Tag Archives: home finance

Three Questions to Ask Yourself for a Happier Retirement

July 31, 2014 Glen Lazovick Leave a comment

#1: What does retirement mean to me?

Many people think of retirement as a time in your life where you can work if you want to, but not because you have to. In other words, how would you feel if you could work for fun and/or pursue your passions without worrying about money? This requires financial independence, or having enough money to:

Cover your needs and basic wants
After taxes
After inflation
For some period of time (usually you and your beloved’s lifetime)

The amount of money necessary for financial independence is called “Critical Capital”. This is a pile of money that can sustain all your retirement expenses with inflation and after taxes for the requisite time period. This may be in an assortment of piles of money such as funds in your 401(k), Roth IRAs, and taxable money. Retirement could mean reaching a point where you have enough Critical Capital to spend your money making a life versus being forced to spend your life making money. Now that’s exciting!

#2: What is the role of mortgage planning?

Your mortgage is most likely your single largest debt, and your house is most likely your single largest asset. Your mortgage and home equity situation impact your:

Cash flow
Tax deductions (or lack thereof)
Net worth and wealth position
Liquidity (access to your money)
Estate and legacy planning

It’s important to ask yourself whether your mortgage or real estate equity strategy is helping or hurting your chances of acquiring the right amount of Critical Capital. Does it make more sense to use a smaller mortgage and invest more cash flow into your Critical Capital fund? Does it make more sense to use a bigger mortgage and invest more upfront cash into your Critical Capital fund? What about using or planning to use reverse mortgage now or at some point in the future? Mortgage planning asks and answers all these questions to help you avoid missing your mark and not having enough Critical Capital. Your mortgage, housing, and cash flow strategy play a large role in helping you achieve financial independence.

#3: How Will I Get Enough Critical Capital?

Remember, the amount of money necessary for financial independence is called “Critical Capital”. There are three specific steps that I use to help you acquire enough Critical Capital for financial independence:

Calculate Critical Capital — how much do you need?
Determine the future value of how much you have already saved — what will your current investments be worth in the future?
Determine how much you still need to save — how can you change your cash flow or real estate equity situation in order to make up for the shortfall?

As a CMPS professional, I work as a team with your CPA, CFP® and other financial advisors to help you determine how much cash flow you need during retirement and the best way to generate that income. I can also refer you to a financial planner if you don’t already have one. Either way, give me a call or send me an email to schedule a time to discuss your options in further detail.

PLEASE NOTE: THIS ARTICLE AND OVERVIEW IS PROVIDED FOR INFORMATIONAL PURPOSES ONLY AND DOES NOT CONSTITUTE LEGAL, TAX, OR FINANCIAL ADVICE. PLEASE CONSULT WITH A QUALIFIED TAX AND INVESTMENT ADVISOR FOR SPECIFIC ADVICE PERTAINING TO YOUR SITUATION.

Glen Lazovick
NMLS Number: 721448
Apex Home Loans
Corporate NMLS Number: 2884
glazovick@apexhomeloans.com
http://www.glenlends.com
(240) 238-2424
3204 Tower Oaks Blvd., Suite 400,
Rockville, Maryland 20852

NMLS #2884 (www.nmlsconsumeraccess.org): Licensed as a Mortgage Lender and Broker by the Virginia State Corporation Commission, License #MC1278; Licensed in the District of Columbia as a Mortgage Lender and Broker by the DC DISB License # MLB2884; Licensed in Maryland as a Mortgage Lender and Broker by the DLLR, License #06-4989; Licensed in Delaware as a Mortgage Lender and Broker by the Office of the State Bank Commissioner, License # 011603.

Tax Deductible Items for 2014 Mortgages

June 16, 2014 Glen Lazovick Leave a comment

Congratulations on your mortgage closing! Here is a general overview of some information that may be helpful to you and your CPA as you prepare your 2014 tax returns:

Points Paid on a Home Purchase in 2014

Item 803 on the HUD-1 – If the adjusted origination charges on line 803 include points paid to your mortgage company in exchange for a lower interest rate, you can deduct those points in the year paid… even if they are paid by the seller.

