There are a lot of tax benefits for home owners, some of which include deductions on expenses paid during your mortgage closing. However, there are a lot of categories included in your mortgage closing costs, not all of which are deductible. To determine which closing costs involved with your mortgage are deductible, read on.
* Points are deductible on your tax return during the year in which they are paid. For example, if you pay points on your closing costs during the year 2010, you can deduct them on your 2010 return. Points are the costs of obtaining the loan, or a loan origination fee. Most points are equal to 1% of the total mortgage.
* Seller’s paid points are deductable by the buyer as an expense if there is an agreement that the seller will pay the points on the mortgage. However, the seller is not able to claim those points on their tax return; rather the net gain on the sale of the home is reduced by the amount of the points paid.
* Interest costs are fully deductible through the first 10 years of home ownership. During the closing, you will prepay interest through the month, especially if you close in the middle of the month. Prepaid interest is deductible on your tax return.
* If you make too much money, there are limitations on the amounts that you can deduct. For matters in regards to this, it is best to contact a tax professional to assist in filing your taxes. A certified public accountant will know the limitations and can apply them to your taxes in the proper manner.
* Pro-rated property taxes are also deductible. In most cases you will have to pay pro-rated property taxes on the property at the closing. This expense is completely deductible when you file your return.
Closing costs consist of many fees totaled into one lump sum to be paid upon closing of the house. Some of these expenses are tax deductible depending upon your income and the purpose of the fees. Points, interest and property taxes are a few of the items that are considered tax deductible. To get the maximum deductions allowed, it is best to talk to a tax advisor or CPA to determine how much of your closing costs is deductible.
Many banks and financial advisors are trumpeting the benefits of refinancing your mortgage at a time when interest rates are fairly low. But there are some things to keep in mind which will make your pursuit of a better mortgage go smoother.
* Look at your current situation – Ask yourself why you want to refinance your mortgage. Is it because everyone says you should, or is it because you need to do so to drop your mortgage payments? Is your credit as good as or better than it was when you took out the first mortgage? A worse credit score could actually raise your interest rate. Is your house worth more than you owe? If so, then you may not be able to find a lender willing to take on that risk.
* Try your current mortgage holder first – If you have been a good customer, your current mortgage holder could be your best bet for obtaining a refinance. They may make you a better offer just to keep you as a customer. There also may be some advantages such as a reduction of fees.
* Investigate the interest rates – Shop around and find out what the best interest rate is that you can get with your current credit and income. Your rate may not be the one advertised by the lender and don’t forget the PMI, points, and other factors. It makes no sense to refinance your mortgage if you are going to end up paying more in the long run.
When you add up all the factors, if your new interest rate will be less than half a percent lower than your current one, then you are better off staying with what you have.
* Pay down your mortgage – If you owe more than your home is worth, you will probably not be able to refinance in a tight mortgage market. If possible, pay down your mortgage by several thousand dollars over the next few months before attempting to refinance. Your chances of refinancing, and of reducing or eliminating PMI, should be better afterwards.
* Wait it out – Even though everyone is touting the benefits of refinancing, you might find it’s not worthwhile to you. If you plan to sell in a year or so or if you can’t get a better deal, then just wait. Selling in a few years could net you more profit if you continue making your normal payments now. If you aren’t selling but have paid down more of your mortgage and improved your credit rating, you could get a lower interest rate even if overall rates have gone up.
Refinancing your mortgage can be frustrating, but keeping these tips in mind will help to smooth the process.
Top Features of a Successful Budget – Better Budgeting
Budgeting seems simple enough, but when put into practice most people suddenly realize it is incredibly difficult to make and stick with a budget if certain factors are not developed. Successful budgets, no matter the size or purpose, all have a few common denominators: reality, goals, commitment, focus, and self-discipline.
Here are some budget tips to help you toward your goal of better budgeting:
Reality
Your budget needs to be tailored to fit your particular needs. Consider your income, debt, housing payments and utilities, insurance costs, food requirements, clothing requirements, transportation, activities for each family member, the ages of family members, and your particular financial goals.
Do you need to budget semi-temporary expenses or long-term goals? Do you have plenty of income or are you barely scrimping by? Look at your own situation and seriously consider what money needs to go where to meet the needs and wishes of yourself and your family. Don’t forget unexpected and once-a-year expenses when creating your better budgeting plan.
Goals
To create a successful better budget, you need goals. Having goals will help you decide where you want your money to go. Plan your goals at least monthly and yearly with some long-term goals thrown in. If it works for you, take your monthly goals and break them down into weekly and daily goals as well.
For example, if you have a goal of reducing your environmental footprint, then perhaps a logical goal for you would be to reduce your electric bill through energy conservation and to save money towards installing eco-friendly appliances or solar panels.
