The United States government, in its effort to stimulate the economy, is offering incentives to the housing market.
Already own a home?
In 2008 you will be allowed to deduct a portion or all of your property taxes even if you do not itemize deductions.
This new provision will allow you to deduct up to $500 — $1,000 on a joint return — for all individuals who utilize the standard deduction. Instructions will be provided on your 2008 tax form.
First time homebuyer?
There has probably never been a better time to buy a home.
Until June 30, 2009, first time homebuyers can receive a tax credit of 10 percent of the purchase price of the home, up to $7,500.
If the buyer’s tax liability is less than the credit, they would receive a check from Uncle Sam for the difference between what is owed and the tax credit.
There is an income restriction of $75,000 for a single filer and $150,000 for joint filers. If you are over the income limits, you may be eligible for a reduced benefit.
The credit is repayable over 15 years, which, in effect, makes it an interest-free loan.
Combine this incentive with historically low interest rates and more affordable home prices, and there is little doubt that first time homebuyers should take a serious look at becoming homeowners.
Homebuyers should look to their accountant or financial adviser for more details on this program.
Should I refinance?
That depends, but there is a terrific opportunity to do so right now. As of Dec. 24, we saw 30-year fixed rate loans quoted at 5.625 percent with no points, 5 percent with 1 point, and 4.73 percent with 2 points.
A point is 1 percent of the loan amount. The rates could be even better with excellent credit.
A lender advised that as a rule of thumb, if you can reduce your interest rate by 1 percent with no more than 2.5 percent in loan closing costs, you probably should investigate refinancing if you plan on being in your home for at least 2 years.
For example, if you owe $150,000 on your home, a 1 percent interest rate reduction could reduce your mortgage payment $1,500 a year or $125 a month.
For more information and to see if refinancing is appropriate for your situation, make an appointment with a reputable lender and seek advice from your financial adviser.
Ray Pugel is a designated broker for Coldwell Banker Bishop Realty. Contact him at (928) 474-2216.