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Home buyers in 2012 to help pay for payroll tax cut bill LIP.
http://www.usatoday.com/money/economy/housing/story/2011-12-17/payroll-tax-mortgages/52027164/1
WASHINGTON (AP) ? Who is paying for the two-month extension of the payroll tax cut working its way through Congress? The cost is being dropped in the laps of most people who buy homes or refinance beginning next year.
The typical person who buys a home or refinances starting on Jan. 1 will have to pay roughly $17 more a month for their mortgage, thanks to a fee increase included in the payroll tax cut bill that the Senate passed Saturday.
The legislation provides a two-month extension of a payroll tax cut and long-term unemployment benefits that would otherwise expire on Jan. 1. It would also delay for two months a cut in Medicare reimbursements for doctors that is scheduled to take effect on New Year's Day. The House is expected to act on the bill early next week. Two more months of the Social Security tax cut amounts to a savings of about $165 for a worker making $50,000 a year.
To cover its $33 billion price tag, the measure permanently increases the fee that the government-backed mortgage giants, Fannie Mae and Freddie Mac, charge to insure home mortgages. That fee, which Senate aides said currently averages around three-tenths of a percentage point, would rise by one-tenth of a percentage point under the bill.
For the holder of a typical $200,000 mortgage, that means their monthly housing payment would be about $17 higher.
The 0.1 percentage point increase will also apply to people whose mortgages are backed by the Federal Housing Administration, which typically serves lower-income and first-time buyers.
The higher fee would not apply to people who currently have mortgages unless they refinance beginning next year.
Because of the weak housing market and the huge numbers of foreclosures in the last few years, private insurers have not competed strongly for business with Fannie Mae and Freddie Mac, which have the backing of the federal government. As a result, about 9 in 10 new home mortgages are backed by Fannie Mae, Freddie Mac and the FHA.
President Obama and many congressional Democrats and Republicans want to curb Fannie Mae's and Freddie Mac's dominance in the mortgage market. Obama earlier this year proposed raising the mortgage guarantee fees they charge as one way to do that.
Re: Home buyers in 2012 to help pay for payroll tax cut bill LIP.
posted a similar link in the threads yesterday about the payroll tax cut. i'm kind of pissed at how perfectly the timing coincides with our timing on buying but figure the payroll tax cut will balance out the extra we'll pay for our loan.
ETA: the threads yesterday on MM. forgot where i was. lol.
ETA2: my math sucks. we'll save $165ish for two months to pay but pay about $5k over the life of the loan. never mind. totally does not balance out. at all. grrrrr.
Mortgage interest rates are at historical lows (historical average is 8%)--- housing prices are low --- People should be able to absorb an additiona $17.
The bill should be called an unemployment extension bill rather than a payroll tax cut - it is more like a payroll tax holiday as it will be resumed at some point.
well, it passed. the new fee is on all fannie mae and freddie mac backed mortgages, not just fha loans.
so those of us with hefty down payments and conventional loans, or those for whom it makes sense to refinance because rates are low will be paying the price. yes, rates are at historical lows, and it won't affect monthly payments much. for mh and me specifically, though, it does suck as it is affecting whether we buy in a price range that is hot in our area right now or one that isn't as hot, has better inventory, and will help our local real estate market more.