Skip to main content

  • Home
  • Home
  • Clients
  • Philosophies
  • Our Team
  • Contact Us 
    • Ask Us A Question
  • Affiliations
  • Blog
  • Financial Check-Up℠
  • Resources
    • Calculators
    • TD Ameritrade Account Login

    You are here

  1. Home
  2. Blogs
  3. Be Careful When Refinancing

Be Careful When Refinancing

Submitted by BCR Wealth Strategies on January 25th, 2021
  • Facebook Like
  • Google Plus One
  • Tweet Widget
  • Linkedin Share Button

Several of our clients have found opportunities in refinancing over the last several months.  Even with already low interest rates they are finding financial benefit in reducing the rates even more and extending their amortization back out to get what seems like unbelievably low monthly payments. In reviewing refinances, I have come across two mistakes that are worth knowing if you are in the process or considering a refinance. Both are easy to handle and likely do not affect the decision to move forward.

  1. We have seen clients receive offers to cash-out refinance below 3%.  This can be exciting particularly when we are talking the opportunity to invest that money and have 30 years of arbitrage. Your house will appreciate at the same rate either way, and you can use some of the equity to grow in your portfolio.

The Tax Cuts and Jobs Act of 2017 considers a cash-out refinance to be debt restructuring and eliminates the deduction of your interest payments unless you spend the cash out to improve the home.   If you use the standard deduction anyway this may not be an issue.  If you itemize, this can cause an annual tax increase that most people will not see coming. If you put the funds into your portfolio you could use interest tracing rules to allocate a portion to your original home interest deduction and use the new portion against your investment activity but understand that is going to complicate your tax filing (and cost from your tax provider).

  1. Having only one spouse on the loan. At face it sounds cool. The lender says, “let’s see if we can qualify with just the larger income earner on the loan so that we don’t have to hassle the other spouse while underwriting.” The clients discuss it and think it does not harm the spouse because they are still on the title of the mortgage and have not lost any rights to the property. 

The clients do not think about what happens if the higher earner dies. It may be unlikely but in financial planning we look not only to chart a successful path but also negate potential threats. If one person is on the mortgage and two people own the property, the loan is considered in default if the person on the loan dies.Yes, the surviving spouse still owns the property but that amazing rate you got is forced to rates at that time. Worse yet, what if the surviving spouse does not qualify for a new mortgage on their own.Even if it works out mathematically the last thing the survivor needs is to go through underwriting on top of everything else, they are dealing with at the time.

Tags:
  • Author - Marshall Rathmell

Subscribe to Our Blog

Enter your email address:

Recent Blog Posts

  • Stop, Collaborate and Listen
  • An Unusual Opportunity For a Tax Deduction
  • Should You Invest to Get Income In Retirement? Not So Fast My Friend

Categories

  • Author - Clay Wood (2)
  • Author - Harold Sasnowitz (2)
  • Author - Intern (13)
  • Author - Lindsay Birchfield (2)
  • Author - Mark Hume (25)
  • Author - Marshall Rathmell (6)
  • Author - Sandra Cleveland (3)
  • Author- Clay Wood (31)
  • Author- Harold Sasnowitz (29)
  • Author- Kristie Clayton (7)
  • Author- Marshall Rathmell (92)
  • Author- Sandra Cleveland (49)

Archived Blog

  • March 2021 (1)
  • February 2021 (5)
  • January 2021 (4)
  • December 2020 (4)
  • November 2020 (5)
  • October 2020 (4)
  • September 2020 (4)
  • August 2020 (5)
  • July 2020 (4)
  • June 2020 (5)
  • May 2020 (5)
  • April 2020 (8)
  •  
  • 1 of 7
  • ››

Contact Us

Ask Us A Question

 

Alabama

Phone: 205-298-1234
Fax: 205-298-1230

1952 Urban Center Parkway
Vestavia, AL 35242

Get Directions

New Jersey

Phone: 607-238-7718
Fax: 607-238-2859

22 Lenox Ave
Clifton NJ 07012

Get Directions

Affiliations

BCR Wealth is an independent firm that puts its clients’ interests first.  In order to maximize the value we provide clients we have affiliations and strategic alliances with other organizations including:


TD Ameritrade, Inc. is one of the firms that we use to custody our client assets. TD Ameritrade, BCR Wealth Strategies, and the other entities named are separate and unaffiliated firms, and are not responsible for each other’s services or policies. TD Ameritrade does not endorse or recommend any advisor and the use of the TD Ameritrade logo does not represent the endorsement or recommendation of any advisor. Brokerage services provided by TD Ameritrade Institutional, Division of TD Ameritrade, Inc., member FINRA/SIPC. TD Ameritrade is a trademark jointly owned by TD Ameritrade IP Company, Inc. and The Toronto-Dominion Bank. Used with permission.

  • Sitemap
  • Legal, privacy, copyright and trademark information
  • Form CRS

© 2021 BCR Wealth Strategies LLC. All rights reserved.

Website Design For Financial Services Professionals