Points Paid on a Mortgage Refinance in 2014

You can deduct over the life of the mortgage all points paid on the portion of the mortgage proceeds that were not used for home improvements (for example, if you refinance your mortgage to reduce your interest rate, but do not take any cash out for home improvements).
You can deduct this year all points paid on the portion of the mortgage proceeds that were used for home improvements (if you received cash-out and are using that cash-out for home improvements). Remember, any points paid on the portion of the mortgage NOT used for home improvements must be spread out over the life of the loan. For example, assume you refinance an old $200,000 mortgage into a new $300,000 mortgage and walk away with $100,000 to be used for home improvements. In this case, 1/3 of your points are fully deductible this year and 2/3rds of your points are deductible over the life of the loan.

Property Taxes (actual and pro-rated)

Items 106 and 107 on the HUD-1 – Property taxes are generally deductible in the year they are paid. These are listed as items 106 and 107 on the HUD-1. Whatever you put into your escrow account for property taxes is listed as items 1004, 1005, or 1006 on the HUD-1. These are deductible in the year that your mortgage company pays them. Assessments are listed as item 108 on the HUD-1, and these are generally not deductible.

Pre-paid Interest

Item 901 on the HUD-1 – Mortgage interest is calculated in arrears. This means that your monthly mortgage payment actually covers the month that just passed. For example, your February payment covers the interest for the month of January, your January payment covers the interest for the month of December, and so on. Oftentimes, when you refinance a mortgage or buy a new home, you “skip” a month’s worth of mortgage payments. That is why you sometimes pay “daily interest charges” on line 901 of the HUD-1 statement. These daily interest charges cover the interest for the current month. If your mortgage interest is deductible, then anything you pay on line 901 is also deductible (this will be included in the 1098 statement that you receive from your mortgage company).

Previous Year Points Not Yet Deducted

You may be able to deduct the remaining portion of the original points paid on an old mortgage if you refinanced that old mortgage in 2014. For example, assume you paid points on a refinance transaction 3 years ago. You probably were not able to deduct all the points you paid in the year they were paid. Instead, you had to spread that deduction out over the 30-year life of your mortgage. So, assume you’ve deducted 3/30ths of those points so far, and you refinanced your mortgage again in 2014. You can now deduct the remaining 27/30ths of those old points that you have not yet deducted.

Pre-Payment Penalties

A pre-payment penalty paid on an old loan would be deductible on your 2014 tax returns as long as the new loan was taken out with a different lender than the old loan.

Other Closing Costs

Closing costs not mentioned above are not tax deductible. However, they are added to your “tax basis” for purpose of calculating your capital gain when you sell the property. In other words, you may be able to reduce your capital gains tax (if applicable) when you sell the property in the future because your home purchase closing costs get added to your cost basis.

Distinction Between a Qualified Residence and an Investment Property

Everything mentioned above pertains to a mortgage transaction involving a primary home or vacation home that is elected as a “qualified residence” for tax purposes. If your transaction involved an investment property, see IRS Publication 527.

PLEASE NOTE: THIS ARTICLE AND OVERVIEW IS PROVIDED FOR INFORMATIONAL PURPOSES ONLY AND DOES NOT CONSTITUTE LEGAL, TAX, OR FINANCIAL ADVICE. PLEASE CONSULT WITH A QUALIFIED TAX ADVISOR FOR SPECIFIC ADVICE PERTAINING TO YOUR SITUATION. FOR MORE INFORMATION ON ANY OF THESE ITEMS, PLEASE REFERENCE IRS PUBLICATION 936.

Are you overpaying for money?

May 20, 2014 Glen Lazovick 1 Comment

Lots of people overpay for their money. They accept interest rates (the cost of borrowing money) that are higher than necessary for their purposes. You might be saying, “I got a great rate on my 30 year fixed mortgage”, and you very well might have. However, have you asked yourself if you plan on staying in your house without refinancing, taking cash out, or restructuring your loan for a full 30 years? Under most circumstances, the answer is no.

The longer your interest rate on a loan is fixed, the higher that rate will be. Banks charge a premium (by raising the interest rate) on loans that can’t adjust with market trends over time. In other words, when you select a mortgage that has a fixed interest rate, you are paying a higher price for a loan that will remain stable 30 years.