Commitment
You could spend a month breaking down your budget to the tiniest detail and setting great goals, but if you aren’t committed to meeting those goals and maintaining your budget, then you will be wasting your time. Commitment to better budgeting is as important to keeping a budget as earning the supporting income is.
Focus
Once you have your budget and goals in place and you have committed yourself to achieving your better budgeting goal, you will start thinking of them every time an expense comes up. Breaking the budget on a new, bigger television will not seem so attractive when you know that doing so will mean one day less on your vacation in the mountains this summer. Focusing on your goals and your budget will keep you on the straight path towards a successful budget and achievement of your financial goals.
Self-Discipline
Similar to commitment in many ways, self-discipline is the factor that allows you to focus and stay committed to achieving your goals and sticking to a budget. It is the factor that keeps you from buying a snack in the checkout line when you are hungry but your grocery budget is at capacity. Self-discipline keeps your housing budget at the amount you know you can afford, no matter what the bank or realtor suggests you can afford. It is a vital trait to develop, not only to maintain a budget and meet your better budgeting goals, but for just about every aspect of your life.
Working together, the factors of reality, goals, commitment, focus, and self-discipline will be just about all you need to create and stick with a budget. No matter if your income is ten thousand dollars a year or ten million, a fully functioning budget will help you have more, earn more, and live better.
Selling Your Car: How to Get the Best Possible Price
When it’s time to sell your car, you have a few options. It might seem easiest to take it to a dealer and accept whatever price you can get for it. However, if you want a good price, that is not the smartest way to go.
To get the best possible price for your car, it is best to sell it on your own, without any middleman. Here are some tips to help you get the best price when selling your car.
* Have it detailed, cleaned and repaired. Before you put your car up for sale, it’s worth spending a little bit of money to get a better price. Have it detailed, or do the work yourself. Remember to clean under the hood too so it’s ready for show if a prospective buyer pops the hood. Clean out all your stuff, like CDs, kids’ toys, under back seats, in seat pockets and under the trunk. Make any minor repairs. Major repairs, though, probably aren’t worth it.
* Advertise online. Sites like Craigslist and eBay let you advertise your car on their sites for a reasonable price. This gives you a broader base to advertise to than just your local area. As well, advertising here can be more affordable than paying for a print ad. You may want to consider advertising your car on Facebook too. There may be a local website that allows you to post your ad there. Take good photos from various angles so people can get a good idea of what you’re selling and the condition it’s in.
* Do your own research as to what your car is worth. You can research online and find out exactly what your car is worth. Online guides and blue books can give you your car’s value based on make, year, mileage, options, and the condition of the car. This will give you a good idea as to what your car is really worth and give you more confidence. If a prospective buyer balks at the price, you can back yourself up by showing them the printout.
* Write a compelling ad. Good photos are an important part of your ad. Take as many as you can of both the interior and the exterior. In your ad, highlight any improvements you’ve made to the car. You’ll also need to mention any flaws.
* Set your asking price higher than what you want. After you decide how much money you want to get for your car, set your asking price about 5–10% higher than what you really want. This will give the buyer room to haggle. When you do agree to the lower price, the buyer will feel he got a good deal. You will be happy because you got the price you wanted.
Selling your car on your own doesn’t have to be scary. Following the above suggestions will help give you the confidence to ask for the price you want, and help you get it.
When you think about managing your money well, two terms usually come up: saving and investing. While you know those are important aspects of managing your money, you might not be certain of what the difference is. If you are confused about those two terms, rest assured that you have good reason to be confused. They are often, and wrongly, used interchangeably. However, they both refer to very different things, and are both an important part of managing your money.
Here is an explanation that will help clarify the differences and show you how to incorporate both saving and investing into your money management strategy.
First of all, let’s look at saving. We all know that we need to be saving some of our money, but what does it really mean to do so? Saving refers to exactly that – saving your money by storing it somewhere safe. That safe place might be a bank account or a money market account. Hopefully you’re storing it somewhere safer than under your mattress or in a dresser drawer.
Regardless of where you decide to keep your money, the goal in saving it is consistent: you save money for your needs in the short-term such as upcoming expenses that you can predict, such as your tax bill, or for emergency expenses that you can’t anticipate, such as having to replace an unexpected blown tire.
When you save money, you can expect to earn some kind of interest on the money you are saving. It will usually be at a low, fixed rate. Another aspect of saving is that when your money is being “saved,” you are able to access it easily when you need it. So, you can easily make a withdrawal when your tax bill comes or when you have to pay an unexpected visit to the tire repair shop.
One way investing is different from saving is that it typically isn’t as safe. There is some degree of risk involved when you decide to invest a portion of your savings. Some examples of investments might be stocks, bonds, or mutual funds. You invest your money in them because you hope to realize higher long-term returns than you would from a savings account. Usually, the interest you will earn on your investments is more than the inflation rate, so your money continues to grow.
