Reducing Interest Expense

Debt Free Home.png0% financing has induced car buyers into taking the plunge because it doesn’t cost anything to use someone else’s money. While mortgage rates are not at zero, they’re close enough that many buyers are applying similar logic.

Qualified mortgage interest is deductible on taxpayers’ returns subject to the maximum acquisition debt of one million dollars. For the fortunate homeowners who have paid off their mortgage, their acquisition debt was reduced to zero and only the interest on a maximum home equity debt of $100,000 is deductible.

If you have to pay interest, deductible interest is preferable because it reduces your actual cost.

Consider the following example of a taxpayer with a $500,000 debt-free home. If they did an 80% cash-out refinance of $400,000, $100,000 would be considered home equity debt and the interest on that would be deductible on their income tax. The other $300,000 of debt is considered personal debt and the interest is not deductible.

However, because the rates are currently so low, the loss of deductibility of the interest doesn’t have as much impact as if the rates were higher. The key is to have a good purpose for the money that would offset the actual cost of the interest.

Paying off a higher rate debt such as credit cards, student loans, possibly, business debt could all have significantly higher interest rates. Refinancing a home and eliminating debts like these could be a big savings.

All lenders are not the same. Call for a recommendation of a trusted mortgage professional.

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About abolastig

Antonio Bolastig is one of the most dedicated and committed real estate agents in the nation. There are many qualities and skills that go into being an excellent real estate professional - integrity, in-depth community and market knowledge, marketing savvy, effective negotiation skills and a high-quality professional network, all of which are hallmarks of how Antonio work. That said, in Antonio''s experience as a real estate professional, hehas also found that providing the very best service is essentially about putting his clients first. This means keeping himself accessible, being a good listener as well as a good communicator, and responding quickly to his clients'' needs. This "client first" philosophy has always been his approach and it requires him to continually improve his skills and ways of doing business. In addition, Antonio has found that the latest technologies are enabling him to do everything he has always done, only much more quickly and efficiently. They''ve also helped him to extend the range of services he provide to his clients. Antonio is backed by Realty Mark LLC, recognized as a leading real estate company with the most productive sales force in the industry. So when you decide that you''d like to buy or sell a home, please contact Antonio Bolastig.
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