Paying Down Your Boston Mortgage Wisely

Can’t wait to have your Boston mortgage paid off so you can do other things with that money each month? There are some smart ways to reach your financial goal of paying off your Boston mortgage faster, and wiser.

Refinance Your Boston Mortgage to a 15-Year Term

Tips for paying down your Boston mortgage wiselyGetting a 30-year mortgage is the common track most people follow when getting a Boston mortgage, mainly to keep their payments as low as possible. If you can afford the higher monthly payments on a 15-Year term, consider refinancing to the shorter term loan. You’ll usually get a lower interest rate, and you’ll pay off your Boston mortgage sooner, thereby reducing the amount of interest you pay over the life of the loan.

The trade off is, your monthly payments will be higher because you’re paying more of the principal each month. Here’s an example:

$250,000 30-Year Loan @ 5.0 percent, monthly payment is $1,342.05
$250,000 15-Year Loan @ 4.5 percent, monthly payment is $1,912.48

The total interest you’d pay on the 30-Year Loan would be $233,139.46
The total interest you’d pay on the 15-Year Loan would be $94,246.98

So as you can see, shortening your Boston mortgage to 15 years saves you a ton of interest over the life of the loan.

Make Extra Payments When You Can

If refinancing to a shorter term is not possible for you, consider making extra principal payments each month. When you pay more than your loan requires, and when you designate the extra payments to be applied against the principal balance of your loan, you end up reducing that balance at an accelerated rate. Be sure your lender applies the extra payment towards principal and not towards future payments owed, or you’ll just be giving them the gift of interest they haven’t yet earned.

To achieve the greatest benefit, the increase should be at least 1/12th of a normal monthly principal and interest payment.

Check Your Property Taxes and Insurance

For most people, their Boston mortgage payment includes four things: your principal, interest, property taxes, and insurance – which is collectively called your PITI.

Most people tend to focus on the principal and interest when they’re looking to pay down their mortgage faster. The amount you pay in property taxes and insurance, however, is often overlooked and this could be a big mistake.

If your property tax rate was set during the heady boom days of Boston real estate, you might be paying taxes based on an assessment that’s no longer valid. It might be worth it to protest the assessment with your county to see if your rate should be re-adjusted to reflect today’s lower home values.

Re-investigate your insurance. If you opt for a higher deductible, you could get a lower premium, which will result in a lower monthly mortgage payment.

If your property taxes are lowered after the re-assessment, and/or your insurance premium is lowered, you can continue to make the same monthly payment and more of your money will be applied towards the principal and interest, which will help you pay down that loan much faster.

Hopefully these tips to pay down your Boston mortgage faster and more wisely will help you become a better handler of your finances. For more mortgage tips, check out our Boston Mortgage Info section under Boston Real Estate Categories to your right.

Paying Off Your Boston Mortgage Early

Paying off your Boston mortgage may not be the smartest move you could make with your money.Paying off your Boston mortgage early may not actually be a smart idea, especially if your mortgage rate is low, or free, when you factor in inflation and tax deductibility. Making a larger payment is considered foolish if you’re not saving for emergencies or retirement first.

Savvy homeowners have long added extra money to their monthly mortgage to save interest, but it’s not necessarily the smart thing to do in this world of record-low interest rates.

Most lenders will allow borrowers to make extra payments towards their principal whenever they’d like, thereby taking months or years off a loan’s repayment period. Not to mention the interest you’d save over a 20 or 30 year period.

For example, making an extra payment each year on a $250,000 30-year fixed rate mortgage at today’s average rate of 3.4% will cost you an additional $1,110 a year, but will shorten the length of your Boston mortgage by 44 months. You’ll also save roughly $20,300 in interest by paying the mortgage off in 26 years instead of 30.

Retiring your Boston mortgage early actually has more drawbacks than advantages in today’s low-interest-rate environment.

Experts believe you shouldn’t even think about making extra mortgage payments until you first:

  • pay off all high-interest credit-card balances;
  • build up emergency savings to cover six months of living expenses if you lose your job or suffer some other serious setback;
  • make sufficient annual contributions to 529 plans or other college-savings vehicles to cover your or any dependents’ future educational expenses;
  • make the maximum allowable contribution each year to your and your spouse’s 401(k) and individual retirement accounts. For most married couples, that means putting $17,500 into each spouse’s 401(k) and another $5,000 into each person’s IRA (the maximum the Internal Revenue Service will allow as of 2013). People age 50 or older can also add another $1,000 “catch-up” IRA contribution, and sometimes put an extra $5,500 into 401(k)s.

Not many people can check off each of those items, but if you lose your job, all that extra money you’ve poured into your house isn’t something you can get your hands on when you need it without going through a refinance, but if you’ve lost your job, you won’t qualify for a refinance.

Experts add that if you have lots of spare cash and are tempted to put that into shaving years off your Boston mortgage, setting aside that same extra principal for retirement money will give you more chance to enjoy compound investment returns.

