Your mortgage and the new tax bill

Your mortgage and the new tax bill

One of the big conversation pieces floating around our office for the last week or so is what happens with your mortgage and the new tax bill when it finally gets the big OK.

In my professional opinion, now could be a great opportunity to save some money down the road by acting now. Now is the time to put your politics aside and deal the new hand that you have just been dealt from the dealer. The decks have been changed, the table rotated and yesterdays rules no longer count.

Buying Down Your Rate

With the passing of the new tax bill it has been stated that more than 80% of Americans will benefit from this bill. Planning ahead to take advantage of these new tax breaks can be an important part to planning you new home purchase or mortgage loan refinancing.

Depending on your current mortgage note rate, loans with a principle balance of over $200,000 you may want to consider doing some serious math on refinancing and buying down your new rate. This would be similar if you plan on purchasing a home at any value. Buying down your rate as low as possible may prove to be a much greater benefit in the long run.

Here are some quick bullet points to think about:

  • Under the new bill mortgage loan interest will no longer be deductible
  • Closing cost will still remain deductible
  • Buying down your rate is part of your closing cost whether refinancing or purchasing your home.
  • A lower rate means a lower monthly payment allowing you more money to invest elsewhere monthly, whether in your 401K or IRA plans on in other real estate
  • Upon receiving your new income tax refund, take the amount you received for the cost of buying down your rate and apply that to your principle balance on your mortgage loan. This will help accelerate your amortization on your balance.

Your mortgage and the new tax bill need to be assessed to ensure that you are doing the right thing. Reviewing your total financial picture with your CPA and planning ahead could prove to be a great benefit to your total retirement plan and a better monthly financial position.

Make sure you are working with an experience and knowledgeable loan originator like me. Ask questions, get your facts, plan ahead and we will see you at a happy closing table.