HOW MUCH SHOULD I PAY DOWN WHEN I BUY A HOUSE?
In this episode of Real Estate Mortgage Shoppe you will get some tips on how to determine how much to pay down when you buy a house-advantages and disadvantages to paying 10% to 20% down or all cash. You will also hear some important points from a tax attorney and a private mortgage insurance expert as well as from Jo Garner, mortgage professional.
Let me know what real estate and mortgage information you want to hear. If I do not have the answers you need, I will try and connect you with someone who can help you. Subscribe to our updates at www.JoGarner.com and get the latest tips and trends that will help you strategize and monetize your real estate financing endeavors.
To Your Success,
Jo Garner (901) 482-0354 jo@192.232.195.219
Good morning, Memphis! Welcome to our listeners in the 50 states across the US. You’re listening to Real Estate Mortgage Shoppe. I’m your host, Jo Garner. Connect with me at www.JoGarner.com. You can also send me an email at jo@192.232.195.219 If you’re on twitter, share your comments using #JoGarner on Twitter. This episode of Real Estate Mortgage Shoppe is brought to you by the Memphis Mortgage Department with Evolve Bank and Trust.
Today is June 18th, 2016 and our general topic is HOW MUCH SHOULD I PAY DOWN WHEN I BUY A HOUSE? During our time together we will be looking at the pros and cons of using a mortgage to buy a house or paying cash. You will get some tips on how to determine how much to pay down when you buy a house-advantages and disadvantages to paying 10 to 20% down. In the studio to offer you his expertise is Tax Attorney, Wis Laughlin, a former IRS tax attorney was picked as the Top Tax Lawyers in Tennessee and in 2015 was chosen as one of the top Trust and Estates Lawyers in Tennessee. It is an honor and a pleasure to have you back in the studio again. Tell us a little about yourself and what you do for your clients.
(Jo) Wis, you and I have known each other in the networking circles for a long time .We’ve seen the real estate market when it was hot and when it was NOT and like now back to HOT again. There are a number of reasons why the real estate market it hot but one big reason is because mortgage rates are at around a 3-year low again. The conventional 30 year fixed rates were around the mid to high 3’s this past week. When rates are this low, so many times paying a mortgage payment on a house is significantly less per month than trying to make a rent payment on the same house. As I ask our listeners each week, “Are you trying to decide whether to rent vs buy? Either way you are making a mortgage payment –yours or your landlord’s.” When more and more people decide to buy a home, the supply of homes shrinks, driving up the prices in some areas. The clients I have spoken with lately aren’t just buying one home, they are buying as many homes as they can while the mortgage rates are this low. Only in America can you lock in and enjoy these rates for up to 30 years. The biggest reason for the dip in rates is due to the bond market reaction to the Fed Announcement. But rates tend to jump up faster than they fall down, so if you or someone you know is about to lock a rate on a home purchase loan or a refinance, I am happy to help them –even if they live in another state. You can reach me after this show by calling me personally at (901) 482-0354 (901) 482-0354 or you can talk with us right now while we are live in the studio by calling (901) 535-9732 or (800) 474-9732.
Wis points out the some of the tax benefits on having a mortgage.
(Jo) The real estate market seems to be doing great now. But back during the real estate crash, some of my older clients told me they pulled their retirement funds out and paid off their mortgage just so they could feel secure, knowing their house was paid off. For some families, having the house paid off is a great way for them to continue building wealth in other places. But for some of my retired clients, pulling their investments out of action meant it was no longer earning them income and wealth. A number of these dear clients called me asking for a mortgage again because it was time to buy a new car or pay a medical bill or other expense and they found they were house rich and cash poor. Getting a small mortgage on their house and putting it into an emergency fund and some back into earning income again, they found brought them more peace and that feeling of security than owing nothing on the house. When they ran out and paid their house off with their investment funds, they had unknowingly traded one type risk for a different one. Owning a house with a mortgage can have its advantages. Wis and I looked at the numbers for a family making $100,000/yr They bought a $250,000 house with 10% down with a conventional 30 year fixed rate mortgage at 3.75% interest. Their principal and interest payment was $1,042/mo and for about the first 5 years the interest portion was over $640/mo. The private mortgage insurance per month was around $76/mo or about $912 per year. Wis, What kind of tax breaks do you think this couple would be able to get ?
Example of a married family filing taxes jointly, making $100K per year.
Sales price: $250K 10% down payment with 30 year fixed rate 3.75% loan amount $225k with principal and interest payment $1,042/mo with $76/mo private mortgage insurance in place until 78% LTV.
