Real Estate Archives - Hanover Mortgages

February 26, 2021

Underground Compound of 4 Fallout Shelters in Montana Awaits Buyer To Burrow In

When spectacular mountain views are available, nearby homes almost always feature an abundance of windows to soak in the vistas.

However, this property in Montana heads in a completely opposite direction. These four homes have no windows at all—they’re completely underground.

The quartet of below-ground homes sit beneath 10.6 acres in Paradise Valley near Emigrant, MT, just north of Yellowstone National Park.

Listed for $1.75 million, the earth-sheltered homes were originally built as fallout shelters. They offer all the amenities a comfortable residence requires—albeit with curved walls.

Three of out of the four homes measure in at about 2,500 square feet, and each features multiple bedrooms, bathrooms, and living spaces.

The fourth home is significantly larger, with space to accommodate a crowd looking for a real escape.

“The largest one has several bunk rooms, so you could have more than a couple people in there,” says the listing agent, Theresa Lunn.

Each boasts a basement for food and supplies storage and to house all of the mechanicals.

The earth keeps the houses at a constant 50 to 55 degrees and to increase the temperature as needed, each home is equipped with its own HVAC and ventilation system.

“It never feels musty in there with the air circulation system. It always smells fresh,” Lunn says.

Each home comes with its own kitchen, complete with appliances.

“Once you’re in there, they’re comfortable. It’s just like you’re in a house,” Lunn explains. “You walk down hallways, but then you just you walk into a kitchen that you think is your mom’s kitchen—a great area, bedrooms, very nice bathrooms.”

One house features a pool table in the rec room.

The current owner is a builder and is willing to sweeten the deal for a buyer who might be interested in buying the land and the underground homes.

“He would put a very nice [above-ground] home for an extra $240,000 onto the list price. Underneath the house, it would have a discrete entrance into shelter No. 4,” Lunn explains. “The additional house has not been built. He is offering that as a buyer package, if someone wanted that.”

The Paradise Valley area is known for its outdoor activities.

“It’s arguably one of the most beautiful places in the U.S., for sure. It’s a huge mecca for fly fishermen,” Lunn says, adding hunting, hiking, snowmobiling, four-wheeling, and horseback riding are also popular.

“It’s a great spot for vacation rentals,” Lunn says, adding that renting an underground home could offer a unique allure for guests. “If you bought this, you could live in it and still rent it out. It’s also a great retreat possibility.”

Lunn says buyers have shown an interest in the property—ranging from those in search of a sustainable property, to folks who desire the ultimate in protection.

The agent says she doesn’t like to use the term “preppers,” because of the negative connotations attached to the term. But she acknowledges that that is basically what people do when they store supplies in underground bunkers.

“If our great-grandparents didn’t prep, none of us would be here,” she says. “It’s just being prepared.”

The homes are currently attached to the electrical grid, but could be unhooked if a buyer decided to rely on the property’s own generators for power.

As in the case of most fallout shelters, the entrance to each home is through a thick door. Upon entry, the hallway takes a turn at a right angle.

“Any bunker worth its salt has to have those 90-degree turns, because nuclear and chemical material can’t go around [corners],” Lunn explains. “That’s really one of those tips of the trade for guys that are building bunkers.”

Lunn stresses these are regular homes where people would be very comfortable living or vacationing.

“[They’re not] some kind of freaky, end-of-the-world, zombie-apocalypse whatever. There is a lot of need for this type of property.”

Source: realtor.com

February 25, 2021

Even with high lumber prices, new home sales beat

Extreme increases in lumber prices have caused some people to go bearish on new home sales. Not this one! If we play a version of rock, paper, and scissors with lumber prices and mortgage rates, mortgage rates will win. Mortgage rates have a much more significant influence on the new home sales market than lumber prices, even at their current highs.

Proof of this is the recent new home sales report released by the Census Bureau. New home sales beat expectations by a lot, and all the revisions to the last report were positive.

Last month, I wrote that we should have expected new home sales to moderate after their parabolic rise.

Sales are still working to find a sustainable trend after the massive distortion in all housing data lines due to COVID-19. This recent report, especially regarding the positive revisions to the last report, tells a solid story for new home sales in 2021 as long as rates stay low.

From Census: “Sales of new single-family houses in January 2021 were at a seasonally adjusted annual rate of 923,000, according to estimates released jointly today by the U.S. Census Bureau and the Department of Housing and Urban Development. This is 4.3% (±18.1%)* above the revised December rate of 885,000 and is 19.3% (±19.5%)* above the January 2020 estimate of 774,000.

When reviewing new home sales data, it is wise to keep an eye on the monthly supply. When the monthly supply is 4.3 and below, builders will have the confidence to continue building. This is especially true when the 3-month average is 4.3 months or below. Currently, inventory is at four months with a three-month average of 4.06 months of supply, so it’s looking pretty good. The revisions on this report showed a lower monthly supply than in the previous month.

The low monthly supply is why builders’ confidence is high, despite the massive spike in lumber prices. As a high school basketball coach in my previous life, I know that sometimes all that matters is that you shoot better than your opponents. Don’t overthink it. Better sales plus lower inventor equals increased builder confidence.

Today, the MBA’s purchase application data was also positive by 7% year over year, even with the President’s Day holiday and the Texas snowstorm — two factors that typically hurt applications. Positive year-over-year growth is a good thing.

So far this year, our year-over-year comparisons have been against a “pre-covid” housing market. March 18 is almost here, which means year-over-year comparisons of housing data are going to get funky. If you see scorching year-over-year growth – don’t be fooled that it will be a sustainable trend.

Purchase applications in 2021 have exceeded my estimated peak rate of growth of 11%. I expected to see a trend growth rate between 1%-11% year over year, up until March 18. We are currently trending at 12.375%. The substantial purchase application growth speaks well for housing sales 30 to 90 days out.

The take-home message is that sales are strong, which will contribute to hotter home prices. Right now, we want the rate of growth to cool down.

Next week for HousingWire, I will explain why we should expect to see some purchase application data show weaker year-over-year data in the second half of 2021. There is more to this story than higher mortgage rates.

Source: housingwire.com

February 25, 2021

Mortgage delinquencies below 6% for first time since March

For the first time since March 2020, the national mortgage delinquency rate fell below 6% to 5.9% in January, according to data from Black Knight on Wednesday.

