Bond Market Update

 Mortgage pricing is better than it was yesterday

Source: Thomson Reuters

Market Update

Friday, December 18, 2015

What's going on and why does it matter?Mortgage bond prices have rebounded on indications that the Federal Reserve is likely to continue its bond-buying program throughout 2016.  The Fed has been the biggest buyer of mortgage bonds in the market, so mortgage pricing has improved slightly on the news.  Bond prices are near their technical levels of resistance, so the uptick in bond prices may be short-lived.  All-in-all, it should be a relatively quiet day in the markets today.

What should you do about it?
Enjoy the uptick in bond prices, but be prepared to lock your rate if the market changes directions.

Economic Calendar

Economic reports that may impact mortgage rates this week:

Date	Report	Period	Prior	Estimate	Actual
Tue 15 Dec	Core CPI	Nov	+0.20%	+0.20%	+0.20%
Wed 16 Dec	Building Permits	Nov	1,150,000	1,150,000	1,289,000
Wed 16 Dec	Housing Starts	Nov	1,062,000	1,135,000	1,173,000
Wed 16 Dec	Fed Funds Rate	-	0.125%	0.375%	0.375%
Thu 17 Dec	Initial Jobless Claims	Week of Dec 13	282,000	275,000	271,000

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Jay Sibley
NMLS Number: 383991
Sibley Mortgage Group, LLC
Corporate NMLS Number: 1041547
jay@sibleymortgage.com

(321) 689-0089
919 Timber Isle Dr
Orlando, Florida 32828

  

Three Reasons to Buy a Home this Winter

Three Reasons to Buy a Home this Winter

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The winter can be a fantastic time to buy a home because:

1. Sellers tend to lower their list price in the winter.  Most sellers who weren't able to sell their home in the summer become more willing to accept an offer below list price during the winter.  After all, the alternative for the seller is to wait until next spring or summer to sell the house.  In the meantime, he/she would have to pay the mortgage, property taxes and utilities.  
2. You are competing with fewer buyers.  One main reason why most buyers wait until the spring or summer to buy a house is because they don't want to move their children to a new school district in the middle of the school year.  However, this shouldn't be a limiting factor for you if you don't have children, or if your children are too young (or old) to go to school.
3. You are positioning yourself to benefit from price increases next spring and summer.  The spring and summer homebuying season is when most people buy houses.  Therefore, if you get a good deal on the purchase of your home this winter, you'll likely benefit when prices go up in the spring/summer.  This sure beats getting stuck on the losing end of a bidding war or price increase!

Contact me so that we can further explore how you may benefit by buying a home this winter.

Three Questions to Ask Yourself for a Happier Retirement

#1: What does retirement mean to me?

Many people think of retirement as a time in your life where you can work if you want to, but not because you have to. In other words, how would you feel if you could work for fun and/or pursue your passions without worrying about money? This requires financial independence, or having enough money to:

• Cover your needs and basic wants
• After taxes
• After inflation
• For some period of time (usually you and your beloved's lifetime)

The amount of money necessary for financial independence is called "Critical Capital". This is a pile of money that can sustain all your retirement expenses with inflation and after taxes for the requisite time period. This may be in an assortment of piles of money such as funds in your 401(k), Roth IRAs, and taxable money. Retirement could mean reaching a point where you have enough Critical Capital to spend your money making a life versus being forced to spend your life making money. Now that's exciting!

#2: What is the role of mortgage planning?

Your mortgage is most likely your single largest debt, and your house is most likely your single largest asset. Your mortgage and home equity situation impact your:

• Cash flow
• Tax deductions (or lack thereof)
• Net worth and wealth position
• Liquidity (access to your money)
• Estate and legacy planning

It's important to ask yourself whether your mortgage or real estate equity strategy is helping or hurting your chances of acquiring the right amount of Critical Capital. Does it make more sense to use a smaller mortgage and invest more cash flow into your Critical Capital fund? Does it make more sense to use a bigger mortgage and invest more upfront cash into your Critical Capital fund? What about using or planning to use reverse mortgage now or at some point in the future? Mortgage planning asks and answers all these questions to help you avoid missing your mark and not having enough Critical Capital. Your mortgage, housing, and cash flow strategy play a large role in helping you achieve financial independence.