Approximately $3,700 tax savings per year for first year estimating tax writing off of mortgage interest expense and private mortgage insurance expense.
(Correction from podcast—the $10K and $6k amounts were not tax refunds but were part of the formula for producing the $3,700 tax savings for the family scenario)
(Jo) The most important part of making the decision on how much to put down on a house or whether you pay off the mortgage early really comes down to the comfort level of you and your family. What are your short term plans? Long term plans? What is the maximum house payment that is comfortable to you? If you are salaried, do you need more than 6 months cash in your emergency fund? If you are self-employed or 100% commission, do you need more than 1 year accessible in a bank account in case of emergencies? Answer those questions and you are well on your way to making an educated decision on whether to pay cash or a large down payment to buy a house or get a larger mortgage.
Here’s some advantages to having a mortgage:
⦁ Peaceful feeling but you have kept your money invested and working for you, hopefully bringing you compounded returns so that you will eventually be in a position to pay off the mortgage without depriving yourself of your emergency stash.
⦁ Being able to shelter your hard-earned income with a mortgage interest and mortgage insurance deductions
⦁ Having cash to keep other higher interest debt paid off
Advantages of paying all cash-
1.It could make you look more attractive to a seller if you make an offer on his house
2. You could avoid some of the closing costs of getting mortgage
3.Owning 100% of your house may give you peace of mind. (don’t forget about insurance and taxes though)
Wis, we are going to break but when we come back, we are going to talk about some other angles on the question HOW MUCH SHOULD I PAY DOWN WHEN I BUY A HOUSE?
(2nd segment after 9:15 break)
Wis: Attachment with the figures we discussed, the first two columns are joint status, with then without the home purchase for a 12 month year and the last two columns are single. Note a taxpayer without the home gets the standard deduction ($12,800 for joint, $6400 for single). A taxpayer whose itemized deductions already equal or exceed the standard deduction will save even more taxes with a home. That is where I can help.
As for my selling points:
Do you realize how many thousands of dollars you have wasted on taxes and legal costs for yourself, your business and your estate. How can I help?
As a former IRS attorney with over 35 years experience, I will advise you, represent you, and teach you to stay ahead of the game. I specialize in successful businesses, landlords and highly compensated employees, providing you:
1. Professional tax return preparation,
2. My personally developed Tax Commenter© software (developed with Excel), shows you how to pay the lowest legal taxes,
3. Representation against the IRS (by a former IRS lawyer ),
4. Win-win contracts negotiated by me that benefit both parties and avoid conflicts,
5. Caring and considerate estate plans, wills and trusts,
6. A noted speaker and teacher for professional as well as lay groups.
7. Monthly updates by my WealthWISe e-letter.
8. A wealth of information at my website: www.wislaughlin.com
9. and in brochures.
*FREE 1/2 Hour Offer:* Bring me a tax return or legal documents and get a 1/2 hour of advice plus valuable seminar materials covering your question.
–
Harry W. (Wis) Laughlin, Attorney at Law
901 507-4274; cell: 901 218-7820
Website: www.wislaughlin.com
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6. Wis Laughlin talks about the monetary advantages that some homeowners can get using a Home Equity Line of Credit to use for their business so that the interest expense can be used to reduce self-employment taxes.
7. Wis shares details of the tax benefit of selling a current residence where one has resided as a primary residence for at least 2 years out of the last 5 years.
QUESTIONS ANSWERED BY JO GARNER:
⦁ What are some other questions your customers ask you when they are trying to decide how much money to put down on buying a house?
⦁ If you are buying a house but you aren’t sure whether you want to bring zero dollars to the table or 3.5% down or 20%0 to 40% down, Here’s a great question to ask yourself—“If I don’t put a larger lump sum down to buy a house, what am I going to do with the money?”
Will you reinvest those funds back into your stocks and bonds accounts and allow it to continue to earn money and wealth for you ? Or are you going to spend it on stuff that does not earn you money and does NOT appreciate. If you are not going to make good use of your cash, then it may be the best thing to consider paying cash for the house or putting down a huge lump sum. At least you can avoid paying the little 3% to 3.5% or so interest cost associated with the mortgage.
Maybe you just received a big life insurance pay out check. Talk with your certified financial advisor so that you put the funds in the right place—The answer for you might be to put half of it down to pay off all or part of your mortgage and the other half to invest to earn more. . (If you are prepaying over 20% of the principle balance, you could ask the lender to recast your payments to make them lower if that would help your budget.)
