When selling a house, the homeowner must disclose material facts they know about their home. A seller’s property disclosure is typically used by the seller to disclose what they know about their house. It is not required by law for the sellers to fill out a disclosure in all states, but it is commonly used. The seller fills out the property disclosure noting any material facts they know about their property. The seller provides this disclosure to any potential buyers or can wait until a buyer gets the home under contract. The homeowner must disclose any material facts they know about a home whether they use a property disclosure or not. Material facts are physical flaws with a property. In some states you must disclose even more than material facts, like if someone died in the home.

Why do sellers have to disclose facts about their property?

Houses can be very complicated with heating systems, electrical systems, plumbing systems, structural systems, and much more. You can see many parts of the house, but you cannot see everything. Even a home inspection will not be able to check out every part of a house. You cannot tear into the drywall to see how much insulation there is, or how the electrical was done. You may not be able to see the foundation walls, because the basement is finished. You may not know that the basement floods every time it rains, because it has not rained for weeks. You may not be able to tell there was a fire in the attic, because part of the attic access is blocked off. Because a potential home buyer cannot know everything about a home, there are laws in place that require the current homeowner to disclose what they know. The laws are different in every state, but for the most part sellers must disclose material facts.

What is a material fact?

The definition of material facts can vary state to state. Typically a material fact is something physically wrong with a property. Here are some examples of material facts:

• The roof leaks
• The basement floods
• The home has a severely cracked foundation
• The furnace has a cracked heating exchange
• The neighbors garage is partially on the property
• The home does not legally conform to the lot
• High radon levels
• Mold in the home in excess levels

There are many other items that can be considered material facts about a property. “Material” means the fact is important to whomever is making a decision about the property. Here is the actual definition. A homeowner does not have to disclose every single thing they know about the property if it is not important. You probably don’t have to tell the new buyers that an outlet cover is cracked, or some of the trees need trimmed. Material facts are major or even minor problems that someone would want to know about when buying a home.

When I bought my house a few years ago, we found out later the outside water line that went under the deck was broken. The sellers did not disclose this, but it would have been nice to know and a material fact.

If there is a problem with a house, but the seller fixes that problem they may not have to disclose that fact either. In Colorado if a house was a meth house, but cleaned up the seller may not have to disclose it.

What is a seller’s property disclosure?

In many states, there is a seller’s property disclosure form that can be filled out to inform any potential buyers about the home. The seller is supposed to fill out this form on their own without help from their real estate agent. It is not required that this form be filled out by law in most areas, but it is typically done. The form includes information about all the major systems in the house, any problems with them, how old they are, etc. Many homeowners have no idea about the systems in their homes, and that is okay. You can mark that you don’t know to any question asked. Just make sure you if you mark that you do not know, you really don’t know, and are not trying to hide something.

I have seen some sellers in my area mark through the entire property disclosure with a giant X and refuse to answer any question. They claim they never lived in the home and don’t know anything about it. Technically, even if you never lived in a property, you still might know material facts about it. I am a real estate investor with many rental properties and flips. When I sell a house, I still fill out a property disclosure. Even though I may mark “I do not know” to most of the questions, I still take the time to fill it out. I can also mark when something was replaced, that the roof is new, that the appliances are new, etc., which may make the buyer feel better about the home. If you do not fill out a property disclosure or refuse to answer any question, it may make the buyer think you are hiding something.

If a seller chooses not to fill out a property disclosure, that does not relieve them of the responsibility to disclose material facts.

What happens if the seller does not disclose material facts?

The tricky part with disclosing material facts is first determining what a material fact is, and then determining if the seller knew that fact. I think it is reasonable to assume that if the seller of a home knows something is wrong with the house that would cause most buyers to rethink purchasing it, they should disclose it. Whether you have to disclose deaths or a haunting would depend on state laws.

If the seller does not disclose something wrong with a house like a leaking roof, the buyer could sue them for damages. Whether the buyer wins the case or no, would again depend on state laws and how big the issue was. As a seller, it is important to remember that buyers will do inspections on your house. If they complete an inspection that shows major problems with the home, the seller may be required to disclose those problems to new buyers.

