Review your condo bylaws before renting out your place on Airbnb

Renting out your condo on Airbnb might seem like a great way to make some extra money. But before you jump on the opportunity, it’s wise to check your condo association bylaws.

In most cases, you’ll find that the bylaws include restrictions on “leasing.” For example, the rules might state that no unit can be rented for less than 6 or 12 months at a time, or they might state that a unit can’t be used as a hotel.

These provisions exist because the Federal Housing Administration, which is the biggest mortgage lender nationwide, places restrictions on the number of renters a condo complex can have. Generally, the rule is that no more than 50 percent of tenants in any complex can be renters, except in particular cases where it’s 35 percent. [Read more…]

Check your bank’s real estate notices twice

When a bank goes through a merger or agrees to buy or sell mortgage loans, certain notices must be provided to borrowers before and after the transaction closes. Federal law states clearly what notices are required and how they must be worded, but sometimes the legal rules conflict with each other.

It’s helpful to have an attorney review any notices you receive to ensure that they are in compliance with federal law and evaluate how they impact the terms of your loan.

Under a federal law called the Real Estate Settlement Procedures Act of 1974 (RESPA), when a bank or loan servicer transfers the servicing of a residential mortgage loan, borrowers must be provided with written notice by both the transferor and the transferee, including: 1) the effective date; 2) the date on which the transferor will stop accepting payments and the date on which the transferee will begin to accept payments; 3) the name and address of the transferor and a collect or toll-free telephone number to call with questions about servicing; 4) an explanation of any impact on the terms and availability of related insurance coverage; and 5) a statement indicating that the transfer only affects terms directly related to the servicing of the loan. [Read more…]

Don’t let surprise costs of your home purchase shock you

If you’re buying a house, the total price you’ll end up paying is more than meets the eye.

Usually, a buyer pays between 2 percent and 5 percent of the home purchase price in closing costs. Lenders often disclose these costs, but they aren’t the only hidden fees you need to consider.

Other fees to keep in mind include payments to appraisers, home inspectors and settlement agents, as well as the cost of title insurance, homeowners’ insurance and property taxes. [Read more…]

If your house burns down, do you still have to pay your mortgage?

At the closing for your home purchase or refinancing, you are required to sign a promissory note that says you’ll make the mortgage payments every month. That agreement remains in effect even if your house burns down. You’re also required to report any loss to the lender and your insurance carrier promptly.

But a reprieve is still possible. For example, a lender might allow a borrower to suspend mortgage payments for a defined period of time or might put a hold on foreclosure activity.

Based on the standard Fannie Mae or Freddie Mac mortgage form, a borrower must repair or restore the property as long as that is financially possible, unless there is a different agreement between the parties. As a result, you can’t simply walk away after a fire. If you do, you risk defaulting on your mortgage. [Read more…]

Credit monitoring: Be aware the credit score you get might be different than lenders receive

Subscribing to a credit monitoring service to keep tabs on your credit score can be a helpful way to manage and protect your credit.

But did you know that the score you purchase isn’t always the same as the one the lender obtains from a credit reporting agency?

That comes as a surprise to many borrowers. But the real questions are why is this the case and what can you do about it? [Read more…]

Reverse mortgages increasingly available for high-value homes

Seniors with pricier homes now have an increased ability to get a bigger reverse mortgage in order to raise cash for retirement. As the housing market has improved, so-called jumbo reverse mortgages are becoming more popular even though they carry some risk.

Reverse mortgages allow homeowners who are at least 62 years of age to borrow money on their house. The homeowner receives a sum of money from the lender, based largely on the value of the house, the age of the borrower and current interest rates. The loan does not need to be paid back until the last surviving homeowner dies, sells the house or permanently moves out. Homeowners can use money from a reverse mortgage to pay for improvements to their home, to allow them to delay taking Social Security or to pay for home health care, among other things.

The most widely available reverse mortgage product is the Home Equity Conversion Mortgage (HECM), the only reverse mortgage program insured by the Federal Housing Administration (FHA). However, the FHA sets a ceiling on the amount that can be borrowed against a single-family house, which is determined on a county-by-county basis. The national limit on the amount a homeowner can borrow is $625,000.  [Read more…]

Don’t wait until it’s too late to execute a power of attorney

A durable power of attorney is an extremely important estate planning tool, often more important than a will.  If you become incapacitated due to dementia or some other reason, this crucial document allows a person you appoint (your “attorney-in-fact” or “agent”) to act in place of you (the “principal” ) for financial purposes.  The agent under the power of attorney can quickly step in and take care of your affairs.

But in order to execute a power of attorney and name an agent to stand in your shoes, you need to have capacity.  Regrettably, many people delay completing this vital estate planning step until it’s too late and they no longer are legally capable of doing it.

What happens then? Without a durable power of attorney, no one can represent you unless a court appoints a conservator or guardian. That court process takes time and costs money, and the judge may not choose the person you would prefer. In addition, under a guardianship or conservatorship the representative may have to seek court permission to take planning steps that he or she could have implemented immediately under a simple durable power of attorney. [Read more…]

Life insurance can play role as part of estate plan

For young families, life insurance can be a great help in replacing lost income.  But as people get older it can also serve as part of an estate plan.

