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Mortgage Rebate

The Mortgage Rebate is negative points that are due to the buyer. The discount points are upfront fee to lower the interest rate. The discount points are paid by buyer, while negative points are paid to the buyer. Each point equals one percent.

This entices the buyer to buy a home. Since the buyer pays huge cost to buy a home, the buyer loves the Mortgage Rebate. Mortgage Rebate can offset the down payment, and closing costs.

For example, the home is for sale for $300,000. The buyer agent offers 1 negative point to the buyer. The buyer receives $3,000.

Traditionally, the seller pays five or six percent commission to the seller agent and buyer agent. The seller and buyer agent splits the five or six percent commission. For example, the home is for sale for $300,000. The seller pays $18,000 commission on six percent ($300,000 price x six percent). The seller and buyer agent gets $9,000 each for commission ($18,000 total commission / 2).

On a 1 negative points, the buyer gets $3,000 ($300,000 price x 1 percent). So, the buyer agent takes home a $6,000 commission ($9,000 buyer commission - $3,000 Mortgage Rebate) after buyer agent gives the Mortgage Rebate to the buyer.

The mortgage lenders may advertise like 6% interest rate with 1 discount point, 6.25% interest rate with 0 discount points, 6.50% interest rate with 1 negative point, 6.75% interest rate with 2 negative points, or 7% interest rate with 3 negative points. The negative points are Mortgage Rebate. As the buyer receives higher negative points, the interest rate is usually higher.

Another form of Mortgage Rebate is fixed amount. For example, the buyer receives $1,000, $2,000, $3,000, or $4,000 Fixed Amount Mortgage Rebate. It can also be in the form of gift certificate. Some form of Mortgage Rebate is a credit to the costs of buying a home.

As the buyers rejoice on Mortgage Rebate, some lobbyists wants to ban the Mortgage Rebate. Fortunately, the Mortgage Rebate is still legal on the Sunshine State more commonly known as Florida. Kentucky also allows the use of Mortgage Rebate.

However, the state of Alaska, New Jersey, Kansas, Oklahoma, Rhode Island, Louisiana, South Carolina, Mississippi, West Virginia, and Missouri bans Mortgage Rebate. For Alabama, South Dakota, Oregon, and Tennessee, the Mortgage Rebates are only credits to closing costs.

When you are shopping for Mortgage Rebate, you should check if the Mortgage Rebate is ban in your state. The best Mortgage Rebate can cover the whole closing costs.

Capital Gains Exclusion

The Taxpayer Relief Act 1997 allows the homeowner to profit without paying tax on the sale of the property. The single homeowners are allow to profit up to $250,000 without paying tax, while the married homeowners are allow to profit up to $500,000 without paying tax.

Before May 7, 1997, the only way not to pay tax on capital gains is to use the capital gains to acquire another property. These homeowner tax breaks come as a surprise and relief for many homeowners. Now, the capital gains are tax exempt as long the sale comes after the law took affect.

There is no limit of the use of the Capital Gains Exclusion. The homeowners are able to avail as many times as possible.

However, the sold home must be a principal residence. That means the homeowner must have live at least two of five years on the sold home. It does not have to be sequence as long as the total comes over two years.

For any rental property, it can easily convert into principal residence. Suppose the homeowner decides to live on the rental property, the homeowner needs to stay at least two years on the rental property.

The home property does not have to be principal residence at the time of sale. So, the homeowner can rent out the property a few months before the sale of home property.

The married homeowner does not have to live on the same time. For example, the bride got married after a year and three month of living on the home. In nine months, the married homeowners can be tax exempted from capital gains.

Additionally, one of the married homeowner did not use the Capital Gains Exclusion within two years of sale. For example, the bride sold her home to live with groom. The bride used the capital gains exclusion. So, the bride and groom can only use the Capital Gains Exclusion after two years.

For special reasons, the homeowner can prorate the capital gains exclusion on health, employment, and unforeseen circumstances. For example, a heart attack may force a homeowner to sell before two years. Suppose the homeowner lived for twelve months, the homeowner is tax exempted for twelve / twenty four months portion of capital gains.

A great job offer comes along. The homeowner needs to move. For the homeowner to move, the homeowner needs to sell the home. The homeowner can also prorate the capital gains.

The unforeseen circumstances are national disaster, war, terrorism, death, divorce, separation, and multiple births.

The capital improvements increases the home values. As the home values increase, the capital gains also increase. You may worry how much tax that you have to pay. The Capital Gains Exclusion may well save you taxes. For the latest tax laws, you may want to get in touch with IRS, or tax advisors.

Tax Deductible Capital Improvements On Ones Home

Many home improvements are capital improvements. The Capital Improvements are tax deductible according to IRS if the home improvements meet a number of conditions. The home improvements are permanent addition to the home that increases the value of the home. Hence, the home improvements are substantial in which the value of home property appreciates, the life of home property prolongs, and the functionality of home property increases.

