Mortgage Advice from David Gassman

The American Fallacy?

Tue, 05 Feb 2019 16:07:12 -0800

In some circles, this won’t be popular.

Wanted to say it for a long time. But always struggled finding the words. Tonight that ends. Ink hits paper. Well not really. Always sucked at handwriting class.

Tragic they don’t teach cursive, art or PE or anymore. Robotics & Instagram baby. Less human, more automation. Good for profits & bad for everything that came before 1999.

But that’s for another sitting. We’ll need a whistle wetting session of white oak aged corn liquor & and quasi illegal cigars for that discussion. Cuss words & bottle rockets. Maybe a brush fire & spear to chuck. Definitely Doritos.

Not a popular opinion.

Because it hurts industry profits & cornerstone talking points long entrenched within that industry. My industry specifically. But that’s ok.

It’s the truth. At least in my opinion. And I’d like to share it. Here and now.

Don’t mind telling this truth. Because at the end of the day, keepin it real is right up there with Jesus, Allah & baseball.

Too much politically correct bullshit in this world. Everybody selling an agenda. Propaganda. Everybody gets butthurt. If you read far enough, I might bully you into agreeing with me. Won’t that be fun. Say Uncle. Bitch. Or better yet, comment on how wrong I am.

Cool with that too. I’ve been wrong on a lot of things in life. And occasionally need punked to correct course. Examples... WMDs in Iraq, Diet Coke & Bruce Jenner. If you’ve punked me before, thank you. I probably needed your bitter medicine. Carry on.

The biggest lie in Real Estate/Mortgages is your home is an Investment.

It’s a liability you live in. With a built in...Read More

2nd Mortgage Interest: Tax Law Changes

Wed, 28 Mar 2018 14:20:36 -0700

Second Mortgage Interest no longer tax deductible? True. Kind of. It’s complicated. A brief summary…

Starting in 2018, 2^nd Mortgage/Home Equity Line of Credit mortgage interest is NO LONGER Tax Deductible. UNLESS, the funds are used to improve the property they are pulled out against.

Nutshell…

-if the funds are used to improve the property they were borrowed against, then the mortgage interest IS deductible.

-if the funds are used for ANY other purpose than improving the property they are borrowed against, then the interest is NOT deductible.

Outside the Box Strategy…

-using a Cash Out Refinance. In essence a new 1^st mortgage where you pay off the old loan AND get the Cash Out you need. All in 1 loan. With no 2^nd mortgage. Thus, all the interest is tax deductible.

The decision to Cash-out Refinance is entirely relative to 1) current interest rate 2) how much money on top of the mortgage payoff you need 3) what you plan on doing with the money.

Example :

It doesn’t make sense to Refinance a balance of $200K at 4.25% to a 4.75% just to borrow $20K in cash. Unless you need the money desperately for bail. Or to skip town. Or maybe payoff an Italian bookie name Vinnie.

However to borrow $75K on top of the mortgage, that’s a different story. What are you doing with the $75K? Used to pay down other debt at higher non tax deductible interest rates? A new business opportunity?

Summary… know the tax law. And if you don’t, hire people who do. As GI-JOE wisely advised us, knowing is half the battle.

Add a heading here.

PMI and Taxes

Tue, 28 Feb 2017 09:30:35 -0800

Ben Franklin once said… “The only two certainties in life are Death & Taxes.”

If reading this, the latter has arrived. Hopefully not the former. Or else you're into some

wicked sorcery type shit. Please take that Harry Potter bad haircut elsewhere.

Tax season is full of tears. The cost of living under the Ole Red White & Blue is personified in actual dollars.

We certainly enjoy a buffet of social services, infrastructure and safety. And we pay handsomely for those luxuries. Our income, real estate, personal property and everything we purchase is taxed. Even our death. Its absurd really.

I get a lot of questions about PMI being tax Deductible.

In 2016 approximately 43% of all purchases were made with down payments of 5% or less. WOW! This means a TON of you are paying PMI. And might be able to write off that expense.

Short answer… YES.

PMI is tax deductible.

