Category Archives: Investing

Increasing Interest Rates

Photo Credit: Fed Funds Roller Coaster
Photo Credit: Fed Funds Roller Coaster

On December 16, 2015, the Federal Reserve increased its benchmark interest rate by .25%. This was the first rate increase by the Fed in over nine years!


Generally the Fed makes interest rate moves in cycles. The chart shows the Fed Funds Rate rollercoaster over the past 25 years.

So what does this mean for you and your home loan?


Existing Loans

  • Fixed Rate Mortgages – no affect. Loan terms on existing fixed-rate loans will not change.
  • Adjustable Rate Mortgages (ARMs) – collateral affect. Generally the Fed changes also affects other rate indexes, meaning ARM loans may see increases during their adjustable period.
  • Home Equity Lines of Credit (HELOCs) – direct affect. Most HELOC’s adjust based on the Prime Index, which is directly impacted by the Fed rate change. This means HELOCs may see increases during their adjustable period.


New Loans

Surprisingly, Fed rate increases don’t immediately increase mortgage rates. That’s because the Fed changes affect the Discount Rate and Fed Funds Rate, which is very different from mortgage rates. A mortgage rate can be in effect for 30-years, a rate that is set by the Fed can change day-to-day.


A closer look at historical moves by the Fed shows that its rate cuts often increase mortgage rates in the short term, while its rate hikes often decrease mortgage rates in the short term.


So ultimately, new home loans in the short term will NOT see immediate increases in rates due to the Fed rate hike.


However, the Fed’s move does give a general indication of the overall markets and economy, meaning the trend to come will be elevated interest rate levels.


Feel free to contact us if you have any questions regarding interest rates…we’re here to help!!

Retirement Planning Guide For 401k’s and IRA’s

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Photo Credit:

Below is a guide we put together for you to use in assessing the tax implications of different retirement plans, along with the benefits and negatives of each………

401K’S Benefits:

  • Employer matching
  • Higher contribution levels ($18,000 for under 50…$24k for over 50)
  • Contributions are pre-tax (or “tax deferred”)…lower taxable income
  • No income limits for contributions other than earned income must be greater than contribution



  • Normal distributions taxed as income
  • Forced distributions at 70 ½
  • Limited to employer fund availability


Traditional IRA’s Benefits:

  • Contributions are pre-tax (or “tax deferred”)…lower taxable income
  • You can pick the funds (not limited by employer’s fund managers)
  • No income limits for contributions other than earned income must be greater than contribution



  • Normal distributions taxed as income
  • Forced distributions at 70 ½
  • Contribution limited to $5,500 for under 50…$6,500 over 50 (earned income must be > contribution)
  • Contributions may be limited by other contributions (ie-401k)
  • No employer matching


Roth IRA’s Benefits:

  • Normal distributions tax-free (contributions & growth)…provides hedge against higher future tax rates
  • No forced distribution at 70 ½
  • You can pick the funds (not limited by employer’s fund managers)



  • Contributions are made post-tax so no upfront tax benefit
  • Contribution limited to $5,500 for under 50…$6,500 over 50 (earned income must be > contribution)
  • Income limitations (AGI) of $116-131k for Single and $183-193k for MFJ
  • Contributions may be limited by other contributions (ie-401k)
  • No employer matching


Strategy: 401k/Roth IRA Contributions

  • Contribute to your 401k up to employer match amount; and then contribute to a Roth IRA.
  • Always have 6-12 month Safety Fund before contributing to retirement plans
  • Need to plan for unexpected expenses (car maintenance, house repairs, etc.)
  • Need to be able to access penalty-free cash at drop of hat for job loss, health problems, etc.


Do you agree with the strategies mentioned regarding 401k/Roth IRA Contributions? Please leave your comments below. We would love your input!

Should You Purchase A Home Warranty Plan?

Photo Credit: Judy van der Velden
Photo Credit: Judy van der Velden

Generally when you buy a home, the seller will pay for you to have a home warranty plan in force for one year. After that first year, you then have to choose whether you want to continue paying the premiums to extend that plan.   This can be a confusing decision, but one with which we can help!   Below you’ll find information regarding the standard coverages provided by a home warranty plan, along with additional info to help you decide whether you should or should not renew your existing plan.


How Much Does a Home Warranty Plan Cost? Plans typically range from $250 to $450, depending on coverage specifics.


What is Generally Covered Under a Home Warranty Plan?

  • Air Conditioning
  • Ceiling Fans
  • Dishwashers
  • Doorbells
  • Ductwork
  • Electrical Systems
  • Furnace/Heating
  • Garbage Disposal
  • Inside Plumbing Stoppages
  • Range and Oven
  • Water Heater


What is Generally NOT Covered?