The longer you save for retirement, the better off you’ll be. Not paying off the mortgage and not having any retirement. Then you may be forced to think about something like a reverse mortgage later on just to provide you the lifestyle you may have been able to have had you saved more instead of paying down that Boston mortgage early.

For more Boston mortgage information and tips, check out our Boston Mortgage Info section under the Boston Real Estate Categories to your right.

Forgiven Boston Mortgage Debt Remains Untaxed for Another Year

Boston mortgage debt remains untaxed for another year.With all the talk about the “Fiscal Cliff” approved by Congress at the 13th hour, little attention was given to a key part of the extension that prevents distressed Boston homeowners from being taxed on forgiven mortgage debt.

The exception for “qualified principal residence indebtedness” was created by the Mortgage Debt Relief Act of 2007 and applies to most homeowners whose mortgages have been restructured to prevent foreclosures, or those who have gone through “short sales,” selling their homes for less than what is owed in mortgages.

The exception allows homeowners to exclude from their income certain cancelled debt on their principal residence.

The relief act’s extension was seen as vital to the recovering housing market. Short sales nationwide had been surging in anticipation of the exception’s end on Dec. 31. The exception will now expire on Dec. 31, 2013.

Normally, debt that is forgiven or cancelled by a lender must be included as income on your tax return and is taxable.

The maximum amount you can treat as qualified principal residence indebtedness is $2 million ($1 million if married filing separately for the tax year), at the time the loan was forgiven.

The amount of debt forgiven must be reported on Form 982 and this form must be attached to your tax return.

RealtyTrac reports that a total of 193,059 U.S. properties in some stage of foreclosure or bank-owned (REO) were sold during the third quarter of 2012, an increase of 21 percent from the previous quarter, but down 3 percent from the third quarter of 2011.

For continuous updates on how new or extended legislation surrounding the “Fiscal Cliff” deal finally approved by Congress could affect your Boston mortgage debt or taxes, stay tuned to our site. We’ll bring you updates from time to time as they become relevant to Boston real estate or Boston mortgage debts or rates.

Would You Get Your Boston Mortgage at Wal-Mart?

One in three consumers would consider a Boston mortgage from retailer Wal-Mart and almost half would consider one from online payment provider PayPal, according to a financial services study released recently.

The results should be especially disconcerting for banks because the two companies don’t even offer mortgages.

Would You Get A Boston Mortgage at Wal-Mart?

Boston Mortgage at Wal-Mart?The study shows consumers are willing to try alternative lenders as borrowers focus on price, customer service and trust in their provider when selecting a mortgage, said Doug Hautop, lending practice lead at the Carlisle & Gallagher Consulting Group, which conducted the survey.

A Wal-Mart spokeswoman declined to comment on the survey. The retailer provides small business loans at its Sam’s Club stores, but doesn’t offer mortgages (Yet).

While the Carlisle & Gallagher survey found that 80 percent of consumers would consider a Boston mortgage from a non-bank, there was a bright spot for traditional banks. Seventy percent of respondents said they would prefer to have their mortgage with one of their main banks, although only 39 percent currently do so.

Two-thirds of respondents said the high cost of getting a loan was the most painful aspect of the mortgage application process, followed by slow execution (56 percent) and poor communication with the lender (32 percent).

In the past year banks have benefited from surging consumer demand to refinance their mortgages at low interest rates. But in the coming year, refinancings are forecast to decline, so banks will need to focus more on serving customers taking out loans to purchase homes.

We’d love to know YOUR opinion. Would you consider getting your Boston mortgage from a non-bank like Wal-Mart or Pay Pal? Tell us what you think by using our comment form.

Getting a Mortgage For a Boston Property

Thinking of buying a Boston property? Mortgage rates are still near all-time lows, but are being pulled in different directions right now. Borrowers who want to grab these unbelievable rates should act now before the tug-o-war ends.

The Federal Reserve has been doing whatever it can to hold rates down, including printing billions of dollars per month to buy mortgage bonds. But higher mortgage fees, imposed by the Federal Housing Finance Agency, will push rates up later this fall.

Fannie MaeStarting Nov. 1, Fannie Mae and Freddie Mac will raise the guarantee fees they charge loan originators. On average, this increase translates into about a quarter of 1 percentage point in interest. It’s almost like the higher fees will be canceled out by the Fed’s open-ended buying program, or QE3.

Rates will likely stay near the lows until the election, he says. What happens next is anyone’s guess.

What if after the election, they say, “We’re stopping (the bond-buying program) tomorrow…” Borrowers who are on the fence should act soon. There is no reason to hold off on buying a Boston property or refinancing at these levels.

Changes Coming for Boston Property Short Sales

A series of new short-sale guidelines that go into effect Nov. 1 are supposed to make the process of short selling easier and speedier. Fannie Mae and Freddie Mac will allow servicers to streamline the short-sale process for borrowers who are in financial hardship and homeowners who have to sell their homes because of a divorce, disability or job transfer. The expedited process will open the door to more short sales as an alternative to foreclosures.