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Avoid a Major Mortgage Mistake by Increasing Your Down Payment

by Melissa Hayes Thompson


For prospective home buyers who have annuities, selling those future payments for a lump sum of money now can help them avoid getting locked into a mortgage black hole.

First-time home buyers often save money for years to collect enough for a down payment on their house. Once they have that 5 or 10 percent of the house value in the bank, they settle follow through by agreeing to 15 to 30 years of monthly payments on the mortgage, one that costs a fortune in interest.

What many don’t realize is that increasing a down payment for a $300,000 home by just 5 percent can reduce the mortgage by as much as $30,000. Putting money from an annuity sale toward a down payment offers significant long-term savings on your home – decreasing the amount paid for interest, loan principal and monthly payments.

Affording A Down Payment For Your Dream House

For most people, the greatest obstacle for getting a new home is the down payment. While mortgage payments might be easily figured in to a budget, putting together enough cash to buy takes time and hard work. Buyers generally pay a minimum of 3.5 percent (for federal housing loans) to 20 percent for down payments. For a $200,000 home, this means coming up with at least $40,000 to bring to closing. As people still recover from the recession, saving $40,000 while still keeping up with regular bills and living expenses seems like an impossible feat.

Unfortunately, paying less than 20 percent has other financial consequences. Lenders can (and almost always do) require you to purchase private mortgage insurance, which increases your monthly expenses and the total you are paying for your home. Additionally, they may restrict you to mortgages with high interest rates or even deny your application.

How Much Are You Actually Paying?

Let’s look at an example. You’ve found the home of your dreams for $300,000 and you’re ready to commit to a 30-year mortgage. If you can afford a down payment of $30,000 (which would be 10 percent of the cost), then you will need a mortgage of $270,000.   What kind of terms can you expect from a lender?   Banks look at a variety of factors to determine your loan eligibility and your credit-worthiness. They collect credit scores, employment history and the size of your down payment to determine your interest rate. According to The Washington Post, in 2014 the average interest rate was 3.99 percent for a fixed-rate loan. With a 10-percent down payment, an applicant with excellent credit would likely be able to qualify for this rate.

With the help of a mortgage calculator, you can find out how much this will cost. In this example, monthly payments are $1,287.47.   Here is a price chart based on a 30-year mortgage for a $300,000 home:

30-year mortgage at an interest rate of 3.99%

Mortgage (Down Payment)   Monthly Cost    Interest Paid
$285,000 ($15,000)   $1,299.37    $182,909

The Difference Annuity Cash Can Make

Using money from your annuity to bulk up your down payment can be a game-changer. The larger down payment reduces the necessary principal for the loan and decreases the home loan to value ratio. Because of this, a bank may qualify you for a lower interest rate.   For these examples, we used an interest rate of 3.625 percent. This chart shows how every increase in the down payment significantly decreases the total interest paid.

30-year mortgage at an interest rate of 3.625%

Mortgage (Down Payment)    Monthly Cost    Interest Paid
$285,000 ($15,000)    $1,299.37    $182,909
$270,000 ($30,000)    $1,231.34    $173,282
$255,000 ($45,000)    $1,162.93    $163,655
$240,000 ($60,000)    $1,094.52    $154,028

Now, if you are an annuity owner and you pull out $15,000 from selling annuity payments, you can increase your down payment by 5 percent, making a down payment of 15 percent. This reduces the mortgage total and the total interest is now $163,655.10. If we compare the interest on both mortgages, the difference between the old and new mortgages is nearly $30,000 — $193,487.47 – $163,655.10 = $29,832.37.   If you double your down payment to 20 percent, and kept the same interest rate, your savings will be closer to $40,000 — $193,487.47 – $154,028.32 = $39,459.15.