​Source –  https://investfourmore.com/

Life is full of important financial decisions that can impact your involvement in real estate investment later on. For example, something like buying a new car requires a financial commitment that would greatly affect your budget for buying a new home. Ultimately, you should always weigh your options carefully and consider what will benefit you best. Many individuals assume they should buy a car first because it’s cheaper than buying a house. While transportation is undoubtedly important, it may force you to wait longer to invest in real estate. Unfortunately, the real estate market is constantly changing and you could have a difficult time selling or buying if you wait too long. Here are five substantial reasons why you should invest in buying a house rather than a car.

1. Real Estate Market Changes

One of the biggest things to consider when looking into real estate investment is what kind of market and economy. Choosing to buy a car over buying a house could mean missing out on great financial opportunities. For example, the real estate market sometimes becomes a “Buyer’s Market” which conditions favors those who are looking to buy property. This is an ideal time to buy a great home for an ideal price, but this period doesn’t last forever. Not to mention that interest rates may go up by the time you are ready to buy a home after your car purchase. To have a satisfying experience with real estate investment, you’ll need a great Phoenix AZ realtor with in-depth knowledge about market changes. Car prices are much less likely to fluctuate over time, so you won’t be missing out on home-buying deals.

2. Qualifying For A Mortgage Loan

Another reason that you shouldn’t buy a car first is that it may prevent you from qualifying for mortgage. Say for instance you miss a car payment, which would highly damage your credit score and hurt your chances of qualifying. In the real estate investment process, having good credit is incredibly important for receiving any financial assistance in buying a new home. Furthermore, applying for car loans does not require the extent of credit analysis a home purchase does. This way, you can safely purchase a home without risking your chances of getting a car loan, whereas vice versa is much more risky.

3. Assessing Your Budget & Time

For those who are currently working on saving up cash for a big purchase, remember that buying a house is a much slower process. Finding the perfect home, putting in an offer, and coming to an agreement with the seller is a process that gives you time to build your savings up. Many people would rather buy a car because it’s cheaper and requires less effort, but saving up for a house allows you more time to pay off bad credit, debt, or other expenses. This could include saving up more money for a future car! Budget your time and money to determine what is worth investing in first.

4. The Financial Changes A New Home Will Bring

More often than not, buying a house actually helps people solve other financial problems. Such as no longer paying for an older home or apartment that constantly needs repairs. Or you may find a home with more amenities that helps you save on trips out to eat or laundromat visits. You may even be looking to move closer to work or school, which would cut down your transportation costs. This is all money you can use to help pay off debt or save up to reinvest into a new car or other important updates.

5. Other Personal Reasons

In the end, it should really come down to which you think would benefit you best for the next 5 years of your life. You may have to choose between being uncomfortable in a car or house until you can afford to update both. You could also consider your family’s situation and whether they need more space at home now or if it could wait another couple years. In theory, it makes more sense to upgrade the place you spend the most time in. Financially speaking, your house will appreciate in value over time whereas the car will depreciate. Your final decision should reflect your needs instead of wants, so that you will get the most profit from whatever upgrade you choose.

Getting Professional Advice

Depending on the individual, deciding between buying a home versus buying a car is an extremely tough choice to make. You may have to compromise with renting instead of buying a home, or buying an older, used car to ensure you have enough money for both. You may want a professional opinion to help you make a plan of action for your future purchases. Fortunately, realtors at Century 21 Leading Edge Realty have great advice to offer regarding making financial choices that will benefit your real estate investment experience.

​Source – http://c21northwest.com

Source –  Pinterest

     Source –  Pinterest

Raising a family is fun but can be full of challenges. As kids grow so are the family’s expenses, that’s why it’s important to stick with your family home budget. Below are some simple tips that you can do to save big and live on  $30,000 or less.

   Savings tips for the home:

• Of course the obvious: turn out lights, don’t let water run, don’t leave TV on.
• First and foremost, we created a budget on Mint.com which sends us an alert when we get close to our limit for each category
• We keep our A/C at 80 in the summer and heater at 68 in the winter (turned down to 55 at night)
• We got rid of cable because there’s nothing we NEED to watch, and if we want to watch something, usually it’s on Netflix or we can watch it online a day late.
• Unplug anything not in use. Cell phone and laptop chargers drain power even if the device is not charging
• We use coupons and take advantage of BOGO deals at our local grocery stores and always plan meals around the sale ads
• We don’t eat out except for special occasions and even that is rare. I think it is more special to cook a special meal of someone’s favorite foods than to go out to eat. (Fast food/restaurants we are big chuck of where our money went before.)
• We have a small garden in our yard which my kids LOVE to help with in order to offset produce costs
• We have the lowest cell phone plan because I am usually at home and anyone who needs to get in touch with me can call the house phone, and same with data, I’m at home so I mainly use the wifi
• We use a bank with interest checking (While it’s not much, it adds up)
• I try to do all my running around for the week at once, so I am not constantly running around town wasting gas
• I LOVE yard sales. I have found so many great deals on everything from furniture to clothes to dishes and everything in between
• I check our local freecycle group once a week (a group where local people post things they have that they are willing to give away if someone comes to pick them up.)
• I make big meals for my family of four so we always have leftovers which helps with the not eating out because there is always something in the fridge to heat up.
• Allow 10-15 minutes between meal helpings, people usually overeat because they eat too fast and don’t give their food time to settle (esp my kids). If you give your food time to settle, you’ll usually find you’re full and don’t want seconds (of course you’re always welcome to them if you truly are still hungry)
• Always buy generic if available (always check active ingredients first though)
• I use gasbuddy to find the cheapest gas near me when I fill up (again, small difference, but it adds up)
• Buy anything you know you’ll eventually use that won’t spoil in bulk. (trash bags, lightbulbs, paper towels, detergent, etc.) This also saves on gas by cutting out extra trips to the store.

• Saving tips for kids:

• Matinee movies are usually half the price and we eat before going o they aren’t hungry for popcorn or candy
• Check with parks and rec for local events. We live in a college town, so there are always free events and concerts going on and we make an effort to attend these
• IF we decide to go out to eat, we base it on who has kids eat free nights (Frugal living website)
• We homeschool, so we do a lot of field trips with out homeschool group which don’t cost anything
• They have kids clothing consignment sale twice a year here, so I buy the kids new clothes and sell their old ones
• My daughter begged me to teach her to sew, so I did. Now she loves to sew new clothes for her dolls and barbies from scrap cloth I pick up from freecycle or yard sales
• Before planning an big money event always check for sales. My daughter wanted to go to Six Flags for her bday, so I checked around and found out that they were planning Homeschool Day for the day before her bday so we planned to go then because tickets were $37 cheaper than if we went on her actual bday.
• Anytime we plan an outing, we make sure to pack a cooler with snacks/lunch/drinks, so we are not tempted to purchase them
• Teach kids to enjoy the outdoors. We save so much more than our friends because our kids don’t feel like they have to have the newest game system or ipad, they enjoy just going outside or to the ecology preserve near our home and playing outside using their imaginations.
• Utilize free/cheap resources for vacations: road trips, campgrounds, etc.
• More than anything be realistic about your situation, of course there are things I wouldn’t mind having, but I have to stop and ask myself if it’s something I really need and/or would even use. Usually the answer is no. :-/

References  –  http://madamedeals.com/

When buying a home or refinancing, one of the most crucial decisions is choosing your mortgage. Fixed-rate and adjustable-rate mortgages have some unique features that can help inform your decision.

Comparison chart

Key differences between fixed rate loans and ARM

Interest Rate

In a fixed rate mortgage, the interest rate the bank charges the borrower remains the same throughout the entire duration of the loan (usually 15 to 30 years). On the other hand, interest rate on an adjustable-rate mortgage (ARM) is reset periodically (usually every year after an initial period of 2,3 or 5 years). A 3/1 ARM means that the interest rate on the loan is fixed for the first 3 years but changes after that once a year until the loan is repaid. Lenders usually aren't allowed to raise interest rates on ARM arbitrarily. When the interest rate on an ARM is reset, it is determined by using a benchmark market rate e.g. LIBOR.

With a long-term fixed-rate mortgage, the lender assumes the interest rate risk i.e. the risk that interest rates will rise in the future. Therefore,

• Longer term fixed-rate mortgages are more expensive i.e. interest rate on a 30-year fixed-rate loan will be higher than a 15-year fixed-rate mortgage
• Initial interest rate on ARM is lower than any fixed-rate mortage i.e. interest rate for the first 5 years on a 5/1 ARM will be lower than the interest rate on a 15-year fixed-rate mortgage. So monthly payments will be lower with ARM loans initially.

Risk

The risk with an ARM is that the rate of interest (and therefore, monthly payments) may rise over the lifetime of the loan. The low interest rates on ARM may not last beyond the initial period. So when interest rates are low, it may be tempting to lock them in with a fixed-rate mortgage.