However, adjustable rate loans (ARMs) are able to adjust to mirror the highs and lows in the market over time, making them less risky to banks, subsequently making them less expensive for borrowers. Most are fixed for an introductory period, say 5 or 7 years. After that, they are able to adjust by small increments each year depending on how the market is behaving. They don’t automatically increase in rate, rather they adjust to an Index such as the One Year LIBOR (London Inter-Bank Offer Rate) plus a fixed Margin, annually after the fixed introductory period. In fact, if the market pushes the LIBOR down before your loan adjusts; your effective rate will actually drop! On average, a 5/1 ARM’s introductory rate is a full 1% lower than a comparable 30 year fixed rate loan. That can amount to tens of thousands of dollars of interest saved in the first five years alone!

In the United States, only about 15% of all mortgages remain in place for more than 10 years. That means that about 85% of all mortgages, are refinanced, cashed out, or eliminated through the sale of a house, within the first 10 years. However a majority of mortgages are taken out with fixed rates for 30 years. Because of this, millions of Americans are currently overpaying for a privilege that they will never use.

Would you pay for a magazine subscription that will last for 2 years, if you knew you would only be reading that magazine for 1 year? Probably not, but that’s what many people are doing by taking a 30 year mortgage.

So instead of automatically taking a 30 year fixed loan, consider the life-events that might cause you to change your financing sooner than that. Here are a few examples.

Nearing retirement and you’ll likely downsize when you do
- You know when you’ll be selling your house
- Use the monthly savings to fund an IRA or max out your 401K
You’re buying your first home and you’ll likely upgrade in a few years
- By saving on your monthly interest, you’re able to save additional money for the down payment on your 2^nd house. This is in addition to the appreciation of your starter home!
You’re not planning on being in a particular area for a long time
- Your job or school may take you to another area at a known time
You’ll likely need to use the equity in your house to fund your kid’s college tuition
- Your kids will likely be attending college after high school. Is that less than 10 years away?

These are only a few of the reasons that people alter their financing early. There are dozens of other reasons why this is done. That’s why you should always choose a financing option that mirrors your plans. Ask your mortgage professional about the various financing options available to you. They’ll be able to make sure you’re picking the right mortgage product to help you reach your goals, without overpaying for something you’ll never use.

Do you have curb appeal?

May 7, 2014 Glen Lazovick Leave a comment

Well not you, rather does your house have curb appeal? You might be thinking, “I mow every weekend”, or “I trimmed the bushes in last year”, or even “I love the miniature Venus De Milo statue in the front yard”. However noble these efforts may be, it might take a bit more attention to detail if you want to get top-dollar for your house. If you’re planning on selling real estate, don’t underestimate the importance of a little curb appeal, because first impressions are priceless and the exterior of your house is the first thing a potential buyer will see. Here are a few simple suggestions that can insure you make a great first impression on house hunters!

• Mow, edge and trim: Don’t underestimate the importance of basic lawn care. Be sure to maintain your yard’s mowing, edging and trimming. Also be sure to collect any branches, sticks, or animal waste that might be in your yard. This is also the time to seed any bare spots in your lawn. A good clean yard will go a long way to give the impression that your house is a fun, relaxing place to live.
• Put fresh mulch down: Nothing makes a garden look its best, with the least amount of effort than a fresh pack of mulch. It controls weeds, sharpens borders and makes the greens of your grass and plants really pop.
• Tone down “personalized” features: You may absolutely love the gnomes wearing Ravens jerseys in your garden, or UM flag on your garage, but not all potential buyers will feel that way. Keep it simple and clean. Try not to over ornament your garden. Avoid anything branded, political or polarizing in any way. You’re trying to show your house off as a nice place to live, to whoever may want to buy. There’s no need to turn off people who may have differing views on political affiliation, team or school.
• Clean up that front door: Your front door is the focal point of your house’s exterior. Be sure the glass is clean, the knobs and handles are functioning and in good shape, and touch up any paint if necessary. This single feature can leave the greatest impression on a visitor so be sure your front door is a welcoming one. It’s also a good idea to make sure your mailbox is straight, not dented and in good repair.
• Clean your windows: This is something that is so often neglected; it’s surprising there aren’t more articles about it. Keep your glass clean and bright. Not only does it add to the curb appeal of your home, it also allows more light to reach the interior spaces making them show better as well.
• Power wash: Be sure to wash your deck and siding to remove any mildew or grim that has accumulated. This will make sure these parts of your home appear to be fresh and in good repair.
• Touch up any peeling or cracked paint: Be sure to keep all painted surfaces fresh and bright. Use neutral colors and be sure to take care of any cracking, splitting or peeling. Weather can be hard on exterior finishes and when buyers see peeling paint, they very well may think the house requires a lot of maintenance. By keeping these surfaces fresh, your buyers will see a beautiful house, not a lot of chores to be done.
• Make sure all exterior bulbs are functioning: House hunters will often drive by potential properties at night after their workdays. You want your house to look as good at night as it does during the day. Make sure all bulbs are fresh and bright.
• Keep the mess inside: Get into the habit of collecting any children’s toys, yard equipment, or other miscellaneous items on a daily basis. This also goes for any project cars, or extra vehicles. If you’re able to get them into the garage, that’s where they belong. You want your house to look spacious and clean from the outside as well as the inside.