Eliminating the Waiting Period

Bottom line: If you own an annuity or structured settlement and want to own a home, don’t go through another decade of saving or sit around until the date your annuity payments are scheduled. And avoid the mistake of making a small down payment. By paying more up front, you reduce the home loan-to-value (LTV) ratio, which increases your eligibility for a mortgage and the likelihood of receiving approval for a better interest rate.

By selling annuity payments – using a resource that is already at your disposal – and putting the money toward your home, you can save tens of thousands in interest. Let your neighbor be the one with the 10-percent down payment, while you pay 20 percent and spend the next 30 years with $200 more in your pocket every month.

By Alanna Ritchie and Learn More About Annuities

101 Things To Do In Memphis #51: Theatre Memphis

by Melissa Hayes Thompson

Theatre Memphis is a non-profit community theatre whose mission is “to provide outstanding theatrical experiences to enrich the live of our audiences, participants and community”. As one of the oldest and most successful community theatres in the country, Theatre Memphis has offered an opportunity for people with every degree of talent to become part of the creative process. As a community theatre, all of the cast and crew are volunteers with an average of 750 annually.

Theatre Memphis was founded in 1920 and presented three one-act plays as its first performance in 1921. In 1925, the theatre opened its doors to its first permanent home, housed in a former stable. By 1929, the theatre had moved to its second permanent home on the east wing of the Pink Palace. Theatre Memphis opened its doors on its current location in East Memphis on May 1, 1975. The building houses two separate stages - the Lohrey MainStage, which seats 400, and the smaller black-box theatre, the Next Stage, which seats 100. Both spaces area enable with state-of-the-art sound and lighting instruments and equipment. While visiting the theatre, don’t miss the Dramatis Personae sculpture garden, including original works by Lawrence K. Anthony.

Showagon is the educational component of Theatre Memphis whose four actors present a variety of productions that tour to local schools, libraries and other locations. For over 30 years, Showagon has performed in schools and libraries in the greater Memphis area, and sometimes other parts of Tennessee and exposing children to the magical world of theatre. 

The 95th season promises to be entertaining with a strong selection and variety of dramas, comedy, musicals, new work and classic offerings to ensure that there is something for everyone.  Currently performing Copenhagen until March 1st and The Boy from Oz starting March 6th.  Visit their website today for the full performance schedule and to purchase tickets or call 901.682.8323 for more information.

By and photo credit: theatrememphis.org

Bartlett TN Home For Sale: 5164 Canebreak Cove Bartlett TN 38002

by Melissa Hayes Thompson

Bartlett TN Home For Sale

5164 Canebreak Cove, Bartlett TN  38002

Welcome home to 5164 Canebreak Cove – an amazing Cove lot overlooking the gorgeous Walker Farms lake. As soon as you walk through the front door you are welcomed into this stunning home with a spacious open layout! Quality features include 5” gleaming hardwood floors, updated kitchen, vaulted ceilings, fireplace, crown molding, neutral colors, two car garage and so much more. The stylish eat-in kitchen comes equipped with granite, stainless steel appliances, gas cooktop, breakfast bar and pantry. Enjoy your morning coffee in the cozy dining area just off the kitchen. Entertain family and friends in the inviting great room with a warm gas fireplace and French door to the patio. A private main level master suite is a great place to relax at days end complete with a vaulted ceiling, walkin closet and luxurious bath with granite, whirlpool tub, separate shower, double sinks and dressing area. Fantastic secondary bedrooms offer ample growing space with neutral carpeting and paint. Two spacious bedrooms on the main level share a beautiful bathroom with granite vanity and tub/shower combo. Large fourth bedroom or use as a bonus room on the upper level. Sit back and enjoy the beautiful lake views from your private backyard with covered patio, professional landscaping and tons of room for the kids and pets to play. If you are looking for a home with a sense of grandeur while still feeling cozy and livable, look no further! Do not miss out on this incredible home!

Melissa Thompson has distinguished herself as a leader in the Memphis TN real estate market. Melissa assists buyers looking for Memphis real estate for sale and aggressively markets Memphis TN homes for sale.
Melissa brings with her a keen eye for the details of buying or selling a Memphis TN home and seemingly boundless determination and energy, which is why her clients benefit from her unique brand of real estate service. Rooted in Tradition, Focused on the Future –Melissa Thompson will help make the most of your Memphis TN real estate experience. Give her a call today, 901-756-8900, and discover the difference she can make during your family’s next move.

Don't Miss These Home Tax Deductions

by Melissa Hayes Thompson

From mortgage interest to property tax deductions, here are the tax tips you need to get a jump on your returns. 

Owning a home can pay off at tax time. Take advantage of these homeownership-related tax deductions and strategies to lower your tax bill:

Mortgage Interest Deduction 

One of the neatest deductions itemizing homeowners can take advantage of is the mortgage interest deduction, which you claim on Schedule A. To get the mortgage interest deduction, your mortgage must be secured by your home — and your home can be a house, trailer, or boat, as long as you can sleep in it, cook in it, and it has a toilet.

Interest you pay on a mortgage of up to $1 million — or $500,000 if you’re married filing separately — is deductible when you use the loan to buy, build, or improve your home.

If you take on another mortgage (including a second mortgage, home equity loan, or home equity line of credit) to improve your home or to buy or build a second home, that counts towards the $1 million limit.

If you use loans secured by your home for other things — like sending your kid to college — you can still deduct the interest on loans up $100,000 ($50,000 for married filing separately) because your home secures the loan.

PMI and FHA Mortgage Insurance Premiums

You can deduct the cost of private mortgage insurance (PMI) as mortgage interest on Schedule A if you itemize your return. The change only applies to loans taken out in 2007 or later.

By the way, the 2014 tax season is the last for which you can claim this deduction unless Congress renews it for 2015, which may happen, but is uncertain.

What’s PMI? If you have a mortgage but didn’t put down a fairly good-sized downpayment (usually 20%), the lender requires the mortgage be insured. The premium on that insurance can be deducted, so long as your income is less than $100,000 (or $50,000 for married filing separately).

If your adjusted gross income is more than $100,000, your deduction is reduced by 10% for each $1,000 ($500 in the case of a married individual filing a separate return) that your adjusted gross income exceeds $100,000 ($50,000 in the case of a married individual filing a separate return). So, if you make $110,000 or more, you can’t claim the deduction (10% x 10 = 100%).

Besides private mortgage insurance, there’s government insurance from FHA, VA, and the Rural Housing Service. Some of those premiums are paid at closing, and deducting them is complicated. A tax adviser or tax software program can help you calculate this deduction. Also, the rules vary between the agencies.

Prepaid Interest Deduction

Prepaid interest (or points) you paid when you took out your mortgage is generally 100% deductible in the year you paid it along with other mortgage interest. 

If you refinance your mortgage and use that money for home improvements, any points you pay are also deductible in the same year. 

But if you refinance to get a better rate or shorten the length of your mortgage, or to use the money for something other than home improvements, such as college tuition, you’ll need to deduct the points over the life of your mortgage. Say you refi into a 10-year mortgage and pay $3,000 in points. You can deduct $300 per year for 10 years.

So what happens if you refi again down the road?

Example: Three years after your first refi, you refinance again. Using the $3,000 in points scenario above, you’ll have deducted $900 ($300 x 3 years) so far. That leaves $2,400, which you can deduct in full the year you complete your second refi. If you paid points for the new loan, the process starts again; you can deduct the points over the life of the loan.  

Home mortgage interest and points are reported on Schedule A of IRS Form 1040.

Your lender will send you a Form 1098 that lists the points you paid. If not, you should be able to find the amount listed on the HUD-1 settlement sheet you got when you closed the purchase of your home or your refinance closing. 

Property Tax Deduction 

You can deduct on Schedule A the real estate property taxes you pay. If you have a mortgage with an escrow account, the amount of real estate property taxes you paid shows up on your annual escrow statement.

If you bought a house this year, check your HUD-1 settlement statement to see if you paid any property taxes when you closed the purchase of your house. Those taxes are deductible on Schedule A, too.

Energy-Efficiency Upgrades

If you made your home more energy efficient in 2014, you might qualify for the residential energy tax credit.

Tax credits are especially valuable because they let you offset what you owe the IRS dollar for dollar for up to 10% of the amount you spent on certain home energy-efficiency upgrades.  

The credit carries a lifetime cap of $500 (less for some products), so if you’ve used it in years past, you’ll have to subtract prior tax credits from that $500 limit. Lucky for you, there’s no cap on how much you’ll save on utility bills thanks to your energy-efficiency upgrades.

Among the upgrades that might qualify for the credit:

To claim the credit, file IRS Form 5695 with your return. 

Vacation Home Tax Deductions

The rules on tax deductions for vacation homes are complicated. Do yourself a favor and keep good records about how and when you use your vacation home.

  • If you’re the only one using your vacation home (you don’t rent it out for more than 14 days a year), you deduct mortgage interest and real estate taxes on Schedule A.
  • Rent your vacation home out for more than 14 days and use it yourself fewer than 15 days (or 10% of total rental days, whichever is greater), and it’s treated like a rental property. Your expenses are deducted on Schedule E.
  • Rent your home for part of the year and use it yourself for more than the greater of 14 days or 10% of the days you rent it and you have to keep track of income, expenses, and allocate them based on how often you used and how often you rented the house.

Homebuyer Tax Credit

This isn’t a deduction, but it’s important to keep track of if you claimed it in 2008. 

There were federal first-time homebuyer tax credits in 2008, 2009, and 2010.

If you claimed the homebuyer tax credit for a purchase made after April 8, 2008, and before Jan. 1, 2009, you must repay 1/15th of the credit over 15 years, with no interest. 

The IRS has a tool you can use to help figure out what you owe each year until it’s paid off. Or if the home stops being your main home, you may need to add the remaining unpaid credit amount to your income tax on your next tax return.

Generally, you don’t have to pay back the credit if you bought your home in 2009, 2010, or early 2011. The exception: You have to repay the full credit amount if you sold your house or stopped using it as primary residence within 36 months of the purchase date. Then you must repay it with your tax return for the year the home stopped being your principal residence.

The repayment rules are less rigorous for uniformed service members, Foreign Service workers, and intelligence community workers who got sent on extended duty at least 50 miles from their principal residence.

Read more...

By: Dona DeZube and HouseLogic

101 Things To Do In Memphis #50: Memphis Grizzlies Games

by Melissa Hayes Thompson

Have you caught “Grizz Fever”? Fans, young and old, are standing behind the home team, win or lose! Formerly known as the Vancouver Grizzlies, the team migrated South to Memphis in 2001 and brought Mid-Southerners a major-league sports team right in their backyard. They are the only team in the four major professional leagues that plays in Memphis. The Grizzlies play their home games at FedExForum and are part of the Southwest Division of the Western Conference in the National Basketball Association.

Grizz, the official mascot of the Memphis Grizzlies, was named 2011 NBA Mascot of the Year! Grizz gets help cheering from the popular Grizz Girls, performing throughout the games in between plays and in the stands.

Here’s another reason to cheer for the home team…the Grizzlies have launched the program “Friends of Grizz”, which sends donations and proceedings to St. Jude Children’s Research Hospital. Plus, there is the Memphis Grizzlies Tickets for Kids program. The program, which distributes tickets to nearly 200 organizations across the mid-South, provides opportunities for youth to attend games in one of the best home court environments in the league. 

The next home game is Friday, February 27th, 7 p.m. vs. rival LA Clippers – sure to be an exciting game!
Can’t make it to the game? The Grizzlies appear on television on the cable channel SportSouth and on the radio on their flagship station WMFS ESPN 92.9 FM.

Be sure to visit their website for the full schedule, tickets, gear, and player info. Go Grizzlies!

 

Photo Credit: nba.com

Net Worth: A Homeowner’s is 36x Greater Than A Renter!

by Melissa Hayes Thompson

Net Worth: A Homeowner's is 36x Greater than a Renters! | Keeping Current Matters

Over the last six years, homeownership has lost some of its allure as a financial investment. As homeowners suffered through the housing bust, more and more began to question whether owning a home was truly a good way to build wealth.

Every three years the Federal Reserve conducts a Survey of Consumer Finances in which they collect data across all economic and social groups.

Some of the findings revealed in their report:

  • The average American family has a net worth of $81,200
  • Of that net worth, 61.4% ($49,856) of it is in home equity
  • A homeowner’s net worth is over 36 times greater than that of a renter
  • The average homeowner has a net worth of $194,500 while the average net worth of a renter is $5,400

Bottom Line

There are many reasons why owning a home makes sense, the Fed study shows that owning is still a great way for families to build wealth in America.

by 

Bartlett TN Home For Sale
4937 Rivercrest Lane, Bartlett TN 38135

Welcome home to this amazing brick transitional home in the desirable Rivercrest subdivision of Bartlett TN. Nestled on a beautiful lot 4937 Rivercrest Lane is move in ready. Quality features include gleaming hardwood floors, tile floors, high ceilings, arched doorways, spacious rooms, neutral paint colors, chair rail and big window views with arched transom windows . Enjoy a fancy dinner in the formal dining room then  kick back and relax by the cozy gas fireplace in the great room, this home is an entertainers delight!  Cooking will be a snap in the stylish kitchen with new quartz countertops, an abundance of cabinetry, pantry, tile floors, self-cleaning oven, cooktop plus there is room to dine in the sunny breakfast area with access to the back deck. Play, party or entertain in the large bonus room upstairs, an ideal place for the kids and kids at heart. A soothing main level master suite is complete his and her walk-in closets and a luxury bath with a bubbly whirlpool tub, separate shower and dual vanities.  Fantastic secondary bedrooms offer ample growing space and share a lovely bathroom complete with vanity and a tub/shower combination. Large laundry room with built-ins helps keep things tidy. A relaxing deck overlooking the beautiful backyard with flower garden makes this the perfect place for grilling and chilling! A large shed and 2-car garage offer ample storage space. You will enjoy walking to Rivercrest Elementary. Make you appointment today before this home is sold!

Melissa Thompson has distinguished herself as a leader in the Memphis TN real estate market. Melissa assists buyers looking for Memphis real estate for sale and aggressively markets Memphis TN homes for sale.
Melissa brings with her a keen eye for the details of buying or selling a Memphis TN home and seemingly boundless determination and energy, which is why her clients benefit from her unique brand of real estate service. Rooted in Tradition, Focused on the Future –Melissa Thompson will help make the most of your Memphis TN real estate experience. Give her a call today, 901-756-8900, and discover the difference she can make during your family’s next move.

101 Things To Do In Memphis #49: Aldo's Pizza Pies

by Melissa Hayes Thompson

Looking for a loaded slice of New York style pizza? A massive beer list? Outdoor dining, plus take-out and delivery? Than Aldo’s Pizza Pies is the place! Head on down to South Main Street in beautiful downtown and you’ll enjoy dining on the two-sided patio or go inside and let the New York Times wallpaper whisk you away to the hustle and bustle of the New York City streets. Have a seat at the bar and enjoy from over 60 beers! Perfect for an outing with the kids or catching the game with friends.

Aldo's Pizza Pies have been designed from start to finish with love and respect for the dough! You can watch the pizza chefs toss handmade dough or see the dough master transform flour into magic! Aldo’s may be known for their pizza, but its certainly not the only thing on the menu. The menu has a lot of variety while still being well-edited, a few nods to regional tastes (one pizza comes with Top's barbecue), and a variety of salads, sandwiches and mouth-watering desserts.

Aldo’s Pizza Pies is earning the reputation of Best Pizza in Memphis! By way of impressive hand-tossed New York style pizza, friendly service and an exciting atmosphere, we understand why. Aldo’s is the place to be!  Call 901.577.7743 or visit their website for more information.

Photo Credit: Aldo’s Pizza Pie Facebook Page

Germantown TN Home For Sale: 1831 Hidden Oaks Drive, Germantown, TN 38138

by Melissa Hayes Thompson

Germantown TN Home For Sale
1831 Hidden Oaks Drive Germantown, TN  38138

Amazing Germantown home that you will have to see to believe! Built for entertaining, this spacious open floor plan offers impressive formal rooms, plus comfortable everyday living spaces. Quality features include hardwood, renovated kitchen, hearth room, office, five bedrooms plus bonus room, three fireplaces, and an in-ground pool. The renovated eat-in kitchen comes equipped with an abundance of cabinetry, island with breakfast bar, double ovens, gas cooktop, Grohe fixtures, and opens to the great room and hearth room. Family and friends will enjoy gathering in the cozy hearth room with brick fireplace, built-in desk and cabinetry and wood paneled ceiling. The vast great room offers an abundance of natural light from the large windows and French doors. An elegant dining room and separate living room offer the perfect spaces for formal entertaining. An oversized office/sunroom provides additional living space on the main level. Retreat to a master suite you will never want to leave! Features include a fireplace, walk-in closet, crown moulding and a spa bath with whirlpool tub, steam shower, double vanity and heated floors! The master womens closet has a dressing area with built-ins, vanity and sink. Four additional bedrooms distinctly designed for comfort offering ample growing space. A private bedroom features a full bath making this an ideal place for guests. A fabulous bonus room offers great flex space for home office and recreational fun. Beautiful outdoor space in the professionally landscaped and fenced-in yard with a sparkling heated, in-ground Gunite pool, delightful courtyard, mature trees, plus a front porch and side-loading 3 car garage. Make your appointment today before this gem is gone!

Melissa Thompson has distinguished herself as a leader in the Memphis TN real estate market. Melissa assists buyers looking for Memphis real estate for sale and aggressively markets Memphis TN homes for sale.
Melissa brings with her a keen eye for the details of buying or selling a Memphis TN home and seemingly boundless determination and energy, which is why her clients benefit from her unique brand of real estate service. Rooted in Tradition, Focused on the Future –Melissa Thompson will help make the most of your Memphis TN real estate experience. Give her a call today, 901-756-8900, and discover the difference she can make during your family’s next move.

The Difference Between A Home’s Cost vs. Price

by Melissa Hayes Thompson

The Difference Between A Home’s Cost vs. Price | Keeping Current Matters

As a seller, you will be most concerned about ‘short term price’ – where home values are headed over the next six months. As either a first time or repeat buyer, you must not be concerned only about price but also about the ‘long term cost’ of the home.

Let us explain.

There are many factors that influence the ‘cost’ of a home. Two of the major ones are the home’s appreciation over time, and the interest rate at which a buyer can borrow the funds necessary to purchase their home. The rate at which these two factors can change is often referred to as “The Cost of Waiting”.

What will happen in 2015?

nationwide panel of over one hundred economists, real estate experts and investment & market strategists project that home values will appreciate by almost 4% by the end of 2015.

Additionally, Freddie Mac’s most recent Economic Commentary & Projections Tablepredicts that the 30-year fixed mortgage rate will appreciate to 4.5% by the end of 2015.

What Does This Mean to a Buyer?

Here is a simple demonstration of what impact these projected changes would have on the mortgage payment of a home selling for approximately $250,000 today:

Cost of Waiting | Keeping Current Matters

 

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