The US government has for decades incentivized home ownership through allowing a tax deduction for mortgage interest. As a result, many who are wealthy enough to pay off their mortgages or not to need a mortgage in the first place, chose to maintain a mortgage to take advantage of the mortgage interest deduction. The longer they have a mortgage, the longer they can deduct the interest on their taxes.

Many have raised an issue about whether the mortgage interest deduction contributed to our housing bubble and housing collapse. In Canada, for example, mortgage borrowers are not allowed to deduct the interest on their mortgages. Banks in Canada also hold about 75 percent of the loans in the country and only about one percent of all mortgages in Canada are in default. Compare that to 14 percent in the United States. However, in the UK, mortgage interest is also not deductible, and home ownership rates and prices outpaced the US dramatically during the 1990s and early 2000s. Default rates are believed to be approximately the same as in the US.

An additional question is whether the numbers of people who could pay off their mortgage and are not because of the mortgage interest deduction is impairing bank's balance sheets and preventing them from loaning more to new homeowners so that the market can recover. Many who believe this are now suggesting that the government should allow mortgage borrowers an extra incentive to pay down their mortgage balances with a deduction for their principal balance rather than on their interest.

What do you think?

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Reverse mortgages are becoming more popular with the uncertain economy and the flailing housing market today. Under a reverse mortgage, the borrower gets a loan based on the home’s equity. The homeowner is then paid installments for as long as they live in the home. Once the homeowner moves out or dies, the payments stop. During the time they stay in the home, they must stay current on property taxes and insurance. Reverse mortgage are also typically available only for people who are 62 years old and older.

But what happens to the surviving spouse of a reverse mortgage borrower if the deceased person’s name was the only one on the deed?

In 2008, there was a rule that was put into place for reverse mortgage borrowers. It required the surviving spouse of a reverse mortgage borrower to either move out of the home or continue to make payments beyond the value of the home once the spouse passed away. The main reason for the rule was so the lenders could avoid holding on to the reverse mortgage loans for longer than they expected. Also, due to the manner in which reverse mortgages are designed, the older of the two people living in the house would apply for the reverse mortgage because they would get more money each month as a result. This leaves the younger spouse out of the deal, which can cause problems when the older spouse dies.

But the United States Department of Housing and Urban Development is rescinding that rule due to a number of lawsuits that has been brought against the department by two widowers and a widow of reverse mortgage borrowers.

The lawsuit has been brought to federal court by these surviving spouses who were facing foreclosure. However, HUD recently notified these plaintiffs that the policy to pay the full balance of the mortgage loan in order to stay in the home. In many cases, the spouses would be required to pay the full balance even if that would result in paying more than the home is even worth.

The plaintiffs in this particular case are being represented by AARP. The organization said that changing the policy is a step in the right direction, but the lawsuit would continue. The plaintiffs also want to change some of the regulatory policies regarding reverse mortgages so the surviving spouses of those who had a reverse mortgage will be allowed to stay in the home even if they did not have their name on the deed. According to Jean Constantine-Davis, a senior attorney with the AARP litigation team, surviving spouses should not be kicked out of their reverse mortgaged home because they have a right to stay in the home after the death of their spouse.

A spokesperson for HUD stated that the department changed its policy to avoid “confusion on the issue” and to make sure the sale of the various properties are based on the market values so they will reflect the real value of the property.

If you want to avoid going through this frustration, the best way to avoid it is to make sure both names are on the reverse mortgage loan. By doing that, you ensure that you won’t risk getting kicked out of the home that you have loved and lived in with your spouse for all those years.

When shopping for a home, the most important factor in your decision making process is likely going to be the price. Can you afford the monthly payments? Is the home worth the value at which it is priced? How do you know how much the monthly payments are going to be? Here is how you can calculate how much you will need to pay each month to help you make your decision.

1. Use the help of a mortgage calculator. There are many websites that offer mortgage calculators that will help you calculate your monthly interest and principal payments based on the cost of the mortgage, the length of the mortgage term and your mortgage rates.

