Mortgages are netting households the biggest cost savings relative to rent in at least 20 years in San Antonio. And with home prices as low as they may ever be again, now may be the ideal time for would-be home buyers to consider throwing in the towel on rent, and take advantage of all the home ownership perks afforded by owning vs. renting.
Mortgages Higher Than Rent Since 1991
According to data compiled by Deutsche Bank from the National Association of Realtors and the REIS Inc. information service, those with home loans are benefiting from mortgages costing 0.8 percentage points less in last year’s fourth quarter after being about the same as rents during the first three quarters. Mortgages have been 3.1 points higher on average since 1991.
Analysts John Perry and Nishu Sood noted in their report that falling home prices and still-rising rents accounted for the fourth-quarter gap. The median price of a single-family house fell 5.8 percent in the quarter, while rent payments rose 0.5 percent on average.
Rents averaged 14.9 percent more than mortgages during the last three months of 2011. The gap widened from the third quarter by 8.1 points, and rentals were more costly for the fifth consecutive quarter.
The differential points toward a rebound in homebuilding and a slowing of rent increases.
If you’ve been renting, with San Antonio mortgages being at or below record low rates, now may be the time for you to make the move and buy a home. We’d be happy to discuss the market with you, and talk to you about whether now would be the best time for you or not. Just contact us for a no-obligation consultation.
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San Antonio home renovations, in general, now exceed the dollar value of expenditures on newly constructed single family homes.
This trend is not only in San Antonio, according to federal estimates, but it is having a profound effect on real estate markets all across the country.
Housing Scenarios
Maybe you can say you fit one of these scenarios.
- You’ve been reluctant to sell because you don’t think you can get what your house is worth…
- Buying a home seems out of reach because it’s so difficult to qualify for a mortgage…
- You’ve decided it may be smarter to improve the house you already own and just stay put for a while…
The National Association of Home Builders’ remodeling market index recently hit its highest level in five years, which only underscores this home remodeling trend.
Many San Antonio home renovations companies are seeing a significant jump in interest in renovating, especially from owners who have been in their houses for years, have built up some savings and managed to get through the recession without falling behind on their mortgages.
San Antonio Home Renovations No Longer About McMansions
San Antonio home renovations are generally the projects where people are no longer thinking along the grand, McMansion show-off scale; they’re smaller, more modest, less costly efforts than five to seven years ago, with more emphasis on finishing details and quality than square footage.
Many of the San Antonio home renovations being made are not ones where the owner worries about immediate paybacks from their improvements. Most owners understand that the boom-time expectations of 100 percent immediate returns on their investment are gone.
Most people are happy with modest returns, which is right in line with what’s happening overall in the San Antonio real estate market: a slow, modest recovery, spurred by modest and realistic expectations about where we’re headed and how fast we’ll get there.
Tax advantages of owning a San Antonio home are probably not the number one motivating force behind buying a home. But the tax advantages associated with owning your own home are significant, and may be a factor in your decision to buy a home.
Mortgage Interest Deduction
If you itemize deductions you’re generally able to deduct the interest you pay on debt resulting from a loan used to buy, build, or improve your principal residence, provided that the loan is secured by your San Antonio home.
The ability to deduct mortgage interest also generally applies to second homes, though special rules apply if you rent the home out for part of the year. Interest you pay on up to $1 million in mortgage debt ($500,000 if you’re married and file a separate federal income tax return) can qualify for the deduction (different rules may apply if you incurred the debt prior to October 14, 1987).
Interest on qualifying home equity debt of up to $100,000 ($50,000 for married individuals filing separately) is generally deductible regardless of how the loan proceeds are used. If you’re subject to the alternative minimum tax (AMT), the AMT calculation doesn’t allow a deduction for interest on debt that’s not used to buy, build, or improve your San Antonio home.
Qualified mortgage insurance premium payments made prior to 2012 can be deducted in the same manner as qualified mortgage interest, provided the mortgage insurance contract is issued after 2006. Congress is debating this tax deductible interest subject, and have been for several years. Each year, the possibility of this valuable deduction evaporating becomes more and more possible.