⦁ What is a good rule of thumb to know when you should pay points to buy a mortgage rate down and when you would not want to do this?
A calculate recapture time. Then ask how long you will be in the house.
Who is paying the points –you or the seller?
REAL ESTATE TIP OF THE WEEK:
4TH segment after 9:45 advertising break – (producer to start the song “Taking Care of Business” by Bachman Turner Overdrive –but bring the volume down before the lyrics start) It’s time to talk shop with Talk Shoppe’s Business Tip For Real Estate Professionals. Talk Shoppe is a marketing company offering free education and networking to anyone interested in real estate or in business. Talk Shoppe is made possible by the financial support of its sponsors and advertisers. For more about Talk Shoppe, go to www.TalkShoppe.com (shoppe) For our Talk Shoppe Business Tip today we have Katie Gilliand of BackupRX.com who has been an advertiser with Talk Shoppe for a while. Katie, What is our Talk Shoppe Business Tip for Real Estate Professionals today? (Jo says, “Thanks Katie Gilliland of BackupRX.com for helping ME keep MY data backed up too.”
Katie’s tip—regarding how to protect yourself from the #1 computer threat—ransomeware.
Katie shares details of how the cyber attack works,
And 3 ways to avoid it.
Katie shares what www.backuprx.com can do for their clients to protect their data.
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Announcements: Talk Shoppe offers free networking & education to anyone interested in real estate or in business. Talk Shoppe meets every Wednesday 9A-10A CT at the University of Phoenix 65 Germantown Center 1st floor Cordova, TN. This Wednesday June 22nd, 2016 9A-10A CT Talk Shoppe presents Bradly Harris, Author and Editor BradleyHarrisGoodbook@gmail.com Communications Group will be presenting, “Me Talk Real Good-Confessions of a Toastmaster.”
2.Talk Shoppe events are free thanks to our sponsors and advertisers like Leah Anne Morse of Cartridge World in Collierville, TN (901) 853-3230.where you can save about 30% of your printing costs by using recycled cartridges designed to fit your printer. .
3. Thank you to Kim Hummel, Creative Director of www.SauceMarketingMemphis.com, our Real Estate Mortgage Shoppe webmaster and brand expert.
4. Thank you, the Memphis Mortgage Department of Evolve Bank and Trust for sponsoring today’s Real Estate Mortgage Shoppe. Evolve Bank helps support the The Neighborhood Christian Centers and the Food Bank Mobile Market in the Memphis area. It will be providing a mobile food market to families in need. NCC is seeking private and corporate partners to sponsor the Mobile Market each week and provide volunteers to package and distribute the food to our neighbors in need. For more information, donors and volunteers call 901-881-6013 ext. Development Dept.
5. Attend the University of Phoenix Memphis Campus Career Fair on July 21st at 10 am.
For details, contact the campus at 901.752.2612
4. FOR THIS PODCAST OF REAL ESTATE MORTGAGE SHOPPE AND MORE, GO TO JOGARNER.COM
5. Sending out best wishes to you fathers out there for FATHER’S DAY tomorrow.
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QUOTE CORNER : (on the subject of mortgages)
From unknown- “If Plan A doesn’t work, the alphabet has 25 more letters. Stay cool.”
Unknown- “Home Is Where The 30 Year Mortgage Is.”
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Transitional Songs: Take The Money And Run Steve Miller Band; Money (That’s What I Want) Barrett Strong; ”Money Changes Everything” by Cindi Lauper
Taking Care of Business by Bachman Turner Overdrive for Talk Shoppe Business Tip for Real Estate Professionals
REJOINERS:
Donna Bellinger, Revenue Accelerator, & Business Development Author, Speaker & Trainer. Creator of: “Revenue UP: From Sluggish to Sensational in Sales”. www.DonnaSmithBellinger.com
Troy and Lynn McDonald, Erin McDonald Insurance Agency (901) 849-7101
Shelley Baur, Author, Speaker, Leadership Trainer www.ShelleyBaur.com
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ABOUT KIMBERLY MILLER
Bio
Kim Miller is the Account Manager for Arch Mortgage Insurance in Tennessee. Building upon deeply valued relationships cultivated with over 20 years in mortgage sales, Kim uses her experience and enthusiasm to promote Arch MI’s mortgage insurance innovative solutions to support her client’s business strategies. Supported by an amazing team at Arch MI, her goal is to provide the Tennessee mortgage community with superior and responsive service along with extremely competitive products for clients and their borrowers.
