Incorporating Mortgages into Your Financial Plan

Purchasing a home is one of the largest, single investment you can make. Let the expert advisors at Wealth Alliance help you incorporate homebuying elements, such as the purchase and mortgage, into your financial plan.

Step 1: Choosing a Mortgage
Get a better understanding of fixed vs. variable interest rates, 15-year vs. 30-year terms, APR, up-front expenses and mortgage insurance.
Step 2: Comparing Mortgage Terms
Different mortgage terms and rates can make selecting a mortgage confusing. Use an online mortgage calculator to help determine the total cost of various mortgage alternatives.
Step 3: Considering Tax Rules When Selling Your Home

How the gains from the sale of a primary residence are taxed have changed in recent years. If you have recently sold your home, or are considering doing so, you may want to be aware of these new rules.

Home Sale
If you owned and lived in your home for two of the last five years before the sale, then up to $250,000 of profit may be exempt from federal income taxes. If you are married and file a joint return, then it doubles to $500,000.¹

To qualify for this exemption, you cannot have excluded the gain on the sale of another home within two years to this sale. Please consult a professional with tax expertise regarding your individual situation.²

This profit would be excluded from your taxable income. In fact, the sale may not need to be reported unless you receive a Form 1099-S or do not meet the above requirements.

If you sold your home at a loss, unfortunately, you can’t deduct the loss.

There Are Exceptions
Even if you do not meet the above requirements, you may qualify for this exclusion:

  • If you receive the house in a divorce settlement
  • If you are able to count short-term absences as time lived in the house
  • If a surviving spouse who has not remarried can count the time that the deceased spouse lived in the house.

The five-year test period can also be suspended for up to ten years in cases where any spouse has served on “qualified official extended duty” as a member of the military, foreign service, or federal intelligence agencies.

Even if you don’t pass the five-year rule test, a reduced exclusion may be available if you have a change in employment or health, or because of unforeseen circumstances, such as divorce or multiple births from a single pregnancy. Please speak with a professional with tax expertise regarding your situation.

1., 2016

2. The information in this material is not intended as tax or legal advice. It may not be used for the purpose of avoiding any federal tax penalties.

Step 4: Determining Your Home Mortgage Deduction
For those who itemize deductions, the mortgage interest on their main home and on a second home may be deductible. Talk to a Wealth Alliance advisor to estimate your potential tax savings.

Have Questions? Talk with Our Team!

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