Rates Up In April, Sales Strong

In late April mortgage rates reached their high for the year, 5.94 percent plus .7 points, according to Freddie Mac. In essence, rates are now somewhat higher than the levels we saw in early January.

What does it mean? Interest is a central consideration because as rates rise affordability declines. For example, $200,000 borrowed over 30 years at fixed rates requires a monthly payment of $1,136 for principal and interest. At 6 percent, the same loan costs $1,190 monthly.

While rates in the current marketplace are now rising, they are rising relative to lows unseen for decades. One result is that sales of both existing and new homes remain strong in most communities. Existing home sales in February were 5.7 percent above the same month last year, according to the National Association of Realtors. New-home sales posted an all-time record in March, says the National Association of Home Builders, "buoyed largely by the second lowest interest rates since 1956 and a strengthening national economy."

Some buyers, no doubt, will be knocked out of the marketplace because rates are not at all-time lows -- but it's also true that the rates we're seeing now would have set off a buying frenzy not long ago.

So what will happen to prices and sales as rates rise? It's a local question -- speak with your real estate broker and ask about sales and prices in your immediate community. In particular look at the local job market, building restrictions and population growth.

The Taxing Matter of Points

With so much financing and refinancing underway in the past year, one has to ask: Are points deductible?

The rules for points vary, but in general terms they look like this:

• If you buy a home and pay a point at closing, the point is deductible in the year paid.

• If you buy a home and the seller pays the point, the point is deductible as a marketing expense to the owner -- and as an acquisition cost to the buyer. When the buyer sells, the value of the point can be used to reduce any profit from the sale.

• If you refinance and pay a point, the point may be deducted over the life of the loan, say 15 or 30 years. If you pay off the loan in advance, any remaining value can be taken in the year the loan is repaid.

• But there's a catch: "If you refinance the mortgage with the same lender," says the IRS, "you cannot deduct any remaining balance of spread points. Instead, deduct the remaining balance over the term of the new loan. A mortgage may end early due to a prepayment, refinancing, foreclosure, or similar event." See Publication 936, page 5.

As always with tax questions, speak with a CPA, enrolled agent or tax attorney about specifics before filing any forms.

Computer Screens Change Home Design

Since computers first evolved as common household appliances space has always been an issue. Early computers the size of suitcases were deemed "portable" because they had handles. But today we not only have traveling laptops, we have something else: flat-panel or LCD screens just a few inches wide that take up little or no desk space -- if you're so inclined you can actually hang them on a wall like art.

In terms of household decor, such screens can radically change the notion of home offices. No longer do you need a desk as large as a piano to hold a huge and heavy monitor. Instead, combine a laptop with a flat-panel monitor and printer and there's your home office. A table or shelf in any room can now become a computer center. Just plug into a proper phone or other connection and you have access to the world.

In effect, where only one room might have been a home office in the past, computers and Internet access are increasingly available at many points in the house -- not a bad idea when several members of the household need to be online.

Prices for flat-panel monitors and TVs have fallen substantially in recent months and, as is usually the case with electronics, look for even lower prices in the months ahead.

What To Do With That Tax Refund

If you were one of the lucky citizens to receive a tax refund this year from one part of the government, another part has some ideas regarding how you can spend the money to improve household safety. Here are several suggestions from the U.S. Consumer Product Safety Commission:

• Install and maintain smoke detectors and CO detectors.

• Purchase fire extinguishers for the kitchen.

• Have a professional electrician inspect your home's electrical wiring system. This should be done every 10 years.

• Have an electrician install ground fault circuit interrupters (GFCIs) in rooms where water could be present.

• Install safety latches and locks on cabinets and drawers so children cannot gain access to medicines and cleaners.

• Use safety gates to keep children away from stairs and rooms containing hazards.

• Get anti-scald devices for regulating water temperature to help prevent burns.

• Spring-loaded lid supports can prevent the lid of chests used to store toys from falling on a child's neck or from closing and trapping a child inside the chest.

• Outlet covers and outlet plates can protect children from electric shock or electrocution.

• Window blind cord safety tassels can help prevent strangulation in the loops of cords.

• Use helmets and other safety equipment when riding on bicycles, scooters, skates and skateboards.

For more articles by Peter G. Miller, please press here.

Published: April 27, 2004

Use of this article without permission is a violation of federal copyright laws.

Peter G. Miller, also known as OurBroker®, is the author of six real estate books -- including The Common-Sense Mortgage -- and is the original creator and host of America Online's Real Estate Center. Peter's weekly columns appear in more than 100 newspapers nationwide, he is also published in a variety of other media outlets and he is a frequent speaker at national events and conventions. Peter welcomes your questions, comments, and news releases via e-mail at .