In today’s economy owning a home appears to be the best way to live, create wealth and secure a good retirement. I rest my case with two or three reasons: tax write-off from the interest on your home loan and your property taxes, and the fact that most real estate increases in value because of demand, supply, inflation and government regulations.
The tax law on the sale of your owner occupied house that is currently in affect can help you create an estate that most Americans could only dream about a few decades ago.

I will explain my case so that nobody can say they didn’t know. The write-off of your mortgage interest that is part of your monthly payment (the other part being the principal pay down) and your property taxes are tax write-offs that lower your state and federal income taxes. Generally houses increase in value because of inflation which forces prices up for the materials that are used to build your house. This means that each year and each decade require a higher price to build a house and thus a higher price when you sell your house. The supply of homes usually diminishes by the neighborhoods that are more desirable forcing prices up as well. Even when we go through hard times, recessions, the prices of homes can drop but almost always the prices recover and the upward climb continues.

The best thing the government has done recently for homeowners is to allow a single homeowner who has lived in his or her owner occupied home for two years before they sell it. The single owner gets the first $250,000 in profit without being taxed by the Federal government. If you are married you receive a $500,000 exclusion from taxes on the sale of the house, again if you have lived in it for two years.

If you have 4 to 8 years with a mission you can become a millionaire by selling your houses every two years. If you are single you need to do this 4 times and pocket $250,000 each time from the profit. If you are married you need to only sell the house and put $500,000 in the bank each time. Now you have seen the bright side of the picture, but that usually doesn’t happen
that quickly.

Most people will have to be in their house for 5-10 years to get that much profit from the sale of
their house. So instead of 4 great sales for and individual and 2 for a couple it could easily be
double: 8 for a single person and 4 for a couple. It really totally depends on how driven you are. If you are a handy person who can do a lot of the fix up work yourself it will go quicker because you will be doing it and it won’t cost too much.

If I were a young man my future would depend on a steady job and most of my free time fixing
up my house so equation will work for me.

CAUTION: The Federal Government is in heavy debt and their generous tax plan for those
who are selling their owner occupied house could end at any time. They also could modify
it by extending the holding period of 2 years to maybe 4 years. They could also cut down the
amount of profit that doesn’t get taxed. If you are really anxious to do this

Let me begin by telling you that the current crop of young working people, either out of high school or out of high school and college aren’t looking for a house and many cases they aren’t looking for work either.The youngsters are not excited about owning a house because they haven’t convinced themselves as of yet, that they are their sole responsibility. While the baby boomers were coming of age they not only were house oriented they were work oriented and anxious to get both started.

Today the graduates will work for executive salaries even though only a small majority of them have enough education and work experience to qualify for the jobs and pay they want. One of the reasons they don’t have work experience is student loans. Today everybody has them; in my day almost everybody worked through college and learned the basics of hard work.

Home loans aren’t particularly easy to get today, but virtually impossible to get without working for a period of time before applying for a loan. Many of the student/workers or non worker do not have an opportunity to live at home and must seek an apartment or a rental property to shelter themselves. This is the foundation of the rental market and it is growing. Amazingly the rents in many cities are in line with the mortgage payments on an entry level house which was never true in years gone by.

Developers generally build tracts of homes for owner occupiers with very few building them for renters. Apartments are going up throughout most cities and are renting for higher prices than ever before. Individuals with an eye to the future have been buying up older houses, refurbishing them and renting or leasing them to the crowd of humanity that is trying to find a decent and less expensive way to live.

Others are buying homes in new developments and renting those to married couples as well as groups of two or three roommates that are looking for something that is more like a home than just shelter. In the suburbs of Los Angeles I have been helping investors buy these properties and rent them for $1.40 to $1.65 per square foot for 4 and 5 bedroom houses in 2400 to 2750 sq. ft. houses. 1800 square foot houses are renting for even more.

With long term mortgage rates in the 3% range the rents from the properties not only cover the costs but produce positive cash flow. If you currently live in a more expensive neighborhood the rental rates escalate very quickly and many seniors have moved to second homes, or rented smaller houses, to use the rent on their house to specifically meet their monthly overhead. There are many that make this work..

I have written this article to show what is really happening in the real estate industry. You can probably find a way to increase your cash flow without switching professions or adding a second job. Those who have cash in the bank can purchase a home that will produce a cash flow that can close any gap you may have between your current income and your expenses. Those of you who are 62 or older can possibly get a reverse mortgage, take out cash from your house and purchase a rental. The reverse doesn’t require payments on the mortgage and if you buy the rental with the cash you get from the reverse from your house you may have a balanced budget for the first time in years

Please feel free to contact us to help you design a program specifically for you. It isn’t impossible to become landlord and it can make all the difference during your senior years.

