Do you owe more on your home than it’s worth right now? Have you thought about refinancing to get the principle on your mortgage reduced? If you’re like so many other people in this situation, you may have avoided getting a short refinance because you don’t want to have to claim the reduction as taxable income.
It happens to a lot of people. They bought their home a couple years ago, and now with the current real estate market being what it is, their home is just not worth as much as it was a few years ago. So what options do you have when your home has gone down in value and you still owe so much on it? Well a short refinance is the mortgage industry’s standard solution. You refinance your loan to more affordable payments, and also get your lender to forgive the portion of the debt above what the home is currently valued at.
Debt forgiveness, however, usually has tax implications, and you may be worried, like so many people, that you will have to claim whatever is forgiven as taxable income. Getting something like $75,000 of your mortgage forgiven is nice, but it hurts to have to pay taxes on it. Well the good news is that the Mortgage Forgiveness Debt Relief Act of 2007 is in effect.
The Mortgage Forgiveness Debt Relief Act of 2007 applies to debt forgiven in calendar years 2007 to 2012. What it does is allow taxpayers to exclude income from the discharge of debt on their primary residence. As long as your debt was discharged on your primary residence, does not exceed the limit ($2 million), occurred between 2007 and 2012, and was not discharged for services rendered, you may qualify for this debt relief.
So if you’re in the same boat as so many others and have been holding off on refinancing to avoid tax implications, you don’t have to worry anymore. Relax, and give CREFCO a call. We want to help you with your mortgage situation. (866) 854-4242.
You can also visit us online at our website.
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