Both the monthly premiums and the upfront. Which if you used FHA/VA/USDA to buy a home, the upfront portion is sizeable.

However as in all mail-in rebates, there is some fine print.

-Your Adjusted Gross Income (AGI) must be LESS than $109, 000 for married couples and $54, 500 if single.

-If your AGI is more than $100K (married) or $50K (single) then the deduction is reduced.

So what does this mean in Real #'s?

-Let's say you borrowed $200K on January 1st 2016 using an FHA Mortgage.

-And let's say your income limits...Read More

No Appraisal Loans Return

Fri, 28 Oct 2016 09:59:26 -0700

The return of No Appraisal Loans (a.k.a. Property Inspection Waivers) is looming.

Fannie Mae recently announced that on December 10th, the flood gates are opening.

Who will qualify?

-700+ credit scores

-sub 45% Debt to Income Ratios

-property located in solid area (sorry Algonquin… much love homey)

Why are PIW’s BAD ASS?

-they save you $450ish on an Appraisal.

-you can eliminate your PMI. Maybe you bought a home in past 5 years and STILL paying PMI. This no appraisal Refinance will effectively allow you to “state” your Appraised value. Which if you have a jazzy inside guy like me, we can “strategically” state your value at 80%, thus eliminating that pesky PMI. Insert your Garth Brooks friends in low places joke here.

-kill 2 birds with one stone. Lower rate and eliminate PMI. Multitasking is cool.

What to do?

-hit me up via email at dgassman@swanhelp.com

-or if you prefer long idle awkward pauses in phone conversation 502-396-1375

Free $45, 000?

Thu, 03 Mar 2016 21:00:00 -0800

New program available for 1^st time buyers (or anyone who hasn’t owned in past 3 years). The interest rates are significantly better than anything Kentucky Housing Corporation offers and no gov’t bureaucratic hoop jumping.

Approved on ANY type of Mortgage. Conventional, FHA, VA and USDA.

Buyer gets a 25% mortgage interest tax CREDIT. Not a deduction. Big difference. CREDIT = actual net tax savings.

Numbers…

-Let’s say a buyer pays an average of $8K in mortgage interest over course of a year.

-They get a 25% State Tax credit, which comes to $2K annually

-minus the 25% deduction they would have received anyways of about $500 annually (assuming 25% tax bracket)

-$2K x’s 30 years = $60K

-minus $500 x’s 30 years = $15K

-Net Savings over life of Mortgage is $45K

Want more information? Email me at dgassman@swanhelp.com

Urkeling FHA Mortgages.

Tue, 29 Dec 2015 21:00:00 -0800

Short and sweet… avoid FHA Mortgages if possible.

It’s easier to qualify for FHA than Conventional. But sometimes due to a credit/income hiccup, FHA is your only option.

FHA does have the most liberal guidelines. Down payment and credit score requirements are lower. Maximum debt to income rations are higher.

But generally speaking, if you can qualify Conventional, do it. Cheaper loan product all the way around.

FHA Up-side

-only 3.5% down payment

-down to 600 credit scores (lower on case by case)

-high debt to income ration allowed (I’ve seen up to 60% DTI approved)

-rates are lower than conventional.

-more liberal underwriting standards

FHA Down-side

-1.75% FHA Mortgage Insurance Premium is ADDED into your loan amount. So on a $250K loan… that is $4375 tacked on to your balance.

-with maximum 96.5% Financing, the monthly PMI is permanent. Never falls off your Mortgage. Ouch! This is what makes FHA so unattractive. On a Conventional Mortgage, once 20% equity is established, the PMI is removed.

Exhibit A…

-$250K Purchase Price

-720 credit score

20% Down???

Thu, 06 Aug 2015 15:34:09 -0700

Do you need 20% down to buy a home? Lord no!

Delaying your home purchase to save 20% is not always wise.

You might miss out! Property values increasing, the potential to grab a deal or even interest rates increasing.

Minimum down payments are quite manageable.

