American Pacific Mortgage

American Pacific Mortgage

Saturday, February 4, 2023

GIFT FUNDS --- AND ARM LOANS

 ARE YOU TAXED ON GIFT FUNDS?

One of the most common questions we hear from home buyers is about gift funds.  You can use gift funds from a relative towards a down payment and in most cases, there is no tax consequence to the donor.

The current annual amount that is tax-free, or excluded from taxes, is $17,000 per donor per individual.  For example, a couple may gift to their child $34,000 tax-free.  ($17K per donor) They may also gift $34,000 to their child’s spouse.  And, to all their other children and spouses, grandchildren, etc. at $17,000 per donor per recipient. 

But, what if they gift a larger sum, $200,000 or more?  Right now, the lifetime exclusion for gift tax is $12,920.000.  Yes, almost $13 million per individual.  A gift larger than $17,000 per individual must be reported to the IRS on form 709 and yet, no tax is due unless and until the donor passes the threshold of $12.92 million.   However, this threshold expires in 2026.  At that point it will likely revert back to $5 or $6 million.  Funds already gifted over that threshold will be “grandfathered” and no gift tax will be due.

We always suggest consulting with a professional CPA, tax preparer or estate attorney on these matters.  But, for most of the “hoi polloi” (the common people, or the masses) this will likely not present a future tax issue.  If you are a Hoi Oligoi (elite or the few) you may owe taxes for larger gifts.

RATES and ARMs

You’d think that short term ARMS (Adjustable Rate Mortgages) would have lower rates, right?  Not in this environment.  Since the market anticipates more volatility in the short term-- and that rates will drop sooner than later, short term rates, for 5- and 7-year ARMs are HIGHER than for 30 year fixed rate loans right now.  This is the dreaded “inverted yield curve” foretelling recession on the horizon. 

INCOME TAXES

Yes, it is that time of year again! We are in the process of sending out the final closing statements for all clients who closed a loan in 2022.  This is necessary when prepping for your 2022 tax return.  This year the due date is April 18 for individual federal tax returns. The IRS is already accepting filings. REMEMBER IF YOU PLAN TO BUY OR REFINANCE THIS YEAR, HAVE YOUR LOAN OFFICER REVIEW DRAFTS PRIOR TO FILING.

Recently a client reached out with a complaint regarding capital gains on the sale of a rental.  This in turn affected her Medicare premiums.  A quick review of her taxes revealed her CPA had entered the wrong basis for the property upon inheritance, which means she overpaid by a hefty amount on her taxes.  Good news:  Amending the returns will result if a refund of over $30,000 and an attendant reduction in the Medicare premiums.

REVERSE FOR PURCHASE LOAN

Yes, you can use a reverse loan to buy a home.  This increases your buying power, and there is no monthly payment required for the loan. Please reach out to us for more information.  These are a very useful tool in the retirement planning process.

Monday, January 9, 2023

Rain, Rain, and....Rates!

Happy New Year!  2022 was a humdinger!!!   The start of 2023 has brought a lot of cold weather and rain here in California.  We need the rain and snow, so we can’t complain too much.  We need to sit back and enjoy sweater weather.

RATE AND HOUSING OUTLOOK

Interest rates have remained relatively flat for the month of December and show no signs of coming down…yet!  Most “experts” are banking on a drop by the end of this year.  Home prices are on a downward trend with the median home price in both Orange and Los Angeles counties dropping a bit.  Orange County is down to $960,000 and La County is down to $865,000.

Many buyers are either using a permanent “rate buydown” paid by either buyer or seller, or a 2-1 buydown paid by the seller.  This has the effect of reducing the rate and payment to a more affordable level.  Most homes are not receiving multiple offers, so the buyer is in the driver’s seat today.

BUY/FI Program

We offer a program where any client who closes a purchase before April 30th can refinance that loan with us – at a lower rate, as anticipated by next year, with NO LENDER FEES.  We will waive all lender fees so long as the refinance is completed by end of 2024.  This provides a great motivation to buy now, and refinance later to lower your interest rate.  Less competition + lower prices = good timing to buy now, and refinance later.

HOMEBOT

This is a cool service providing a monthly digest including a lot of information about your home value and neighborhood.  It will also note opportunities to sell or refinance.  Our clients love it, and if you aren’t receiving it yet you can click here to sign up: Home Owners

For prospective buyers, it is also a useful tool for watching market activity and values in a specific area.  Potential buyers should click here to sign up: Home Buyers

HELOCS

Home Equity Lines of Credit are very popular currently for homeowners who want to pull cash out of their home for home improvements or revolving debt payoff, but don’t want to touch their low interest rate mortgage.  We have some competitive programs to offer to our clients.

WE LOVE REFERRALS

We work hard for our clients and do our utmost to provide clear information and choices, and great communication.  We truly care about our clients and always try to provide the best experience for their home loan. Please think of us when you hear of a friend or relative who could use our help.  We love referrals.