  • Compliance Upgrades (aka – bringing water heater up to code)
  • Haul-Away Costs
  • Outdoor Items (sprinklers, fences, etc.)
  • Permit Fees
  • Refrigerators, Washers/Dryers, Garage Door Openers, Faucet Repairs (not all plans cover these)
  • Spa or Pools (unless specific coverage requested)


Should You Renew Your Plan?Consider the following:

  • The general age of your items that would be covered by the plan (older items are more likely to fail)
  • Your experience maintaining a home (can you tackle the repairs on your own?)
  • Your resources for helping you fix problems (consider your friends & family…assess the tools you have)
  • Your financial capability to replace items should they fail (are you capable of buying a new dishwasher?)


If You Buy a Plan, What Type of Coverage Should You Get?Consider your specific needs. Make sure you pay close attention to whether the home warranty company will pay for repairs to make certain types of systems or appliances compliant with new regulations. We’ve seen water heaters go out with a home warranty plan that covers its replacement. But the plan didn’t cover the $500 in work that needed to be done in order to update the compliance of the system.


We hope this helps with your decision about your Home Warranty Plan options.   Feel free to contact us if you have questions about whether you should renew your Home Warranty Plan…we’re here to help!

CA Property Tax Assessments Explained


The information below outlines the procedure California uses to determine the amount of property taxes you pay on your home:
In 1978, California adopted Proposition 13, which defined how your property taxes are calculated.
Annual Taxable Value
The annual taxable value of a home is determined by calculating which of the following amounts is lower:

  • Market Value (of the home on January 1)
  • or, Factored Base Year Value (FBYV)

Market Value
Every January, homes are assessed by your county to determine their market value (using comparable home sales during that time). This figure is then compared against the FBYV to determine the basis for your taxes.
Factored Base Year Value (FBYV)
The FBYV in year one of ownership starts out as the market value of a home when the property was transferred (applies to properties acquired after 3/1/75). So a home purchased for $300,000 would have a starting FBYV of $300,000.
The FBYV of properties that have not changed ownership since the prior January 1 is calculated by taking the FBYV from the prior year and adding 2% per year.
So ultimately your property taxes can increase a maximum of 2% per year from the original FBYV. However, there are times when a home can increase more than 2% in one year. This would occur if your property experienced any of the following:

  • A Change In Ownership
  • New Construction
  • Temporary reduction(s) in taxable value in prior tax year(s)

For Example:
Let’s assume you are trying to calculate your 2015-2016 taxes on a home that had a market value of $300,000 on January 1, 2015. Your first step would be to look at your previous year’s FBYV (taken from the prior year’s property tax bill). You would add 2% to this figure and compare it to the $300,000 market value figure. The lower amount is your taxable value for that year. You then pay taxes on the amount that results from multiplying your tax rate times that taxable value.
So if you purchased the above home last year for $200,000; this year’s FBYV would be $204,000 ($200,000 + 2% for year 1). This means your taxable value would be $204,000; since that figure is lower than the $300,000 market value.
The following year, the FBYV of this home would be $208,080 ($204,000 + 2% for year 2). So that following year’s taxable value would be determined by comparing that $208,080 FBYV to the market value in that year.
NOTE: The FBYV does not change with the refinance of a home; it only changes with ownership transfers or certain other situations (like when permitted construction is performed).
Feel free to contact us if you have questions about determining the taxes on your CA home…we’re here to help!
Information gathered from

Tips for Leasing Your Home

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Photo Credit:

Here are several tips you’ll want to utilize when leasing your house to tenants:


1)    Keep Good Tax Records

Most landlords aren’t very good at keeping records for their rental home(s). It is critical to keep rental property transactions separate from your personal transactions. This means having a separate bank account for your rental. Deposit all your rental income into that account; and have separate checks and debit/credit cards solely for rental expenses. Do NOT comingle funds. It will make life much easier come tax time!


2)    Consider A Property Manager

One of the major complaints with owning rentals is the hassle. It requires responding to tenant calls at all times and you have to deal with acquiring new renters when your home goes vacant. A property manager can alleviate these issues. Just be aware it will generally cost you around 10% of your monthly rent. You must decide whether to maximize your profits, or keep your sanity!


3)    Entertain Taking Less Monthly Rent

We know this seems counter to what most landlords want – and that is the maximum monthly rent. But renting your property for slightly less than market value provides more tenant options to choose from upfront; which means you’ll be less likely to have a vacant home for months at a time. The low rent can also be used as a trade-off agreement with your tenants not to hassle you for minor repairs. With less hassle, maybe you won’t need the property manager mentioned above!