At the current rate of improvement, the data giant estimates 2.1 million borrowers remain 90 or more days past due though are not yet in foreclosure. While modest mortgage delinquency improvements have occurred for several months, loans considered seriously delinquent are still five times that of pre-pandemic levels.

Thanks to widespread moratoriums, borrowers have managed to avoid eviction and foreclosures for some time now. Foreclosure starts and sales activity managed historic lows in January with starts down 86% year-over-year and sales down more than 95%.

The FHFA most recently extended COVID-19 foreclosure and forbearance moratoriums to March 31, 2021 and the Department of Housing and Urban Development‘s also kicked the foreclosure can further down the road for FHA and USDA loans to June 30, 2021.

While those extensions have reduced short-term foreclosure risk, they are also serving to extend the recovery timeline, Black Knight said. But even with these continuous extensions, Black Knight estimates 1.8 million mortgages will still be seriously delinquent at the end of June when those moratoriums are slated to lift.

From forbearance to post-forbearance: How to make the process effective

To accommodate the large volume of loans still in forbearance, mortgage servicers must have functional, flexible and effective forbearance processes in place. Here are some actionable steps to create that process.

Presented by: FICS

While servicers gear up to handle the million-plus borrowers that will feed through the mortgage delinquency pipeline, recent research from the Urban Institute estimates that a looming foreclosure crisis isn’t actually on the horizon.

A bevy of loss mitigation waterfalls from both the FHA and FHFA allows borrowers not in forbearance programs eligibility for loss mitigation options, including mortgage modifications. Still, not every borrower will qualify for a modification, and some will be forced to downsize or rent, the Urban Institute noted.

Borrowers also have the most equity available to them in history, and those with ample home equity could exit their home, if they needed to, with their credit intact and potentially some cash in hand.

However, approximately 626,000 of the 3.2 million delinquent borrowers have government loans in Ginnie Mae securities. Because of their high loan-to-value ratios at origination, these borrowers are likely to have less home equity.

“Our analysis shows that, even among delinquent borrowers, less than 1 percent have negative equity and 5.5 percent have near-negative equity. For comparison, in the aftermath of the Great Recession, approximately 30 percent of homes were in negative or near-negative equity, but the number is now 3.6 percent,” Urban Institute report said.

Source: housingwire.com

February 24, 2021

Can you use a 203k loan for an investment property?

203k loans for investors: A special use case

The FHA 203k rehab loan can be an affordable way to buy or refinance a home and refurbish it with a single loan.

This might make the 203k loan attractive to investors and fix-and-flippers. But there’s a catch.

These mortgages are limited to ‘primary residences,’ meaning the borrower has to live in the home full time. So they’ll only work for specific types of investment properties.

But there are ways to legally and ethically use a 203k loan for rentals and investments. Here’s how.

Verify your 203k loan eligibility (Feb 23rd, 2021)

In this article (Skip to…)

FHA 203k loan for investment properties

There’s only one legitimate way to use a 203k loan for an investment property. You can buy and renovate — or construct or convert — a multifamily (2-4 unit) building and live in one of the units.

FHA allows borrowers to purchase 2-, 3-, and 4-unit properties and renovate them using the 203k loan.

To fulfill FHA’s residency condition, you’ll need to occupy one of the units yourself as your primary residence for at least 12 months.

You can rent out the other unit(s), and even use the rental income to cover your monthly mortgage payments.

Benefits of the FHA 203k loan for investors

While this might not be your first idea of an investment property, it can be a foot in the door for first-time investors who want to test out owning and renting properties.

It’s also worth noting that since you’d be buying the property as a primary residence, you get access to lower interest rates.

This means you’d have lower monthly payments and pay less interest overall compared to someone with a ‘true’ investment property mortgage.

Drawbacks

The main downside to this strategy is that you yourself need to occupy one of the units for at least one year.

After 12 months, you could rent out the unit that you live in and move on to purchase other real estate.

But FHA is not for serial investors. Once you use one FHA loan, you likely can’t get another one. You’ll have to secure other financing if you move out and buy again.

Also, keep in mind that you will be living side by side with your future tenants for those 12 months — some may consider this a downside while others won’t mind.

Another downside: FHA loans come with pricey mortgage insurance premiums (MIP) which borrowers are normally stuck with until they sell or refinance into a different loan program.

So there’s a lot to consider before going the 203k investment property route.

But for the right borrower, this could be a great strategy to finance and renovate their own home and a few rental units at the same time.

Verify your 203k loan eligibility (Feb 23rd, 2021)

Can I use a 203k loan if I already own the home?

If you already bought your home, you can use a 203k rehab loan to refinance your current mortgage. This opens up another back door for investors.

You could potentially use the 203k loan to refinance your current home, make renovations, then move after one year and rent the house out as an investment property.

FHA allows you to rent out a home you still own with an FHA loan, as long as:

You fulfilled the one-year occupancy requirement
You moved for a legitimate reason, like a work relocation or upsizing to a bigger house for a growing family

This would only work for refinancing a home you currently live in and plan to keep occupying for at least a year after the loan closes.

If you already moved and kept your previous home as a rental property, you would not be able to use the 203k rehab loan since the home is no longer your primary residence.

How does the lender know if it’s my primary residence?

Some people make good livings by buying fixer-uppers and then selling them after rehab — aka “flipping” them.

A few might be tempted to take advantage of the 203k program by lying about their intention to live in the home. After all, how can the FHA prove in court what your intentions were when you made the application?

The main argument against this strategy is that lying on a mortgage application can be a felony that could see you in federal court.

Even an email to a contractor mentioning that you don’t intend to live there or other indication of your plans could show up in the court case.

And, repeat FHA buying would not be a viable long-term strategy.

FHA only allows borrowers to have one active FHA loan at a time, except in rare circumstances (for instance, if your work required you to relocate and you needed to buy another home near your new job).

In other words, borrowers cannot move once a year and continue financing new homes with FHA loans.

If you see yourself as an entrepreneur with a rosy future in real estate investing, set yourself up for success by choosing a legitimate financing option that keeps your options open in the long run.

