year they are paid; you have to allocate the amount over the life of the loan. For example, you paid $1700 in points for a 30 year loan. Each year you are permitted to deduct only $56.66 ($1700 divided by 30); however, when you pay off this new loan, any remaining portion of the points you have not deducted are then deductible in full.

Needless to say, if you have any questions about these tax benefits, discuss them with your financial and legal advisors.

 

 


Presented as a public service by:

<

 

 

 

 

 

Buying a Home is Cheaper than Renting in 38 States which includes New Jersey!

Buying a Home is Cheaper than Renting in 38 States which includes New Jersey!

Some Highlights:

  • According to a study by GOBankingRates, it is cheaper to buy a home than rent in 38 states across the country.
  • In six states the difference between buying & renting would account for less than a $50 monthly difference, leaving the choice up to the individual family.
  • Nationwide, it is now 26.3% cheaper to buy. 

     


    Presented as a public service by:

    <

     

     

Rents Are on The Rise in Hunterdon and Somerset County: Don’t Get Caught in The Rental Trap!

Rents Are on The Rise in Hunterdon and Somerset County: Don’t Get Caught in The Rental Trap!

There are many benefits to homeownership, but one of the top benefits is protecting yourself from rising rents by locking in your housing cost for the life of your mortgage.

Don’t Become Trapped 

A recent article by Apartment List addressed rising rents by stating:

Our national rent index is up 0.1 percent month-over-month, marking the sixth straight month of increasing rents. Year-over-year growth now stands at 1.2 percent.”

The article continues, explaining that:

Rents increased month-over-month in 62 of the nation’s 100 largest cities, down significantly from the 85 cities that saw rents rise last month. That said, rents are still up year-over-year in most of the nation’s largest markets — 77 of the 100 largest cities have seen rents increase over the past twelve months.”

Additionally, Urban Land Magazine explained that,

Currently, nearly half (47 percent) of renter households are cost burdened (i.e., paying more than 30 percent of income for housing), while 25 percent (totaling 11 million households) are severely cost burdened, paying over 50 percent of their total household income for rent.”

These households struggle to save for a rainy day and pay other bills, including groceries and healthcare.

It’s Cheaper to Buy Than Rent

As we have previously mentioned, the results of the latest Rent vs. Buy Report from Trulia show that homeownership remains cheaper than renting with a traditional 30-year fixed rate mortgage in the 100 largest metro areas in the United States.

The updated numbers show that the range is an average of 2% less expensive in Honolulu (HI), all the way up to 48.9% less expensive in Detroit (MI), and 26.3% nationwide!

Know Your Options

Perhaps you have already saved enough to buy your first home. A nationwide survey of about 1,166 renters found that 34% said they rent because they cannot afford to buy, 29% said they cannot afford to buy where they live, and nearly a quarter (24%) were saving to buy.

Many first-time homebuyers who believe that they need a large down payment may be holding themselves back from their dream homes. As we have reported before, in many areas of the country, a first-time homebuyer can save for a 3% down payment in less than two years. You may have already saved enough!

Bottom Line

Don’t get caught in the trap that so many renters are currently in. If you are ready and willing to buy a home, find out if you are able. Let’s get together to determine if you can qualify for a mortgage today!

 

 


Presented as a public service by:

<

 

 

Rent or Buy: Either Way You’re Paying A Mortgage!

Rent or Buy: Either Way You’re Paying A Mortgage!

There are some people who have not purchased homes because they are uncomfortable taking on the obligation of a mortgage. Everyone should realize, however, that unless you are living with your parents rent-free, you are paying a mortgage – either yours or your landlord’s.

As Entrepreneur Magazine, a premier source for small business, explained in their article, “12 Practical Steps to Getting Rich”:

“While renting on a temporary basis isn’t terrible, you should most certainly own the roof over your head if you’re serious about your finances. It won’t make you rich overnight, but by renting, you’re paying someone else’s mortgage. In effect, you’re making someone else rich.”

With home prices rising, many renters are concerned about their house-buying power. Mark Fleming, Chief Economist at First American, explained:

Over the last three years, renter house-buying power has increased fast enough to keep pace with house price appreciation, so the share of homes that a renter can afford to buy has remained the same since 2015.

Although mortgage rates are expected to rise, they are still low by historic standards, and real household incomes are the highest they have ever been. Assuming this trend continues, our measure of affordability, which takes into account income, interest rates, and house prices, indicates that homeownership is still within reach for renters.”

As an owner, your mortgage payment is a form of ‘forced savings’ which allows you to build equity in your home that you can tap into later in life. As a renter, you guarantee the landlord is the person building that equity.

Interest rates are still at historic lows, making it one of the best times to secure a mortgage and make a move into your dream home. Freddie Mac’s latest report shows that rates across the country were at 4.51% last week.

Bottom Line

Whether you are looking for a primary residence for the first time or are considering a vacation home on the shore, now may be the time to buy.

 

 


Presented as a public service by:

<