Your Guide to the Mortgage Interest Deduction: It’s Not Gone!

Mortgage interest tax deduction

As 2019 is coming to a close, most of us turn our attention to end-of-the-year festivities. Along with great food and joyous time with friends and family, the end of the year also means taxes. Because nothing says “party” like talking tax law and mortgage interest deductions.

So as you embark on the holiday season, you are probably eagerly anticipating tax time right around the corner. No? Just us?

Regardless, if you are a homeowner or are considering buying a house, it’s essential to have accurate information about the tax benefits. It is especially crucial to understand how your mortgage interest factors into taxes.

Get your ducks in a row

Every year it is important to get your ducks in a row to make sure you are prepared for the annual rite of taxation. Part of that preparation includes becoming knowledgeable about what you can deduct and what you cannot.

And to add a little spice to the meatball this year, the Tax Cuts and Jobs Act (TCJA) kicks in. This tax reform bill arrived on the scene in 2018, but it did not kick in to affect tax returns until this year.

The TwinCity Lending team is here and ready to help you become a homeowner so that you can take advantage of the associated tax perks. Reach out today to ask questions or start a loan application. You’ll be in the home of your dreams in no time.

Tax Reform Misconception

In addition to changes in tax brackets, tax rates, family benefits, and standard deductions, there is a change in the mortgage interest deduction. Unfortunately, many homeowners mistakenly think that this tax break disappeared with the new law. 

There has been a lot of uproar over this supposed elimination of the deduction. But it didn’t go anywhere. It just changed. If you are a homeowner, it is likely you still qualify for this deduction. But first, let’s review and clarify what your mortgage interest is.

What Is Mortgage Interest?

Mortgage interest is the amount of money you pay for the privilege of borrowing the money needed to buy a home. When you fill out a loan application and seek preapproval for a home loan, the lender will tell you what interest rate you will pay to borrow the money. This rate works just like the interest on any other credit card, student loan, or car loan. But mortgage interest rates are generally much lower than others. This amount will be part of your mortgage payment each month.

Your monthly payment will generally cover the following obligations:

  • Principal loan amount
  • Interest charges
  • Mortgage insurance, if required
  • Homeowner’s insurance, if not paid separately
  • Property taxes, if not paid separately

Historically, those who own homes have been able to include the amount they pay in mortgage interest in their itemized deductions on tax returns. This tax benefit lowers the person’s taxable income, potentially saving them money.

Did the Mortgage Interest Deduction Disappear?

Mortgage interest

No, it did not go away. It’s still there, and most homeowners can take advantage of it.

Under the old law, homeowners could deduct the mortgage interest on a principal loan amount of up to $1 million. They also could deduct interest on home equity loans of up to $100,000. These deductions applied to primary residences or second homes.

So what changed? Taxpayers who are married and filing jointly now may deduct the mortgage interest on loan amounts of up to $750,000. The number is $350,000 for individuals. So although it is different now, the mortgage interest deduction is still around. And many people can benefit from it.

There is even more good news. If you acquired your mortgage before December 16, 2017, the old limits apply to you. So it is not all gloom and doom, as you may have heard. Securing a home loan and buying real estate is still a worthwhile financial goal.

Can I Still Deduct the Interest on Home Equity Debt?

This question doesn’t have as clear-cut of an answer. The tax bill removed the home equity interest deduction in some circumstances.

Specifically, to deduct this interest now, a homeowner must use the loan to buy, build, or make large-scale improvements to their primary or secondary residences. 

The new tax law changes keep valuable tax deductions within reach of most homeowners. The majority of home loans qualify the taxpayer to claim the mortgage interest deduction.

And a home equity loan or line of credit remains a great option to pay for big-ticket items. It can make it possible to get a new roof, a kitchen remodel, or an awesome second home.

And even if you need to use home equity for other needs, such as debt consolidation, it can still be a smart idea to do so. The interest rate for HELOC options typically is much lower than the rate on credit cards and other consumer debt. So it can be a worthwhile plan, even if you can’t deduct the interest. TwinCity Lending can help you get this started.

Get a home loan

Is Homeownership Still the Right Choice?

Buying real estate is absolutely the right move when it comes to building long-term wealth. Even with the tax reform changes, most homeowners will be able to deduct their mortgage interest. 

Any time there are sweeping changes to tax laws, misconceptions and myths can make the rounds. But the new bill does not eliminate the mortgage interest benefit as some do believe. This long-standing deduction has helped homeowners for decades, and that isn’t changing. 

TwinCity Lending Is On Your Side

Regardless of how the new tax rules affect you, the experts at TwinCity Lending are here to help you through the home loan process. We are a concierge mortgage broker team, and our experience and training have us ready to answer all of your home loan questions.