Historically, one main reason to buy life insurance as part of an estate plan was to have cash available to pay estate taxes. Now that the estate tax exemption is so big (in 2016, estates could exempt $5.45 million per individual from taxation), most estates don’t pay federal estate taxes, and President Donald Trump and his Republican allies would like to eliminate the estate tax entirely. However, life insurance can still be helpful in a number of other ways:

  • Providing immediate cash. Life insurance provides cash to use for the payment of debt, burial or estate administration fees. In addition, life insurance can be used to pay state estate taxes, if applicable. [Read more…]

The life estate: a useful tool in the right circumstances

The term “life estate” often comes up in discussions of estate and Medicaid planning. Life estates can be used to avoid probate and to give a house to children without relinquishing the ability to live in it.  They also can play an important role in Medicaid planning.  But what, exactly, does the term mean and how are life estates used?

A life estate is a form of joint ownership that allows one person to remain in a house until his or her death, when it passes to the other owner.  Two or more people each have an ownership interest in a property, but for different periods of time. The person holding the life estate — the life tenant — possesses the property during his or her life. The other owner — the “remainderman” — has a current ownership interest but cannot take possession until the death of the life estate holder. The life tenant has full control of the property during his or her lifetime and has the legal responsibility to maintain the property as well as the right to use it, rent it out and make improvements to it.

When the life tenant dies, the house will not go through probate, since at the life tenant’s ownership passes automatically to the holders of the remainder interest. Because the property is not included in the life tenant’s probate estate, it can avoid Medicaid estate recovery in states that have not expanded the definition of estate recovery to include non-probate assets. Even if the state does place a lien on the property to recoup Medicaid costs, the lien will be for the value of the life estate, not the full value of the property. [Read more…]

Are you covered by Medicare while traveling within the U.S.?

Those who have reached age 65, the typical age of Medicare eligibility, often have more time to spend traveling.  Although Medicare coverage is generally not available when beneficiaries are overseas, the news may be better for those exploring destinations closer to home.

If you have the original Medicare, the answer is simple: You can travel anywhere in the U.S. or its territories and receive health services from any doctor or hospital that accepts Medicare.  (“Territories” includes Puerto Rico, the U.S. Virgin Islands, Guam, American Samoa and the Northern Mariana Islands.) The amount you will pay depends on whether the provider “accepts assignment.”  Providers that take assignment agree to accept the approved Medicare amount as payment in full, although in the case of outpatient visits you or your Medigap insurer may be left with a 20 percent coinsurance, as would be the case for care at home.

Providers that don’t accept assignment may charge you up to 15 percent above the Medicare-approved amount, although this percentage may be lower in some states. In the case of providers that don’t accept Medicare at all, you will have to pay the entire cost of care. [Read more…]

Five home office deduction mistakes

Here are five common mistakes of those who deduct home office expenses.

  1. Not taking it. Some believe the home office deduction is too complicated, while others believe taking the deduction increases your chance of being audited.
  2. Not exclusive or regular. The space you use must be used exclusively and regularly for your business.
    • Exclusively: Your home office cannot be used for another purpose.
    • Regularly: It should be the primary place for conducting regular business activities, such as record-keeping and ordering. [Read more…]

Three actions to save for retirement

If you haven’t started saving for retirement or you haven’t saved enough, here are three actions you can take to put you in a better position during your golden years:

  1. Contribute as much as possible every year to a 401(k) pretax retirement plan, up to the $18,000 maximum, or $24,000 if you are age 50 or older.
  2. Contribute as much as possible to a Traditional or Roth IRA every year, up to the $5,500 maximum, or $6,500 if you are age 50 or older. [Read more…]

Reap the benefits of hiring your child for the summer

Hiring your children to work in your business can be a win-win situation for everyone. Your kids will earn money, gain real-life experience in the workplace, and learn what you do every day. And you will reap a few tax benefits in the process. The following guidelines will help you determine if the arrangement will work in your situation.

  • Make sure your child works a real job that he or she can reasonably handle, no matter how basic or simple. Consider tasks like office filing, packing orders, or customer service.
  • Treat your child like any other employee. Expect regular hours and appropriate behavior. If you are lenient with your child, you risk upsetting other employees. [Read more…]

Tax-free income

Yes, that’s correct, there are some forms of income you receive that may be tax-free. Here is a list of eight common sources of tax-free income.

  1. Gifts. Gifts you receive are not taxable income to you. In fact, they are not subject to gift tax to the person giving the gift as long as the gifts received in one year from one person do not exceed $14,000.
  2.  Rental income. If you rent your home or vacation cottage for up to 14 days, that rental income does not need to be reported. Homeowners often can earn some tax-free income by renting out a home while a large sporting event (Superbowl or a golf event) is in town. [Read more…]