These are just a few tips that can go a long way to make sure your house shows it’s very best. If you have any ideas you’d like to share, please respond and let us know. With a little effort, you can make sure your first impression is a lasting one!

Not All Homeowners Insurance Is Created Equal

May 2, 2014 Glen Lazovick Leave a comment

This week, I want to feature a guest blogger; Michael Herson with Liberty Mutual Insurance Group. I’ve worked with Michael for a long time and trust he ‘s always honest and insightful with his clients. Here’s what Michael has to say about insurance coverage:

Throughout my career in the insurance industry, I have been fortunate enough to work with a wide variety of clients with very different needs. Being in my field, it is very important that I, as a professional, provide the right type of products to my clients to make sure that their needs are taken care of.

The interesting thing is that many consumers these days do not fully understand their home insurance. Because of this, consumers are being provided home insurance policies that may or may not have the coverage required to protect them when it’s needed most. It is important that you have a professional that understands the intricacies of insurance, and who truly cares about your well-being, analyze your insurance situation.

Now let’s go back to the need; if you are buying your first home and a professional doesn’t tell you about a coverage options and requirements, how will you know if you need it or not? That highlights the main problem with the insurance industry today. There are not enough professionals out there that truly take care of the customer.

Here are some important features that are commonly missing from insurance policies:

Water Backup Coverage

Did you know that if you have a sump pump in your house and it overflows, it is actually not covered under a standard home insurance policy? During storms, this affects so many people that it is actually the number one claim filed in the district. This coverage protects your home structure and your personal property and it has specific limits associated with it.

Replacement Cost on Personal Property

Not having this coverage means that if you ever experience a loss of your “stuff,” the insurance company will factor in depreciation in to your loss. Look around your home. Imagine getting the depreciated value of all of your things if your home burnt down. You’d be coming out of pocket a ton to replace your belongings.

Personal Articles

Insurance companies have very specific limits on jewelry, fine arts, and many other items. If you are walking around with an expensive piece of jewelry, it is important that you look into having separate insurance on that piece. It will be covered for nearly any type of loss, with a zero dollar deductible.

Excess Liability

Depending on the value of your home and your current assets, as well as whether or not you have children; having excess liability can protect you from having your wages and home at risk. This should be done on a case by case scenario, but I have seen a ton of people with many assets, and poor liability coverage. If someone was seriously hurt in their home, they could literally lose everything.

Michael Herson is a Lead Insurance Representative for a Fortune 100 company and provides insurance services in MD/DC/VA/PA. You can reach him at 240-271-0167 or at: Michael.Herson@Libertymutual.com.

Why get an Annual Mortgage review:

April 22, 2014 Glen Lazovick Leave a comment

Chance are, if you purchase or refinanced your home in the past 4 to 5 years you most likely have a great rate and are doing fine mortgage wise. So why take the time to talk to your trusted mortgage advisor?

Because even though you may have a good rate, life events happen and your existing mortgage may no longer be aligned with your current situation and goals.

Your kids are getting ready to enter college
You are now planning on retiring in the next 5 – 10 years
You had a another child and need to add on to your existing home or move to a larger one
You are getting divorced
You or your spouse now have medical needs
You are planning on downsizing in the next 3 – 5 years
You switch jobs or were down sized
Your income has gone up or down
The above list represents just a few of the many life events that may make it in your best interest to make sure your current financing is aligned with your current goals.

