Weekly Rate & Market Update 2-24-17
Question of the week: I’m doing my taxes, what is deductible from my mortgage transaction last year?
Answer: This has become an annual question for the Weekly Rate & Market Update.
NOTE! I am not a Certified Public Accountant, nor a professional tax preparer. Depending on your situation the following items may be deductible when you file your taxes:
• Mortgage Interest
• Origination/Discount Points
• Mortgage Insurance Premiums
• Property Taxes
Each of these is subject to not being eligible for deductions depending on the nature of your transaction (purchase, cash-out refinance, home improvements, etc) and your income.
My standard answer to this question was answered in the first sentence; I am not a tax professional. I have a hard enough time trying to keep up with the changes Congress, the Fed, HUD, DRE, Fannie Mae or other government agencies have regulated, I certainly have not been able to keep up with all the changes in the state and federal tax codes these past few years.
Note that the mortgage insurance premium deduction has been on a year-to-year extension by Congress and is subject to limitations based on income. Congress extended deduction in 2016 for 2016 but as of this point in 2017 the deduction is not part of the tax code—yet. This may change however, and the deduction could become a permanent part of the tax code not requiring annual renewal is H.R. 109 – Mortgage Insurance Tax Deduction Act of 2017 is passed by Congress and signed into law by the President. The bill sponsored by Rep. Brownley (D-CA-26) simply states, “This bill amends the Internal Revenue Code to make permanent the tax deduction for mortgage insurance premiums.” (Sidebar I have long advocated that every bill presented in Congress must be hand-written by the sponsoring member of Congress, not put together by staff or cut and paste from lobbyists, but pen to paper written by the member. This would lead to less complicated laws that are easier for everyone to understand. End Sidebar)
Whether this bill, currently in the House Ways & Means Committee, makes it through, and makes it through with the simple declarative sentence, remains to be seen, but if passed those paying mortgage insurance will have deductibility annually—possibly subject to income limitaions.
If you purchased, sold or refinanced property last year I strongly advise you to take copy of the HUD-1 closing statement from your escrow documents to a professional tax preparer or CPA. S/He will be able to assist you in maximizing your deductions while staying out of trouble with the IRS and State Franchise Tax Board.
Provide your tax professional with your IRS Form 1098 showing mortgage interest paid, and if applicable mortgage insurance paid and amount paid in property taxes for the year. (Note, if you paid under $600 in interest to a lender you will not receive this form—which is why your HUD-1 statement will be needed if you refinanced or purchased in 2016.)
If you need a recommendation for a tax preparer do not hesitate to contact me.
Remember, with Dennis it’s not just a mortgage, it’s your complete financial picture.
Housing data headlined economic reports this week. In a tale of two markets, existing homes sales and new home sales, the existing home sales in January were very strong while new home sales softened. Existing home sales across the country were up 3.3% from December and 3.8% from January 2016. Nationally the median home price is up 7.1% from last January, the West showed an 8.4% year on year increase. Housing has been driving economic growth and stronger housing will lead to more growth—which means higher rates. These conflicting reports result in neutral overall effect on mortgage rates.
Locally the price data shows a dip and a jump. The dip is in prices from December to January statewide and in all Southern California Counties, the jump is in prices from January 2016 to 2017. In LA County the median price for a single family home was $509,320 in January, up 5.9% from 2016, Orange County is up 5.7% for the year to $740,000. Both counties saw sales drop over 26% from December but up 6.7% in LA County from 2016 and down 1.1% in Orange County from last year. The best return on investment in California in 2016 on the median single family home? Del Norte County (most northeastern county, from Oregon border to below Klamath, Pacific to western part of Klamath National Forest), where if you bought the median priced home last January and sold in January you would have seen a 48% return, your buy price having been $157,000 and your sale price was $232,250.
Rates for Friday February 24, 2017: Our range is shifting up a bit for Mortgage Backed Security (MBS) prices (higher prices mean lower rates), not a lot but there is some momentum and if it holds we could see rates dip a bit next week. “If.” For now rates are flat from last week with downward momentum.
FIXED RATE MORTGAGES AT COST OF 1.25 POINTS
30 year conforming 4.00% Flat
30 year high-balance conforming 4.125% Flat
30 year FHA 3.50% Flat
30 year FHA high-balance 4.00% Flat
Please note that these are base rates and adjustments may be added for condominiums, refinances, credit scores, loan to value, no impound account and period rate is locked. Rates are based on 20% down (3.5% for FHA) with 740 FICO score for purchase mortgages.
Somehow I am not getting any older but our youngest daughter turned 15 this past weekend—I keep telling myself that. When I started the Weekly Rate & Market Update as a monthly email to real estate agents her older sister was still an only child. We have seen a lot of changes in our industry during her lifetime, I wonder what changes will occur in her next decade and a half.
The Oscar’s are this weekend and we’ve seen four of the Best Picture nominees (I wish they would go back to just five films nominated—but I’m a grumpy old guy who’s not getting older). Of the four we saw my ranking for the Oscar would be: winner: “Lion” A great story that is wonderfully told, great acting, very moving and everything that makes going to the movies a great experience. Just behind, “Arrival” I am not a sci-fi guy, Star Wars, Star Trek, etc are not a genre I like very much. “Arrival” is not of that type sci-fi, but an encounter movie that is fantastic. A mind bender with great acting and writing. I need to see it again as I understand it better after Leslie explained it to me and patiently answered my “but what about….” questions. In third place is another great movie with a wonderful story that is well told, and like “Lion” a true story, “Hidden Figures.” Perfect movie: story, acting, production, casting, every box for what makes a movie great is checked, I just liked the other two better. Finally, a very good movie that was very enjoyable and I can see how some would consider it a winner but I found fell short of the other three is “La La Land.” I have always loved musicals, from the big production Rogers & Hammerstein shows to Fred Astaire, Bing Crosby, Doris Day smaller scale but movies with great stories, humor and songs—I watch them all. La La is great in that maybe Hollywood will get back to making good family musicals again, but not quite there.
I realize by putting this list together I probably cursed “Lion” but hope not, it is very deserving.
Have a great week,
Dennis
