Raymond Kerege - How To Find The Home Of Your Dreams

tax breaks that home buyers can take advantage of, whether they are first-time buyers or otherwise. The IRS allows you to deduct from your taxable income the interest you pay your lender. Home mortgage interest is one of the largest deductions for those who itemize. Lenders will report your mortgage interest on a 1098 form sent out annually. The Mortgage Interest Deduction (MID) is valid for mortgage debt up to $750,000 or mortgage debt up to $375,000 if you are married but filing separately. Home buyers can receive a large benefit in the first years after buying, as the first repayments have the highest interest. To claim the MID benefit, home buyers will have to file an itemized tax return. • Mortgage Points. Discount points (also known as mortgage points) are fees paid directly to the lender at closing in exchange for a reduced interest rate. The cost of discount points is equivalent to 1% of your mortgage ($1,000 for every $100,000). Discount points involve prepaid interest and can reduce your total mortgage payment. The interest rate on your mortgage typically lowers by 0.25% with each point you buy. If you elect to do this, the fee for the points is tax deductible for the year in which you paid them, assuming the loan you obtained is for your full-time, year-round home (as opposed to a second home or a vacation home). • Mortgage Credit Certification. The Mortgage Credit Certification (MCC) is another program that helps thousands of first-time home buyers secure a tax break. This IRS-based program is aimed at helping lower-income groups afford their first home by essentially subsidizing the loan. The MCC program is designed to help first-time home buyers offset a portion of their mortgage interest on a new mortgage to help them qualify for a loan. Because it’s a tax credit and not a tax deduction, mortgage lenders will often incorporate the estimated amount of the credit (prorated on a monthly basis) as additional income to help the potential borrower qualify for the loan. Depending on the price at which you purchased your home, you can get back up to 30% of the interest you pay as a tax credit. The program is administered by local authorities and can vary according to the state in which you live. To qualify for this tax credit, you’ll need an MCC issued by the local government, which your loan officer may or may not know how to do. • Home improvements. Improving your home will not only add to


Powered by