Reasons to Refinance: Some Tax Breaks Dead and Gone

Congress passed “fiscal cliff” related legislation on Tuesday that stops some taxes from going up; it also killed some popular tax breaks that could make some homeowners reconsider delaying a refinance loan application in favor of trying to get lower mortgage payments to offset those higher taxes.

A Marketwatch.com report includede this mention of tax breaks dead and gone in the wake of the fiscal cliff issue. “The payroll tax cut is gone, meaning smaller paychecks in 2013. That tax break, in effect in 2011 and 2012, reduced the Social Security tax rate workers pay to 4.2%. The resumption of the regular 6.2% rate means about $1,000 less in pay this year for people making $50,000.”

Some might not be interested in a refinance loan that simply offsets that $1000 a year, but those on tighter budgets may want to give serious thought to the implications refinancing might bring--especially younger homeowners who aren’t trying to beat the retirement clock.

Any borrower currently weighing the options should also pay attention to the current mortgage loan rates available. At the time of this writing the rates are not at the rock-bottom lows they were four weeks ago, but those rates are still impressive--and helpful.

Could a borrower current on his or her FHA loan or VA mortgage with a history of good payments get an effectively lower mortgage payment or interest rate (or both?) with a Streamline refinance loan? Depending on the lender and the circumstances, yes. Borrowers should know that current conditions are ideal for any homeowner who feels ready to commit. But the current low rates are not guaranteed to STAY low--it’s crucial not to take the current mortgage rates for granted. Many financial analysts say the rates could change at any time based on current events, market trends or other variables.

That does not mean you should rush into a refinance loan, but consider the implications of waiting versus acting now--how much will your loan cost if rates go higher? Or stay the same? knowing the numbers--or at least having some familiarity with them--could help you make the most informed decision when the time is right.

Housing market conditions are improving in hundreds, if not thousands of areas. Refinance loans that require an appraisal are also getting more attractive as home equity keeps rising in these markets--those who don’t need to lower monthly payments but do want to cash in on their equity should also speak to a loan officer about the options and mortgage rates currently available.

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