Check your investment property loan options (Feb 23rd, 2021)

About the FHA 203k rehab loan

The 203k rehabilitation loan is backed by the Federal Housing Administration (FHA), an arm of the U.S. Department of Housing and Urban Development.

This mortgage program lets you buy a rundown home — a fixer-upper — and then renovate it using a single loan that covers the purchase price and cost of repairs.

If that involves demolishing the existing structure down to the foundations and rebuilding, that’s fine under 203k loan rules, too.

203k renovation loans are only for necessary repairs to improve the structure or livability of the home. So the funds can’t be used to add luxuries like tennis courts or swimming pools.

And there’s one more important rule: You cannot do the construction or remodeling work yourself. The 203k loan requires you to hire a reputable, licensed contractor, unless you are one yourself and you work full-time as a contractor.

Limited vs. Standard 203k mortgage

There are two flavors of the 203k program: the “Limited 203k mortgage” and the “Standard 203k.”

The Limited 203k used to be called the “Streamline 203k.” As its new name implies, this version is more restrictive about the amount you can spend and the types of work you can do. But it’s also less complicated, hence its former “streamline” moniker.

The maximum repair budget for a Limited 203k loan is around $31,000 ($35,000 officially, but there are mandatory reserve accounts that eat into that sum). And you can’t make any structural renovations to the home.

On the plus side, these loans require much less paperwork and hassle.

The Limited 203k loan is typically best for current homeowners who want to make cosmetic repairs or renovations. It works a bit like a cash-out refinance, except you must spend the money on the home improvements you’ve listed.

A “Standard 203k loan,” by contrast, allows much higher budgets and would be better for home buyers purchasing serious fixer-uppers that need structural repairs.

FHA loan requirements

The basic requirements for 203k loans are similar to those for other FHA mortgages:

A 3.5% down payment — Based on your purchase price and rehab budget combined, subject to an independent appraisal
Minimum 580 credit score — It may be possible to dip below 580 if you have a 10% or higher down payment
Debt-to-income ratio of 43% or less — No more than 43% of your gross monthly income can normally be eaten up by housing costs, existing debt payments, and other inescapable monthly obligations such as child support

Although the FHA sets these minimum requirements, you’ll be borrowing from a private lender. And they’re free to impose their own standards.

For example, some mortgage lenders require a credit score of 620 or 640 for an FHA loan. If one lender has set the bar too high for you, shop around for other, more lenient ones.

Verify your FHA 203k loan eligibility (Feb 23rd, 2021)

What repairs can you do with a 203k loan?

The FHA is putting up taxpayers’ money to guarantee part of your mortgage. So it’s not in the business of writing loans for luxury upgrades.

There are strict rules about the types of home renovations you can do and the amount of money you can borrow.

In fact, the total amount you can borrow for your home purchase and renovation costs is governed by current FHA loan limits, which vary depending on local home prices.

You can find the loan limit where you wish to buy using this lookup tool.

Maximum rehabilitation loan budgets

We already mentioned that a Limited 203k loan gives you a cap of around $31,000 on your rehab budget.

A Standard 203k lets you have as big a rehab budget as you want, capped only by your local loan limit minus the home’s purchase price.

Your total loan amount can be up to 110% of the property’s future value when complete.

But an appraiser will pore over your plans to make sure the final value of the home — after your projects are completed — will match the amount FHA is lending you.

What you can spend your rehab budget on

The Limited 203k is mostly intended for refreshing a home that’s a bit tired. So you can do things like:

Replacing flooring and carpeting
Installing or replacing an HVAC system
Remodeling a kitchen or bathroom
Fixing anything that’s unsafe
Making the home more energy-efficient

But you can’t use the money to do structural work, such as moving loadbearing walls or adding rooms.

The Standard 203k is very different.

You can do all the above and almost everything else, including serious construction work. Heck, you can even move the house to a different site if you get the FHA to approve your plans.

The 203k loan process

Limited 203k loans are pretty straightforward. Indeed, they’re easier than most to qualify for and set up.

But a Standard 203k isn’t like that. It may be your best path to your dream home. But there will be some extra hoops to jump through compared to a traditional mortgage.

Here’s the basic process to apply for and close an FHA 203k loan.

Find your best lender — You can save thousands just by comparison shopping among multiple lenders. They aren’t all the same! Make sure the ones you consider offer FHA 203k loans and are experienced in delivering them. You’ll want a lender familiar with the specifics of 203k loans to make sure the process goes smoothly
Get pre-approved — Pre-approval shows you your exact budget as well as your future interest rate. And you’ll get a chance to resolve any issues that arise in your application
Find the home you want — This is the fun bit. But download the Maximum Mortgage Worksheet PDF from HUD’s website because that will help you assess whether your plans are affordable
Find a 203k consultant — A 203k loan consultant will visit the home site, inspect the building, and then prepare a document outlining the project’s scope and specifications, along with a detailed cost breakdown for each of the repair tasks. He or she also prepares lender packages and contractor bid packages, along with draw request forms for stage payments
Find a licensed contractor — Some lenders maintain lists of approved contractors. And your consultant may help you find a reputable one. Make sure candidates have proven records for projects similar to yours and are familiar with FHA 203k jobs. Many contractors add serious delays to 203k approval because they can’t seem to complete the paperwork correctly
Have the home and project appraised — The lender will set this up for you
Begin work — Once the appraisal is approved, the lender should let you close. And your contractor can then begin work, drawing on funds in an escrow account

Limited 203k loans require the borrower to live in the home while repairs are completed. So if it’s a new home purchase, you’ll have to move in within 60 days, which is the norm for FHA loans.

Standard 203k loans, on the other hand, might include structural repairs that render the home unlivable while construction is going on. In this case, the home buyer is not required to move in right away.

Rehab loan alternatives for investment properties

FHA 203k loans aren’t the only way to buy and renovate a home with one loan. Fannie Mae’s HomeStyle Renovation and Freddie Mac’s CHOICERenovation products can do much the same thing.

Since the HomeStyle and CHOICERenovation loans are conventional mortgage loans, they won’t charge for private mortgage insurance (PMI) if you put at least 20% down. This can save home buyers a lot of money on their monthly mortgage payments.

However, like the 203k loan, these programs are only available for primary residences.

If you’re buying a ‘true’ investment property — meaning you won’t live in one of the units yourself — these loans aren’t an option.