2. Don’t forget about the property taxes. Your property taxes can increase the amount you pay on your mortgage significantly depending on where you live and some other factors. You can usually have your property taxes rolled into your mortgage payments, too. Find out how much your annual property taxes will cost and then divide that by the number of payments you will make each year. Add that number to your monthly mortgage payment.

3. Mortgage insurance is vital. There are two types of insurance you will need to think about. A homeowner’s insurance policy is essential to help you protect your financial interest in the home in case a catastrophe happens. But if you don’t have a 20 percent down payment for the home, your lender will likely require you to have PMI, or private mortgage insurance, to protect their financial interest in the home. Determine the price of the insurance you will need to carry for your home and divide that by the number of mortgage payments, too. You can typically roll these charges into your mortgage payments as well to help you keep everything simple.

4. Add the figures from all of these steps together. This will give you a pretty good idea of how much you will need each month to pay your mortgage.

Before you make the decision about if you can afford this mortgage payment, remember that lenders will not make the home loan if the figure is more than 30 percent of your income. You also have to take into consideration the utility and maintenance costs. Large homes are going to be expensive to heat and cool throughout the year and those bills can range into the hundreds of dollars. Although it is exciting to buy a new home, make sure you take the time to do your homework on the costs before you make your final decision.

Click here to compare mortgage rates in your area.

In the last year, we’ve seen mortgage rates go up and we’ve seen them drop to all-time lows. Of course, we like to see the rates drop to historic lows, but there aren’t a lot of people who can qualify for those low rates. In fact, it is becoming more difficult than ever to qualify for the low mortgage rates that are available.

Although the rates are starting to increase slightly, 30-year home mortgage rates remain close to historically low levels around 5%. These rates are only available to qualified buyers having a very high credit score as well as a 20 percent down payment. For homeowners who are refinancing their homes, these rates are typically only available to the ones who have at least 20 percent equity built up in their home.

Mortgage rates for a 15-year fixed rate loan are even lower. The average rate for a 15-year fixed rate mortgage is about 4.09 percent, which is up a half of a percentage point over last week’s 4.04 percent.

According to the US Treasury Department, roughly 1/3 of all mortgage applicants are being denied for home loans. An even larger percentage of buyers are behind denied those great advertised mortgage rates that have made the news this year. Unless you have a score that is at least 620, a lender will not even consider you for those great mortgage rates. In addition, you also need to have a steady income and stable employment to be considered for a mortgage loan. And even if you meet all of these qualifications, you will still need to have a significant down payment – between 10 and 20 percent – in order to be considered for a loan.

If you don’t meet these qualifications, all hope is not lost. If you are willing to pay a couple extra percentage points on your mortgage, you may be able to get a mortgage loan. Surveys show that about 75 percent of recent homebuyers stated that it was much more difficult to get a mortgage than they had expected. At least 10 percent of those surveyed reported that their lender gave them a higher interest rate than they were expecting.

The mortgage debacle has affected all aspects of the housing industry. And with the tightened credit restrictions, it almost seems impossible to get a home if you are a first-time home buyer. But if you are dedicated and motivated, you can save up a sizable down payment and become a more attractive risk to banks and lenders. So the dream of home ownership is not totally dead. It is just much more difficult to attain these days.

Click here to see the mortgage rates where you live.

Did you know that 22 percent of today’s homeowners are having trouble making their mortgage payments every month? A recent Harris Poll showed that nearly one in every four homeowners are worried that they may not have enough money coming in each month to write that check and send it off to their mortgage lender.

21 percent of the homeowners surveyed in the Harris Poll said that their home was “underwater.” That means that their homes are worth less than what they owe on it.

As alarming as these number may sound, they are lower than statistics from earlier polls. At this time last year, 29 percent (almost 1 in every 3 homeowners) reported that they were having trouble making their mortgage payments each month. About 24 percent of those surveyed last year said that they owed more on their home than what their home was worth.

The survey, which was conducted in March, found some other things that you may find surprising. For instance, about 62 percent of those surveyed – homeowners and non-homeowners – said that they are worried about having enough money each month this year to pay their regular monthly expenses. However, during the same time last year, 65 percent of those surveyed had the same response. That’s a three percent drop which could mean that consumers are having a little more confidence in the market. But three percent may not be significant enough on which to base that conclusion.