Whether you are just getting started as a home buyer or want to add to your existing real estate portfolio, we have you covered. We offer competitive mortgage interest rates and can help you with programs for veterans, first-time buyers, and more.

Reach out today and let our experienced staff make your dreams of homeownership a reality.

Brokers Do it Better: Why You Should Work with a Local Broker

Mortgage broker gets your home loan

When homebuyers set out to look for a mortgage, many of them turn to hire local mortgage brokers. This choice makes perfect sense. Everyone wants that dream home, yet most don’t know how to go about finding it.

That’s why using a professional at TwinCity Lending is always in your best interest. You will find many advantages when working with a local mortgage broker. Once you start this process, you’ll learn that trying to do it yourself isn’t always as easy as you think.

You certainly can search for properties and approach lenders on your own, but it will take a lot of time and effort. You may even find someone who offers you a seemingly low price that you think is a great deal.

However, when you dig deeper, is it a competitive interest rate? A professional will be able to find an excellent deal for you and your circumstances and is the best choice during the home loan process.

Why Should I Choose a Local Mortgage Broker?

As you navigate the home loan options out there, here are some essential things to keep in mind about a professional broker.

They Can Do Much of The Busy Work For You

One of the most significant benefits of hiring a local mortgage broker is that they handle all the hard stuff. It’s unlikely you want to make a full-time job out of tracking down the best home loan package. Making phone calls, sending emails, and following up on all of it takes a great deal of time and energy on your part.

Luckily, a professional broker wants to do precisely that. You get to concentrate on all the other important things, while they focus on getting you the best offer.

They Don’t Settle for the First Choice

Many homeowners make the mistake of jumping at the first loan that they find. Professionals can help you discover several options that will serve you well and save you money.

A local professional broker knows the mortgage market inside and out, and they know how to find that perfect deal. Having a mortgage broker in charge of your home loan takes a tremendous amount of stress out of the home-buying process.

They Have a Reliable Network

Professional local mortgage brokers know just who to contact for each step of the home loan process. They have built a trusted network of experts to be sure that you receive the best possible service.

Because of these relationships, brokers can get answers and responses quickly. This promptness ensures that your loan process moves forward smoothly so you can close on time.

They Give You Personalized Assistance

When you use the services of a local mortgage broker, the person that you select will be by your side throughout the entire process, protecting your interests. You can rely on them to be ready to answer all of your questions.

Because they specialize in home loans, mortgage brokers tend to have more in-depth knowledge of the market than banks do. They are aware of upcoming trends in the home loan financing industry that can benefit you in many significant ways.

Bank Lenders Don’t Offer The Best Options

When you deal with bank lenders for a home loan, you limit your opportunities. Banks want you to use their products only. They will not show you other choices.

Professional brokers, on the other hand, always have a wide array of products available for their clients. More options mean better deals for you.

Local brokers have the expertise to keep the home loan process flowing swiftly so that you can close as planned. Their knowledge helps you avoid unpleasant surprises.

How Are Mortgage Brokers Paid For Their Work?

Some homebuyers worry that a broker will only steer them to expensive loan products. This is not the case. Yes, mortgage brokers get paid for their work, just like anyone else. But they have an ethical and legal obligation to offer you the best possible option for your situation.

Unlike a loan officer who works directly for one lender, a broker typically does not receive a salary. While loan officers get paid whether they close your loan correctly or not, brokers get paid when they have finished the job for you. They have a vested interest in keeping the process running well. At TwinCity, we usually can get to closing in two weeks.

Typically brokers receive their compensation from the lender, and it is dependent on the amount of the loan. There are legal limits placed on how much a broker can receive from each mortgage package they write.

When you approach a professional broker, you know you will work with someone who has access to dozens of mortgage products. This accessibility means that they are the right choice to find the home loan option that best suits your situation.

Finding The Right Local Broker For You

One of the best ways to choose the perfect local mortgage broker is to get recommendations from others. Ask your friends, real estate agent, work colleagues, or neighbors who they used.

When interviewing brokers, ask what their compensation rate is so that you can make accurate comparisons. Find out what their typical turnaround time is for closing. Hint: If they normally need more than two weeks from the time they have all your paperwork, you might want to look elsewhere. Although occasional glitches do arise, a professional broker should be able to have the loan close quickly once you have all your ducks in a row.

Work with the Best

Choosing a home loan package is not like choosing a hat. One size does not fit all. That is why it is so important to choose a local mortgage broker rather than going through a specific lending institution.

You deserve to see all the sizes, all the options, and all the different possibilities. Buying a property is likely the most significant investment you will ever make. Make sure you have TwinCity Lending on your side from start to finish. Reach out today to see how our concierge experience is perfect for you.