But investors have other renovation loans to choose from.

Traditionally, you would buy a home with a mortgage and then borrow separately — perhaps with a home equity line of credit or home equity loan — to make improvements. Then you could potentially refinance both loans into one later on.

Another option is using a cash-out refinance on your investment property or primary residence and putting the cashed-out funds toward repairs or upgrades.

Of course, all these types of loans require you to have enough equity built up to cover the cost of repairs.

And if you choose to draw from the equity in an existing investment property, you’ll pay higher interest rates.

But the upside is that there are no rules about how the funds can be spent. So if luxury upgrades are on your agenda, this could be the way to go.

Explore all your options

FHA 203k loans are only available to a select group of investors: Those who will buy a multi-unit property and live in one unit themselves.

For real estate investors looking to fix-and-flip or build a large portfolio of investment properties, an FHA loan isn’t the right answer. But there are plenty of other financing options out there.

Be sure to explore all your loan options before buying or renovating a home. Choosing the right program and lender can help you achieve your goals and save money on your project.

Verify your new rate (Feb 23rd, 2021)

Compare top lenders

Source: themortgagereports.com

February 23, 2021

$16.9M French Provincial Mansion Near NOLA Is Louisiana’s Most Expensive Home

Now on the market for $16,895,000, a mansion built to the most exacting specifications has achieved the distinction of being Louisiana’s most expensive home.

Owned by Shane Guidry, CEO of Harvey Gulf International Marine, and his wife, Holly, the house on Northline Street in Metairie, LA, just outside New Orleans, is a 15,230-square-foot French Provincial masterpiece.

“It took him three years to design and build this, and they used the most high-end products in this house that you may ever come across,” says the listing manager, Peggy Bruce, who is working with the listing agent, Shaun McCarthy.

“It’s an outstanding home. When you think of luxury, this is what that entails,” she says.

For starters, to make sure there was enough marble for the ground floor and that all the marble matched, the Guidrys bought the entire quarry in Italy.

“It’s 24-by-24 marble flooring that is just luxurious. The veins are just beautiful, and it all just kind of flows together, because it all came from one quarry,” says Bruce.

Entry

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Living space

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Master bathroom

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Closet

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Quite apart from its ultra-sleek appearance, the marble flooring is heated in the first floor master bedroom and bathroom.

“In the master bathroom, it’s a walk-in shower, and there’s a clawfoot soaking tub in the front of the shower,” Bruce says. “The walk-in has two entrances and four shower-heads. It’s got hand-carved mosaic tile in the shower.”

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Watch: This Ghirardelli Family Home Is a Feast for the Eyes

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In the master closet and elsewhere in the home, the cabinet hardware is solid silver.

“It’s tremendous. Everything was hand-milled and hand-carved—custom-done,” she says.

The enormous kitchen offers an array of custom cabinetry, a chandelier, and a large island with plenty of room for seating.

Kitchen and dining area

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The mansion in the town’s Metairie Club Gardens neighborhood has a total of six bedrooms, seven bathrooms, and four half-bathrooms, all with tall ceilings. In the entry, the ceilings are 24 feet high.

“It’s dramatic,” Bruce says, adding that the owners purchased many antique fixtures in Europe and brought them back, rewired them, and included them in their design.

“You go into a lot of homes that look like this on the outside, and you expect the inside to be a little gaudy,” she says. “This is so tastefully done. It is beautifully appointed. Everything just flows perfectly.”

Home theater

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Gym

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Many of the home’s features are connected to automated technology, and can be controlled via a mobile device or remote, including the home theater.

Bruce explains that it has leather seats for 15 people and includes a digital ceiling that can be set either to clouds, or to the night sky, with twinkling stars.

Spa

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Spa

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Spa

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Shower

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There’s also a full spa with a massage room, wet and dry saunas, and hair and nail stations.

Canine friends can enjoy an indoor dog home and washing station.

Outdoor space

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Outside, there’s a large outdoor kitchen, along with a petite pool.

“It’s a cocktail pool”—a small pool with steps, Bruce explains. “It’s not very deep at all. It’s really for just lounging and sipping cocktails or just kind of cooling off if it’s a hot summer night or summer day.”

In addition to the three-car garage, there’s room to park a variety of vehicles on the half-acre property.

The owners purchased the land in 2011 for $1.2 million, and Bruce says they poured at least $15 million into building this dream home. But times change, and the family is moving out of town to pursue other interests.

“I think the perfect buyer for this home is someone that values being in the New Orleans area and understands what went into this house—because it is a hefty price,” Bruce says.

The pool of buyers looking for this type of home in the New Orleans area is not large, and Bruce says the future owner might be someone from out of town.

“Beyoncé put a play on this house a few years back, and the owner wasn’t interested in selling at that time,” she says. “We have tried to reach out to Beyoncé using some connections we have, but haven’t received a response yet.”

Wine room

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For more photos and details, check out the full listing.
Homes for sale in Metairie, LA
Learn more about Metairie, LA

Source: realtor.com

February 22, 2021

How Much Is Capital Gains Tax on Real Estate? Plus: How To Avoid It

Capital gains tax is the income tax you pay on gains from selling capital assets—including real estate. So if you have sold or are selling a house, what does this mean for you?

If you sell your home for more than what you paid for it, that’s good news. The downside, however, is that you probably have a capital gain. And you may have to pay taxes on your capital gain in the form of capital gains tax.

Just as you pay income tax and sales tax, gains from your home sale are subject to taxation.

Complicating matters is the Tax Cuts and Jobs Act, which took effect in 2018 and changed the rules somewhat. Here’s what you need to know about all things capital gains.

What is capital gains tax—and who pays it?

In a nutshell, capital gains tax is a tax levied on possessions and property—including your home—that you sell for a profit.

If you sell it in one year or less, you have a short-term capital gain.

If you sell the home after you hold it for longer than one year, you have a long-term capital gain. Unlike short-term gains, long-term gains are subject to preferential capital gains tax rates.

What about the primary residence tax exemption?

Unlike other investments, home sale profits benefit from capital gains exemptions that you might qualify for under some conditions, says Kyle White, an agent with Re/Max Advantage Plus in Minneapolis–St. Paul.

