4sale by divorce may 2016

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4S ALE BY D IVORCE May 2016 Issue

DID YOU KNOW? Is “Divorce Monday” Real?

The Monday of the first full week in January is known as “Blue Monday” – officially, the most depressing day of the year. Blue Monday was originally identified in 2005 by academic Cliff Arnall But legal experts have also coined Blue Monday as “Divorce Monday”. Statistically, this is the busiest day of the year for divorce lawyers. Many factors are said to contribute to this increase in divorce filings in January, including the dissipating of feelings of “holiday cheer”, quarrels over holiday debt couples find themselves in, too much family time over the holidays, and general depression and sadness due to lack of sunlight and cold temperatures.

Divorce lawyers in both the US and UK report that January, generally, is their busiest month, seeing the highest rate of divorce inquiries during this month.

Phillip H. Lande RE/MAX Legends Group/ Atlas Group Direct: 317.863.2356 plande@atlasrealty.com www.remax-atlasgroup.com

Good News for Divorcing Homebuyers?

Fannie Mae’s New Low-Down-Payment Loans Is Fannie Mae’s new low-downpayment mortgage loan good news for divorcing homebuyers?

Fannie Mae launched new offerings for low-down-payment home loans in December of 2014 for first-time homebuyers, saying it would begin accepting applications immediately for borrowers with FICO credit scores as low as 620.

Homebuyers are considered ‘first-time’ homebuyers if they have NOT owned a home within the last three years—it does not mean have NEVER owned a home before.

So, how can this benefit your divorcing clients? With the cost of renting a home going up significantly in the past few years along with the extended tax benefit of the potential to deduct private mortgage insurance, divorcing clients may be better positioned to purchase a new home rather than continuing to rent OR if one spouse was not on title or on the current mortgage to the marital home; they may qualify as a first-time homebuyer as well to take advantage of this new loan program.

Additionally, Fannie Mae’s new 97% loan-to-value program allows homeowners who currently own their home and are not eligible for the HARP refinance program to refinance their current mortgage to a higher loan to value. This may be an advantage for divorcing clients where one spouse needs to refinance the other spouse’s name off of the mortgage with little equity in the home.

Private Mortgage Insurance will be required on these new loans just as it is currently required on any loan purchased by Fannie Mae with greater than 80% loan to value.

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Breaking Down the Benefits of the 3% Down Payment Program We all know that going through a divorce can leave clients with a cash shortage. Fannie Mae’s new 97% loan to value program can be a useful tool for divorcing clients looking to purchase a home post divorce.

Let’s look at a couple of the benefits of the new loan program.

1. At least one borrower must be a first time homebuyer.

2. Allows credit scores as low as 620—this lower credit score is to allow expanded access to credit for qualified borrowers that may not have resources for a larger down payment.

3. Private Mortgage Insurance is required for loans in excess of 80% loan to value. What’s the advantage of this new loan program over FHA’s low-down-payment program with FHA mortgage insurance? 

FHA loans require borrowers to pay for private mortgage insurance premiums for the entire term of the mortgage -- typically 30 years. That means adding an extra 1.35 percentage points to monthly mortgage rates. A loan carrying a 4% rate, for example, becomes a 5.35% mortgage. (In dollars, that's about an extra $80 a month for every $100,000 borrowed or $960 a year. That adds up to nearly $30,000 over the life of the loan.)

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Under Fannie and Freddie's programs, borrowers are permitted to cancel their private mortgage insurance premiums once the mortgage balance drops below 80% of the home's value -- either because they've made enough payments or the home's value has risen. If home prices increase 5% a year for three or four years, for example, these borrowers may be able to cancel their insurance and save them tens of thousands of dollars over the next 26 or 27 years.

4. Limited Cash Out Refinance: Eligible homeowners who wish to refinance their Fannie Mae-owned mortgage but do not qualify under the Home Affordable Refinance Program (HARP) can refinance their loan up to the 97% loan to value level under a limited cash-out option.

Important Benefits of the Mortgage Forgiveness Debt Relief Act are Extended for 2014 Tax Period Under the recently passed bill by the Senate in December 2014, homeowners can deduct the cost of mortgage insurance premiums as well as premiums paid on FHA, VA, and USDA guaranteed loans. The legislation includes the tax-deductible treatment of mortgage insurance premiums for low and moderate income borrowers.

Limit on deduction. If your adjusted gross income on Form 1040, line 38, is more than $100,000 ($50,000 if your filing status is married filing separately), the amount of your mortgage insurance premiums that are otherwise deductible is reduced and may be eliminated. If your adjusted gross income is more than $109,000 ($54,500 if married filing separately), you cannot deduct your mortgage insurance premiums.

