Avoid PMI Like a Rockstar!

Tue, 21 Jun 2022 17:03:13 -0700

Private Mortgage Insurance (PMI)Private Mortgage Insurance is required of borrowers who do not have a 20% down payment on the new home they plan on purchasing. The insurance is designed to protect lenders from the risk of default and foreclosure. There are other measures to avoid PMI such as piggyback mortgages and lender-paid mortgage insurance but I'll leave that to the other experts on this forum (ahem, staying in my lane). When saving for that 20% down payment on your new home…consider I Bonds!The rockstar unicorn that we are talking about today is Series I savings bonds, also known as inflation-adjusted bonds or I Bonds. I Bonds are providing the safety of bonds - but 9.62% returns of the stock market (well previous stock markets). See the chart below (magnified for those with more "mature" eyes).A money market account at your local bank is probably only paying 0.2%. To put that into perspective; the earnings on $10,000 are $962 per year (a guaranteed $481 in interest over 6 months) if you purchase an I bond, versus $20 per year putting your money in a money market at your local bank or credit union. You note that only $481 is guaranteed because the rate paid by I Bonds changes every May and November. The good news is that you can purchase I Bonds any month within that 6 month period and get the 9.62% rate for the next six months. So say you purchase your I bond in August 2022, you will get the 9.62% rate until January 2023. Then the rate would adjust to the rate announced in November 2022. The Fine PrintThere are some important caveats to remember with I bonds: You must hold I bonds for at least a year before cashing them. You should purchase with money you will not need for 5 years or you will lose the previous 3 months' worth of interest (not too bad). Unlike the stock market, your capital (the money you used to purchase the I bonds) is never at risk. You can only buy $10,000 worth of I bonds per person per year Of Course, There Are TaxesThe interest you earn from I bonds is subject to Federal income tax, but not state and local. You can pick your poison: Interest can be reported and taxes paid every year or Wait and report the interest when you cash or transfer ownership of the bonds, or at 30 years when the bond stops earning interest. Parents, Grandparents, Aunts, and Uncles I bonds are great for college funding because they are tax-free to the recipient when used for education expenses. Would any of you recommend I Bonds to family, friends, or prospective buyers as a way to save for a downpayment on a home?

Cordi Powell, CFP®, EALocated in the Triad Region of NC. Virtually serving clients locally and nationally.Tax favored comprehensive financial planning that helps you reach your goals by integrating investments, budgeting, insurance, and estate planning. Your financial interest comes 1st at Favored - no insurance products, annuities, or commission-based sales!	Call Me 336-422-6734Read More Blog PostsAbout MeEmail Me
No information contained in this blog is meant to constitute tax, legal, insurance, or investment advice.

Real Estate...A Part of My Investment Portfolio!

Fri, 17 Jun 2022 11:05:01 -0700

Hi ActiveRain!I'm Cordi, a comprehensive financial planner and owner of Favored Financial Planning.I'm looking forward to diversifying (a little investment humor there) the topics in the ActiveRain community!As a financial planner, I view home ownership and/or real estate as an essential component when approaching finances and an important consideration in a client's overall financial position. Real estate: Helps to protect against inflation; especially for those who purchased a home or refinanced a mortgage at 2% - 3% for 30 years. Provides long-term leverage. Those who purchased a $200,000 house with a 20% down payment of $40,000 received a 20% return ($8,000) on the home. That's if the home only appreciated at 4% per year; which is about half the current rate of appreciation! Is a tax-free return on realized gains. Under current tax law, realized gains of up to $250,000 (single) or $500,000 (married) are tax free! Assuming other conditions are met. May be tax-deductible depending on your other itemized deductions. While the current standard deduction limits the deductibility of mortgage interest; having student loans or individuals charitably inclined may still benefit from having mortgage interest. Of course, there is also the enjoyment of home ownership that you can not place a dollar figure on. That brings up a sore topic for me and a future blog post - "Renting the American Dream!" There is no string of words put together that makes me sadder. I hope you'll follow along as I add some diversification to the ActiveRain Community! (You'll find that I tickle myself as I write, hopefully, it will remain undetected to the untrained eye! ;)

Cordi Powell, CFP®, EALocated in the Triad Region of NC. Virtually serving clients locally and nationally.Tax favored comprehensive financial planning that helps you reach your goals by integrating investments, budgeting, insurance, and estate planning. Your financial interest comes 1st at Favored - no insurance products, annuities, or commission-based sales!	Call Me 336-422-6734Read More Blog PostsAbout MeEmail Me
No information contained in this blog is meant to constitute tax, legal, insurance, or investment advice.

A Tax Favored Approach to Financial Planning

Avoid PMI Like a Rockstar!

Real Estate...A Part of My Investment Portfolio!