1.  A first time buyer of an owner occupied house is defined as someone who hasn’t owned
a house in three years.  Prior to that you could own as many houses as you wanted but
that would have to be sold before the three years starts.

2.  If you take out cash from your house with a home loan the money you received is not
taxable.  It is a loan, not income     .

3.  If you take more than $100,000 out of your house, whether the house didn’t have a mortgage
prior to this loan, or had a mortgage of any size you can only deduct the interest of an
additional $100,000 you take out on the new loan.
Any amount you take out over the additional $100,000 does not qualify to have
the deduction from your taxes for the interest you will pay.
You can take the interest on any loan over $100,000 if the proceeds go to improve the house.

4.  If you have a VA certificate because you were in the military or are currently in the military
you can buy a house with no money down up to $625,000.  If you have a house and want
to pull cash out up to $625,000 you can do it without any money of yours.

5.   If you have a VA certificate you can buy a house over the $625,000 maximum allowed you.
must put down 20% of the difference of $625,000 and the amount of the house.

6.   Property tax does not increase when you are refinancing your house and the value is higher
than the assessed valuation.  The mortgage industry doesn’t share information with the
taxing authority in the area.

7.   You cannot use the income from renting a room in your house to qualify for the loan.

8.   A second home that is bought with a conforming loan will get the same rate as a primary
home.  Second homes that need a jumbo loan to purchase the property will generally pay
a higher interest rate

9.   A high percentage of second homes are bought with monies pulled out of the primary
house and a mortgage loan for the balance.  There are advantages with this formula
from tax savings and the price appreciation on the second home.

10.  New tax rules have recently been adopted when selling your personal residence.  A full
dissertation will follow shortly .

Today I am writing you about the lowest fixed rate I have ever offered in the 25 plus years I have
been in this business.  This is  conforming loan up to $417,000 for borrowers with good credit,
good earnings, a modicum of reserves and who live in an owner occupied home or second home.
The rate is 2.750% for a 15 year fixed fully amortized loan and is without any points.
We also have a jumbo loan up to $2 million for a 15 year fixed with a 1 point cost subject to your loan to value. The rate on the jumbo loan is 2.875%
I caution you to move quickly as rates can change at any time.  We stand ready to lock the loan as  soon as you send it, and as quick as we can validate the information.
I believe these can be life changing rates!
Roger Schlesinger
The Mortgage Minute Guy


Reverse Mortgages

Reverse Mortgages: A simple concept most everyone confuses
Qualification:  One person on title in a owner occupied home of 1-4 units
must be 62 year of age or older.  If the dwelling has a mortgage on it there
must be enough equity to have the reverse mortgage pay off the existing loan.
The equity for a reverse mortgage is a combination of the age of the youngest
one on title and the current equity.  The closer you are to 99 years of age, the
larger the reverse mortgage.
Most owners have either a low enough mortgage or no mortgage which will allow
them to get cash in the form of two payments, one at the close of the transaction and
one a year after the close of the loan.  You also can elect an income stream that will
pay you every month or a line of credit that you can use at your convenience.  All the
cash you take out will be added to the mortgage and accrue interest.
When the heirs get the house the vast majority find that the house has appreciated
to at least what is owed if not more.  If the house is worth less than the balance you
can negotiate with the lender or give the house to the lender without owing any money.
You will not make a mortgage payment while residing in the home.  When the last
owner leaves the home the heirs will have to pay off the mortgage through a refinance
a purchase or with their own funds.  They can give the home to the lender without
being liable for any monies.
While living in the house the owner must pay the property tax, HOA fees if applicable
and the insurance on the property.  Any remodeling or repairs are also the cost of
the owners.
What does not happen to the owners who have a reverse mortgage, although people
will tell you it does happen:
       1.  Your property tax will not go up because you have a reverse.
       2.  No insurance the owners have will be affected including health and disability.
       3.  You can sell the house whenever you want without any permission by the lender.
       4.  Your heirs will lose the house when you leave.  It can only happen if they don’t
             taken one of the aforementioned steps.
       5.  You can’t take an extended vacation or the lender will call the loan.
When you understand all of the benefits of a reverse mortgage you will want one for
your family.
Rental Property:  The Time Is Right
Whether you believe the economy is the reason, or the Millennia’s (the burgeoning
youth in our country) desire to rent instead of buying a house the rental market is on
fire.  Rents are going through the roof and demand is strong.  Put that together with
a lower amount of new homes being built and now you have something to consider.
Lenders will quickly approve rentals of one to four units and the rates are low enough
to produce cash flow on the property.  Imagine a renter living in your house and paying
off the mortgage and giving you monthly cash flow as well.
Even the tax code is currently in your favor.  If you live in a house for two years as your owner occupied residence you can then turn it into a rental and when you sell the place you get $250,000 in profits free if you are a single owner and $500,000 free from income tax if you are a joint owner.  If you work it out you can do this every two years and it
won’t be long before you have a pot full of money stashed away.
People who never considered it are now becoming landlords and repeating the benefits.

