The Benefits of an FHA Loan
There has been a lot of controversy surrounding the new tax bill and what it will mean for Americans. Whatever your beliefs, this new bill will come with certain changes to buying, selling, or simply making payments on your home. Any person looking to purchase a home or refinance in 2018 should be aware of the way these new changes can affect the housing market. We’ve done some research and collected the information homeowners and future homeowners will want to know from this tax bill.
Home Equity Loans? There’s a Better Solution
There’s very little incentive for homeowners to get a home equity loan after the introduction of the new tax bill. Homeowners can no longer write off the interest paid on home equity loans. Before the change, up to $100,000 of that interest was deductible. The better solution for homeowners looking to refinance is the streamline refinance program which can alter the length of the loan term, the monthly mortgage payments, or the interest rates instead of giving a cash-out loan. This means that families looking for a cash-out solution to pay student loans, car loans, or other bills can reduce their monthly payments by lengthening their term instead. That way, the money from their old, higher payment can be used elsewhere.
Lower Interest Deductions in 2018
The new tax plan also cut the amount of mortgage interest deduction which can be claimed by a family from $1 million to $750,000 for a first or a second home. Home buyers looking to invest in a second home may find that this deductible amount is not substantial enough to be able to purchase it. Any home bought before December 15, 2017 can continue to deduct up to $1 million, so the change will only affect those with closing dates subsequent to that time. Additionally, interest paid on vacation homes will no longer be deductible under the new tax bill, making a second home for vacation use a much more expensive endeavor in the long run. Make sure to talk to a mortgage specialist if you’re looking to purchase your first or second home.
Mortgage Rates Likely to Rise Slightly in 2018
Only about 2% growth is projected for mortgage rates in the new year. This comes as no surprise, but it’s not necessarily due to the new tax plan alone. In the last ten years since the 2008 recession of the American economy, the country has made a drastic turn for the better. Typically as demands for homes rise, mortgage rates will rise as well. However, this has not been the case in recent years. Mortgage rates have stayed relatively low in comparison to the economic growth the last decade. For example, 10 years ago, the unemployment rate was around 10% of the population. Now, it rests comfortably around the 4% mark. That means another 6% of the population is looking to improve aspects of their lives: a common one being their living situation. With a more affluent society comes higher mortgage rates, so we can expect to see a slight increase in 2018. For those looking to refinance their home, it’s best to act before rates rise further because even a 1-2% increase can mean paying more for your home in the long run.
Have questions about whether your mortgage or refinance could be affected by the new tax plan? Call the experts at Oceanside Mortgage today!