#3: How Will I Get Enough Critical Capital?

Remember, the amount of money necessary for financial independence is called "Critical Capital". There are three specific steps that I use to help you acquire enough Critical Capital for financial independence:

• Calculate Critical Capital — how much do you need?
• Determine the future value of how much you have already saved — what will your current investments be worth in the future?
• Determine how much you still need to save — how can you change your cash flow or real estate equity situation in order to make up for the shortfall?

As a CMPS professional, I work as a team with your CPA, CFP® and other financial advisors to help you determine how much cash flow you need during retirement and the best way to generate that income. I can also refer you to a financial planner if you don't already have one. Either way, give me a call or send me an email to schedule a time to discuss your options in further detail.

PLEASE NOTE: THIS ARTICLE AND OVERVIEW IS PROVIDED FOR INFORMATIONAL PURPOSES ONLY AND DOES NOT CONSTITUTE LEGAL, TAX, OR FINANCIAL ADVICE. PLEASE CONSULT WITH A QUALIFIED TAX AND INVESTMENT ADVISOR FOR SPECIFIC ADVICE PERTAINING TO YOUR SITUATION.

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Jay Sibley
NMLS Number: 383991
Sibley Mortgage Group, LLC
Corporate NMLS Number: 1041547
jay@sibleymortgage.com

(321) 689-0089
919 Timber Isle Dr
Orlando, Florida 32828

   

How to Finance the Roth IRA Conversion Strategy

How to Finance the Roth IRA Conversion Strategy

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What is a Roth IRA?

A Roth IRA is a retirement account where (1) you invest your money after you've paid taxes on it, and (2) you can withdraw your money without paying taxes on the withdrawals.

Traditional IRA	Roth IRA
Invest money before you pay taxes on it	Invest money after you pay taxes on it
Grow the money in the account tax-free	Grow the money in the account tax-free
Pay taxes when you withdraw the funds	No taxes when you withdraw the funds

What if you leave the funds in your traditional retirement account?

Consider a situation where you have a traditional retirement account worth approximately $300,000. Assume the market goes up by an average of 6% per year over the next 5 years and your account goes up in value to $400,000. You will need to pay taxes when you withdraw the $400,000 from the account. Assume you are in a 33% income tax bracket. Do you think your tax bracket and/or the income tax rates in the future will be higher, lower, or the same as today? Most people would agree that tax rates will probably be higher - especially given the enormous US federal budget deficit. Even so, let's assume your tax bracket in the future is the same as today, around 33% in our example. When you withdraw the $400,000, you will need to pay $132,000 in taxes (33%). If you leave the money in the account to be inherited by your heirs when you die, they will need to pay income taxes on the money when they take distributions, and they are required to take distributions over their life expectancy. They also might need to pay estate taxes on the funds, depending on the value of your estate.

Why Convert the Funds from a Traditional IRA into a Roth IRA?

In the example above, let's assume you convert the $300,000 into a Roth IRA. In this case, you will not need to pay any taxes at all as you withdraw the funds when the account goes up in value to $400,000. However, you will need to pay taxes now on the $300,000 ($99,000 in taxes assuming a 33% tax bracket).  In this example, you would save at least $33,000 in taxes by paying the 33% tax now on the $300,000 account value instead of later on the $400,000 account value. Your savings will be even greater if tax brackets are higher in the future and/or if the retirement account goes up in value more than expected. If you don't take the distributions yourself, the funds will be distributed income tax-free to your heirs. If the market goes down, and the account loses value after the conversion, you could simply change your mind, "re-characterize" the account, and then convert the funds again later at the lesser value. This would save even more money in the upfront taxes that would be due.

Where to get the money for the tax bill?