15 Years Are Plenty

15 Years Are Plenty

I don’t know when first time home buyers began looking at buying a house as if it were an automobile.  Buying an automobile and choosing which one has the best monthly value makes a considerable amount of sense.  You have a way to get around but you are opting to get a new vehicle which should meet all your needs and reflect the value you feel you can afford on a monthly basis.
Buying a house does not generally have one major value such as a roof over you and your family: a place called home.  But that is just one of the reasons for buying a house, because you are also looking at a tax write off, a home that will appreciate and add to your net worth. You also could make the house a rental giving you monthly income as well.
One must consider a number of options available and starting with the home loan makes the the buyer a person who sees more than one opportunity.  The largest number of home buyers go for a 30 year mortgage because they believe it is the lowest payment for 30 years which is when the house will be paid off.  The majority believe that the 30 year loan is the cheapest one we offer.  IT ISN’T!  The following is the easiest way to understand the difference between these two loans:
             A $250,000 mortgage with a 30 year loan would be $1175.59 a month.
             A $250,000 mortgage with a 15 year loan would be $1726.45 a month.
             After 5 years with a 30 yr. your monthly payments would be $70,535
             After 2 years with a 15 yr. your monthly payments would be $41,435
Your balance on the 30 year after 5 years would be $225,869
Your balance on the 15 year AFTER 2 YEARS IS    $222,791
                 Now which loan is less expensive?
The most important part of the example is the 30 year loan has 25 years to go, while the 15 year has only 13 years to go.  Your goal should not be having the lowest monthly payment but having a life without any payment!

Three Ways With a House

Rent, fix and flip or make it your retirement but you need to make up your mind. Each of the above is a strategy that can work for you if you plan your work and then work your plan. Let’s take a quick look at each while I demonstrate why, how and when. After digesting the
ideas it is your turn to make it happen.

Renting is as much a plan as fix and flip or the retirement plan but
you must have a idea of why you are renting, how long you will rent
and what you will be doing throughout the rental period. Renting is generally the least expensive way to have housing for you alone or for you and your family. The lower expense can help you accumulate a down payment or building fund when you purchase
a home. Renting also can give you an idea of what type of house,
how many rooms and an idea of what type of floor plan works best.
Set a time limit and get to saving or investing the money!

Fix and flip is for those who want to find something in a good growing neighborhood that is under valued and buy something that you can fix up and sell hopefully for a profit. You must be careful
of the neighborhood and be quite sure it is getting better, not worse
with both the houses and the people. You should take an ARM, at
the lowest interest rate you can get because you will need your money for the remodel. Today you can get a 5/1 arm in the high
2% range to the low 3% range. To save on the income tax on your profit you need to be there 2 years and make it your owner occupied

The last plan is the retirement one even if you are in your 20’s or 30’s. You want to do that because paying a home mortgage has limited advantages, deducting the interest on your mortgage and
deducting your property tax bill. The big advantages comes when
you use this house as an owner occupied for a minimum of two years and are married. The 1st $500,000 in profit is tax free for married; $250,000 if single. With a 15 year mortgage you will have
paid the house off in 15 years; half in a little over 8 years. During that time your house can easily increase by some significant number, which when sold, would give you a nice tax free amount of cash. Do it several times and you may just have a $1,000,000 in your bank account.

Any plan can work for you if you understand it and are willing to work
it. I know that to be true, because it has worked for me!

Not Everyone Wants to Build Equity in Their House

The title of this piece suggests that a certain percentage of home buyers aren’t interested in building equity, which means they are buying houses for the tax write off from the interest paid and the property taxes.  They are doing it for several reasons: they have a net worth from investments that exceeds the loan they have and can use these investments to pay off the loan.
A second reason is they are buying a house to remodel or fix up to be sold at the end of the work.  Having an interest only loan is one of the lowest payments you can have which keeps the cost low while they are doing the work to prepare for the sale.
A third reason is that interest only loans have lower payments than fully amortizing loans and the borrower can get a more expensive house by going interest only
If the borrower is 62 years of age or older he can take a reverse mortgage if his current equity position and age give him enough of a credit that he can either pay off the current mortgage and take the reverse, Should the borrower have a house free and clear or a small loan it is possible to pull out cash on the reverse mortgage.  In both cases there will not be a mortgage payment until those on title have passed on or in a medical facility and will not return to the house.  In the reverse mortgage case the borrower is exchanging equity for no payments for life on the property except property taxes and insurance.
Those are the major reasons for lack of interest in building equity.  There are some pit falls that you must be aware of when exercising this type of loan.  The interest only loan is generally an arm, with a 30 year term and  either a 3,5,7,or 10 year fixed period.  After that period the loan becomes a variable, fixed for one year at a
time based on the index being used and the current interest rate on the index chosen.  The amortization at the time the fixed period runs out will be 27,25,23 or 20 years, all of which will bring a higher payment.  Most arms lose the interest only feature when they become a variable.  If the payment on the variable is too high you
then need to sell the place or refinance.
Before you think of going interest only please read the above, digest it and realize
that it isn’t necessarily the best loan for every borrower.