Additionally, the bill also ensures underwater borrowers that sold their homes in a short sale in 2014 will not be penalized.

www.remax-atlasgroup.com

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Cost of Renting Continues to Increase

A Little Divorce Humor

Bloomberg News: There’s an undersupply of single-family houses and apartments to rent for the first time since 2001, according to an analysis by Frank Nothaft, chief economist at mortgage buyer Freddie Mac, based on available inventory and historic vacancy rates. The deficit in the 3rd quarter was about 350,000, the most in records dating back 14 years.

The U.S. rental-vacancy rate fell to 7.4% in the 3rd quarter according to Census Bureau data. The market is considered balanced, with neither landlords nor tenants having the upper hand when it comes to rents, at a vacancy rate of 8.2%, based on the average from 1994 through 2003 according to Nothaft.

Rents on all single-family homes and multifamily units are expected to climb 3.5% in 2015, compared with a 2.5% increase for home purchase prices, according to estimated by Zillow Inc.

Net Monthly Benefits of Purchasing a Home Owning a home over time has proved to be a strong contributor to building wealth—here’s why:

Factors as follows: Mortgage interest @ 4.5%, loan to value of 80%, rent is calculated at 6% of value, real estate taxes @ 2% of value, maintenance is .5% of value, insurance is $2.90 per $1,000 of mortgage amount and marginal tax bracket used is 30%. “Costs” equal monthly interest expense + insurance + maintenance + property taxes. Net Monthly benefit = appreciation + shelter value/rent saved + tax savings—costs.

First and foremost, a home is a place to live. Over time, it’s also proved to be the single largest contributor to building wealth but still, that’s the gravy. One has to be prepared to make the payments that they sign up for as things like appreciation aren’t realized until the property is sold. However, other benefits such as tax deductions and of course, the fact that you’re paying your own mortgage rather than your landlord’s is the best thing of all.

Perusing the chart above evidences the value of owning real estate over time and clearly, getting paid to own vs. paying to rent is the clear winner at the end of the day.

When advising divorcing clients on their housing options post-divorce, it’s important to understand the long term financial benefits as well. With so many new options available including the new low-down-payment options combined with the financial and tax benefits when comparing the option of renting vs. owning—please don’t hesitate to contact me directly for a detailed analysis of the options available for your clients.

www.remax-atlasgroup.com

Phillip H. Lande ABR, ASP, CDPE, CRS RE/MAX Legends Group/ Atlas Group 5645 Castle Creek Pkwy N Indianapolis, IN 46250 www.remax-atlasgroup.com plande@atlasrealty.com Direct: 317.863.2356

As a professional real estate agent specializing in helping divorcing couples, we are here to help both parties involved through a smooth yet emotionally difficult process when they need to sell the marital home and purchase new homes moving forward.

As a member of your professional divorce team, our goal is to: 1. Help clients understand the legal and tax aspects of divorce in regards to the sale of the marital home and other real estate.

2. Offer alternatives to the usual mistrust and the emotional responses as a result of dividing real estate assets.

3. Work with both parties together to help them save and make money now and down the road with regards to real estate.

4. Work with both parties, not just one, in selling the marital home for the best price.

Please don’t hesitate to call us if we can be of service to you and your divorcing clients!

R E A L E S TAT E

S T R AT E G I E S FOR DIVORCING COUPLES

With the divorce rate stable at fifty percent and home ownership at sixty-two percent, there are a lot of families who need professional guidance as they navigate what to do with their home. For most people their home is the largest asset they own, so the decision must be carefully thought out and analyzed. Now more than ever a full time local Realtor must provide professional guidance. This is not the time to take the real estate advice of family, friends or other professionals. While your legal adviser or family member who lives in another state means well, real estate still remains local, particularly with our mercurial national market.

The sale of the marital home is not an isolated decision. There are short and long term financial, emotional and tax consequences. A Realtor, preferably one who specializes in divorce, can offer the best guidance regarding the marital home.

They must understand that they will work in tandem with other professionals for the best customized outcome.

The goal should be a client that has their individual needs met and is making informed decisions from a knowledgeable place.

Teamwork is the winning formula.

This is for informational purposes only and not for the purpose of providing legal or tax advice. You should contact an attorney or tax professional to obtain legal and tax advice.

Copyright 2016 All Rights Reserved Bruns Group LLC The information contained in this newsletter has been prepared by, or purchased from, an independent third party and is distributed for consumer education purposes.