Rental homes can be the IDEAL investment in today's market because they offer a much higher rate of return than alternatives without the volatility of ups and downs in the stock market.  

IDEAL serves as an acronym to identify the advantages of rental properties:

• Income from the monthly rent contributes to paying the expenses and a return on the investment
• Depreciation is a non-cash deduction that contributes tax shelter
• Equity grows monthly as the mortgage amortizes due to some of each payment being applied to principal
• Appreciation is achieved as the value of the property goes up
• Leverage can increase the return on investment by using borrowed funds to control a larger asset

If you invest in a savings account, you'll make less than 1% and will have to pay income tax on the earnings.  On the other hand, contribute something extra to your house payment on a regular basis and you'll essentially, earn at the mortgage interest rate which is certain to be more than you're earning in the bank.

Making additional principal contributions on your mortgage will save interest, retire debt and build equity.  An extra $100 a month in the example shown will save thousands in interest and short the term of the mortgage as well.

Reducing your cost of housing is another way to improve the investment in your home.  Becoming debt-free is a worthy goal that is achieved with discipline and good decisions.  Suggestions like this are part of my commitment to help people be better homeowners when they buy, sell and all the years in between.

© 2012 Residential Finance Consultant | This article cannot be reprinted or republished without written permission.  Subscription service is available to republish the article in your blog or mail merge through InTouch.

Points refer to prepaid interest on a home mortgage and can be fully deductible by the buyer in the year paid if the right conditions exist.  The points must be used to buy, build or improve a taxpayer's principal residence but not all fees charged by the lender are necessarily deductible.

According to IRS Publication 936, "The term 'points' is used to describe certain charges paid, or treated as paid, by a borrower to obtain a home mortgage.  Points may also be called loan origination fees, maximum loan charges, loan discount, or discount points.  A borrower is treated as paying any points that a home seller pays for the borrower's mortgage."

If you purchased a home in 2011, have your tax professional evaluate your closing statement to see if there are loan fees that may be used as a deduction on your tax return regardless of whether you or the seller paid them.

Refinancing a principal residence or purchasing an investment or income property require that points must be deducted ratably over the term of the mortgage rather than deducting them fully in the year paid.  Borrowers in these situations should consider the benefits of lower interest rates from paying point to higher interest rates without points.

This article is meant to provide information that can be discussed with your tax professional about your specific situation and is not to be considered tax advice.

© 2012 Residential Finance Consultant | This article cannot be reprinted or republished without written permission.  Subscription service is available to republish the article.

Part of the American Dream is to own a home.  A home is a place to call your own; a place to raise your family and share with your friends.  A home is a place to feel safe and secure.  A home is a good investment?

"It's not far, if you know the way."  Maybe it is an obvious statement but there are some definite steps that will improve your success in buying a home in today's market.

1. Know you credit score - the best mortgage rates are available to borrowers with the highest scores.  Unless you know what your credit score is at all three major bureaus, you don't really know what rate you'll have to pay.
2. Clean up your credit - it is estimated that about 90% of credit reports have errors.  Some are not serious but others could affect a borrower from getting the best loan terms.  It is your responsibility to know what is on your different reports and correct them if possible.  You're entitled to a free copy of your credit report each year from Experian, Trans Union and Equifax.
3. Get pre-approved - Taking the time to make a loan application with a qualified lender even before you start looking at homes will provide peace of mind, make sure that you are looking at the "right" homes and may help you negotiate the best price on the home you select.
4. Do your homework - when you find the home that meets your needs and desires, research the tax assessments, school ratings, crime activity, possible zoning changes and comparable sales in the area.