In our example, you would need to pay approximately $99,000 in taxes to make the strategy work. You could pay the taxes out of the retirement account itself, but that would almost defeat the purpose of the conversion.  Instead, it may be smarter to take advantage of the record low mortgage rates that are currently available. You could bump up the balance on your home mortgage, and use the extra funds to pay the taxes on the conversion:

	Pay Taxes Using Cash on Hand	Pay Taxes Using Mortgage
Funds Needed	$99,000	$99,000
Opportunity Cost %	6%	-
Opportunity Cost $ (what you would have earned by keeping your money invested)	$5,940	-
After-tax Mortgage Cost % (based on 5% mortgage rate)	-	3.35%
After-tax Mortgage Cost $	-	$3,317
Annual Benefit	-	$2,623/year

As a CMPS® professional, I work together as a team with your financial advisor to help you evaluate your mortgage options in the context of your overall financial goals. Let me know if this idea is something you'd like to consider in more detail!

PLEASE NOTE: THIS ARTICLE AND OVERVIEW IS PROVIDED FOR INFORMATIONAL PURPOSES ONLY AND DOES NOT CONSTITUTE LEGAL, TAX, OR FINANCIAL ADVICE. PLEASE CONSULT WITH A QUALIFIED TAX AND INVESTMENT ADVISOR FOR SPECIFIC ADVICE PERTAINING TO YOUR SITUATION.

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Jay Sibley
NMLS Number: 383991
Sibley Mortgage Group, LLC
Corporate NMLS Number: 1041547
jay@sibleymortgage.com

(321) 689-0089
919 Timber Isle Dr
Orlando, Florida 32828

   

What You Need to Know About Forgiven Mortgage Debt in 2015

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The tax break for forgiven mortgage debt expired January 1, 2015. This means that you will be required to pay income taxes on any debt that's forgiven you this year. For example, if the lender forgives you $50,000 in debt, and your income tax bracket is 25%, you would owe the IRS $12,500!

The "Insolvency" Exception

Here's an interesting twist: there's no tax on the forgiveness of debt if you are "insolvent" at the time of debt cancellation. Insolvent simply means that your total debts are greater than your total assets. In our example, assume your total assets are $20,000 and your total liabilities are $70,000. This means that your net worth would benegative $50,000. This would make you "insolvent" according to the IRS, and you wouldn't have to pay any taxes at all on the $50,000 in forgiven mortgage debt! Keep in mind that when you calculate your assets, you need to include everything you own, including exempt assets beyond the reach of creditors under the law, such as interest in a pension plan and the value of your retirement account.

PLEASE NOTE: THIS LETTER AND OVERVIEW IS PROVIDED FOR INFORMATIONAL PURPOSES ONLY AND DOES NOT CONSTITUTE LEGAL, TAX, OR FINANCIAL ADVICE. PLEASE CONSULT WITH A QUALIFIED TAX ADVISOR FOR SPECIFIC ADVICE PERTAINING TO YOUR SITUATION. FOR MORE INFORMATION ON ANY OF THESE ITEMS, PLEASE REFERENCE IRS PUBLICATION 4681.

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Jay Sibley
NMLS Number: 383991
Sibley Mortgage Group, LLC
Corporate NMLS Number: 1041547
jay@sibleymortgage.com

(321) 689-0089
919 Timber Isle Dr
Orlando, Florida 32828

Markets in turmoil, Rates get better

Market Update

Monday, August 24, 2015

What's going on in the market?

Mortgage bond prices are continuing to jump higher amidst turmoil in global stock markets.  Market participants are concerned that economic weakness in China could spill into the global economy and spark a global recession.  This is causing investors to flock to the bond market for safety, and driving up the price of mortgage bonds.

Why does it matter?

When mortgage bond prices go up, mortgage pricing improves.  In fact, mortgage rates are currently at their lowest levels since May of this year.

What should you do about it?

Enjoy the rally in bond prices, but be prepared to lock your rate quickly if the market changes directions.

The 90-Day Window for Cash Buyers: How it Works & Why it Matters

The 90-Day Window for Cash Buyers:
How it Works & Why it Matters

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Congratulations on paying cash for your home!  I just wanted to make you aware that the IRS gives you a 90 day window to put a mortgage on your property and gain the tax benefits associated with the coveted “acquisition indebtedness” status.

What is “Acquisition Indebtedness” and Why Does it Matter to Me?