Money is invested for the long term. There is usually a brokerage fee or a delay when you decide to make a withdrawal from an investment account. This means that you wouldn’t be able to access your investments quickly when you have to repair that tire or make a bill payment.
However, if you are planning for a larger purchase, such as a house or a big trip, investing would be preferable to saving. As well, when you’re planning for life events such as retiring or sending your child to college, you would want to invest your money.
Both saving and investing have a place in your overall financial planning. Knowing the difference will help you make better decisions about where to put your money.
You know when it happens. The day after you stock up on ice cream for your son’s July birthday party the freezer quits working. Or the morning before a dinner hoping to impress a new boss your oven suddenly won’t heat up. It’s enough to put you into a panic! And then the decisions begin – do you call a repair man or just go to the appliance store and buy a new one before the ice cream all melts or you have to order take-out?
Whatever the problem, there are some things to consider before you make the repair or replace decision.
* Warranty - If your appliance is under warranty, then it makes sense to just get it fixed. Even if you have to pay a service fee, it’s surely going to be less expensive. And if an appliance is still under warranty, it’s probably still fairly new and has a long life left.
* Age of appliance - The older your appliance, the more sense it makes to just replace it. A good rule of thumb is to replace it if it is about eight years old for a high-end appliance and half that for a less expensive one. If it has had little use, such as an appliance in a vacation property or if you simply don’t cook much, then it could be worth considering a fix if it’s older than that.
* Cost of fixing – If fixing the appliance will cost more than half the price of an equivalent new appliance, then it’s usually not worth fixing. If you are handy, you may be able to fix it yourself, so consider all options before deciding.
* Cost of replacing - The sticker price on a new appliance may not be the only thing you have to consider at this point of the decision. Do you want a higher-end model? Have you been planning to renovate your kitchen?
Make sure you get the appliance you are going to want a year or two from now to go with the other new appliances you may have been planning to purchase. Does the appliance qualify for a tax credit or rebate at this time? That would be a huge dent in the sticker price. Also look at the cost to run the appliance. The less energy it takes, the less the appliance will cost in the long run.
* Environmental impact - No matter which way you end up going, there will be an environmental impact. If you keep the older appliance, it will probably be using more electricity than a newer model. However, if you replace it, the older appliance may end up in a land-fill.
To minimize the latter scenario, first consider if it’s worth donating. Someone who cannot afford a new appliance might very well be able to afford fixing your old one, and many charities have volunteers who fix donated appliances for free. Offer the appliance on Freecycle or post it for free on Craigslist. Someone may want it to fix or to part out. Even if it’s in really bad shape, the metal can be recycled by someone who knows how to do it.
Deciding whether to replace or repair an appliance is a difficult decision for some, especially when finances are tight. Considering all of these aspects should help smooth that decision.
When making the decision save, it is good to have goals in mind. However, an important part of saving is almost always overlooked – where to keep the money so that it works for you. There are many different types of accounts that you can use to gain interest on your savings account and make your money work for you.
* Savings accounts are available at your local bank. Most banks have different types of savings accounts and rates that vary depending upon the amount that is deposited. The annual percentage rates are usually low, with interest being paid quarterly. If you are looking for a long-term, high interest yielding investment, you might want to skip the savings account in favor of a certificate of deposit.
* Certificates of deposits, or CDs, are a type of investment tool that requires the investment to be held for a specific time frame. If you invest in a certificate of deposit, your money will be on hold until the time expires. You will be able to withdraw the money early, but a penalty will apply. Interest will be credited according to the agreement, but all interest will be lost if the withdrawal is made before the CD matures. Placing your money in a CD is not a good idea if you wish to have unlimited access to the money.
* Savings bonds are a type of bond that is issued by the government. They are backed 100% and typically take 20-30 years to mature with interest accumulating every month. However, they can be cashed in at any time with no penalty; you just will not earn the extra interest. Savings bonds can be purchased online as well as through your bank.
* IRAs are designed for retirement. Investments are typically held until the depositor reaches retirement age. The money will hold a severe penalty if withdrawn early, but there are exceptions. Taking money out for educational purposes or buying a house, for example, are not penalized.
* Money markets are held at your local bank as well. Money markets usually require higher balances and the access to the money is limited, although not as limited as a CD. Most money market accounts allow only a limited number of withdrawals per period, usually per quarter. The plus side of a money market is that it tends to yield higher interest due to the higher amounts required for deposit.
There are many different types of savings methods available. There is no wrong way to invest your money. A typical low interest yielding savings account is good if you want unlimited access to your money. If you are interested in investing long term only, you might consider a savings bond or an IRA. Whichever route you decide to go, do your research first so you know exactly what to expect. You can always change your mind at a later date, although you may pay a penalty.
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