In California and across the country, homeowners are doing what’s called “strategic defaulting” on their homes. This means that even though they can afford their mortgage payment, the borrower is so underwater on their home that they intentionally stop making payments and ultimately give their home back to the bank. Does it make sense for folks in these situations to walk away? Another question some folks are asking… Is it morally wrong for borrowers who can afford to continue paying their mortgages to strategically default?
If you are considering purchasing a second home, you should know that at least 1 presidential candidate is considering dumping the mortgage tax deduction on second homes. Knowing this, every presidential candidate will have to present their plan to “balance the budget.” Looking through the spending lines, the second largest tax expenditure is the mortgage interest deduction line.
California legislatures are discussing a plan to charge new home buyers $75 on the HUD 1 settlement form (the standardized closing statement) which would raise between $400 million and $1 billion per year to provide help to low income renters. Although it’s only $75 per closing, home buyers are already hit with thousands of dollars worth of fees that can be as much as 4% of the price of the home. This is a proposed act right now, but I believe it’s definitely a program that California will pass long term.
An appraisal is the process taken by a licensed, professional, third-party appraiser to value a piece of real estate. Appraisals are done for many reasons, but typically the purpose is to find a fair market value.
If you are buying a home in California, you need to know how much you will pay in taxes each year. It’s important to be prepared for the expense of real estate taxes. Here are some things to consider before purchasing a home.