Another situation we are seeing more and more these days is someone who took out and used an Interest Only Home Equity Line of Credit 10 – 15 years ago and the draw period is now ending. This means you will need to amortize and pay back the balance at a higher monthly payment. In some cases it may make more sense to combine the balance on your 1^st mortgage and the balance on your Home Equity Line of Credit into one loan.

Your trusted mortgage advisor should also be able to give you an update on what is currently happening in the housing market, make suggestions to help you maximize your mortgage, as well as referring you to professionals such as Certified Financial Planners, CPAs or Real Estate Attorney’s to help you achieve your goals.

It only takes a few minutes to speak to your mortgage advisor to assure that your current mortgage is aligned with your ever changing goals.

Guest Blog: Different types of real estate titles: by Harvey S. Jacobs

April 7, 2014 Glen Lazovick Leave a comment

This week, I’d like to share an article originally run in the June 8th edition of the Washington Post, authored by Harvey S. Jacobs, a real estate lawyer with Jacobs and Associates.

There are four main ways to hold title to real estate: solely, as a tenant in common, as a joint tenant with right of survivorship and as a tenant by the entirety.Each has very different rights, obligations and protections. Knowing the best way to hold title can save you major headaches.

Sole ownership: This is most fundamental way to own real property. When an individual owns property in his name solely, he has all rights and obligations of an owner. Those rights include: right to occupy and peaceably use the property, right to lease it out, to convey, to sell, to pledge, encumber and devise the property in his will as he sees fit.The sole owner’s obligations include: paying property taxes and ensuring that no nuisances emanate from his land that adversely effect his neighbors.A sole owner’s real property is not protected from his creditors. If his creditor obtains a judgment against him, his property is at risk of being attached and sold. Once a judgment is obtained against a sole owner, depending on the jurisdiction, it may automatically become a lien against all real property he owns in that jurisdiction.

In other jurisdictions, such as the District , the judgment creditor must record that judgment in the office of the recorder of deeds for the lien to take effect. But once the lien has been attached, the judgment creditor may seek to have the sole owner’s real property sold at a sheriff’s sale and have the net sale proceeds used to satisfy that judgment. For this reason, an individual may wish to consider forming a limited-liability entity, such as a limited-liability company or corporation, to hold title to his real property.

Tenancy in common: This allows two or more owners to hold title. It is most commonly used in a business-like purchase in which two or more people buy investment property together.

Tenancies in common are also appropriate when an unmarried couple buys a house together and both want to be able to devise their interest in their will, perhaps to children from prior marriages or other reasons. Each tenant in common can own a different percentage in the property. This percentage should be stated in the deed.

Subject to his co-owners’ rights, a tenant in common has essentially all the same rights as a sole owner, including the right to devise his interest in his will. Thus, although a co-owner can theoretically use, occupy, sell, lease or mortgage his interest in the real property, practically speaking, it may be difficult to find a buyer, lender or tenant for his portion of the property.

A judgment creditor’s lien against one co-tenant only attaches to that co-tenant’s interest. But that judgment creditor can force the sale of that co-owner’s interest in the property.

Other problems also often arise internally, when two or more owners have differences of opinion regarding the property’s use, operation, financing, management or disposition. If those differences cannot be amicably resolved, the only recourse may be to file a lawsuit. That lawsuit can be for declaratory judgment or partition.

A declaratory judgment lawsuit asks the judge to decide each co-tenant’s rights. A partition lawsuit seeks to have the property sold and the net proceeds distributed to each co-owner in accordance with their percentage interest. These lawsuits are risky, time-consuming and expensive. They require lawyers, appraisers, real estate agents, expert witnesses and, of course, a buyer. These lawsuits often can be avoided with a little advance planning. Co-owners should take the time to sign a written co-tenancy agreement that addresses these dilemmas.

Joint tenancy with rights of survivorship: This is another way for two or more persons to hold title. Its one main difference, as its name implies, is that when a joint tenant dies, the surviving joint tenant acquires his interest. So, for example, if five siblings inherit their parent’s home as joint tenants with rights of survivorship, each child owns a 20-percent interest. If one sibling dies, the remaining siblings will then each own a 25-percent interest. At some point, the last survivor becomes the sole owner.

Joint tenant rights and obligations are similar to tenants in common, except that, a joint tenant’s interest cannot be devised by a will. A joint tenant’s judgment creditor can only attach that joint tenant’s interest. But that judgment creditor can force the sale of that joint tenant’s portion of the property. If that happens, the joint tenancy is deemed severed, and the remaining co-owners find themselves as tenants in common.