Correspondingly, the risk with a fixed-rate mortgage is that interest rates may either fall or stay low for an extended duration. While a borrower can usually refinance to take advantage of lower interest rates, sometimes there is a prepayment penalty for closing out the loan; and there is always fees (closing costs, appraisal fee etc.) associated with refinancing.

Pros and Cons

With a fixed rate mortgage loan, you can be certain of the amount you owe the bank on a monthly basis. It remains the same through the entire term of your loan, never stressing you out if there is a fluctuation in the market. A variable rate mortgage on the other hand, gives you the option to pay less interest, if the market conditions are favorable. Also, some lenders usually put a cap to the highest interest rate that can be charged. In this way, you are assured of paying moderate rates. Due to lower monthly payments (at least in the first few years), ARMs are more affordable.

How to choose

Here are some tips to choose which mortgage to take:

• If interest rates are already very low and unlikely to go much lower, choose a fixed rate mortgage and lock in your interest rate.
• If you expect to repay a substantial portion of the principle in the early years, choose an adjustable rate mortgage. e.g. You take a $300,000 loan but are planning to repay $60,000 (as extra payments; over and above your monthly payments) in the first 3 years.
• If the lower interest rate on the ARM allows you to buy the home but the fixed-rate would raise monthly premiums too high, then be careful. Only take the ARM loan if you expect your income to rise in the future, because if your income does not rise and the interest rate resets higher after the initial period, then you will no longer be able to afford to make your payments.
• Always try and choose loans that do not have a prepayment penalty. This gives you more flexibility to refinance if interest rates fall.

​Source –  Text http://www.diffen.com/

Picture –  Google.com

Mortgages are types of loans that are secured  with real estate or personal property.

A loan is a relationship between a lender and borrower. The lender is also called a creditor and the borrower is called a debtor. The money lent and received in this transaction is known as a loan: the creditor has "loaned out" money, while the borrower has "taken out" a loan. The amount of money initially borrowed is called the principal. The borrower pays back not just the principal but also an additional fee, called interest. Loan repayments are usually paid in monthly installments and the duration of the loan is usually pre-determined. Traditionally, the central role of banks and the financial system was to take in deposits and use them to issue loans, thus facilitating efficient use of money in the economy. Loans are used not just by individuals but also organizations and even governments.

There are many kinds of loans, but one of the most well-known types is a mortgage. Mortgages are secured loans  that are specifically tied to real estate property, such as land or a house. The property is owned by the borrower in exchange for money that is paid in installments over time. This enables borrowers (mortgagors) to use property sooner than if they were required to pay the full value of the property upfront, with the end goal being that the debtor eventually comes to fully and independently own the property once the mortgage is paid in full. This arrangement also protects creditors (mortgagees). In the event that a debtor repeatedly misses mortgage loan payments, for example, his or her home and/or land may be foreclosed upon,  meaning the lender once again takes ownership of the property to recoup financial losses.

Financial and Legal Definitions

Financially, loans are structured between individuals, groups, and/or firms when one person or entity gives money to another with the expectation of having it repaid, usually with interest, within a certain amount of time. For example, banks frequently loan money to people with good credit who are looking to purchase a car or home, or start a business, and borrowers repay this money over a set amount of time. Borrowing and lending happen in a variety of other ways, too. It is possible for individuals to lend small portions of money to numerous others through peer-to-peer lending exchange services like Leding club, and it is common for one person to loan another money for small purchases.

How a loan is treated legally varies according to the type of loan, such as a mortgage, and the terms found in a loan agreement. These contracts are judged and enforceable according to the Uniform Comercial Code and contain information about the loan's terms, repayment requirements, and interest rates; they also include details on the repercussions for missed payments and default. Federal laws are set out to protect both creditors and debtors from financial harm.

Though people frequently borrow and lend on smaller scales with no contract or promissory note, it is always advisable to have a written loan agreement, as financial disputes can be settled more easily and fairly with a written contract than with an oral contract.

Loan and Mortgage Terminology

Several terms are commonly used when discussing loans and mortgages. It is important to understand them before borrowing or lending.

• Principal: The amount borrowed that has yet to be repaid, minus any interest. For example, if someone has taken out a $5,000 loan and paid back $3,000, the principal is $2,000. It does not take into account any interest that might be due on top of the remaining $2,000 owed.

• Interest: A "fee" charged by a creditor for a debtor to borrow money. Interest payments greatly incentivize creditors to take on the financial risk of lending money, as the ideal scenario results in a creditor earning back all the money loaned, plus some percentage above that; this makes for a good return on ivestment (ROI). 