The IRS gives each person, no matter how much that person earns, a $250,000 tax-free exemption on capital gains from a primary residence. You can exclude this capital gain from your income permanently.

“So if you and your spouse buy your home for $100,000, and years later sell for up to $600,000, you won’t owe any capital gains tax,” says New York attorney Anthony S. Park. However, you do have to meet specific requirements to claim this capital gains exemption:

The home must be your primary residence.
You must have owned it for at least two years.
You must have lived in it for at least two of the past five years.
You cannot have taken this exclusion in the past two years.

If you don’t meet all of these requirements, you may be able to take a partial exclusion for capital gains tax if you meet certain exceptions (e.g., if your job forces you to move before you live in the home two years). For more information, consult a tax adviser or IRS Publication 523.

What’s my capital gains tax rate?

For capital gains over that $250,000-per-person exemption, just how much tax will Uncle Sam take out of your long-term real estate sale? Under the new tax law, long-term capital gains tax rates are based on your income (pre-2018 it was based on tax brackets), explains Park.

Let’s break it down.

For single folks, you can benefit from the 0% capital gains rate if you have an income below $40,000 in 2020. Most single people will fall into the 15% capital gains rate, which applies to incomes between $40,001 and $441,500. Single filers with incomes more than $441,500, will get hit with a 20% long-term capital gains rate.

The brackets are a little bigger for married couples filing jointly, but most will get hit with the marriage tax penalty here. Married couples with incomes of $80,000 or less remain in the 0% bracket, which is great news. However, married couples who earn between $80,001 and $496,600 will have a capital gains rate of 15%. Those with incomes above $496,600 will find themselves getting hit with a 20% long-term capital gains rate.

Your tax rate is 0% on long-term capital gains if you’re a single filer earning less than $40,000, married filing jointly earning less than $80,000, or head of household earning less than $53,600.
Your tax rate is 15% on long-term capital gains if you’re a single filer earning between $40,000 and $441,500, married filing jointly earning between $80,001 and $486,600, or head of household earning between $53,601 and $469,050.
Your tax rate is 20% on long-term capital gains if you’re a single filer, married filing jointly, or head of household earning more than $496,600. For those earning above $496,600, the rate tops out at 20%, says Park.

Don’t forget, your state may have its own tax on income from capital gains. And very high-income taxpayers may pay a higher effective tax rate because of an additional 3.8% net investment income tax.

If you held the property for one year or less, it’s a short-term gain. You pay ordinary income tax rates on your short-term capital gains. That’s the same income tax rates you would pay on other ordinary income such as wages.

Do home improvements reduce tax on capital gains?

You can also reduce the amount of capital gains subject to capital gains tax by the cost of home improvements you’ve made. You can add the amount of money you spent on any home improvements—such as replacing the roof, building a deck, replacing the flooring, or finishing a basement—to the initial price of your home to give you the adjusted cost basis. The higher your adjusted cost basis, the lower your capital gain when you sell the home.

For example: if you purchased your home for $200,000 in 1990 and sold it for $550,000, but over the past three decades have spent $100,000 on home improvements. That $100,000 would be subtracted from the sales price of your home this year. Instead of owing capital gains taxes on the $350,000 profit from the sale, you would owe taxes on $250,000. In that case, you’d meet the requirements for a capital gains tax exclusion and owe nothing.

Take-home lesson: Make sure to save receipts of any renovations, since they can help reduce your taxable income when you sell your home. However, keep in mind that these must be home improvements. You can’t take a deduction from income for ordinary repairs and maintenance on your house.

How the tax on capital gains works for inherited homes

What if you’re selling a home you’ve inherited from family members who’ve died? The IRS also gives a “free step-up in basis” when you inherit a family house. But what does that mean?

Let’s say Mom and Dad bought the family home years ago for $100,000, and it’s worth $1 million when it’s left to you. When you sell, your purchase price (or “basis”) is not the $100,000 your folks paid, but instead the $1 million it’s worth on the last parent’s date of death.

You pay capital gains tax only on the difference between what you sell the house for, and the amount it was worth when your last parent died.

What if I have a loss from selling real estate?

If you sell your personal residence for less money than you paid for it, you can’t take a deduction for the capital loss. It’s considered to be a personal loss, and a capital loss from the sale of your residence does not reduce your income subject to tax.

If you sell other real estate at a loss, however, you can take a tax loss on your income tax return. The amount of loss you can use to offset other taxable income in one year may be limited.

How to avoid capital gains tax as a real estate investor

If the home you’re selling is not your primary residence but rather an investment property you’ve flipped or rented out, avoiding capital gains tax is a bit more complicated. But it’s still possible. The best way to avoid a capital gains tax if you’re an investor is by swapping “like-kind” properties with a 1031 exchange. This allows you to sell your property and buy another one without recognizing any potential gain in the tax year of sale.

“In essence, you’re swapping one investment asset for another,” says Re/Max Advantage Plus’ White. He cautions, however, that there are very strict rules regarding timelines and guidelines with this transaction, so be sure to check them with an accountant.

If you’re opting out of the rental property investment business and putting your money in another venture that does not qualify for the 1031 exchange, then you’ll owe the capital gains tax on the profit.

For more smart financial news and advice, head over to MarketWatch.

Source: realtor.com

February 20, 2021

Get a no-closing-cost mortgage and a low rate, too

Out-of-pocket mortgage fees are optional

Mortgages always have closing costs, whether you’re buying a home or refinancing. But you don’t always have to pay them out of pocket.

You get to choose how your home loan is structured.

You could take your lowest rate and pay closing costs on your own dime. Or you can ask your lender to cover closing costs and pay a slightly higher interest rate.

These “no-closing-cost” mortgages aren’t always a good deal because a higher rate means you pay more in the long run.

However, today’s mortgage rates
are so low that many borrowers can get the lender to cover their fees and still
get an ultra-low rate.

Find a no-closing-cost mortgage (Feb 19th, 2021)

In this article (Skip to…)

What is a no-closing-cost mortgage?

A no-closing-cost mortgage or no-closing-cost refinance isn’t exactly what it sounds like. There are still closing costs. You just don’t pay them yourself.

What a no-closing-cost mortgage really means is that the lender covers part or all of your closing costs. In exchange, you pay a higher interest rate. The lender’s extra profit from your higher rate repays your closing costs in the long run.