For example, placing a fence, adding a room, installing a driveway, implementing a swimming pool, installing a new roof, setting a new built-in heating systems are capital improvements.

The capital improvement increases the value of your home. For example, adding a new room increases the value of home. The new room increases the ability of the property to earn more income. Thereby, the value of home property increases as well.

Another example, adding a garage increases the value of home. Renters will pay extra for a parking space. And again, the new garage increases the ability of the property to earn more income. Thereby, the value of home property increases as well.

On the other hand, the home repairs are not home improvements according to the IRS. Repairs are expenses that keep the property in good repair. And, the rental property owner can claim the as expenses on the year that the expenses are made.

For example, repainting the walls, patching the roof, installing the wallpaper, replacing the carpet, sealing the links, and repairing the windows are home repairs.

To be able to claim capital improvement tax deductible, the homeowner needs to use the Depreciation Method. The Depreciation Method is a way to recover the cost of capital improvements thru depreciating the expense over the life expectancy of property.

Private Mortgage Insurance Tax Deductible

The private mortgage insurance allows the borrower to acquire a mortgage in which the down payment is less than twenty percent. The borrowers pay the private mortgage out of their pocket. Now, the private mortgage insurance is tax deductible for US residents.

Actually, the mortgage insurance is either government or private. Whether the mortgage insurance is government or private, the mortgage insurance is tax deductible.

To acquire the mortgage insurance is an alternative for piggyback second mortgage. The piggyback second mortgage is plain simply a second mortgage. The borrower acquires another mortgage on top of the first mortgage for down payment.

The tax deductible applies for modest income earners. That means the borrower earns up to $100,000. In case the borrower earns over the $100,000, the borrower can only write off the private mortgage insurance partially.

Additionally, the tax deductible only applies to new mortgage. The mortgage financing must have happen in the calendar year 2007. Unless the borrower made a mortgage refinancing for the mortgage on or after the calendar year 2007, the tax deductible will not be allowed.

This is good news to the millions of Americans. Millions of Americans pays for the mortgage insurance. The mortgage insurance only cancels out when the home equity or total amount paid goes over twenty percent of the principal amount.

More importantly, the mortgage insurance will be made affordable with this turn of event.

Like the mortgage interest tax deduction, the mortgage insurance tax deduction benefits millions of American. Now, the borrowers or home owners have a choice between mortgage interests of second mortgage or mortgage insurance premiums as tax deduction.

What Is Mortgage-Backed Security

Mortgage-Backed Security (MBS) is a pool of mortgage investment in which the investors get payments on a timely basis. These investments are guaranteed by a government agency.

In Canada, the Central Housing and Mortgage Corporation (CMHC) guarantee such investments thru the National Housing Act. In the US, the Fannie Mae, Freddie Mac, and Ginnie Mae guarantee such investments. Since the government agencies guarantee such investments, these types of investment are highly safe.

Long time ago, only the wealthy with large financial assets can get involve in such investments. With the introduction of Mortgage-Back Security, more people can get involve in such investments. An initial investment can go as low as five thousand dollars.

That is why these investments are getting popular. At this time, the total investments on Mortgage-Backed Security run in the billions of dollars. Although these investments are relative safe, the investors can encounter three kinds of risks.

First, the default risks are encounter when the borrower fails to make mortgage payment. Second, the interest rate risks are encounter when the borrower refinances to a lower interest rate. Finally, the prepayment risks are encounter when the borrower pays extra on the mortgage payments to pay off mortgage early.

The Private Mortgage Insurance (PMI), or Mortgage Insurance softens the blow for the default risks. In case the borrower misses mortgage payment, the PMI resolves the default risks.

The Insurance Company, Chartered Banks, Trust Company, Loan Company, Credit Unions, and Mortgage Lenders can offer Mortgage-Backed Security (MBS). The MBS can be open or close. The borrower can prepay the mortgage on open, while the borrower can not prepay the mortgage on close.

Mortgages are also on a variety of mortgage terms. For example, 6 months, 2 years, 3 years, or 5 years are common mortgage terms.

MBS are available for exclusive homeowner, multi-family, social housing, or combinations. Social Housing is housing co-ops, and senior housing.

In Canada, the MBS are currently eligible for RRSP, and RRIF. The RRSP and RRIF are tax-sheltered retirement investment fund.

The MBS is relative safe investment, because the government agencies guarantee the timely payment or profit. And, the profits are comparable to GIC, and Bonds. It is an investment that is worth to consider.


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Information and calculation provided on this mortgage calculators website is for general purposes only. It is not intended to take the place of advice from your mortgage brokers.