You’ve probably seen the TV commercials offering you the chance to “Get your free credit report now!” One of the most common ad campaigns features a musical group of 20-something misfits playing guitars as they work in a restaurant dressed like pirates.
With the National Financial Capability Challenge, the federal departments of treasury and education hope to educate one million students about basic financial literacy. The program challenges educators to lead classes on topics such as how to limit spending, boost savings, buy appropriate insurance, pay for additional schooling, and invest wisely.
Capital One is offering a savings account that currently has a savings account rate of 1.39 percent and an annual percentage yield of 1.40 percent. The interest rate isn’t the highest savings rate around but still beats the national average rate. The minimum balance to earn the 1.40 APY is $2,500.
Capital One Direct Banking, which [...]
Mortgage rates are back above 5.00 percent in this morning’s mortgage application survey. 30 year mortgage rates have been seesawing above and below 5.00 percent for over a month. The average contract 30 year mortgage rate is at 5.01 percent for the week ending March 5, 2010 according to the Mortgage Bankers Association’s Weekly Mortgage Applications Survey. Mortgage discount points averaged 0.82 [...]
HSBC Advance, formerly known has HSBC Direct is offering certificates of deposits that have terms between 6 months and 4 years. The best CD rate (deal) is their 12 month certificate of deposit rate. The bank’s 12 month CD rate and annual percentage yield is currently at 1.01 percent.
The bank’s other certificate of deposit rates are not the [...]
Alabama Credit Union is advertising some of the best certificate of deposit rates available. Right now the best CD rate and yield offered by Alabama Credit Union is on their 7 months certificate of deposit. The current CD rate is 1.50%. The minimum opening deposit is $5,000.
You will have to join Alabama Credit Union to open a certificate of [...]
Navy Federal Credit Union is offering some of the best mortgage rates available today. Navy FCU is also offering 100 percent financing which is unusual these days. The 100 percent financing option is for home purchases only, not for refinancing a mortgage.
The credit union’s current fixed 30 year mortgage rate is advertised at 4.75 percent with 1.25 mortgage discount points. The mortgage rate increases [...]
HSBC Advance, the online banking division of HSBC, which was formerly known as HSBC Direct, is offering an online savings account rate that is more than double the national average savings account rate. The bank’s current savings account rate is 1.24 percent with an annual percentage yield of 1.25 percent.
Looking for Savings Account Rates? Search our interest rate tables [...]
Through the first three months of the year, the answer so far is “no,” says the National Association of Realtors (NAR).
After writing a post yesterday on the homebuyer tax credit — asking readers just how well they know the tax credit — the question popped into my head: “I wonder how successful the tax credit has been this year in comparison to last year?” I got an answer from one source.
From National Mortgage News (emphasis added):
The homebuyer tax credit has been a dud so far this year, but the National Association of Realtors is hoping it will kick in this spring and drive home sales higher before it expires at midyear. When the tax credit was due to expire in November, the rush by new first-time homebuyers to meet the deadline pushed November sales 45% higher than a year ago. “We would anticipate that April, May, June home sales figures will be high if there is a similar buying pattern as last year,” said Lawrence Yun, chief economist for NAR. But so far the extension of tax credit by Congress has generated only a modest increase in foot traffic, he told reporters. And the expansion of the tax credit to existing homeowners or repeat buyers has not generated much excitement either. “Right now there is nothing to indicate we will get that 40% kick” in May or June, Mr. Yun said. “But we are keeping our fingers crossed.”
What’s behind the lack of “foot traffic?”
Especially with an expanded tax credit in place, why aren’t more borrowers taking advantage of what is being offered? Beyond the minimal activity associated with the winter home-buying season — a slow season made even slower by major snow storms — there’s a consequence to altering the marketplace with cash incentives: it changes borrower behavior.
“Natural demand that would have occurred in December, January and February got bumped up — a certain amount of demand was advanced in November due to the pending expiration,” explains HSH VP Keith Gumbinger.
“That said, you can bet that potential buyers are scrambling once again with the credit set to expire in only six weeks.” (We’ve noted in several posts that “The mortgage process usually takes anywhere between 45 and 60 days.”)
Will a quiet 2010 kill the credit’s chances of another extension?
Not necessarily. If the tax credit isn’t flying off the shelves, than it’s not costing taxpayers much either. However, whether the credit receives another extension or not depends on the amount of political pressure, said Gumbinger.
Don’t expect a decision to come right away. “You’ve to give people time to react,” he said. If the people react, and if the trade groups — such as the realtors and home builders — apply the pressure that the market can’t properly function without the credit, then lawmakers may be forced to extend the program one more time.
Is the homebuyer tax credit a loan? Is it a credit? Is it a one-time check for a couple grand? Does it ever have to be repaid? These are all good questions, and questions we’re not sure everyone knows the answers to. As tax time is upon us, it’s more important than ever to understand such things.
In late January, we wrote a post on the homebuyer tax credit because many consumers were complaining about just how long it was taking to receive their check. The reason for the delay? Due to rampant fraud surrounding the program, the IRS decided to change the documentation it required in order for homebuyers to receive their “credit.”
A short paragraph in the latest Kiplinger Tax Letter points to the fact that the IRS still doesn’t have the fraud problem under control. Furthermore, this item also provides some very definitive answers to the questions: “Is the homebuyer tax credit a loan? Is it a credit? Is it a one-time check for a couple grand? Does it ever have to be repaid?”
According to the tax letter: “The IRS has a new way to police the recapture of the home buyer credit: It will check public databases of real estate sales. If a person buys a home between Jan. 1, 2009 and April 30, 2010 and sells within three years, the tax credit is [repaid to the IRS]. The $7,500 credit for purchases between April 9 and Dec. 31, 2008 is recouped over 15 years, but the remaining balance is due if the home is sold early.”
By this reckoning, if you bought a home in 2008, you got more of a loan than a credit. Ironically, the IRS agrees (emphasis added):
For 2008, the credit applies to a principal residence purchased by the taxpayer after April 8, 2008, and on or before December 31, 2008. Homebuyers who qualify are allowed a one-time credit against their income tax for the year of purchase. Unlike some past credits, this one must be repaid over a 15-year period. As a result, the new tax credit works like an interest free loan. You take the full credit on your 2008 return, and then repay the credit amount in equal payments over 15 years, with no interest charges.
If you bought a home between January 1, 2009 and April 30, 2010, you don’t have to repay it, provided that you hold your home longer than three years, otherwise your credit must be repaid in full:
The obligation to repay the credit arises only if the home ceases to be your principal residence within 36 months from the date of purchase. The full amount of the credit received becomes due on the return for the year the home ceased being your principal residence.
Here are two scenarios of what will happen if you sell your home (purchased in 2009 – 2010) within three years of receiving the tax credit:
Example 1: Taxpayer, a first-time homebuyer, purchases a home for $100,000 in 2009 and claims an $8,000 first-time homebuyer credit. In 2011, the taxpayer sells his home for $120,000. He has no adjustment to basis. The taxpayer must pay an additional tax of $8,000 for 2011.
Example 2: Assume taxpayer in example 1 sold his home to an unrelated person for $98,000 in 2011. He has no adjustments to basis. To determine the amount of gain for recapture purposes, the taxpayer’s $100,000 basis is reduced to $92,000 by the $8,000 credit. His gain for this purpose is $6,000 ($98,000 amount realized minus $92,000 basis). Taxpayer must pay an additional tax of $6,000 for 2011.
While we aren’t tax experts, if you have any questions regarding the tax credit, you can submit them in the comment section of this post, or click the “contact us” link in the top-right portion of the page, and we’ll do our very best to answer them.