Lenders can cover some or all of your closing costs in most cases, including loan origination fees, appraisal fees, title search and title insurance fees, and prepaid taxes and insurance.

Depending on the lender, a no-closing-cost mortgage loan can also be called a:

Zero-cost mortgage
No-cost mortgage
Lender credits
Rebate pricing
Lender-paid closing costs

All these terms refer to the same arrangement, where you’ll pay a higher interest rate in order for the lender to cover closing costs.

This is no free lunch — if you keep the loan for a long time, you could end up paying more via the higher interest rate than you would have paid in upfront closing costs. So you should think about how long you plan to keep your new loan before deciding on a no-closing-cost refinance or home purchase loan.

However, if you’re ready to buy a home or refinance but don’t have the upfront cash, a zero-cost mortgage can be a smart way to lock in at today’s low rates without having to wait and build your savings up.

Check no-closing-cost mortgage rates (Feb 19th, 2021)

Types of no-closing-cost home loans

There are several ways to
structure a no-closing-cost loan. A lender might cover all your
upfront fees or only select closing costs.

The amount and type of closing
costs your lender absorbs will affect your interest rate, so it’s important to
compare offers on equal footing.

To compare zero-cost offers,
make sure each lender covers the same items. For example:

The mortgage lender covers lender fees but not the third-party expenses or prepaid items (upfront property taxes and homeowners insurance)
The lender covers lender fees and third-party charges, but not prepaid items
The mortgage lender absorbs everything, including loan costs and prepaid expenses

A lender that covers all
three parts of your closing costs will likely charge a higher rate. Conversely,
a lender that charges a lower rate is likely only covering its own fees, not
fees from the appraiser, title company, or escrow service.

No-closing-cost mortgage example

For example, your
various rate and fee options might look like this:

2.750% rate — The borrower pays all closing costs, including lender fees, third party fees, and prepaid costs
2.875% rate — The borrower pays no lender fees, but does pay third party costs and prepaid costs
3.250% rate — The borrower pays no lender or third party charges, only prepaid costs
3.50% rate — The borrower pays nothing out of pocket whatsoever

None of these options are
good or bad. Borrowers should understand that lower rates cost more upfront,
and higher rates cost less upfront.

To be able to pay your
closing costs, lenders increase your interest rate and use the extra profit
from the loan to pay your costs.

It’s up to you to decide if the upfront savings are worth the higher interest rate and payment.

No-closing-cost refinancing

A no-closing-cost refinance can be a particularly good idea because it eliminates the one big drawback to refinancing — the upfront cost.

For this to work, however, your new interest rate needs to be low enough that you can accept a slight rate increase and still see your desired savings.

A higher interest rate will result in a higher monthly payment and a bigger long-term cost. So before using a no-cost refinance, you should check the numbers and determine:

Will your monthly payments still be reduced at the no-closing-cost mortgage rate?
How long do you plan to keep the mortgage before moving or refinancing again?
How much more will you have paid in interest by the time you sell or refinance? Is this amount higher or lower than paying closing costs upfront?

The point at which the added interest cost starts to outweigh your savings is the “break-even point.”

With a no-cost mortgage refinance, you’ll likely want to move or refinance again before you hit the break-even point.

Of course, if you need lower mortgage payments because your monthly budget is too tight, the higher long-term cost might not matter as much. You might be happy with the month-to-month savings and lack of upfront fees.

As always, the right mortgage refinance strategy depends on your current loan and your personal finances.

When you’re shopping around, you can ask lenders for offers both with and without closing costs to compare your potential interest rates and long-term costs.

No-closing-cost vs. ‘rolled’ closing costs

A zero-cost loan isn’t the only way to eliminate closing costs when you refinance. Most homeowners also have the option to roll closing costs into their new loan balance.

Rolling closing costs into your loan is not the same as a no-closing cost refi.

By rolling in closing costs, you increase your mortgage amount, which means you’ll pay more interest in the long run. But your actual interest rate stays the same.

Compare that to a no-closing-cost mortgage refinance, which keeps your loan balance the same but increases your rate.

There are pros and cons to each strategy.

Keeping your lower interest rate by rolling closing costs into the loan might save you more on interest. But it also increases your loan-to-value ratio (LTV), which could impact your refinance eligibility or your ability to cancel private mortgage insurance (PMI).

Your refinance options also depend on the type of loan you have.

For instance, FHA and VA Streamline Refinance loans only allow borrowers to include upfront mortgage insurance fees in the loan amount. All remaining closing costs need to be paid out of pocket.

Note, including closing costs on the loan balance is only an option when you refinance — not when you buy a home. But you can get a no-closing-cost loan with a higher interest rate when you purchase real estate.

The right no-cost option depends on your particular mortgage.

You can compare both options when you’re shopping for refi offers to see which makes more sense for your financial situation.

Compare no-closing-cost mortgages (Feb 19th, 2021)

Getting a zero-closing-cost loan from a
mortgage broker

A no-closing-cost loan looks a
little different with a mortgage broker than it does when you’re working
directly with a lender. That’s because the broker is an intermediary; they can
help you negotiate the rate and terms of your loan, but they don’t control the
end lender’s pricing.

However, a no-cost loan is still
possible via a mortgage broker. You just need to know how they work.

Mortgage brokers collect a
yield spread premium, or YSP, as payment to work on your loan.

The end lender pays this fee
to the mortgage broker for delivering your loan. The YSP is the mortgage
broker’s profit.

Knowing this, you can request
that the broker use the YSP to engineer your no-cost home loan.

For instance, a broker
getting paid a 1% YSP by the lender need not charge the borrower an origination
fee. In this case, the YSP can save you one percent of your loan amount in
out-of-pocket costs. A broker getting 2% YSP can cover even more of your
closing costs.

When comparing no cost loans
between mortgage lenders and brokers, ask for the same structure
from each.

In other words, ask them all
for offers with no lender fees. Third party costs like appraisal, credit
report, title and escrow and recording fees should be fairly similar. Your taxes
and insurance should be the same regardless of which lender you choose.

This allows you to look at just one variable: the interest rate.

Mortgage rates with no closing costs

The downside to a no-closing cost mortgage is that you’ll pay a higher interest rate. Even a slight increase in your rate can cost you thousands more over the life of the loan.

