Twenty Seven Point Twenty Seven, Repeating

[digitaldiscipline]

According to the appraisal we had done on the house this past weekend, that's how much the work we've put into it has paid off, in percent. It's about a three hundred percent ROI on the capital that's gone into the house thus far (insulation, A/C, paint, sewer line, driveway pavers, lighting fixtures, etc).

Realistically, this means two things. The refinancing I'm looking at to consolidate outstanding debts will be at a lower APR (by up to .7%), and there's more $$ available to pay off more of that stuff.

As far as I can tell, the biggest (and perhaps only) downside to moving from my current mortgage to the refinanced arrangement is that it doesn't include an escrow account for property tax and home insurance automatically with the monthly payment.

Financial types, am I missing something that could bite me in the ass come tax time? Is this still considered to be a mortgage, so that the interest paid is deductible?

But, yeah. That was nice to hear, regardless.

Comments

[lil-m-moses.livejournal.com]

As long as it's still a loan on a house, secured by the house, AFAIK it still counts as a mortgage. I don't have my taxes or insurance escrowed, just because I'd rather earn the interest on the money myself, and I know I'm responsible enough to put aside the money through the year and pay the bills when they come. I have a money market account that, once things settle out, will be exclusively for saving and paying for those things and major home improvements.

[trystbat.livejournal.com]

Ditto what lil_m_moses said. I don't have taxes/insurance paid w/the mortgage -- I pay those separately when due.

[theonebob.livejournal.com]

We're doing a home equity line of credit. I think this has the same tax benefit as refinancing but there's no closing cost. The term of the loan is shorter as well, so that the dinner you bought on your credit card for $60 today doesn't wind up costing you $2000 when you finally pay it off in 30 years.

(Angel can verify all this, 'cuz I'm not totally sure.)

[lil-m-moses.livejournal.com]

I'm not sure HELOCs are treated the same for tax purposes as regular mortgages (including refinances), but I've never had one. You'll definitely want to check on that.

[argylerockstar.livejournal.com]

HELOC interest is tax-deductable as well. That's why it pays to get a HELOC and then use it to pay off your credit cards.

[argylerockstar.livejournal.com]

But, on the flip side of that, your credit card debt is unsecured. Your HELOC is secured by your home. If you default on cc payments, they can't grab anything. If you default on a HELOC, they can grab your home.

[kat1031.livejournal.com]

It depends on the type of mortgage, but yes, most mortgages are tax deductible, whether they are conventional or HELOCs. I'm not licensed anymore, but I was a financial advisor with American Express, and I'm still going to give you the I'm not an attorney or an accountant, so check with either of those types of professionals for the proper tax advice.

It also is a better financial move to not escrow. The mortgage company averages out the payments over a year and banks the money in an escrow account until the bills come due. They get to make interest on your money that way. If you are responsible enough and have the cash-flow enough to handle the payments yourself, it's better to do so.

[etcet.livejournal.com]

Gotcha. Thanks. :-)

[etcet.livejournal.com]

*nods* We're looking at a full refinancing and debt consolidation suite, to pay off all the 'bad' debt for the household (this is as much for K's benefit as my own, if not moreso).

Down the road slightly, I/we may look at a HELOC to fund home improvements (windows for sure, addition for maybe) if need be.

Depending on how the monthly payment structure looks, I'm leaning towards a 12 or 15 year term on the big one, because that's commensurate with the current outlay for the expenses it's assuming - I may go with 20 just to have more cash on hand month-to-month, but that depends on how much the payment would differ.

In any case, it wouldn't assume any day-to-day expenses; everything that would be getting rolled into it one time, and leave the credit cards and whatnot balance-free, for normal (and responsible) use, so the hypothetical $2000 dinner wouldn't happen. . .

. . . Unless, of course, we get C12 and everyone hands me cash at the CorpGoth Dinner, and I put it on plastic. ;-)

[etcet.livejournal.com]

*makes note to pick your brain about the MMA*

[lil-m-moses.livejournal.com]

Nothing special about that - it's just another checking account at my credit union, except that it pays interest equivalent to a short-term CD (better than savings, IOW), I can't write a check for less than $200, and I'm limited to something like 4 checks and 10 electronic transfers out per month. Different institutions of course will have different rules, but that's mine.

[lil-m-moses.livejournal.com]

Go ahead and make the term as long as practical (in balance with good rates). Just make sure that it's a loan with no prepayment penalty. Then you can make up your own payment schedule to pay it off in 12 or 15 years if you want, but you're not _obligated_ to pay that much if something expensive and unexpected comes up.

Oh, and ignore the billions of things you get in the mail from everyone wanting to set you up on two week payment schedules (you can do that on your own without their help), refinance you for dirt cheap payments (very likely interest-only loans, if even that much), and etc. You probably already do, but I mention it just in case. I'm getting a couple a day at this point, and I'm starting to just shred them and send them back in their own business reply envelopes. Asshats.

[etcet.livejournal.com]

Ooooh, that's a good idea. I've just been trashing them. I think the shred-and-reply thing is a good way of letting them know I'm less than interested in their schemes.

There is a prepayment penalty, but it's relatively marginal, and based on the outstanding value of the loan; the no-penalty option charges a .5% APR surcharge (which, given my expectations for the loan, would end up costing me more than the prepay fee).

[etcet.livejournal.com]

i will investigate this at my current bank to see if that's viable; k and i are planning on a joint account for "house stuff," so that may suit our needs, other than handling monthly utilities.

[christyr1q.livejournal.com]

I personally perfer the accounts that don't have the escrow. What ex-DH and I did was to calculate out the T&I and create an escrow account in a seperate bank account. Sounds like K&you are on the right track with a house account. You might want to make sure you put in a bit more up front (yearly taxes+insurance)/12 + $150 fudge factor per month. That'll add up to enough for new windows within 2-3 years if you use it for that.

I too would recommend making the term longer if there's no prepayment penality. It sounds like there is a penality, so go for 15-20, but not less. Cash flow is king.
My Idaho houses are both on 15 year loans (one's paid off in 3.5 years!!!), but my CA house is a 30 year, just because I didn't want to be tied to more than 1500/month!

When I did my windows in 2003, I got 10 installed for 4854.00. Good luck on all!!!