Tax Benefit to Owning a Home and Having a Mortgage | Martini Mortgage Group

January 26, 2023 by Kevin Martini

Are you among the many future and current homebuyers, excited with the prospect of purchasing a new property? While it’s certainly an exciting time for anyone, regardless of your experience level, it’s important to be educated about all aspects of becoming a homeowner – including understanding the potential of substantial tax benefits to owning a home and having a mortgage.

Did you know that homeowners that itemize tax deduction can deduct interest on an up to $750,000 of mortgage balances used to buy, build or improve a qualified home (see IRS Publication 936)?

With the mortgage interest tax deduction, the cost of borrowing may be lower than you think!

Most homebuyers and some current homeowners don’t understand and are surprised that their cost of borrowing is significantly reduced by this tax benefit.
Kevin Martini

As discussed, homeowners who itemize tax deductions can deduct the interest on up to $750,000 of mortgage balances used to buy, build or improve a qualified home. In the past few years, not as many homebuyers benefited from this because their total annual interest expense was lower than their standard deduction. In 2023, for married couples filing jointly for tax year 2023 the standard deduction will be $27,700. For single taxpayers and married individuals filing separately, the standard deduction is $13,850 for 2023

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IMPORTANT: Uncle Sam will never help you pay your rent however he will help you pay your mortgage vis-à-vis Home Mortgage Interest Deduction however to take advantage you must itemize your taxes not take the standard deduction.

The Kevin Martini 3 Step Process to Calculate Impact of Home Mortgage Interest Deduction

Determine Marginal Tax Rate
Know Mortgage Rate
Very Simple After-Tax Benefit Math

Determine Marginal Tax Rate

What is your marginal tax bracket? A marginal tax rate is the rate that applies to your last dollar of taxable income. In other words, the highest bracket homebuyer’s income falls into. At the time of publication, there are seven federal income tax brackets (i.e. 10%, 12%, 22%, 24%, 32%, 35% and 37%). Determine which bracket you are in based on how you file (i.e. a single filer or married filing jointly).

2023 Single Filers Tax Bracket (for illustration only)

2023 single filers tax bracket best raleigh mortgage broker

2023 Married Filing Jointly Tax Brackets (for illustration only)

2023 married filing jointly tax bracket best raleigh mortgage broker

Know Your Mortgage Rate

You need to know what your mortgage rate is not you Annual Percentage Rate (APR).

Very Simple ‘After-Tax Benefit’ Math

This step is very simple but does have 3 components

#1 Express the tax bracket as decimal

#1 Express the tax bracket as decimal … for illustration and example ONLY, let’s assume a 24% marginal tax bracket so in decimal form that is expressed as 0.24

#2 Subtract the decimal from the whole number one

#2 Subtract the decimal from the whole number one … for illustration and example ONLY, we would take one minus the marginal tax bracket expressed as a decimal hence, 1 – 0.24 = 0.76

#3 Multiple that number by the the current or actual mortgage rate

#3 Multiple that number by the the current or actual mortgage rate … for illustration and example ONLY. let’s use a mortgage rate of 6.5% so 6.5 x 0.76 = 4.94

In the example above, your mortgage rate is 6.5% and your are in a 24% tax bracket then your after-tax rate in 4.94% assuming that you itemize your taxes. That means, the Home Mortgage Interest Deduction saves you 1.56%!

While there are many exciting aspects to purchasing a new home, it is important to be educate about all aspects of becoming a homeowner – including understanding the potential of substantial tax benefits to owning a home and having a mortgage. With the mortgage interest tax deduction, the cost of borrowing may be lower than you think! If you’re considering homeownership, connect with either Kevin Martini or Logan Martini today so we can help you take advantage of this amazing opportunity.

Kevin Martini

Certified Mortgage Advisor | NMLS # 143962

Logan Martini

Senior Mortgage Strategist | NMLS #1591485

PLEASE NOTE: THIS ARTICLE 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. Also, this article is not an offer or commitment to lend you money, and it is not an advertisement for a specific mortgage or a specific interest ratehttp://2023 Raleigh Conforming Loan Limits

What You Need To Do Before Buying a Home in Raleigh

2023 Raleigh Conforming Loan Limits

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Freeze It and Opt Out

What You Need To Do Before Buying a Home in Raleigh

December 30, 2022 by Kevin Martini

Are you thinking of buying a home in Raleigh? Before you dive into the process, it’s important to make sure that you are prepared for the journey. Here are three Martini Mortgage Group key things that you can do to get ready to buy a home in Raleigh or anywhere in the U.S. for that matter.

Prepare Your Credit

Before applying for a mortgage loan, it’s important to make sure your credit is in good shape. Mortgage lenders typically require a good credit history for you to qualify for a mortgage. This means having several credit cards and installment loans with payments made on time for the past two years, as well as making all rent payments on time during that period.

A good credit score will ensure that you have access to better mortgage rates and loan terms. You can look at your free credit report from the 3 major bureaus (Equifax, Experian, and TransUnion) once per year as well as order copies of your credit reports from each bureau through annualcreditreport.com. It’s important to review all of your reports closely and address any discrepancies or errors with the respective bureaus.