Tenancy by the entirety: This is reserved exclusively for real-property ownership by married couples, or, where applicable, domestic partners. Over many years, the law created this fictionalized entity called the “entirety.” Each spouse is deemed to own 100 percent of the entirety, subject only to his spouse’s ownership of 100 percent of the entirety.

The tenancy by the entirety has all of the beneficial attributes of sole ownership. The entirety can use, occupy, sell, lease, mortgage or encumber the property. However, one spouse cannot act unilaterally. The entirety also has the attribute of survivorship. When one spouse dies, the surviving spouse automatically becomes the sole owner. If the parties divorce, the tenancy by the entirety becomes a tenancy in common. If that happens, any outstanding judgments against one spouse can, in fact, attach to that spouse’s interest in the property.

Tenancy by the entirety is often referred to as the “strongest” form of ownership, since property owned by the entirety cannot be reached by one spouse’s creditors. The sole exception to this protection is the Internal Revenue Service. Thus, unless a creditor gets a judgment against both spouses, the marital home is safe from attachment or forced sale.

Harvey S. Jacobs is a real estate lawyer for Jacobs and Associates. He is an active real estate investor, developer, landlord and lender. This column is not legal advice and should not be acted upon without obtaining legal counsel. Jacobs can be reached at Jacobs@jacobs-assocates.com or http://www.jacobs-associates.com

Why a Mortgage Planner is a better option:

March 24, 2014 Glen Lazovick Leave a comment

What is Mortgage Planning?

Mortgage planning is the process of evaluating your mortgage options in the context of your overall financial objectives. Your mortgage is most likely your single largest debt, and your home is most likely your single largest asset. The strategy you use today carries financial consequences that can impact your life for years to come. As a Certified Mortgage Planning Specialist (CMPS®), my mission is to help you improve your life by the proper use and consideration of various mortgage options. Here’s how:

Step #1: Initial Conversation

Our initial conversation will focus on these questions:

What are your housing obectives and why?
What does your current cash flow situation look like?
What large expenses should we take into account as we help you develop a budget for the future (college funding, retirement planning, elder care needs, etc.)?
What can I do to help?

Step #2: Analyze & Evaluate Your Options

The next phase of our relationship will focus on:

What are your housing, debt planning and cash flow options?
What, if any, mortgage products and strategies would be useful to you?
What is the likely short and long-term impact of these mortgage options on your overall financial situation?

Step #3: Develop & Implement Your Personal Mortgage Plan

Once we’ve discussed your options, and how these various options may impact your overall housing and financial situation, it’s up to you to decide on which plan of action works best for you. I’ll be here to answer any questions and be a resource to you in any way I can. I’ll also coordinate the whole process with you and other professionals such as CPAs, CFP® professionals, attorneys, Realtors, builders, insurance professionals and other qualified advisors.

Step #4: Monitor Your Mortgage Plan Through an Annual Mortgage and Housing Review

Mortgage planning is a life-long process because your financial situation is likely to change from time to time. As your mortgage planner, it’s my role to help you monitor these changes as needed and through an annual conversation. Most often, this process involves periodic assessment of:

Your fluctuating cash flow needs
Changing interest rates and housing market conditions
Family changes and life events including job changes, college funding, retirement planning and elder-care needs

Here’s how mortgage planning is different than the traditional “shopping for a mortgage” experience:

“Mortgage Planning” with a Certified Mortgage Planning Specialist (CMPS®)	“Shopping for a Mortgage” with any of the 500,000 + Mortgage Salespeople in the US
5-Star Experience	Overwhelming and/or Confusing Process
Focus on Which Mortgage Options Fit into Your Life, and Why	Focus on Whether You Fit into the Mortgage Lender’s Box, and How
Consider the Mortgage Transaction in the Context of Your Overall Financial Situation & Objectives	Consider the Mortgage Transaction “In a Vacuum”
Customized Options for Your Scenario	One Size Fits All
Mortgage Salesperson Who Puts His/Her Relationship With You Ahead of the Transaction	Mortgage Salesperson Who Puts the Transaction Ahead of His/Her Relationship With You

Contact me so we can get started!

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