Any mortgage that is used to buy, build, or improve a primary or vacation home qualifies for “acquisition indebtedness” status. Any mortgage that is used for any other purpose is demoted to the “home equity indebtedness” status.

If you don’t put a mortgage on your primary or vacation property within 90 days of the purchase closing date, any mortgage you put on the property in the future that is not used specifically for home improvements will be demoted to “home equity indebtedness” status. This means that:

• You will NOT be able to deduct ANY of the interest at all if you are subject to the Alternative Minimum Tax (AMT)
• You will only be able to deduct the interest on up to $100,000 of the mortgage balance if you are not subject to the AMT

On the other hand, if you do put a mortgage on your primary or vacation property within 90 days and qualify for the special “acquisition indebtedness” status:

• You can use the funds for any purpose you want (including investment, starting a college fund for the kids or grandkids, retirement needs, etc.)
• You can deduct the interest on up to $1,000,000 of mortgage balance regardless of whether you are subject to AMT

Is There a Deadline to Qualify for the Tax Benefit?

Yes! You must put a mortgage on your primary or vacation property within 90 days of the purchase closing date in order to qualify for the special “acquisition indebtedness” status.

What if I Wait Until After 90 Days?

You will lose the special tax benefits associated with the “acquisition indebtedness” status. Any mortgage you put on your primary or vacation property in the future that is not used specifically for home improvements will be classified as “home equity indebtedness”.

Okay, So I Lose the Tax Benefit… But Why Would I Want a Mortgage On My Property in the First Place?

With interest rates being so low right now, you could use the funds for any number of reasons including:

• Investment - can you and your financial advisor find a safe investment that yields more than the 2% or 3% after-tax cost of your mortgage?
• College fund for your children or grandchildren - would you rather leave them a bunch of equity in a home or a legacy that makes an impact in their life?
• Elder care needs - do you have enough set aside to care for yourself or your loved ones as you age?
• Retirement needs – do you have enough set aside to provide income during retirement?
• Vacation home or other property – how are you taking advantage of the clearance sale going on in the housing market right now?

Remember, if you decide to wait and use a mortgage to do any of these things in the future, you won’t be able to deduct the mortgage interest. It may be worthwhile to put a mortgage on the property now, and then put the funds aside until you know what you want to do with them. After you make a decision, you could then pay off or pay down the mortgage with any leftover funds that you don’t use.

Does the “90 Day Rule” Also Apply to Investment Properties?

No. Investment properties have different rules, deadlines and guidelines that must be followed.

What’s the Next Step?

I would recommend that we have a brief 20-30 minute conversation to evaluate your options and whether a mortgage might make sense for you right now. You could then take my recommendations to your CPA and get his or her opinion before making a decision. If you don’t have a CPA, I’d be happy to make an introduction for you. Contact me using the info below so we can get started!

Five Reasons Real Estate Agents Should NOT Give Mortgage Advice

Five Reasons Real Estate Agents Should NOT Give Mortgage Advice

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1. SAFE Act and state licensing laws – it’s illegal to quote rates and fees and take an application (including the qualifying piece) unless you are a licensed loan originator. The licensing rules also prohibit anyone that is not licensed as a mortgage broker or lender from "advertising" mortgage loans. This might also apply to the "advice" given by real estate agents.
2. Federal Mortgage Advertising Practices (MAP) Rule (Regulation N) prohibits any misleading communication. This includes ALL communication via face to face, over the phone, email, online and otherwise. CFPB regulators can impose hefty fines on the agent if the agent gives mortgage advice without being a licensed loan originator… especially if it's wrong advice.
3. Depending on the advice given, the real estate agent may be engaging in "origination activities" as defined in the loan originator compensation rule, 12 CFR 1026.36(d), e.g. referring a consumer to a particular lender or loan product. The rule might require the licensed broker to perform background checks and train the agents, provided that the agents are deemed to be employees for purposes of the rule.
4. There may be state real estate laws that preclude or restrict unauthorized real estate agent activities. Also, the NAR Code of Ethics prohibits illegal and unlicensed activities.
5. Depending on the advice given, the real estate agent could be prosecuted for the unauthorized practice of law.

It's more important than ever to work with a licensed and qualified mortgage professional. Contact me for more details!