For more information about credit, check out: Martini Mortgage Podcast | Episode 167 | Freeze it and opt-out

Prepare Your Cashflow

It’s also important to take a close look at your income and expenses before beginning the process of buying a home in Raleigh.

Make sure that you understand how much money is coming in and going out each month, so that you can begin planning for what kind of house payment you can afford on top of any other existing debts or expenses. Knowing how much money is available for down payments and closing costs will help set realistic expectations about what kind of home you may be able to purchase in Raleigh.

It’s also important to make sure your debt-to-income ratio is not too high. Most lenders require that your total monthly debt payments (including the new mortgage payment) should not exceed 43% of your monthly income. If your debt-to-income ratio is higher than 43%, consider paying down some debts before taking out a new loan or try finding ways to increase your income.

Prepare Your Savings

Mortgage lenders typically require you to have a certain amount of savings in reserve in order to qualify for a mortgage. Your savings should be in your account for at least two months in order to qualify, and any large deposits will need to be explained and documented.

The amount of the required savings will vary based on the loan program that you choose. However, a good goal is to save enough for a 3%-5% down payment, plus 1-3 months of mortgage payment reserves.

For example, if your new mortgage payments will be $3,000 per month, you should probably aim to save approx. $9,000 plus the amount of your down payment.

Start budgeting now so that when it comes time to make an offer on your dream house, you’re prepared financially too!

Martini Mortgage Group Bottom Line

Buying a home can be an exciting experience – but first you need to make sure that you are prepared financially by having good credit history and cashflow situation plus enough savings set aside for closing costs and fees associated with the purchase of the home. By following these three Martini Mortgage Group steps – preparing your credit, cashflow and savings -you will be well on your way towards becoming a homeowner in Raleigh!

If you have questions about buying a home or about securing the proper mortgage, let’s connect so you have expert advice on your side.

Kevin Martini

Logan Martini

FHA Home Loans Explained by Raleigh Mortgage Broker Kevin Martini

December 20, 2022 by Kevin Martini

Are you a homebuyer looking to buy your first house in the Raleigh, NC area?

If so, then you may have heard about FHA Home Loans and the potential benefits of them. But what exactly are FHA Home Loans and how do they work? As an experienced mortgage broker in the Raleigh area for more than 15 years, this article has been curated to answer all your questions about this popular loan program.

In this article, I will share a glimpse of what you need to know about FHA loans including who can apply for one and some of their advantages both financially and long-term. I truly believe, armed with knowledge on FHA Home Loans from my helpful explanations, you’ll be able to make educated decisions that could potentially save you thousands of dollars over time and help you create generational wealth with the proper mortgage strategy.

What is a FHA Home Loan?

FHA Home Loans are a type of mortgage loan that is insured by the Federal Housing Administration (FHA). This government-backed insurance is designed to help qualified borrowers get into a home easier and with less money down. FHA loans do not require a high credit score and offers a lower down payment requirement than more traditional mortgage loans, making them an ideal choice for first-time homebuyers and repeat homebuyers too!

FHA loans are also incredibly flexible, as they can be used to purchase a wide variety of properties from single-family homes to townhomes and much more.

Advantages of FHA Home Loan with Kevin Martini

In terms of advantages that come with choosing FHA Home Loans, the most notable one is their low down payment option.

With FHA Home Loans, borrowers only need to put down 3.5% of the total purchase price as a down payment. This amount is significantly lower than what is typically required for more traditional mortgage loans and can be attained with a variety of financial sources such as gifts from family or funds from your local housing agency.

Another advantage of FHA Home Loans is that they are assumable, meaning that if you eventually decide to sell your home, a qualified buyer can assume the balance of the loan without having to go through the entire approval process again. This makes it easier for buyers and sellers alike, especially in today’s highly competitive housing market.

Things to know about the FHA Home Loan

It’s important to note, however, that FHA Home Loans do come with certain restrictions and requirements. The most notable of these is the Mortgage Insurance Premium (MIP). All FHA Home Loans require borrowers to pay an annual MIP in order to keep their loan in good standing. This does add an additional cost on top of the loan itself, but it’s important to remember that the MIP is what allows borrowers with lower credit scores and higher debt-to-income ratios to qualify for a loan in the first place.

Although there is no income limit with FHA Home Loans, the borrower must still demonstrate an ability to repay the loan. This means that having a steady job and verifiable income are important for obtaining approval.

Additionally, the property must be appraised by an FHA-Additionally, there is a loan limit in place which varies depending on the particular county and/or area of the country. In Wake County and Raleigh, NC, the loan limit for a one-family with a FHA Home Loan in 2023 is $502,550.

As you can see, there are a few things to consider when it comes to FHA Home Loans. Myself and the entire Martini Mortgage Group can help you navigate the process, so don’t hesitate to get in touch if you have any questions or would like to start the application process. Together we can find a solution that’s best for you and get you into your dream home as quickly and easily as possible.

The Kevin Martini Bottom Line

Now that you know more about FHA Home Loans and their potential benefits, it’s time to start your mortgage journey! If you’re ready to take the next step, contact me today so we can discuss your options and help you find the perfect home loan for your unique situation. With my trusted advice and expertise in the Raleigh mortgage market, I’m confident that you’ll be able to make an informed decision on which loan program is right for you.