• Interest Rate: The rate at which a percentage of the principal — the amount of a loan yet owed — is repaid, with interest, within a certain period of time. It is calculated by dividing the principal by the amount of interest.

• Annual Percentage Rate (APR): The costs of a loan over the course of a year, including any and all interest, insurance, and/or original fees. See also APR vs. Interest Rate and APR vs APY .

• Pre-qualified: Pre-qualification for a loan is a statement from a financial institution that provides a non-binding and approximate estimate of the amount a person is eligible to borrow.

• Pre-approved: Pre-approval for a loan is the first step of a formal loan application. The lender verifies the borrower's credit rating and income before pre-approval.

• Down Payment: Cash a borrower gives to a lender upfront as part of an initial loan repayment. A 20% down payment on a home that is valued at $213,000 would be $42,600 in cash; the mortgage loan would cover the remaining costs and be paid back, with interest, over time.

• Lien: Something used to secure loans, especially mortgages; the legal right a lender has to a property or asset, should the borrower default on loan repayments.

• Private Mortgage Insurance (PMI): Some borrowers—those who use either an FHA loan, or a conventional loan  with a downpayment of less than 20%—are required to purchase mortgage insurance, which protects the borrowers ability to keep making mortgage payments. Premiums for mortgage insurance are paid monthly and usually bundled with the monthly mortgage payments, just like homeowner's insurance and property taxes.

• Prepayment: Paying a loan in part or in full before its due date. Some lenders actually penalize borrowers with an interest fee for early repayment as it causes lenders to lose out on interest charges they might have been able to make had the borrower kept the loan for a longer time.

• Foreclosure: The legal right and process a lender uses to recoup financial losses incurred from having a borrower fail to repay a loan; usually results in a public auction of the asset that was used for collateral, with proceeds going toward the mortgage debt. See also Foreclosure vs Short Sale.  

Types of Loans

Open-End vs. Closed-End Loans

There are two main categories of loan credit. Open-end credit — sometimes known as "revolving credit" — is credit that can be borrowed from more than once. It's "open" for continued borrowing. The most common form of open-end credit is a credit card; someone with a $5,000 limit on a credit card can continue to borrow from that line of credit indefinitely, provided she pays off the card monthly and thus never meets or exceeds the card's limit, at which point there is no more money for her to borrow. Each time she pays the card down to $0, she again has $5,000 of credit.

When a fixed amount of money is lent in full with the agreement that it be repaid in full at a later date, this is a form of closed-end credit; it is also known as a term loan. If a person with a closed-end mortgage loan of $150,000 has paid back $70,000 to the lender, it does not mean that he has another $70,000 out of $150,000 to borrow from; it simply means he is a portion of the way through his repayment of the full loan amount he already received and used. If more credit is needed, he will have to apply for a new loan.

Secured vs. Unsecured

Loans can either be secured or unsecured. Unsecured loans are not attached to assets, meaning lenders cannot put a lien on an asset to recoup financial losses in the event that a debtor defaults on a loan. Applications for unsecured loans are instead approved or rejected according to a borrower's income, credit history, and credit score. Due to the relatively high risk a lender takes on to give a borrower an unsecured line of credit, unsecured credit is often of a smaller amount and has a higher APR than a secured loan does. Credit cards,  bank overdrafts, and personal loans are all types of unsecured loans.

Secured loans — sometimes known as collateral loans — are connected to assets and include mortgages and auto loans. In these loans, a borrower places an asset up as collateral in exchange for cash. Though secured loans usually offer larger amounts of money to borrowers, at lower rates of interest, they are relatively safer investments for lenders. Depending on the nature of the loan agreement, lenders may be able to seize partial or full control of an asset if a debtor defaults on his or her loan.

Other Types of Loans

Open-end/closed-end and secured/unsecured are broad categories that apply to a wide variety of specific loans, including student loans (closed-end, often secured by the government), small business loans (closed-end, secured or unsecured), loans for U.S veterans (closed-end, secured by the government), mortgages (closed-end, secured), consolidated loans (closed-end, secured), and even payday loans   (closed-end, unsecured). With regard to the latter, payday loans should be avoided, as their fine print almost always reveals a very high APR which makes the loan repayment difficult, if not impossible.