4)    Be Wise In Selecting Tenants

Conventional wisdom says to locate tenants with great credit, a strong income, and a perfect rental history. While these are important, they are not the most critical. You want tenants who feel lucky to rent your property; not ones who feel entitled. “Entitled” tenants are the ones who make demands and requests before you even decide to accept them as tenants. It’s often better to take tenants with lesser qualifications, if you feel they won’t be a pain in your neck! And of course you want to still assess their ability to pay rent. Don’t forget to look for tenants with good character!


Feel free to contact us if you have questions about leasing your property…we’re here to help!

Easier Loan Qualifying for Self-Employed Homebuyers

Photo Credit:
Photo Credit:

The days of “Stated Income” loans for self-employed homebuyers are a thing of the past. Government rules now require borrowers to prove their ability to repay loans by way of an income source.


This can make things very difficult for self-employed borrowers who take heavy deductions on their tax returns, resulting in lower net business profits used for qualifying income.


However, there are common-sense lenders who understand certain business deductions don’t really affect a self-employed buyer’s “bottom line”. Among the most common deduction of this type are those for business mileage driven and use of home offices.


So it’s important for self-employed homebuyers to know they have many options when it comes to qualifying. There are lenders who can qualify self-employed borrowers based on their income prior to taking the above two deductions.


Sample Scenario
You are self-employed and have $76,000 in gross business income. After deducting $40,000 in business expenses, your tax return shows a net business income of $36,000 ($3,000 per month).

Of the above $40,000 in business expenses, $12,000 are from mileage and home office deductions.
With a lender that will add these two deductions back to the net business income number, the $12,000 in mileage and home office deductions won’t affect your income qualifications. After making this $12,000 adjustment, you would be given credit for an income of $48,000 ($4,000 per month).

So while many lenders would qualify you using an income of $3,000/month, there are lenders that would use an income of $4,000/month. That’s 33% more qualifying income!


Feel free to contact us if you have questions regarding self-employed buyer qualifying. We have access to lenders who can help!

The Myth About Taxation of Work Bonuses
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Many believe work bonuses are taxed at a higher rate than ordinary earned income. The truth is that bonuses are actually taxed the same as any other income.


If this is true, then why does your withholding not reflect that fact?


While bonuses may be taxed just like regular wages, payroll companies often calculate withholdings at a different rate for bonuses than that of your other earned income. The withholding rate hinges on the method used for your withholdings. Some companies use the “Percentage Method”; while others use the “Aggregate Method”.

Percentage Method
This method calls for a flat “supplemental rate” of 25% to be withheld for taxes. So if you receive a $1,000 bonus, the percentage method would dictate that $250 (25% of $1,000) go straight to the IRS. Employers often choose this method because of its simplicity.

Aggregate Method
This method requires your employer to combine the amount of your bonus with your most recent paycheck. Then, the withholdings are calculated based on the total amount necessary for that particular paycheck. Because withholdings are calculated based on year-end earnings as if you were earning this amount every paycheck, you’re likely to see excessive withholdings for any pay period that includes a bonus. This is especially true if your bonuses are a large percentage of your income.
Sample Scenario
Let’s say you get paid $3,000 per month ($36,000 per year) and get a year-end bonus of $6,000. Under the Aggregate Method, your withholdings for that year-end paycheck will be computed as if you receive $9,000 per month in pay. For payroll calculations, that $9,000 is assumed to be 1/12th of your annual salary. Therefore, your paycheck would be withheld as though you make $108,000 for the year instead of the more accurate $42,000 ($36,000 salary + $6,000 bonus). Because the U.S. is on a progressive tax system, the tax rate increases on higher levels of income. So you would see higher withholdings for this paycheck than you will actually face in taxes, since you aren’t receiving this bonus every paycheck.

How To Avoid Over-Withholding
If you know a bonus check is coming and you feel the withholdings will be too high, you can request a decrease in withholdings** for this pay period. This will allow you to keep more of the money now, rather than having to wait until tax time to recoup the over-withholding. Or you can just keep your withholdings at current levels, knowing you can expect an adjustment when your tax returns are prepared.

** Just be careful you don’t swing too far the other way and have your bonus under-withheld. We suggest checking with your tax preparer to ensure you do this correctly.
*** If you change withholdings, be sure to change them back to normal levels after your bonus check.

Lower Payment vs. Lower Term

Photo Credit:
Photo Credit:

With interest rates still near all‐time low levels, an argument can certainly be made to consider a shorter mortgage term, such as a 15‐year loan versus a 30-year loan. But there are some important factors to consider.
The greatest benefit of choosing a shorter term is to know that the mortgage will be paid off in less time, saving thousands of dollars in interest payments over the life of the loan. A 15‐year term loan builds discipline, forcing you to make the 15‐year payment.