Moving Up Can Be Easier Than You Thought!

I have sent a number of ideas out to all showing various mortgages that will put you in the best financial place you can be in at this time. Today I can help you become independently wealthy with just a few moves, at most.

The U.S. Government will allow you to take $250,000 in profit from your owner occupied if you are single when you sell it without ever paying tax on it. If you are married you can take $500,000 in profits when you sell the house as well tax free. Qualifications are simple: you must be an owner occupied and you must have been in the property for two years at least or two years out of 5 years, and not just the last two years of the 5 year stay. Any two years counts and it can be or have been a rental during the 3 years you weren’t in it. If you are able to do this you will have a stipend that would be very hard to get in other ways.

We currently have a 7/1 arm; 30 year loan that is fixed for 7 years and then becomes a variable for the remaining 23 years. The interest rate is in the high 2% range for the first 7 years with the principal and interest payment on a $100,000 loan in the low $400 a month range. A million dollar loan would have a monthly payment in the low $4000 a month if you qualify. The amortization, pay down of the mortgage, is very quick.

Real Estate prices are starting to rise again and with very low interest, you can realized the price you need to make the maximum profit you want up to the tax free limits above with less trouble than you would have had in the past decade. So why not try to structure something that can help you become wealthy. We are here to help.

Remember there are various ways to structure a plan. Get on it, start working it and smile perhaps for the rest of your life.

Retirement Starts At 25

If you haven’t been paying attention let me bring you up to date. The Social Security Fund

is in a bad way at this time as the Baby Boomers who are now retiring are taking more from the
Fund that is coming in. If you are over 55 you may be okay when it is your turn to retire and start drawing your Social Security check. If you are younger than 55 years of age I would start working
on another way to get cash once you have reached 65 years of age. Those 40 and under should realize that your retirement is on you, and if you ever get anything from Social Security I would consider it a bonus.
That is why I am writing this column to explain how you can live your life to its fullest and still
build yourself a retirement package that ignores any income from the Social Security Fund. it can
all be done with real estate. First you must realize your residence is more than a home for the family it is an investment that can pay huge dividends in the future. This requires planning and the use of the right financing to make it all work.
Next comes the simple investments in real estate that have medium and long term consequences. Included in this are two types of investment: a primary residence and a pure investment. The primary residence aspect is simply realizing your house or condominium is more than just a place to live. It is an investment as well and can be short term or long term and with the right financing it should be profitable. The right financing is the shortest amortization you can afford, as it will yield the most profit.
A real estate investment can also be making the real estate part home and part investment. This comes about by buying a duplex, triplex or fourplex. You would live in one unit and the other unit(s) would be an investment. The right financing vehicle has extra importance on this type of situation. You should be able to take a much shorter amortization because you have the extra help in paying the mortgage with the rental income you collect.
The simple investment is purchasing a house, units or a condominium for rental purposes.. The property does not have to be expensive; it should be, however, as much an investment you can buy with a loan that is amortized over 15 years. Once the 15 years passes you will enjoy a major increase in your investment income which you can keep, or sell the property and receive capital gain tax advantages. If you keep the project you should begin again buying another property, as soon as your are ready financially. If you decide to sell you should seek a more expensive project as long as you use a 15 year loan. The idea behind this is to increase your assets and your income at the same time with an eye toward retirement on your terms.

There are other ways to use real estate to help your retirement in the distant future. You can
buy a second home, which should be in a nice recreational area, as a beach, lake, ski lodge, golf course, horse riding facilities or the mountains. The reason behind the various recreational facilities
is to have the opportunity to get vacation rentals for your unit. You can make a lot of money on vacation rentals which helps you pay down a shorter amortizing mortgage, which in the long run will get you a very nice capital gain on the sale of the property. Regardless of the vacation rental second homes also go up in value which fits nicely into our plan.
I am ending this report at this time because there are sophisticated maneuvers that can
come into play with options, buying and flipping and trading. I will write a column on the more
unusual ways to make money in real estate in the near future. For now concentrate on what I have outlined today.