However, you should consider the interest rate increase in perspective.

Today’s rates are at historic lows. And that means many borrowers can accept a slightly higher rate while still ‘saving’ compared to homeowners who bought or refinanced a year ago or more.

Imagine you’re offered a 30-year fixed mortgage rate of 2.875%. Your lender is willing to cover closing costs but will increase your rate to 3.5%.

That’s a big increase compared to your original rate offer. But 3.5% is still less than half the historic average for 30-year rates — and it’s less than most borrowers would have paid any year prior to 2020.

Yes, you should get the lowest rate you can to save money in the long run. But if a no-closing-cost loan is your only route to homeownership or refinancing, it’s not a bad deal.

The important thing is that you’re aware of the tradeoff between zero upfront costs and bigger long-term costs so you’re certain you’re making the right decision.

Tips to lower your no-cost mortgage rate

The lower your initial mortgage rate is, the lower your no-closing-cost mortgage rate will be.

To get a no-cost mortgage loan and a low rate, try to present a strong mortgage application. You’ll typically get a lower interest rate if you have:

A credit score above 720
A clean credit report with no late payments
A debt-to-income ratio (DTI) below 43%
A loan-to-value ratio (LTV) below 80% (meaning you have at least 20% home equity)

Additionally, refinancing with at least 20% equity (or buying a home with 20% down) can help you avoid private mortgage insurance (PMI) or FHA mortgage insurance premiums (MIP).

Eliminating mortgage insurance costs can go a long way toward reducing your monthly payment and making up for the increased interest rate on a no-cost loan.

But perhaps the most powerful way to lower your rate is to let lenders compete for your business. Get two or three quotes. Send the quote with the lowest rate and fee combination to one of the other lenders. See if that lender can beat it.

You may end up getting much of your closing costs paid for and get close to the full-closing-cost rate.

What are today’s mortgage rates?

Purchase and refinance rates are still at historic lows. Many home buyers and homeowners can get the lender to cover their upfront costs and still secure a great interest rate.

Make sure you compare no-cost offers from a few different lenders if you want to go this route. Check that each one is covering the same closing costs so you can make an apples-to-apples comparison of upfront costs and interest rates.

Verify your new rate (Feb 19th, 2021)

Compare top lenders

Source: themortgagereports.com

February 19, 2021

Homebuilders preparing for big 2021, data suggests

Overall housing starts in January totaled 1.58 million units, a decline of 6% from December, according to the latest statistics from the U.S. Census Bureau. But there’s reason for optimism from homebuilders – a huge spike in building permits.

“Despite a modest month-over-over decline, single-family housing starts are up 17.5% from one year ago,” said Odeta Kushi, deputy chief economist at title insurance firm First American. “Single-family permits, a leading indicator of future starts, are up nearly 30% from one year ago. It’s still not enough to significantly narrow the gap between supply and demand, but it’s a step in the right direction.”

A total of 1.881 million residential building permits were issued last month to homebuilders, roughly 1.2% above December’s tally but more than 22% greater than were issued a year ago.

Interestingly, the overall decrease in housing starts last month was driven by single-family starts, which decreased by 12.2% from the prior month, while multi-family starts increased by 17.1% from last month. A seasonal dip was to be expected, experts said, but the widespread distribution of a COVID-19 vaccine should give the economy – and the housing industry – a shot in the arm in 2021.

Doug Duncan, Fannie Mae’s senior vice president and chief economist, said the vaccine combined with President Joseph Biden’s $1.9 trillion fiscal stimulus will drive consumer interest in locking-in historically low mortgage rates, thus driving the amount of home sales upward.

Making housing more affordable by bridging the affordable supply gap

In the last few years, the number of existing single-family homes for sale has decreased. But home prices have increased. To make homeownership a possibility for everyone, there needs to be a higher supply of affordable homes.

Presented by: Fannie Mae

“We assume that the proposed fiscal stimulus of around $1.9 trillion will be passed in mid-March, and that growth will accelerate sharply beginning in the second quarter,” Duncan said. “If 2020 was the year of the virus, then 2021 will more than likely be the year of the vaccine. Whether the vaccines are effective, including with the new virus strains, and how broadly and timely they can be distributed remain key questions.”

Economists are wary, Duncan said, of a potential boom-or-bust scenario for the housing industry in the new year: the combination of rising interest rates from record-low levels, a high national debt, and the risk of rising inflation.

“Very strong growth in the second half of 2021 could push inflation, and thereby rates, up significantly in 2022, thus invoking a Fed response of tightening and a significant deceleration later in 2022,” Duncan said. “This is not our base case scenario, but we see it as a significant risk moving forward.”

Added John Pataky, TIAA Bank executive vice president: “With rates creeping up and homebuilding still partially restricted by the pandemic, the housing market’s next phase of growth may be much more of a grind.”

Privately-owned housing starts in January hit an adjusted rate of 1.336 million, down 2.3% from December but up 2.4% from January 2020.

Single-family authorizations in January were at 1.269 million, up 3.8% from December.

January housing starts increased in the Northeast (+2.3%), but decreased in the Midwest (-12.3%), the West (-11.4%), and the South (-2.5%).

Where homebuilders go from here is of great interest to industry experts: Construction rates are expected to climb in the opening quarter of 2021 and possibly into the summer thanks to high-lumber prices and low land inventory, but the demand for homes is expected to remain high thanks to low interest rates and the hope of President Joseph Biden’s $15,000 first-time homebuyer tax credit.

“Lumber now costs more than double what it did this time last year – a fact that that has reportedly caused some builders to stop some projects mid-way,” said Matthew Speakman, Zillow economist. “Land and labor shortages also continue to hinder the ability to take on new projects.”

Still, Speakman noted, homebuilders’ earned some benefit of the doubt with the way they handled hurdles in 2020.

“Home construction was a source of strength in the U.S. economy in 2020, as builders strove to keep up with robust demand for housing and put up homes at the strongest pace in a decade and a half,” he said.

Source: housingwire.com

February 18, 2021

@properties plucks Detroit shop as first franchisee

Chicago’s @properties announced its first franchise location Tuesday – the Detroit shop formerly known as Alexander Real Estate.