Conventional = 5% Down

FHA = 3.5% Down

VA = 0 Down

USDA = 0 Down

With 20% down on a conventional Mortgage, you will avoid monthly Private Mortgage Insurance( PMI). Which is fine & dandy. But the PMI is temporary and isn’t even that expensive. Certainly not enough to delay your home buying plans.

PMI is $40-$80 per month per $100K borrowed. Exact amounts will hinge on loan program, credit score and amount of down payment.

Example from a conversation today…

First spoke with this client last year. She delayed buying a home for saving 20%.

Over the course of the past 12 months interest rates have gone up about .5%.

We worked the #’s with no PMI. The monthly payments are very close to the same, had she bought last year and simply put 15% down. Instead she WAITED for 20%... that $60 per month she saved by not having PMI is quickly gobbled up in the higher interest rate.

PMI is not the end of the world. On Conventional Mortgages, its temporary until 20% equity is established.

Don’t wait to buy just on account of paying PMI. Its just a pesky band aid.

Merica!

Mon, 27 Jul 2015 13:30:16 -0700

America. A rags to riches society. That's good. Its healthy.

We hear about the income gap widening between the haves and the have not's. But we hear little about the actual rising & falling. The specific successes and failures. And there lies the meat. The marrow. The content. The true essence of America's unique entrepreneurial opportunities.

While Rachel Maddow bullwhips capitalism, wealth is constantly changing hands. A healthy society needs equal probability to lose. Regardless of socioeconomic class.

In America, less than 10% of citizens on the 1982 list of “Richest 500”, were there again in 2012. Compared to Europe where 60% on the rich list today, inherited that wealth from the 1982 list.

Is this because Europeans drink red wine, bike to work & eat more olive oil? Perhaps. Maybe they live longer and simply retain wealth.

But there is over a 50% disparity. Olive oil my ass! Class divide is real in Europe. The opportunity to jump class, is far better in the US. Along with the opportunity to lose everything on a dice roll. Take the good with the bad homies.

The notion that European society is more advanced than American vermin is hogwash. Maybe socially, but not in terms of economic opportunity.

A healthy society means those at the top can lose that status. Socioeconomic change isn’t only about elevating people, its also about turnover at the top. Some fall, while others use that corpse as a foothold to rise.

Interesting Stats. Courtesy of New York Times. http://www.nytimes.com/2014/04/20/opinion/sunday/from-rags-to-riches-to-rags.html?_r=1

Don't want to read that much? I don't blame you. A summary....

39% of Americans will spend at least ONE year in the top 5% of income...Read More

Pay Off House vs. Living A Bit

Wed, 15 Jul 2015 16:20:34 -0700

Paying

With Dave Ramsey slanging books from here to Singapore, paying off your mortgage is sexy. Its smart. Responsible. Facilitates options of career changes or retirement. No mortgage payment is a game changer.

Living

House poor is no fun. Scrimp on vehicles, eating out and fancy clothes. Those are all “things" not necessities. But splurge on vacations and road trips. Memories last a lifetime. Your kids will remember that trip to be beach more than a fancy SUV.

Happy medium

Set your mortgage up on a 15 Year Term. Just tell yourself… “if we can’t afford the payment on a 15 Year Term, then we can’t afford the payment. “ Redefine your standard of mortgage payment. Set your monthly budget off that 15 Year payment.

30 Year Mortgages are by far the most popular. But principle is paid down at tortoise pace. Think Shaq running a marathon with Spud Webb piggy back. Accelerate that to 15 years and live a little along the way.

Americans Drunk on Debt?

Wed, 08 Jul 2015 21:00:00 -0700

We Americans are borrower against home equity at a pace not seen since 2007.

Check out the chart below. Our home equity borrowing has already returned to Pre-recession levels.

Is this a predictive model of history repeating itself? Perhaps. Finances tend to run in cycles.

Is this simply a surge due to stagnancy in preceding years? Perhaps. From 2009-2012, many folks laid low and put those moving/building plans on hold. Now the storm has subsidized and we are ready for bigger houses, swimming pools and those postponed vacations.

There is no denying that we Americans as a whole... are dropping cheddar like its hot. Keeping up with the Jones appears more important than ever before.