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Entries for December 2011
TaxBizPro, LLC posted on December 17, 2011 19:29
If you are ready to purchase your dream home, a careful tax analysis about different types of mortgages must be done. If you want to know about big tax write-off a mortgage can give you, you should learn how mortgages work and then sit down with a tax advisor or an accountant and determined whether a 30-year mortgage is better or worse for you than the 15-year mortgage. This task might be confusing and you need to make sure you have a clear picture and help from your tax accountant. You can use mortgage calculators to compute the monthly payments on a 30 years or 15 years mortgages. This tool will help you budget your personal expenses and you will see how much the monthly payment will be on your new mortgage.
What if you take out a 30-year fixed rate mortgage?
If you decided to take out a 30-year fixed rate mortgage, you will be able to borrow money for a longer term. Your interest rate will be fixed and not fluctuate according to the changing mortgage markets. The payments for a 30-year mortgage will be lower then for the 15-year mortgage because of extra 15 years in payments. Thus, the monthly payments on a 30-year mortgage will be more affordable to you. When you make a mortgage payment, one portion will be the principal (this is what pays down your mortgage that you owe to the bank) and the other portion of the payment is interest that you pay on the outstanding loan balance. Every time you make the mortgage payment, the principal portion increases and interest portion decreases. See the chart below (aka amortization schedule). This chart only illustrates 20 months on a regular 30-year fixed mortgage for $325,000 at 5% interest rate:
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