The poll was conducted online and included more than 3,170 adults. It was conducted during the second week of March. Here are some other pieces of information that came from that poll:

• Last year, 69 percent of those surveyed had a mortgage on their home. This year, that number dropped three percent to 66 percent. It is unknown if the number dropped due to foreclosures, people paying off their mortgage or other factors.
• About 7 percent of those surveyed reported having extreme difficulty making their mortgage payments. That’s about 11 million homeowners.
• Of those who said their homes were underwater, about 8 percent of them said that their homes were worth “a lot less” than the money they owed on their mortgage loan. Even so, that number is lower than it was last year.

Even though the numbers seem to be getting better, there are still millions of people in the country who are hurting financially. There is still a lot of work that is needed to be done before showing a promising recovery, but this year’s numbers show a slow and possibly steady recovery for the economy. Hopefully this continues in the years to come.

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If you have been considering purchasing a home, this may be the best year to do it. Here are some reasons why you should make your dream of owning a home a reality before this year is over.

Home Prices are Ideal
With the number of foreclosures on bank books and the surplus of available homes for sale, this is one of the best years for buyers in a long time. There is a lot of competition to sell homes because both home builders and banks are anxious to unload their inventory. Add to that the fact that mortgage rates are at historically attractive levels and you have a great combination for getting a great price on your next home.

Your Options are Nearly Limitless
The large number of homes on the market right now brings down the price but also gives you more selection. Just pick a neighborhood and you can probably find several homes to choose from within a radius of just a few blocks. This gives you more flexibility and you are more likely to find something that you are looking for without going too far away.

Discounts are Readily Available
Home builders are offering large discounts right now in order to sell the number of homes that they have available. Builders want to clear out their inventory so in addition to discounts, you may even be able to negotiate other terms like a longer warranty or some extra upgrades to the home that you choose.

Avoid the Procrastination
If you have been looking for the right time to buy a home and you have a down payment saved up, why not just make it happen this year? If you are renting, you are not building up any equity and that money just goes out the window. When you make mortgage payments, however, you are building equity that you can use in the future if you ever have an emergency expense. Besides, the market may never be as affordable as it is right now.

Find the best mortgage rates in the area where you are looking to purchase.

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Fewer people are applying for mortgages these days. In the week that ended on March 25, there was a 7.5 percent decrease in loan applications with application requests dropping back to the lowest levels since February 11, as mortgage rates rose.

But some analysts are saying that it’s not only the increasing mortgage rates that are to blame for the lack of interested borrowers. Some analysts believe that homeowners are holding out for home prices to fall even further from where they are right now, which could entice potential buyers who are looking for a great deal on a new home.

According to Celia Chen, an economist at Moody’s Analytics Inc., people are less likely to invest their money in a home if they think the housing prices have not hit the bottom yet. As the demand for homes weaken across the country, the home prices will weaken as well, making it more difficult for troubled homeowners to find buyers for their home.

In January of this year, prices for real estate dropped to a one-year low. In February, the number of homes purchased hit at a record low. Slower sales market for homes across the country are spreading across the country.

However, that’s not to say that the increased mortgage rates aren’t playing a role in the slowing real estate market. Last week, the average interest rate for a 30-year fixed rate loan went up from 4.80 the previous week to 4.92 percent. For a 15-year fixed rate loan, the average rate went from 4.02 to 4.16 in the matter of a week. And it’s not only home buyers who are putting on the brakes. Current homeowners who are looking to refinance are also becoming fewer and fewer. In recent weeks, the percent applying for a mortgage refinance has dropped from 66.4 percent to 64.3 percent of all mortgage applicants.

Those in the real estate and mortgage industry aren't giving up hope. They are anticipating the spring selling season of 2011 to see what the market holds in terms of buyers. Nobody is sure about how this busiest selling time of the year is going to play out yet. Is it going to be the start of a massive recovery for the housing industry and the economy in general? Or is it going to fizzle out and require everybody to be more patient while waiting for an actual recovery?

How do you think this season is going to compare?

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