Our highlight on American Housing Month continues. Today, we’re answering an often confusing question - what is included in a mortgage payment? All mortgage payments consist of principal and interest. Principal is the portion of the payment that reduces the original amount borrowed. Interest is the portion of the payment the homeowner pays for borrowing money from a lender, charged as a percentage of your loan amount. In many circumstances, a lender may also escrow for taxes and insurance. If escrowed, your payment would now include principal, interest, taxes and insurance, often abbreviated and called a PITI payment. All this means is that the bank is collecting a 1/12 portion of your taxes and insurance, holding it in an escrow account so when the time comes the bank pays the property taxes and homeowners insurance premium on your behalf. Escrowing for taxes and insurance allows you to accrue the annual amount needed to pay these two typically large obligations in small increments over the course of a year and for many homeowners, budget their money more effectively.
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What is an escrow account? An escrow account is like a financial safety net for your home related expenses, such as property taxes, and homeowners insurance. How it works : 1. Initial Funding: at closing, you make an initial deposit into the escrow account to cover future bills. 2. Monthly Contributions: alongside your mortgage, you make monthly contributions to the escrow account. 3. Escrow Analysis: annually, your loan servicer reviews the account to ensure it covers upcoming expenses. Adjustments may happen. 4. Payment of Bills: when property taxes or insurance are due, your loan servicer taps into the escrow account to pay them. No need for sudden cash crunch!
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Escrow accounts are a common feature in mortgage agreements, ensuring seamless payment of property taxes and insurance. Here's how it works: When you pay your monthly mortgage payment, a portion is set aside in an escrow account. When the time comes to pay property taxes or insurance premiums, these funds are used. This eliminates the need for homeowners to handle these payments separately, providing convenience and peace of mind. Escrow accounts simplify financial management and ensure timely payments, protecting both the lender and homeowner's interests. #EricTheRedMLO
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You've heard of APR but have you heard of AFR? Otherwise known as the Applicable Federal Rate, it is the interest rate determined by the IRS for loans to individuals and businesses. In general, it’s important to show that the intrafamily loan, whether for a down payment or a mortgage, is an official, arm’s-length transaction and not a disguised gift. The loan parties should sign a document stating the amount of the loan, the interest rate, and other terms—such as when interest is due. Here’s where professional help might be handy. This interest rate shouldn’t be lower than the Applicable Federal Rate determined by the Internal Revenue Service at the time the loan is made, or the IRS will add an imputed interest rate raising it. The IRS publishes these rates monthly for short-, medium- and long-term loans. For loans made in April 2024, the rate for long-term loans—which are longer than nine years—is about 4.5%, well below the rate for most home mortgages now. And yes, the loan can be refinanced if rates go down.
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Escrow accounts are a common feature in mortgage agreements, ensuring seamless payment of property taxes and insurance. Here's how it works: When you pay your monthly mortgage payment, a portion is set aside in an escrow account. When the time comes to pay property taxes or insurance premiums, these funds are used. This eliminates the need for homeowners to handle these payments separately, providing convenience and peace of mind. Escrow accounts simplify financial management and ensure timely payments, protecting both the lender and homeowner's interests. #EricTheRedMLO
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Tip of the day: Are you confused about how a trust affects taxes on mortgage interest and property taxes on your primary home? Here's a common question: Can I still deduct the mortgage interest on my home loan on my personal tax return if you put my home into a trust? The answer is yes, subject to IRS regulations. As long as your mortgage is a secured debt on a qualified home in which you have an ownership interest, you may continue to deduct the mortgage interest and property taxes. Trust beneficiaries are allowed tax deductions for interest on their home mortgages and property taxes even if the trusts are making the payments. However, the tax consequences stay with the trust if the trust (not you) is indebted for the mortgage and owns the property. However, a simple trust is typically paying a mortgage obligation of a beneficiary - you. My .2/hr non-billable.
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Tax season tip 💼 Did you know many homeowners use their tax refunds strategically? By putting refunds into escrow for a future home, or paying down a mortgage, they smartly manage finances and shorten loan terms! 🏡💡 #HomeownerHacks #TaxSeasonTips #SmartSavings #RealEstateInvesting #escrowservices #prominentescrow
Prominent Escrow Services Inc. on Instagram: "Tax season tip 💼 Did you know many homeowners use their tax refunds strategically? By putting refunds into escrow for a future home, or paying down a mortgage, they smartly manage finances and shorten loan terms! 🏡💡 #HomeownerHacks #TaxSeasonTips #SmartSavings #RealEstateInvesting #escrowservices #prominentescrow"
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Understanding your new property tax assessment. Most everyone has received one of these in the mail. However, the math isn't exactly clear. How much are my property taxes going up? Remember that if your taxes are escrowed into your mortgage payment, this could mean your escrow account could come up short next year. You'll typically have two options. 1) Catch up your escrow account by making a large payment or 2) Accept an increase in your monthly mortgage payment. It's important to note that the rate (2.15% is supposed to decrease to around 1.4%) which could ease the pain. More to come. Still have questions? Call me! #washingtoncountytn hashtag #propertytaxes hashtag #Johnsoncitytn hashtag #jonesboroughtn hashtag #Graytn
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Maximize Your Savings with Mortgage Tax Credits A mortgage tax credit helps make homeownership more affordable by lowering the amount of income tax you owe. Offered through programs like the Mortgage Credit Certificate (MCC), this credit allows qualifying homeowners to claim a portion of their annual mortgage interest as a direct reduction of their federal income tax bill. Unlike a tax deduction, which only reduces your taxable income, a tax credit cuts down the actual tax you owe, potentially saving you a lot of money. The exact benefits depend on where you live and the specifics of the program, so it's a good idea to check with a tax professional or your local housing authority to see if you qualify and how much you can save.
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It is less than 2 weeks until the 5th October. If you are self employed and applying for a mortgage this is a key date to remember. Currently lenders are still okay to accept your tax calculations and tax overview for 2022 however, after the 5th October the majority of lenders will need your 2023 income documents. If you are looking to apply for a mortgage in the coming months we would strongly recommend processing your 2023 tax returns There are a number of lenders who can still accept the 2022 tax calculations after the 5th October so there will still be options available. If you are set up via a limited company, we also have access to lenders who will assess income via company accounts. Options may be available with these lenders if you have more recent accounts to hand. If you are self employed and need advice with your mortgage, please contact JF Financial Solutions for assistance. ☎ 0161 711 1720
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"People told me to stick to my budget, but how much house in the Woodlands, Texas can I afford? And what budget should I have for a house anyway?" These are very valid questions that I've heard from people in the Spring, the Woodlands, Conroe communities these days. Hence, I would like to address this question: The amount of house you can afford depends on various factors including: 💰 Your income, 💯 Credit score, 💸Down payment, and 📈Current interest rates. As a general rule, many financial advisors suggest that your monthly mortgage payment should not exceed 28% of your gross monthly income. Also, consider other costs like property taxes, insurance, and maintenance. With a down payment of 20% and a good credit score, you may be eligible for a larger loan! Consult a mortgage lender or use online calculators to get a more precise estimate based on your individual financial situation and goals. Or reach out to me and I can guide you to the right direction: 📲 (713) 480-3608 📧 anh@anhjorgensen.com #realestate #realestateagent #homebuyertips #conroerealestate #conroerealestateagent #thewoodlandsrealestate #thewoodlandsrealestateagent #springrealestate #springrealestateagent #houstonrealestate #houstonrealtor #NorthHoustonRealEstate #oakridgenorth #theAteam
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