Mortgage Taxes

Introduction:

Financing the activity of home buying through various options of mortgage loans are made available to home-buyers. The Department of Housing and Urban Development is keen in rendering all the assistance for those who need it by extending mortgage loans at comparatively lower mortgage rates of interest. In addition, financial institutions like Banks, Insurance companies and private lending organizations are offering a very wide choice in mortgage loans as well as the types of interest calculations to prospective home buyers. This activity of acquisition of housing properties through mortgage loans or re-financing the mortgages entail certain tax benefits and certain expenses that is deductible from the assessable income towards payment of taxes.

Fees and charges connected with mortgage loans:

Origination fees of 0.5% to 2% is charged on the mortgage loan amount, on prime and sub-prime market, payable to the bank or broker for their services in originating the loan. Discount points are also charged to the borrower for buying down the interest rates (paid upfront interest) in some case structures of mortgage loans. They are different from the origination fees. Title Insurance fees is charged for the lender’s and owner’s insurance on the chain of title to protect their rights and escrow fees charged by the title company acting as independent third party affirming the transaction between the lender and borrower. The notary fee is for notarizing the legal document of trust deed (mortgage deed) and recording fee is for registering the documents in the recorder’s office.

Lender charges a flat fee clubbing the various heads of administration, funding, underwriting, document preparation etc. Additional lender fees are for flood certification, wire and tax services if needed.

An appraisal fee is payable for the appraiser to inspect the property and evaluate the same whether it is owner-occupied, rented, investment property, completion of construction in case of new construction etc. For checking the credit worthiness of the borrower, credit fee is charged by the company doing the job of credit reporting.

Insurance fees that may be payable on mortgage loans are – if the said property is not already covered by home owners’ association insurance (like condominiums, town homes) or if the property is situated in a notified hazardous zone like earth quacks etc. then lender insists upon this coverage. Further, if there is only one lender financing more than 80% of the loan, then Mortgage insurance is to be taken, either paying in lump sum or adding up to the value of monthly installments.

Property tax is levied on the closing price of the property. Apart from this, every sale of property attracts county or city transfer taxes. According to the custom followed in that area, the burden of payment of this tax is determined as to who should bear this tax payment.

Tax considerations related to Home ownership:

For first time home-buyers, Mortgage Interest payments are fully deductible within certain limitations. The fees and expenses payable in relation to the mortgage loans are not deductible. The only exception is the deposit points that are actual prepayment of interest on the mortgage loans are fully deductible. Here again the points paid on refinancing the mortgage can only be deducted over the life of the loan spread evenly per year.

There are so many intricate points to be noted in the mortgage taxes subject and you can get the guidance of appropriate financial advisors by visiting the website http://www.foreclosure1.com

Related Articles

Social Bookmarking