Could the mortgage interest deduction ultimately be eliminated? That seems unlikely, but elimination or reduction of the deduction has remained part of the ongoing debate, and was included among the recommendations contained in the National Commission on Fiscal Responsibility and Reform’s December 2010 report.
Deduction for Property Taxes
If you itemize deductions, in most cases, you can deduct the real estate taxes you pay on your San Antonio home in the year you pay them to the taxing authority. If you pay your real estate taxes through an escrow account, you can only deduct the real estate taxes actually paid by your lender from the escrow account during the year. For purposes of calculating the AMT, however, no deduction for state and local taxes, including any real estate tax, is allowed.
Capital Gains on Your San Antonio Home
If you sell your San Antonio home at a gain, you may be able to exclude some or all of the gain from federal income tax. For the most part, capital gain (or loss) on the sale of your principal residence equals the sale price of the home less your adjusted basis in the property. Your adjusted basis is the cost of the property (i.e., what you paid for it), plus amounts paid for capital improvements, less any depreciation and casualty losses claimed for tax purposes.
If you meet all requirements, you can exclude from federal income tax up to $250,000 ($500,000 if you’re married and file a joint federal income tax return) of any capital gain that results from the sale of your San Antonio home. This exclusion can be used only once every two years. To qualify for the exclusion, you must have owned and used the home as your principal residence for a total of two out of the five years before the sale. If you fail the two-out-of-five-year test, you might still be able to exclude part of your gain if your San Antonio home sale is due to a change in place of employment, health reasons, or certain other unforeseen circumstances.
Special rules apply in a number of situations, including one in which you maintained a home office for tax purposes or otherwise used your home for business purposes. Special rules may also apply if you are a member of the uniformed services. Check with a tax professional about current laws that may affect the tax advantages of owning a San Antonio home.
For more on current tax laws, visit the IRS website.
A San Antonio mortgage is more difficult to get these days than ever, but there are some things home buyers tend to do that delay, or even kill a deal.
This seems to be especially true during the time after signing a contract, and waiting for the home to close.
6 Things To Never Do When Trying to Obtain a San Antonio Mortgage
- Don’t make any large purchases like a new car or a bunch of new furniture for your newly purchased home. New debt comes with it, including new monthly obligations. New obligations create new qualifications. People with new debt have higher ratios. Higher ratios make for riskier loans, and sometimes qualified borrowers no longer qualify.
- Don’t apply for new credit. It doesn’t matter whether it’s a new credit card or a new car, when you have your credit report run by organizations in multiple financial channels (mortgages, credit cards, autos, etc.), your FICO score will be affected. Lower credit scores can determine your interest rate and maybe even your eligibility for approval.
- Don’t deposit unusual cash into your bank accounts. By “unusual cash”, we mean, cash you would not normally come into, like money your parents gave you to help with the down payment. Lenders need to source your money and cash is not really traceable. Small, explainable deposits are fine, but getting $10,000 from your parents as a gift is not. Discuss the proper way to track your assets with your loan officer.
- Don’t co-sign any loans for anyone. When you co-sign, you are obligated. With that obligation comes higher ratios on your credit as well. Even if you swear you won’t be making the payments, the lender will be counting the payment against you.
- Don’t change banks or bank accounts. Remember, lenders need to source and track assets. That task is significantly easier when there is a consistency of accounts. Before you even transfer money between accounts, talk to your loan officer to make sure it won’t affect your mortgage application.
- Don’t close any credit accounts. Many people erroneously believe that having less available credit makes them less risky and more approvable. Wrong! A major component of your score is your length and depth of credit history (as opposed to just your payment history) and your total usage of credit as a percentage of available credit. Closing accounts has a negative impact on both those determinants of your FICO score.
The best advice we can give home buyers when applying for a San Antonio mortgage is to fully disclose and discuss your plans with your loan officer or mortgage broker. The smallest little blip on your credit report could cause you to lose the house you’re waiting to close on! Wait until after you’ve closed on your new home before doing anything that could adversely affect your credit score or credit report.
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