Monthly Archives: September 2013

The Real Cost of Renting vs. Owning

Some people believe that homeownership is riskier than renting. However, the numbers clearly show that owning a home is still a very solid path to build wealth. Conversely, everyone agrees that renting will not help you achieve prosperity.

Even though home prices have been dropping in many parts of the country, the long-term data can be used as evidence that even with conservative appreciation your bottom line costs are significantly less than when renting.

Factoring in the tax benefit that home-owners receive is another bonus that improves the bottom line cost of owning your home.

Also keep in the mind that the costs of owning a home have been steadily declining while rents have been steadily increasing!

Your Home = Your Savings Account

Additional irrefutable evidence is that homeowners pay down the principal more and more with each payment. This loan reduction is essentially a forced savings account because the value of your payments accumulates in the equity of your home.

If you are the type of person who is renting because you are not sure now is a good time to invest in a home, give us a call at 800-499-6371 and we will run the numbers for your individual situation. You’ll probably be thrilled to discover how dramatically your financial future can improve.

Factors used: $200,000 purchase price, 20% down, $160,000 30 yr. fixed loan at 4%.  Principal & Interest payment = $763.86, taxes = $250/Mo., Insurance = $50/Mo. & Maintenance = $166.67/Mo.  Tax deductibility at 28%.  Tax savings, principal paid and appreciation averaged over a 5 year period.  Always consult with your tax advisor for tax advice specific to your situation.

Does 100% financing still exist?

Yes, it does! You can still get 100% financing with two great mortgage programs!

VA Financing
VA financing allows veterans to purchase a home with no down payment-you must have a VA Certificate to qualify.

Rural Development – VHFA or RD
Rural Development also offers a 100% financing option. There are specific property types and location requirements, but overall it is a great way to help borrowers buy a home with little or no money out of pocket. Rural Development allows the seller help to pay the closing costs and has a more flexible credit requirement than traditional mortgage products.

Don’t let cash savings stand between you and purchasing a home. Contact us today instead of waiting years to save up for a down payment.  Remember, in that time, rates and home values will likely rise as today’s record affordability slips away.

We offer a free, no-pressure, one-on-one Homeownership Strategy Session to learn more about these programs and to find out what you can afford. We will help you to create a concrete plan to finance your dream home.

You will leave our appointment with a copy of your credit report, a copy of the Homeownership Strategy and Coaching Session Worksheet detailing where you stand and your next steps and/or with a pre-qualification letter.  If you are looking now, or just starting to plan, when it comes to purchasing a home we can help!

We look forward to finding you the best mortgage product to meet your needs.

How Does The ‘Gift Tax’ Really work?

What are the real consequences of giving a gift for a down-payment? You may be surprised!

You want to help your child or grandchild with the purchase of their new home but you are worried you will have to pay a ‘gift tax’.  What exactly is this tax and how does it work? Well, to start, the IRS defines a gift as “any transfer to an individual, either directly or indirectly, where full consideration (measured in money or money’s worth) is not received in return.”  In other words, if you give someone something of value and don’t receive an equal value in return, you have given them a gift.

How are gifts taxed?

Gifts that you or your child receives are not considered income, and don’t get reported on your tax return. That being said, you can’t simply dodge taxes by calling your income a gift. So what’s all this talk about gift taxes? The gift tax actually applies to the donor, not the recipient. The whole point of this tax is to prevent individuals from transferring their estate to others before their death, thereby avoiding the estate tax.

Exclusions from the gift tax

There is an annual gift tax exclusion that currently stands at $14k/recipient. In other words, you’re allowed to give away up to $14k per recipient per year, to as many recipients as you wish, without any tax implications. This limit is effectively doubled for married couples, who can jointly give gifts up to $28k/year total to a single recipient. Also, if there are two parents gifting to a husband and wife, they can effectively give 56k per year with no tax implications.  More importantly, there is also a lifetime exemption before the gift tax is triggered. If you exceed the annual exclusion of $14k/recipient, you’ll have to file a gift tax return, but you won’t have to pay the gift tax until you reach the lifetime federal estate tax exemption of 5.25 million per person or 10.5 million per couple.

What happens once you exceed your lifetime limit? How much will you owe? At that point, the gift tax rate is, essentially, the estate tax rate and the amount owed will depend upon the estate tax rates in force at that time.

What you need to know

The concern about a ‘gift tax’ has prohibited thousands of families from assisting their children or grandchildren with the purchase of a home. However, the vast majority of these gifts could be given within the yearly limit and almost all within the lifetime limit. Don’t let confusion and misinformation stop you from helping your family members own a home of their own.

Debt Consolidation – Refinance and Save Money Every Month

Debt consolidation is an easy way to save money each month

Although rates have jumped considerably from the lows of earlier this year, there is still a tremendous opportunity to refinance and save money through debt consolidation.

I recently worked with a couple that had a rate of 5.625%. We were able to refi them with no points and no closing costs into a 30 year fixed rate of 5% while cashing out enough to pay off their second mortgage, three credit cards and a high interest school loan. The total monthly savings was over $900/month!

This money, if pre-paid against the new mortgage, would actually pay off the new loan in just a bit over 10 years! However, this may not be the best use of these freed up dollars as this couple has two young children and no college funds. Also, although they both have retirement accounts, they are under-funded. Most likely a combination of a college funding plans and increased contribution to their retirement accounts would make the most sense.

I’m referring them to a qualified financial advisor to make the best choice for their family.

If you would like to see what we can do for you, simply email us at or give us a call at 802-658-5599.

Awards & Recognition: