There’s nothing like tax reform to create confusion among taxpayers. Previously, we wrote that home equity loans in New Jersey (and nationwide) would no longer be tax-deductible, thanks to the new legislation signed into law on December 22. Most major news sources were reporting the same.
As it turns out, there’s more to this story. The Internal Revenue Service recently published a news release to clarify this issue and to eliminate some of the confusion. (It seems that even the CPAs were scratching their heads over this one.)
What you need to know: The interest paid on home equity loans in New Jersey could still be tax-deductible, if the funds are used to “buy, build or substantially improve” the property used to secure the loan.
Interest on Home Equity Loans Deductible in Some Cases
On February 21, 2018, the IRS issued a special advisory to explain that, in many cases, taxpayers can continue to deduct interest paid on home equity loans. The fact that they even issued this advisory indicates the widespread confusion over the subject. In fact, they mentioned it directly:
“Responding to many questions received from taxpayers and tax professionals, the IRS said that despite newly-enacted restrictions on home mortgages, taxpayers can often still deduct interest on a home equity loan, home equity line of credit (HELOC) or second mortgage, regardless of how the loan is labelled.”
Home buyers in New Jersey tend to have a lot of questions when it comes to closing costs and who pays them. One common question is: Can the seller pay some or all of the buyer’s closing costs in New Jersey? Should the buyer ask for this kind of contribution? Is it rare or common?
The short answer is that it’s all negotiable. Trends and customs can vary depending on the current state of the real estate market. In some cases, the seller might agree to pay some of the buyer’s closing costs. This is called a “concession.” But there are a lot of important factors to consider. So let’s start with the basics.
What Are Closing Costs?
The collective term “closing costs” refers to the various fees that must be paid to close a real estate transaction. In New Jersey, as in most states, it’s common for both the buyer and seller to have their own closing costs during a home sale.
- It’s typical for sellers to pay for the real estate agent commissions, transfer fees relating to the sale of the home, and (in some cases) their own attorney fees. There might be other seller-side costs as well, in addition to these.
- The buyer usually pays for most of the fees relating to the mortgage loan (if a home loan is being used), along with the property appraisal, survey and title-related fees.
Can the Buyer Ask the Seller to Pay?
Getting back to the question at hand: Can the seller pay the buyer’s closing ...
Home buyers in New Jersey tend to have a lot of questions relating to home inspections and appraisals. While these two procedures share some similarities, they have different purposes and objectives.
Home inspections are generally not required in New Jersey, but highly recommended. Appraisals, on the other hand, are required when a buyer is using a mortgage loan to finance the purchase.
Home Appraisal vs. Home Inspection
Let’s start by distinguishing the two kinds of property assessments. While they are often confused as being the same, home appraisals and inspections are actually different procedures with different objectives.
- A home inspection is a thorough but non-invasive evaluation of the property’s overall condition. The American Society of Home Inspectors (ASHI) defines it as “an objective visual examination of the physical structure and systems of a house, from the roof to the foundation.” The primary objective here is to assess the condition of the property.
- A home appraisal is a review of the property to determine its fair market value, based on current real estate market conditions. The appraiser will prepare a comprehensive report that includes sales data supporting his or her determination of value. Here, the primary objective is to determine the value of the property.
So there are some similarities ...
Should I buy a home in New Jersey now, in 2018, or wait until 2019? What will market conditions be like if I postpone my purchase until later this year? What are home prices and mortgage rates expected to do over the coming months?
These are common questions among New Jersey home buyers considering a purchase in 2018. While no one can predict future housing and economic conditions with total accuracy, there have been some recent trends that might create a sense of urgency among buyers.
Mortgage rates have risen in recent weeks, and home prices across New Jersey continue to inch upward. These trends make a case for buying a home sooner rather than later, at least from a cost perspective. Here’s what you need to know about them.
Buying in New Jersey: 2018 vs. 2019
According to the latest data from Zillow, the median home value for the state of New Jersey rose by 4% over the last 12 months (as reported in February 2018). The statewide median house value had reached $311,600 by the start of 2018. Prices are higher in some parts of the state, including those that fall within the NYC metro area.
The point is that prices are higher now, at the start of 2018, than they were last year. And they are expected to continue rising over the coming months. Zillow’s economists recently predicted that the median home value in New Jersey would rise by around 2.6% over the next 12 months, stretching into 2019.
But getting back to the question at ...
When home buyers think about down payment assistance, it’s usually grants and short-term loans that come to mind.
But there is another form of down payment assistance available for home buyers in New Jersey, and it comes from a source closer to home. We’re talking about down payment gifts from family members, close friends, and other approved sources. This is one way to remove some of the financial hurdles associated with a home purchase.
Here’s what you should know about getting down payment assistance in New Jersey from parents, family members, or other donors.
The Bank of Mom and Dad?
A lot of the mortgage programs available in New Jersey today allow for down payment gift money to be provided by a third party. This is where the home buyer obtains money from a family member (or some other approved source) to cover some or all of the down payment expense. It’s a great way to reduce your upfront, out-of-pocket costs when buying a home in New Jersey.
There are several different loan programs that allow this kind of down payment assistance in New Jersey. Both FHA and conventional mortgage loans allow gift money contributions from third parties, though the rules and requirements can vary.
There are a lot of myths and misconceptions regarding down payment requirements in New Jersey. For example, a survey conducted by the National Association of REALTORS® found that many people think they have to put down at least 20% when buying a ...