A graduate of the University of Tennessee in Knoxville, Kim began her career as a Loan Originator moving quickly into Retail Management with Pulte Mortgage! Moving from retail sales, Kim focused her career on B2B sales as the Wholesale Account Executive for SunTrust Mortgage followed by an Account Executive opportunity in correspondent sales with Flagstar Bank. Kim’s most important role is that of “Mom” to her two children and she enjoys watching her son play high school basketball and soccer and her daughter play golf as a freshman at Tennessee Tech University!
Account Manager – Tennessee
Arch Mortgage Insurance Company
3003 Oak Road Walnut Creek CA 94597
kmiller@archmi.com | www.archmi.com
Mobile 615.424.1500 |
ABOUT ARCH MORTGAGE INSURANCE COMPANY-
Arch MI is the strong MI partner that can help distinguish you in the 2016 marketplace. Our unique and innovative MI solutions for growing your share of new originations include Arch MI RateStarSM, a dynamic risk-based rates program that more precisely matches MI rates to individual loan risk. archmi.com/ratestar
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ABOUT JOHN KELLER, INVESTMENT ADVISOR WITH EDWARD JONES INVESTMENT COMPANY (901) 569-5009
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ABOUT ATTORNEY WIS LAUGHLIN:
Do you realize how many thousands of dollars you have wasted on taxes and legal costs for yourself, your business and your estate. How can I help?
As a former IRS attorney with over 35 years experience, I will advise you, represent you, and teach you to stay ahead of the game. I specialize in successful businesses, landlords and highly compensated employees, providing you:
1. Professional tax return preparation,
2. My personally developed Tax Commenter© software (developed with Excel), shows you how to pay the lowest legal taxes,
3. Representation against the IRS (by a former IRS lawyer ),
4. Win-win contracts negotiated by me that benefit both parties and avoid conflicts,
5. Caring and considerate estate plans, wills and trusts,
6. A noted speaker and teacher for professional as well as lay groups.
7. Monthly updates by my WealthWISe e-letter.
8. A wealth of information at my website: www.wislaughlin.com<http://www.wislaughlin.com>
9. and in brochures.
*FREE 1/2 Hour Offer:* Bring me a tax return or legal documents and get a 1/2 hour of advice plus valuable seminar materials covering your question.
WIS LAUGHLIN IS A PUBLIC SPEAKER. CONTACT HIM FOR YOUR EVENT.
–
Harry W. (Wis) Laughlin, Attorney at Law
901 507-4274; cell: 901 218-7820
Website: www.wislaughlin.com<http://www.wislaughlin.com/
ABOUT JO GARNER-MORTGAGE LOAN OFFICER:
www.JoGarner.com (901) 482 0354 jo@192.232.195.219 twitter @jogarner
Jo describes her job description: “As a mortgage loan officer, my job is to give my client the benefits they want from their financing terms– listening to my client and determine what’s of the most value to THEM– What is their comfort level on a house payment, how much are they comfortable paying down, what type of financing do they need to get the house they want to buy or refinance. Different clients have different priorities in life—some are buying their first home with very little down payment funds. Some are recovering from medical challenges, divorces or preparing to send children to college and some are embarking on a long term goal of buying properties to build rental income. Whatever their personal priorities are, my job is to put together a mortgage with comfortable terms that will help them achieve their goals.”
Jo Garner is a mortgage officer with extensive knowledge in tailoring mortgages to her customers who are refinancing or purchasing homes all over the country. She offers conventional, FHA, VA or other loan programs for refinancing and purchases.
Jo can help you look at rent vs buy, when it makes sense to refinance, how to get the best deal on your home purchase financing.
Jo Garner has been in the real estate/financing business for over 20 years. She got her start in Portland, Maine where she first began her real estate career. She received her real estate education from the University of Southern Maine and was personally mentored in San Diego, California by Robert G. Allen, author of Nothing Down, Creating Wealth and The Challenge.
On moving back to West Tennessee in 1987, she went into business buying and selling discounted owner-financed notes secured on real estate. In 1990 Jo went to work for a residential mortgage company and has been a mortgage loan officer for over 20 years. Her goal is to offer excellent, affordable service to her customers, tailoring the loan programs to the specific needs of her clients.
In addition to her work in the mortgage field, Jo Garner is the primary sponsor and founder of Talk Shoppe in Memphis. www.TalkShoppe.com She was also the editor of Power Shoppe, a free weekly e-zine designed for real estate professionals and others indirectly connected to the real estate industry and currently publishes on her blog www.JoGarner.com