Deducting Mortgage Insurance Premiums as Mortgage Interest Deduction
Divorcing Homeowners often find themselves having less than a full 20% down payment when purchasing their new home. When a purchase loan in first lien position exceeds 80% loan to value, mortgage insurance may be put on the mortgage to protect the mortgage lender against potential loss in the future due to foreclosure, short sale, etc.
Can mortgage insurance premiums be deducted from income taxes as mortgage interest deduction?
You can treat amounts you paid during 2020 for qualified mortgage insurance as home mortgage interest. The insurance must be in connection with home acquisition debt, and the insurance contract must have been issued after 2006.
Qualified mortgage insurance.
Qualified mortgage insurance is mortgage insurance provided by the Department of Veterans Affairs, the Federal Housing Administration, or the Rural Housing Service, and private mortgage insurance (as defined in section 2 of the...
Alimony vs. Mortgage Interest Deduction
Not all payments under a divorce or separation instrument are alimony. Alimony doesn’t include:
Under the written separation agreement, Spouse A lives rent-free in a home the Spouse B owns. Spouse B who owns the home must pay the mortgage, real estate taxes, insurance, repairs, and utilities for the home. Because Spouse B owns the home and the debts are his/hers, the payments for the mortgage, real estate taxes, insurance, and repairs aren’t alimony. Neither is the value of Spouse A’s use of the home.
If they qualify, Spouse B may be able to deduct the payments for utilities as alimony. Spouse A must report them as income. If Spouse B itemize deductions, he/she can deduct the real estate taxes and, if the home is a...
The Mortgage Interest Deduction May Be a Great Tax Planning tool as long as you understand what you are working with.
In order to use the mortgage interest deduction, the mortgage must be secured by a Qualified Home:
Main home. You can have only one main home at any one time. This is the home where you ordinarily live most of the time.
Second home. A second home is a home that you choose to treat as your second home.
Beginning December 1st, we will be offering our LIVE CDLP Certification training and CDLP Business Launch in a 3-week virtual workshop ~ So Exciting!
The CDLP 3-Weeks to Launch Program breaks down the CDLP Certification program and our proven 6 step CDLP Roadmap to Success program into a 3-week workshop presented live-online with Jody Bruns, President & Founder of the Divorce Lending Association.
We meet the first 3 weeks of each month, Tuesday and Thursday, from 9:00 am to 1:00 MST via GoTo Meeting. Each CDLP Certification Module is paired with a step in the CDLP Road Map to Success program. By the last day, you will be ready for your CDLP Certification Exam and your divorce lending practice will be structured and ready to launch as a CDLP!
Enrollment is now open for our next 3 Weeks to Launch workshop beginning December 1st thru 17th!
CDLP participants will get the benefits of learning Live from the comfort of...
Divorce can be intricate, tricky and emotionally overwhelming. When you have to relocate, find new housing and decide to rent or purchase a new home, you pile on additional tasks and frustration.
Many divorcing spouses understand the financial benefits of owning a home rather than renting. While obtaining mortgage financing on any given day may often times involve a lot of paperwork and challenges, doing so during a divorce may seem overwhelming and out of reach for many.
For many reasons, divorcing clients may decide to purchase a new home with cash rather than obtaining mortgage financing. New home buyers who are in a position to pay cash for the new home need to make sure it is the right decision financially as it may cost you the ability to deduct the mortgage interest deduction on future mortgages on the new home.
The mortgage interest deduction is divided into two categories: Acquisition and Home Equity Indebtedness. Acquisition Indebtedness is any mortgage obtained to either...
One of the most important team members in the collaborative divorce process is the financial neutral. The financial neutral is an impartial expert in his or her field. When a primary asset of the marital property is the marital home and other real estate assets, having a Certified Divorce Lending Professional (CDLP) as a financial neutral on the divorce team becomes increasingly desirable.
In many divorce settings, negotiations break down over financial issues or concerns, oftentimes leading to litigation. The CDLP, as a financial neutral, offers both parties a balanced, thorough financial evaluation of the current mortgage and future mortgage financing requirements and offers realistic solutions to obstacles in negotiations.
Depending on each individual situation, the CDLP can perform a variety of functions in a collaborative divorce, such as:
A reverse mortgage is a type of loan that allows homeowners to borrow money against the equity in their homes. Reverse mortgages enable homeowners to tap into a line of credit or receive from a lender a fixed monthly payment that can help them pay off debts, make upgrades to their property, manage large expenses, or supplement their retirement income.
Divorcing clients over the age of 62 may have the option of utilizing a Reverse Mortgage for an Equity Buyout and keeping the home. Not only may a Reverse Mortgage be a viable option for divorcing clients who want to remain in the marital home; it may be a wise financial planning decision as well. Taking a reverse mortgage can also have implications on the tax bill, and for configuring potential Social Security income. You may be able to limit the income tax exposure by using cash flow from a reverse mortgage, rather than taxable withdrawals from a 401(k) or other retirement investment, to pay off...
“I can’t buy a new home if I’m still on the marital mortgage!” is often the statement made by the spouse leaving the marital home. Unfortunately, this isn’t necessarily true.
In many divorce situations, the spouse retaining the marital home won’t qualify to refinance the current mortgage and the vacating spouse believes they can’t qualify to purchase a new home while remaining on the mortgage for the marital home.
This thought process seems rational; however, there are certain steps and verbiage to include in the divorce settlement agreement that can remove this obstacle. While many mortgage companies have their own guidelines or ‘overlays’ to investor underwriting guidelines, a Certified Divorce Lending Professional (CDLP) will know how to handle Court-Ordered Assignment of Debt and the correct verbiage needed in the divorce settlement agreement or separation agreement.
When a borrower has an outstanding debt that was assigned...
Mediation is a process in which a third person helps the participants in a dispute to resolve it. In order to resolve the dispute, the participants must negotiate a solution. Problem solving is part of the negotiations. The process of mediation is the management of other people’s negotiations, and the mediator is the manager of the negotiations who organizes the discussion of the issues to be resolved. The more coherent and organized the process, the easier it is for the participants to arrive at solutions that are mutual and appropriate for them.
At the center of the mediation process is gathering the data (fact finding), defining the problem and developing options. When the subject matter is specialized as in negotiating the marital home, the cycle becomes specialized and may require the need for mediation support from a Certified Divorce Lending Professional (CDLP).
Ideally, both parties will agree on the appropriate disposition of the marital home. The need for mediation...
The basic understanding of the various real estate deeds is a must when transferring title and ownership to real estate during a divorce situation.
A real estate deed is a legal instrument (document), almost always in writing, that passes an interest in real estate from one person to another person. In short, when real estate is sold or given to someone, it is done with a deed. The new owner of the real estate receives their rights to the property and any title warranties transferred by the previous owner from the deed.
The deed is the most formal type of private instrument and requires not only an executing party (grantor/grantee, transferor/transferee) but also witnesses as signatories, and acknowledgments from a notary public. A deed has, therefore, a greater presumption of validity and is less rebuttable than other types of real estate documents.
Understanding the Quitclaim Deed
The quitclaim deed is a type of legal document used to transfer interest in real estate from...