Market update and more Greg Vanslow

Good afternoon,

Markets

Last Friday the jobs report was better than expected. The Fed talked about scaling back QE3.

And the markets…did nothing, really. Stocks went up. Bonds held flat. This is being taken as a very good sign as the last few times this happened the markets panicked.

Today’s PPI (inflation) was flat.

 

The Dow closed the week at 15,755, down from 16,020 last week.

The 10 year treasury closed at 2.87% yield, down from 2.88% last week.

The Dollar is up to $1.35 vs the Euro.

Oil is under $100/barrel at $96.44.

The MBS is about where it was last Friday.

The attached rates are about where they were a  month ago, except for the standard conforming fixed, which is up. Some others moved, too, some down a few more up.

 

Next week is big week for economic announcements, including more inflation (CPI), Philly Fed Index, and GDP.

 

Mortgage deduction

It’s almost tax time. I thought I’d review the mortgage tax deduction. ( I am not a tax professional, please consult a licensed tax professional)

 

The IRS defines two types of mortgage deduction:

1.       Acquisition debt. This is debt incurred to purchase a “qualified” residence. The debt instrument doesn’t matter. It could be a 30 year fixed or a HELOC (home equity line of credit). It doesn’t matter. A qualified residence is one’s primary residence or one vacation home. The interest on up to $1,000,000 can be deducted EVEN IF one hits AMT. Once the debt is paid down the deduction is gone forever. So, if you pay off your line of credit and then draw on it again it is no longer acquisition debt. If no debt is incurred to buy a property you have 90 days to put a lien on the property to call it acquisition debt. Once the 90 days is gone you can’t take out a loan and get the deduction. 

2.       Home equity debt. Any debt on a qualified residence that isn’t acquisition debt is “home equity debt”, regardless of the debt instrument. So, if you have no debt, then do a cash out with a 30 year fixed, that is home equity debt.  Interest on up to $100,000 in home equity debt can be deducted UNLESS one hits AMT. If one hits AMT the home equity deduction goes away, as does the property tax deduction.

 

Just in case you didn’t read that carefully, a HELOC can be acquisition debt and a 30 year fixed can be home equity debt. The IRS doesn’t care what the loan is called.

Also, a “qualified residence” includes the primary residence and one second home. If you have five “second” homes you can use a different one every year, but only one each year.

 

Some home equity debt can be converted to acquisition debt. For example, if significant improvements are made to the property with the debt then it can be acquisition debt.

What is “significant?” Great question. The IRS doesn’t say, but added square footage is considered safe by most tax pros. Storm windows? Probably OK. Paint? Fixtures? Nope.

 

It’s also worth noting that the IRS is really bad at telling what is acquisition debt and what is home equity debt, unless you tell them. That is why a few years ago the IRS started requiring lenders to identify cash-out loans on the 1098.

 

Questions? I’m around. Or talk to your tax person.

 

 

Wine

 

2006 Bodegas Casa Juan Señor de Lesmos Crianza Rioja (1.5L $24 @ K&L Wines) -  I had the 2005 and it was as good of a wine under $15 I have ever had. The complexity was amazing. This vintage is supposed to be a little different but as good.

“Lesmos is back, and now in magnums, the ideal size for parties and for extended ageing in your cellar! There is a wonderful element of whimsy and joy at this tiny, family bodega located in Laguardia. The elephant logo, the on site African art museum, as well as the name (there is no Señor de Lesmos, as it turns out) all speak to the family's joie de vivre and sense of humor. There is nothing funny about the quality of these wines, though. All estate fruit, hand harvested, and carefully vinified with native yeasts, this is a hand sewn wine with the purity, texture and elegance to prove it. Produced from 85% Tempranillo and 15% Mazuelo, the wine shows a rather Burgundian nose of cherries and plums, opening to reveal a hint of sandalwood that leads to a wonderful palate that opens with tangy cherry flavors that are persistent and presented on an elegantly textured frame. Terrific acidity and a lasting finish. One could not ask for much more in a classically styled Rioja Crianza.”

 

 

Greg Vanslow

Mortgage Planning Specialist

Princeton Capital

Telephone  (650) 917-4263  |  Mobile  (650) 537-7905  |  Private Fax  (408) 335-1176

NMLS# 280209

http://princetoncap.com/gregvanslow

 

Princeton Capital is a Residential Mortgage Lender, and an RMR Financial company, licensed by the California Department of Business Oversight under the California Residential Mortgage Lending Act, license #415-0027.

 

The information in this electronic mail message is the sender's confidential business and may be legally privileged. It is intended solely for the addressee(s). Access to this internet electronic mail message by anyone else is unauthorized. If you are not the intended recipient, any disclosure, copying, distribution or any action taken or omitted to be taken in reliance on it is prohibited and may be unlawful.

 

 

 Please consider the environment before printing this email.