Most people refinance for one of the following reasons:
To make improvements to your home i.e extend/renovate.
To consolidate your debts
To change to a lower interest rate
To change from a variable rate to a fixed rate interst rate, enabling you to have control of your monthly repayments.
To changing from a fixed to variable rate, enabling you to pay off your home loan faster.
Saving on taxesAs an existing mortgage borrower, you already know that your mortgage interest is tax deductible.
You may also know that you pay far more interest in the early years of a mortgage than you do later on. And the more interest you pay, the higher your deduction. Replacing your current mortgage loan with a refinance might lower your tax liability. And if you intend to use the refinance to consolidate credit card debt, the benefits would be even greater, because you'd be replacing non-deductible credit card interest with tax-deductible mortgage interest.
Tax deductions and refinancing The IRS designates two types of mortgage debt: home acquisition debt, and home equity debt. Home acquisition debt is what you paid to buy the house. When you refinance, the amount of the new loan used to pay off the old loan qualifies as home acquisition debt. Any amount over that would be home equity debt.
The following example will help clarify the point: •
Suppose Jenny owes $200,000 on her mortgage. She takes out a new mortgage for $225,000 and pays off her old mortgage. For tax purposes, $200,000 is home acquisition debt, and the remaining $25,000 is home equity debt.Interest paid on home acquisition debt is generally tax deductible in its entirety. You can also deduct interest paid on the first $100,000 of home equity debt. Confused? Don't worry…your tax advisor will happily clear things up. The short of it is that refinancing can help you manage your tax liability.
Tuesday 25 November 2008
Mortgage Refinancing Loan
Do you know that even without a fair credit score you can get a Mortgage Refinancing Loan online easily. But choosing one amongst a wide pool of alternatives can be rather difficult, so here are a few tips to help you decide to choose a good one and stay away from the bad.If you are looking for a regular Mortgaze refinnacing loan, then take a little time to know how to choose a valuable one. Getting the wrong one can cost you a lot.Learn the different types of mortgage refinance lenders and the different types of Mortgaze refinancing products that are available. Besides this, you will want to look at different types of loans available for those who want to refinance. You may also want to read up on why the newer loans may not be the best thing for you - or maybe they are.Negotiate the Mortgage Refinancing Loan that suits your needs. Many times the compensation a lender makes on refinancing a mortgage is dependent on the terms of the mortgage so it is up to you to make sure that the loan received is the most advantageous for you.Online mortgaze refinnacing loan options available in the market can reduce payments by huge amounts. They can even in some cases help benefit from an interest rate reduction. Even extending the number of years in which the loan amount has to be paid back is a reason more than enough to look into mortgage refinance options with an online broker or lender.
There are various reasons that are attracting people towards Refinance Mortgage Loan. Many of these reasons are specific to the person's condition but there are some general reasons also why people across the country are opting to refinance their mortgages. With home values going up so high, refinancing allows people to take advantage of their home equity by drawing some out through a refinance. For refinance options, banks are giving loans that have multiple payment options. As financial conditions in the market change, these factors need to be given more attention.
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There are various reasons that are attracting people towards Refinance Mortgage Loan. Many of these reasons are specific to the person's condition but there are some general reasons also why people across the country are opting to refinance their mortgages. With home values going up so high, refinancing allows people to take advantage of their home equity by drawing some out through a refinance. For refinance options, banks are giving loans that have multiple payment options. As financial conditions in the market change, these factors need to be given more attention.
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Mortgage Refinance-An Introduction
A mortgage refinance is the process of taking out a new loan, and using the proceeds to pay off your old one. Generally, you'd do this to make a change in the structure of your debt in order to get more money, a lower monthly payment, or a shorter pay-off schedule.
Why refinance? You'd trade-up your mortgage for the same reason that you'd trade-up your job, car, or living arrangement-because circumstances change. What you need out of a mortgage today may be different from what you needed five years ago. Refinancing can achieve one or more of the following objectives: 1. Lower your monthly payment. You can reduce your monthly payment by refinancing to a lower interest rate. Have market rates dropped since your old mortgage was funded? Has your credit improved? Has your home increased in value? Any one of these happenings could mean that you'd qualify for a lower rate. 2. Shorten your pay-off term. Paying off your mortgage loan in 15 years rather than in 25 can save you tens of thousands of dollars in interest over the life of the loan. If you can afford the higher monthly payment and plan to stay in the home indefinitely, it's well worth it. 3. Optimize your loan structure. Your current loan structure may no longer be suitable for you in the future. Maybe you bought your home with an adjustable-rate mortgage (ARM) and your initial fixed-interest period is about to expire. Perhaps you have a fixed-rate mortgage, but you'd like to take advantage of the more flexible option ARM. Discuss your objectives with your lender to determine the most appropriate loan structure for you. 4. Consolidate your debt. If you're carrying a lot of credit card debt, you can lower your monthly repayments through consolidation. To do this, you'd take out a mortgage loan large enough to pay off all the debts on your cards plus the balance on your old mortgage. 5. Fund large, one-time expenses. You can raise the funds you need by doing what's called a cash-out refinance, where you'd take out a loan that's larger than your current one. As soon as you pay off the old loan, the excess funds can be used to pay for home improvement projects, college tuition, your daughter's wedding, long-term care expenses, etc. Essentially, your mortgage is a financial tool that might need occasional sharpening. As life throws you new circumstances, trading up that mortgage may be one way to manage change.
Why refinance? You'd trade-up your mortgage for the same reason that you'd trade-up your job, car, or living arrangement-because circumstances change. What you need out of a mortgage today may be different from what you needed five years ago. Refinancing can achieve one or more of the following objectives: 1. Lower your monthly payment. You can reduce your monthly payment by refinancing to a lower interest rate. Have market rates dropped since your old mortgage was funded? Has your credit improved? Has your home increased in value? Any one of these happenings could mean that you'd qualify for a lower rate. 2. Shorten your pay-off term. Paying off your mortgage loan in 15 years rather than in 25 can save you tens of thousands of dollars in interest over the life of the loan. If you can afford the higher monthly payment and plan to stay in the home indefinitely, it's well worth it. 3. Optimize your loan structure. Your current loan structure may no longer be suitable for you in the future. Maybe you bought your home with an adjustable-rate mortgage (ARM) and your initial fixed-interest period is about to expire. Perhaps you have a fixed-rate mortgage, but you'd like to take advantage of the more flexible option ARM. Discuss your objectives with your lender to determine the most appropriate loan structure for you. 4. Consolidate your debt. If you're carrying a lot of credit card debt, you can lower your monthly repayments through consolidation. To do this, you'd take out a mortgage loan large enough to pay off all the debts on your cards plus the balance on your old mortgage. 5. Fund large, one-time expenses. You can raise the funds you need by doing what's called a cash-out refinance, where you'd take out a loan that's larger than your current one. As soon as you pay off the old loan, the excess funds can be used to pay for home improvement projects, college tuition, your daughter's wedding, long-term care expenses, etc. Essentially, your mortgage is a financial tool that might need occasional sharpening. As life throws you new circumstances, trading up that mortgage may be one way to manage change.
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