However, the shorter term comes with a steep monthly payment. A 15‐year loan payment can be several hundred dollars more per month than the 30‐year loan; and in these tough economic times, “cash is king.” That is, cash on hand is king.


Therefore, many people may be better served by having a smaller mortgage payment under a 30‐year fixed rate loan, and then saving or investing the extra money. The key is actually saving and investing the extra money. People who find themselves without a job or who have a pressing financial need would benefit from being able to access these saved funds.
The Tax Consequences

While paying less interest saves you money, it may not save you exactly what you thought since your corresponding tax write‐offs will decrease. Depending on your marginal tax bracket; this could make a substantial dent in the savings you thought were being achieved with the lower interest due. So you must consider income taxes for a relative comparison.


Middle Ground: Flexible Term Loans

You can also choose a point in between the 15-year and 30-year term loan. Refinances are possible to any whole term between 15 and 30 years. That means you can acquire a 17-year term loan or a 23-year term loan, if either of those terms best meet your payment and loan-payback needs.

Best Path for All
Since an individual’s or family’s mortgage payment is often their largest monthly payment, it’s important to get individual advice about your unique situation in order to make the best decision about your home loans. Your short- and long-term financial objectives must be considered.


We’re happy to help you with this decision…don’t take it lightly!

What are your thoughts on acquiring a home loan? Is it best to go with the lowest possible payment, or shortest affordable term? Let us know your thoughts!

Tips On Choosing an Agent to Sell

CN March Blog PicThinking back on when you first sold or bought your home, how did you decide on who you would trust to take you through this experience? Was it from a family/friend referral, the internet, open house, or a complete stranger you met randomly somewhere? Hopefully, the decision made was the right one and if you did your homework, then we are happy that it all worked out in the end. If not, then hopefully this blog can aid you in some way.


Below are some tips/characteristics when searching for someone to sell your home because hiring a good listing agent is crucial to your entire experience as a home seller:

  • Experienced and educated with a proven track record
  • Hire someone that will communicate effectively with you and will give good advice
  • Has extensive knowledge of your neighborhood
  • A good negotiator to sell your home for the best possible price and as quickly as possible
  • Someone with a strategic marketing plan (ask to see what that consists of: how many websites will have your property’s info, how many open houses to be held)
  • Someone you can TRUST


You can check us off for all of the above and if chosen to be your Listing Agent, we at the Iseley & Walsh Group, are very involved with preparing your home for sale and marketing the property. Most importantly, we value your home just as much as you do and will always provide a comprehensive market analysis.


We want to give you the best experience from beginning to end. Not only are we here to do business, but we are here to build a long lasting relationship.


Submitted by a guest blogger.

6 Things You Can Do With Your Tax Refund

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Photo Credit:

How you handle “windfalls” of money can largely determine your financial success. Here are a few ways you can apply your tax refund:


1.   Build an Emergency Fund – One of the best ways to reduce stress in your life is to increase your margin. That includes giving you some cushion for the occurrence of “life events” like job loss, family health issues, etc. It’s nice to have savings for these things when they come up rather than having to rely on credit cards!


2.   Payoff Debt – Paying credit card interest will cripple your chances of financial success. Delay immediate gratification with your refund and apply it towards paying off credit card debt. Then once you have an emergency fund in place and have paid off credit card debt, fire away at those student loans & car loans! Imagine the feeling of not having a student loan payment or a car payment. What could you do with that money each month?


3.   Save For a Major Purchase – Use your tax refund toward a major purchase goal such as your next car, home upgrades, new appliances, or new furniture. Set a goal for how much you’ll need and save that amount so you can pay cash, avoiding the purchase/debt cycle that plagues so many Americans today.


4.   Save to Purchase a Home – Depending on the size of your refund, you may be able to make a dent in saving for your new home down payment. If done right, buying a home is one of the best ways to secure your future retirement, and gain a tax deduction in the meantime. Depending on your situation, you may qualify to purchase a home with only 3% down. Contact us if you have questions regarding this.


5.   Contribute to Retirement Accounts – You can apply refund money toward retirement accounts such as Traditional IRA’s, Roth IRA’s, 401k’s, etc.


6.   Give to Those Less Fortunate – Bless somebody else with your money. There are many ways you can be generous and change somebody else’s life. Be creative! Here’s one fun idea: click here.


The key is to think about how you can best apply your refund according to your goals before you impulsively spend it aimlessly.


What are you going to do with your refund? Please reply and let us know!