The Tax Benefits of Selling Your Home

The tax benefits of selling your home can be quite great. The most notable tax break to selling your home is that you can exclude from taxes up to $250,000 in profit from the sale of your home (if you're a single owner) $500,000 (for couples filing jointly) and not owe any capital gains taxes. This exclusion also covers the sale of a parcel of land adjacent to your house - unless it's used for business.

• First, the property you're selling must be your principal residence, which simply means that you live in it.
• Second, you must have lived there for at least two of the previous five years, although this time does not need to be sequential. You are allowed to aggregate your time living in the house to meet the two-year residency requirement. What does this mean? It means that you can rent your house for two years, live in it for two, and rent it for another year and still be eligible since during those five years you owned and lived in the property for two years.
• Finally, while technically there's no limit on the number of homes you can sell and reap tax-free gain, each sale must be at least two years apart. That still leaves you room to make some money on several properties. You can sell your residence this year, pocket any gain within the tax limits and buy a new residence. Two years later, you can do the same thing, again and again every two years.

Please see your tax attorney for more information on tax benefits that are unique to your specific selling situation.

Making Sure Your Credit is in Tip-Top Shape!

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Ukraine and China

Tensions in Ukraine flared up again this week, causing investors to shift assets from stocks to the relative safety of bonds. Weaker than expected economic data in China also favored bonds over stocks, while the US economic data was roughly neutral. As a result, mortgage rates ended the week lower.

The most significant US economic report released this week, Retail Sales, contained some good news and some bad news. On the positive side, the results for February were stronger than expected. Unfortunately, the figures for January were revised lower. Overall, this left the data over the two-month period a little weaker than expected. Given the offsetting effects of the solid headline number and the downward revisions, combined with weather related distortions, the report caused no change in the economic outlook and had little impact on mortgage rates.

There was a lot of talk in the mortgage industry this week about a proposal out of the Senate Banking Committee that would replace Fannie Mae and Freddie Mac. Together Fannie and Freddie purchase or insure the majority of fixed-rate mortgages, so any changes to their structure would have enormous implications for mortgage lending. In the proposal, a new government entity would take over many of the functions of Fannie and Freddie, while some of the default risk would be shifted to private insurers. Both political parties support a reduction in the risk to taxpayers, but beyond that opinions vary widely about the appropriate role of government in the housing market. As a result, this proposal is viewed as a starting point for a long political debate, and the implementation of major reform of Fannie and Freddie is projected by most experts to be many years away.

Delayed Financing After a Cash Purchase!

   


If you’ve got a client who is doing a quick closing with cash but may want to consider doing delayed financing, we have an option for your client!  Help them conserve their cash and have them give us a call!

Your borrower might qualify as long as their cash out refi loan doesn’t exceed their initial investment in the property purchased and was an arm’s length transaction.  We must also be able to verify that no financing was acquired for the cash purchase and we must be able to source/trail all the funds used for the cash closing.  All other refi requirements must be met, but this is a great option for clients who are interested in conserving their cash.  (Note on jumbo delayed financing, the transaction must be completed within 90 days of the initial closing or cash out rules restricting the dollar amount of cash out will apply)

As you know, making a cash offer can be of great value in negotiations and getting delayed financing after closing helps refill your client’s bank account.  It’s a win win for everyone!

We look forward to hearing from you and your clients about all your mortgage needs.  Call us any time!

Strong Demand for US Bonds

The economic data released this week contained mixed results and had little impact on mortgage rates. Strong demand for US fixed income securities was the main influence this week, helping mortgage rates end the week a little lower.

There were strong indications this week that foreign investors, most likely in Japan and China, increased their purchases of US bonds, including mortgage-backed securities (MBS). The currencies of Japan and China have weakened recently versus the dollar, and the economic policies currently in place in both countries have caused investors to expect their currencies to weaken further. This makes US bonds more attractive to investors in those countries as the investor not only receives interest on the investment, but also expects appreciation in the value of the investment.

After a couple of months of weaker readings, the New Home Sales report released this week was a pleasant surprise. January New Home Sales jumped 10% from December to an annual rate of 468K units, far above the consensus of 400K. This was the highest level since July 2008. Also released this week, January Pending Home Sales posted a slight increase.

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Jobs and Manufacturing Fall Short

This week's key economic data showed that the performance of the economy in January was weaker than expected. The shortfalls caused stocks to decline and mortgage rates to improve, but the impact was surprisingly small.

Both the Employment report and the ISM Manufacturing data saw big misses. Against a consensus forecast of 185K, the economy added just 113K jobs in January. Also disappointing, many investors had hoped to see a large upward revision to the weak December reading, but it was little changed. The ISM national manufacturing index declined sharply to 51.3, far below the consensus of 56.0. For perspective, the increase in jobs reflects improvement in the labor market, and readings above 50.0 indicate an expansion in the manufacturing sector. The issue is that the pace of economic growth has slowed.

The relatively minor impact of this week's data must be considered in light of the performance of the stock and mortgage markets so far this year. Entering the week, stocks had experienced significant losses, as the Dow was down roughly 5% in January. Similarly, mortgage rates have seen significant improvement since the start of the year. To some degree, investors were already positioned for weak data this week. In addition, questions about the effect of unusually severe weather caused some investors to question how accurately recent data reflects the underlying strength of the economy.