Three Ways to Avoid Getting Outbid on Your New Home

Bidding for a new home can get pretty fierce in today's market. Here are three potential solutions to avoid getting outbid on your new home:

Turn in your loan paperwork BEFORE you place an offer. In many cases, you are bidding against cash buyers who don't need to wait for financing approvals. Look at it this way: if you were the seller, would you prefer to do business with a buyer who needs to wait for financing approvals, or a cash buyer who can close the deal quickly? With that in mind, it's important to be proactive and provide your mortgage lender with things like your source of down payment funds, your asset documentation, your credit report and your income documentation. This way, you'll be in a better position to close the deal quickly and compete with those cash buyers.

Pay cash, but do it right. Keep in mind that you only have 90 days after closing to place a mortgage on a property that you bought with cash if you want to secure your tax deduction. (For more info, see my article entitled, 90 Day Rule for Cash Buyers.) In order to get that loan approval after closing, you'll need to document the source of funds that you used for your cash purchase. Talk to me for more details so that you can avoid problems down the road.

Write your offer correctly to begin with. Mortgage lenders are implementing some pretty significant changes this year to the legal requirements for mortgage paperwork as part of the Dodd-Frank Act. When real estate agents and loan officers aren't aware of some of these changes, it causes unecessary delays in the loan process. That's why it's important to work with someone like myself who keeps up to date on all the new requirements. I can work with your real estate agent to make sure you write your offer correctly in the beginning, so that you won't have to redo the paperwork and delay the closing.

Contact me so that we can further explore any/all of these ideas together!

Press Release

For further information:

Jay Sibley, Sibley Mortgage Group, 321-689-0089

Jay Sibley Earns Certified Mortgage Planning Specialist (CMPS) Designation

Orlando – Jay Sibley, a mortgage broker with Sibley Mortgage Group, has passed the qualifying exams to earn the Certified Mortgage Planning Specialist (CMPS®) designation granted by the CMPS Institute. The CMPS Institute is a national organization that certifies mortgage bankers and brokers to help borrowers choose the right mortgage strategies.

“CMPS certification helps me to compare loan options for borrowers in the context of their overall financial situation," says Jay Sibley, Sibley Mortgage Group. "This is especially important to homeowners and homebuyers in Florida because inventory levels are low and home buyers are prone to making quick decisions without thinking through all the implications".

The CMPS curriculum incorporates five essential skill sets including:

1. Mortgage & Real Estate Taxation - how and why to understand the tax implications of various mortgage strategies


2. Housing, Financial & Mortgage Markets - why interest rates fluctuate, and how to understand the housing, financial and mortgage markets


3. Cash Flow Planning - how to reduce debt, improve cash flow & compare your options in the context of retirement planning, college funding, elder care, and other important life events


4. Real Estate Investment Planning - how to reduce your risk, and compare the impact of various mortgage options on your rate of return
5. Ethics and Compliance - how to experience the highest level of professional care, competence and communication during the mortgage and home buying process

"Your mortgage is most likely your single largest debt, and your home is most likely your single largest asset," says Gibran Nicholas, Chairman of the CMPS Institute. "That's why mortgage planning should be conducted with a mortgage professional who is properly trained and certified."

Jay Sibley can be reached at jay@sibleymortgage.com, or call

321-689-0089.

For more information on the CMPS, please visit CMPS Institute's consumer web site at http://homeqb.com or call 888-608-9800.

Market Update

Friday, July 31, 2015

What's going on in the market?Month-end buying and technical factors seem to be driving mortgage bond prices up toward their 100-day moving average.  We've been warning of a potential decline from these lofty levels because the last two times bond prices traded at these levels, they quickly declined and mortgage rates went up by 0.25% within a week's time.  Like any child that defies the rules when given an opportunity, the market seems to be testing its limits. 

Why does it matter?When mortgage bond prices go down, mortgage pricing gets worse.  When mortgage bond prices go up, mortgage pricing improves.

What should you do about it?Enjoy the uptick in bond prices as the market tests its limits.  But be prepared to lock your rate quickly if the market changes directions... especially because bond prices are near the upper end of their recent trading range.