Things to know & Love in your Home Loan!

I saw this article and knew it would be helpful for so many of my clients that are current home owners or who are looking to buy. Once again, I give credit where credit is due. This is an article by Stephanie Fitch of Forbes. Please take a few minutes to read. You won't regret it!

Mortgage got you down? 6 reasons to learn to love your

home loan

Here's how to stop looking at your mortgage as your largest liability and turn it into a

valuable asset.

By Stephanie Fitch of Forbes

Millions of Americans hate their mortgages. To many, the mortgage represents not only their biggest financial liability but

also a once-promising investment gone sour.

That's too bad, says Michael Eisenberg, a Los Angeles accountant who says he employs the techniques of a Hollywood

marriage counselor to dissuade affluent clients from jettisoning their mortgage debt.

"I try to explain that there are advantages to leverage," Eisenberg says.

Advantages to leverage? Believe it or not, the mortgage is still one of the greatest wealth-building tools available, especially

for well-to-do homeowners. Thanks go partly to the laws of economics; leverage in the guise of a mortgage can amplify

gains in a rising market just as it amplified losses in a falling one. Then there's the Uncle Sam effect. Thanks to federal tax

law, no form of debt is potentially as beneficial to the average citizen as the venerable home mortgage. (Bing: When are

taxes due this year?)

1. Cut your taxes.

Homeowners may know that the interest on up to $1.1 million of mortgage debt is deductible from federal taxes. What

many fail to realize is that the math favors the affluent. Suppose that on Jan. 1 your modestly wealthy family took out an

$800,000, 30-year mortgage at a fixed interest rate of 5%. Over the first decade of the loan, your interest payments will

average $36,700 a year. If you're in the 33% tax bracket, you'll save about $12,000 annually. So you're effectively

borrowing at a rate of less than 3.5%.

If a couple filing jointly in the 25% federal income-tax bracket borrows $200,000 at 5%, they'll be able to deduct an

average of about $9,100 in annual interest. That's less than their $11,600 standard federal deduction. Since they can also

write off property taxes, they'll probably get a tax benefit from itemizing deductions, but the after-tax cost of their mortgage

will still likely be close to 5%.

2. Blunt the alternative minimum tax.

Moderately wealthy residents of high income-tax states are prone to get hit by the alternative minimum tax. If you fit this

profile, or are likely to in the future, you can limit your pain by holding a mortgage equal to a large proportion of the value

of your home.

Why so? With the AMT, you can't deduct property or state income taxes. But mortgage interest remains fully deductible. So

if you own a lot of house and would pay AMT with or without a big mortgage, it pays to lever up.

3. Pay early.

Debt-averse homeowners know the appeal of shortening the term of their mortgages. Go from 30 to 15 years and your

interest rate will fall 0.6 to 0.7 percentage points, says Bankrate.com. There's also the allure of retiring your mortgage early.

What's not to like? First off, refinancing costs can run $3,000 or so. If you swap a 30-year mortgage costing 4.2% annually

for a 15-year one at 3.6%, your payments on an $800,000 loan will go up $1,850 a month.

An alternative is to enjoy most of the same benefits by sticking with your 30-year mortgage and prepaying $2,100 a month

in principal. You'll incur no refinancing fees, save enormous interest over the life of the loan and still be able to pay off your

mortgage in 15 years. Another advantage: If you run into financial trouble or your kid enters a costly college, you can go

back to making regular payments on your 30-year mortgage without becoming delinquent.

4. Opt for an adjustable rate.

These mortgages have gotten a bad rap, thanks to a combination of unscrupulous brokers and incautious borrowers. Don't

be deterred.

If you plan to move in four or five years, why pay to lock in a fixed 30-year rate? You can probably cut your interest rate

more than a full percentage point with a mortgage that adjusts in 2016. On an $800,000 home loan, that will knock the

$3,900 monthly payment down to $3,450. Worried that stagflation will set in by 2016? Squirrel away the $450-a-month

savings and by then you'll have a $27,000 rainy-day fund.