Alexander, now rebranded as @properties, is a four-year-old firm with 45 agents and $120 million in 2020 sales volume that has so far focused on downtown Detroit.

Snapping up Alexander is part of a “national expansion plan,” said Chris Lim, president of growth at @Properties, with the Windy City brokerage eying a “half-dozen” franchise announcements in the coming year.

Co-founded by Thad Wong and Michael Golden in 2000, @Properties is the biggest real estate brokerage in Chicago and 10^th largest shop in the nation with $10.8 billion in 2019 sales, according to RealTrends.

For years, Wong and Golden strictly focused on the Chicagoland area. But in 2018, a private equity firm, Charlottesville, Virginia-based Quad-C Management, took a stake in the company.

How to Diversify Your Brokerage to Weather Economic Hardship

Diversification is one approach brokerages can adopt to help ensure stability in unavoidable times of uncertainty, work to protect their revenue and – ultimately – financially weatherproof their business.

Presented by: Motto Mortgage

Since then, @Properties bought an undisclosed stake in Charlottesville brokerage Nest Realty as well as Atlanta’s Ansley Real Estate, headed by Bonneau Ansley.

Wong and Golden announced in September that they were shopping for franchise partners, and that they would charge a $35,000 franchise fee, plus a monthly tech fee of $50 per agent, and collect 6 percent of the franchisee’s revenue.

In exchange, @Properties is offering its marketing department, their proprietary technology @platform, and potential financial assistance in a firm’s expansion.

Eric Walstrom, principal broker of the previously named Alexander, said that his brokerage is now positioned to expand into Detroit suburbs like Grosse Pointe, and eventually Ann Arbor.

Given today’s real estate market, Walstrom said, it was inevitable Alexander would join forces with a larger shop.

“With VC and outside money coming into the space, we started looking for opportunities for partnerships,” Walstrom said.

“I literally met with absolutely everybody,” Walstrom added, stating he found @properties’ marketing and technology superior.

Few real estate brokerages in 2021 say their technology is anything less than second to none. Walstrom said @properties sold him because they have a comprehensive in-house platform, which he believed made their technology more adaptable than brokerages that acquire a customer relationship management system.

Source: housingwire.com

February 18, 2021

House on a Boatâbut Not a Houseboatâfor Sale in Massachusetts

It’s a house on a boat—but it’s not a houseboat.

“It’s one of the only homes in Buzzards Bay that’s floating and not actually considered a houseboat. It’s considered a floating home, because it does not have a motor inside. For it to be moved, it has to be pulled by a barge or put onto a larger structure,” explains listing agent Jan MacGregor.

Listed for $275,000, the 1,800-square-foot home in Fairhaven, MA, is docked on Fort Street in the Fairhaven Shipyard. However, the location will have to change.

“The person who lives in it currently works at the shipyard, so he was able to keep it there. But a future buyer will have to move it. It’s not going to be able to stay at the shipyard,” MacGregor says.

And the possibilities of where to take this floating home are almost endless.

There are “marinas that accommodate large vessels like this down in Newport, and then also in Cape Cod, and in Boston,” MacGregor says. “You can go anywhere because you can move the vessel anywhere you choose. It really just gives you the opportunity to explore as much as you want. You could go all the way down the Eastern Seaboard with it if you really felt like it.”

Known now as Tapestry, the three-bedroom and two-bathroom house once served as the Governor Herrick, a dredge for the Cape Cod Canal.

In 1912, the Governor Herrick and its twin, the Governor Warfield, helped build the artificial waterway that joins Buzzards Bay to Cape Cod Bay by removing 100,000 cubic yards of earth and silt each month.

The waterway became operational on July 29, 1914—a month prior to the opening of the Panama Canal.

After clearing the way in Cape Cod, the Herrick continued to work for many more years along the Eastern Seaboard.

Living space with wood stove

John Maciel

In the mid-1990s, an enterprising seaman saw the formerly busy vessel beached along the shoreline and turned it into a home. The Tapestry’s current owner has lived aboard the vessel for about 15 years.

The vessel measures 76 feet long and 27 feet wide, and the shingled exterior hides a welcoming residence.

“It’s definitely surprising. Nothing really stands out about [the exterior], and then when you get inside everything feels so warm and cozy,” MacGregor explains. “It doesn’t feel cramped at all. You feel like you’re in an actual house. It’s really cool being on the water, and it’s super spacious.”

Each floor has a large bedroom with bathroom. The second floor also has a loft area and laundry room. The main level has the kitchen, dining area, and living space.

The kitchen has space for dining as well as a small refrigerator and freezer disguised as cabinets. A full refrigerator sits in the pantry.

The interiors of the Tapestry are more accommodating now than when it was a dredge.

“There are little holes in the wooden walls downstairs because there used to be bunk beds screwed into the walls when there were workers staying on the barge because they were working on Cape Cod Canal,” MacGregor says.

For electricity, the house has to plug in to marina shore power, and all of the other mechanicals are located below the living space.

“It’s basically like a basement in the barge, but that’s where everything is kept so you can live on it year-round,” MacGregor explains.

There are huge heating fuel and water tanks as well as a holding tank for waste. All need regular maintenance as does the steel structure of the barge.

“The perfect buyer for this house is somebody who is adventurous and wants to live simply and not be in the hustle and bustle of the city,” MacGregor says. “They just want to be out of the way and kind of have their quiet and their peace in their space with a nice view.”

For more photos and details, check out the full listing.
Homes for sale in Fairhaven, MA
Learn more about Fairhaven, MA

Source: realtor.com

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What is capital gains tax—and who pays it?

What about the primary residence tax exemption?

What’s my capital gains tax rate?

Do home improvements reduce tax on capital gains?

How the tax on capital gains works for inherited homes

What if I have a loss from selling real estate?

How to avoid capital gains tax as a real estate investor

Out-of-pocket mortgage fees are optional

What is a no-closing-cost mortgage?

Types of no-closing-cost home loans

No-closing-cost mortgage example

No-closing-cost refinancing

No-closing-cost vs. ‘rolled’ closing costs

Getting a zero-closing-cost loan from a mortgage broker

Mortgage rates with no closing costs

Tips to lower your no-cost mortgage rate

What are today’s mortgage rates?

Compare top lenders

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