Types of Mortgages

Click to enlarge. A chart showing the pros and cons of various types of mortgages. Source: USA.gov.

Fixed-Rate Mortgages

The vast majority of home loans are fixed-rate mortgages. These are large loans that must be repaid over a long period of time — 10 to 50 years — or sooner, if possible. They have a set, or fixed, rate of interest that can only be changed by refinancing the loan; payments are of equal monthly amounts across the lifetime of the loan, and a borrower can pay additional amounts to pay off his or her loan more quickly. In these loan programs, loan repayment first goes toward paying interest, then to paying down the principal.

FHA Mortgage Loans

The U.S. Federal Housing Administration (FHA) insures mortgage loans that FHA-approved lenders give to high-risk borrowers. These are not loans from the government, but the insurance of a loan made by an independent institution, such as a bank;  there is a limit on how much the government will insure a loan. FHA loans are usually given to first-time homebuyers who are low- to moderate-income and/or are not making a 20% down payment, as well as to those with a poor credit history or a history of bankruptcy. It is worth noting that though FHA loans enable those who don't make a 20% down payment to purchase a home, they do require these high-risk borrowers to take out private mortgage insurance.

VA Loans for Veterans

The U.S Department of Veterans Affairs  guarantees the home mortgage loans taken out by military veterans. VA loans are similar to FHA loans, in that the government is not lending money itself, but rather insuring or guaranteeing a loan supplied by another lender. In the event that a veteran defaults on his or her loan, the government repays the lender at least 25% of the loan.

A VA loan comes with some specific benefits, namely that veterans are not required to make a down payment or to carry private mortgage insurance (PMI). Due to tours of duty having sometimes affected their civilian work experience and income, some veterans would be high-risk borrowers who would be rejected for conventional mortgage loans.

Other Types of Mortgages

There are many other kinds of mortgages, including interest-only mortgages, adjustable-rate mortgages (ARM), and reverse mortgages, among others. Fixed-rate mortgages remain the most common type of mortgage, by far, with 30-year fixed-rate programs being the most popular form of them.

Deed of Trust

Some U.S. states do not use mortgages very often, if at all, and instead use a trust deed system, wherein a third party, known as a trustee, acts as a sort of mediator between lenders and borrowers. To learn more about the differences between mortgages and deeds of trust, see Deed of Trust vs Mortgage.

Loan vs. Mortgage Agreements

Loan and mortgage loan agreements are laid out similarly, but details vary considerably depending on the type of loan and its terms. Most agreements clearly define who the lender(s) and borrower is, what the interest rate or APR is, how much must be paid and when, and what happens if the borrower fails to repay the loan in the agreed upon time. According to the book How to Start Your Business With or Without Money, "A loan may be payable on demand (a demand loan), in equal monthly installments (an installment loan), or it may be good until further notice or due at maturity (a time loan)." Most federal securities laws do not apply to loans.

There are two main types of loan agreements: bilateral loan agreements and syndicated loan agreements. Bilateral loan agreements take place between two parties (or three in the case of deed of trust situations), the borrower and the lender. These are the most common type of loan agreement, and they are relatively straightforward to work with. Syndicated loan agreements take place between a borrower and multiple lenders, such as multiple banks; this is the agreement commonly used for a corporation to take out a very large loan. Multiple lenders pool their money together to create the loan, thereby lowering individual risk.

How Loans and Mortgages Are Taxed

Loans are not taxable income, but rather a form of debt, and so borrowers pay no taxes on money received from a loan, and they do not deduct payment made toward the loan. Likewise, lenders are not allowed to deduct the amount of a loan from their taxes, and payments from a borrower are not considered gross income. When it comes to interest, however, borrowers are able to deduct the interest they have been charged from their taxes, and lenders must treat interest they have received as part of their gross income.

The rules change slightly when a loan debt is canceled before repayment. At this point, the IRS considers the borrower to have income from the loan. For more information, see Cancellation of Debt (COD) Income.

Currently those with private mortgage insurance (PMI) are able to deduct its cost from their taxes. This rule is set to expire in 2014, and there is currently no sign that Congress will renew the deduction.

Predatory Lending

Those seeking to take out a loan should be aware of predatory lending prectices. These are risky, dishonest, and sometimes even fraudulent practices carried out by lenders that may harm borrowers. Mortgage fraud played a key role in the 2008 subprime mortgage crisis.

References

http://www.diffen.com/difference/Loan_vs_Mortgage