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Calculators and Tools
Do you currently have credit card debt? Use our calculator to figure out how much you should be paying each month, how long it will take to pay off and how much you'll end up losing to interest.
Your actual payment to the IRS can depend on thousands of factors, but this simple tool should give most people a pretty accurate estimate of how much of their money is straight to going to Uncle Sam.
Curious how much your savings can grow? Just tell us how much you have to invest and your time horizon and we'll show you what you can end up with.
The 3 most important factors that determine real estate prices: location, location and location. See how much housing costs where you live now, or where you'd like to live in the future.
Is Marriage Good for Taxes?
When most people are deciding whether or not to tie the knot, taxes usually aren’t the first thing on their mind. They should be though. In fact, taxes are one of the few tangible benefits of marriage, or costs, depending on the situation.
Tax laws were written to raise money for the government in such a way that the burden would be spread ‘fairly’ among everyone. What exactly constitutes fairness has been, and will continue to be for the foreseeable future, a topic for debate. What most people can agree on is that those that have more disposable income can, and should, pay more in taxes. When two people get married, their incomes are combined, and so are their expenses. Married couples are taxed jointly on their combined earnings.
In a traditional family with one primary breadwinner, marriage is great for taxes. A significant income is combined with the other person’s little or no income to get roughly the original income. However, the tax brackets are much higher for 2 people. In fact, at the lower and mid range level, they’re actually doubled. For instance, a single filer pays 25% of taxable income over $37,650 (in 2016) to Uncle Sam. A married couple doesn’t hit the 25% threshold until $75,300 ($37,650 x 2).
In addition to the tax bracket benefits, couples can also combine their deductions. For instance, the standard deduction in 2016, a deduction that anyone can take in lieu of itemizing their deductions, is $6,300 for individuals and $12,600 for couples.
If two people earn the same low or moderate incomes and they marry, they’ll end up paying roughly the same in taxes. Their taxable income doubled, their deductions were combined, their tax brackets doubled and they’re back to right where they started.
Many people believe marriage can only benefit you come tax time, but that’s simply not true. Why is this the case? Because at higher brackets, the cut-offs don’t actually double. Uncle Sam knows that as a couple, your expenses don’t truly double (you probably both live in the same house, sleep in one bed, etc.), and he wants as much from you as he can get. The next bracket after 25%, which is 28%, starts at $91,150 for individuals and $151,900 (which is much less than $91,150 x 2 = $182,300) for married couples. That means if 2 people, each making $80,000 per year, marry, they’d be moving from a marginal tax rate 25%, to one of 28%. Of course, the 28% is a marginal rate and as such only applies to the amount above $151,900, so they’d end up paying an extra 3% on $8,100, or $243. The more both people earn, the higher the marriage ‘penalty’
It’s a common misconception that married filing separately is the same as being single. It’s not. Filing jointly is almost always the best option for married couples. Reasons for filing separately include wanting to protect yourself legally from a spouse that’s cheating on taxes, protecting your refund from back taxes or child support owed solely by your spouse, etc.
There are two federal taxes that marital status will not affect: Social Security and Medicare. Everybody has to pay a 6.2% tax on the first $113,700 they make regardless of marital status and a 1.45% Medicare tax (2.9% on self-employment income).
Here’s one of the biggest financial benefits of marriage. When your spouse (of 10 years or more) dies, you’re generally eligible for a survivor social security benefit. That means you can keep receiving up to their entire social security benefit, subject to certain restrictions. Calculating the actual amount of the survivor benefit can get a little tricky. It depends on many factors, such as the widow/widower’s age when he or she began receiving benefits, how much that person is receiving already from their own social security, etc. Divorced couples that have been married for more than 10 years may also be eligible for survivor benefits. Check out the Social Security Administration’s website (ssa.gov) for specific information.
Lastly, there’s no estate tax when assets pass between two married people. No matter how wealthy and individual is, he or she can leave 100% of his or her possessions to a spouse, and it’s all safe from Uncle Sam, at least until the spouse dies too.
Marriage is about a lot more than just taxes and financial benefits, but it’s only responsible to consider all the costs and benefits before deciding to make your relationship official. For some, having a marriage certificate may not be worth paying hundreds of thousands of dollars over their lifetimes in additional taxes. For most though, getting married sooner is financially better than later.
Is Marriage Good for Taxes?
Homeownership as an Investment
A home can be one of the most significant investments you make in your entire lifetime. A home is a place where you can store your personal property, have freedom to live your own lifestyle, raise a family, and accumulate wealth in the time you are enjoying those benefits.
Below is a chart of how the Home Price Index has changed on a quarterly basis over the past 15 years. The Home Price Index is a broad home price measurement across various geographical locations, which is produced by the Federal Housing Finance Agency.
As you can see, home prices have moved upwards (I.e. any quarter above the black line) the large majority of the time. Out of the 102 quarters in this chart, home prices declined in value in only 19 of them. This data includes the late 2000's as well, which was the worst housing crisis the US has ever seen. As an example, if you bought an average US home in 1991 for $100,000 and held it through the worst housing crisis in US history, it would be worth around $234,000 today.
Should I rent or should I buy a home? This is a question that most people will eventually come to in their adult lives. There are many things to consider before making this difficult decision. It is not as simple as comparing monthly rent payments with monthly mortgage payments. When you own a home, you must consider property taxes, property insurance, homeowners association fees and maintenance costs. Maintenance costs can be extremely expensive and are often underestimated by homeowners. You must seriously weigh these factors before making the leap from renting to buying a home.
The main benefit of buying a home, rather than renting, is the fact that you will build equity in your home to increase the value of your investment over time. Let's go over a quick example to see how much money you could save by buying instead of renting.
Let's start by using the average cost of a US home (about $200,000) and the average cost of US rent (about $1,000 per month). Also, buying a new home requires a down payment, usually between 10% and 20%. Let's assume a 20% down payment to be safe. Let's also assume that it is a 30-year mortgage. You can see how we set up the rest of the calculation in the image below.
We used a very modest home appreciation of 2%, but you can see from the example in the previous section that home prices can appreciate much faster than 2% a year. In this very modest example, you would break even after 10 years of homeownership. After 15 years, you would have saved $16,586 ($92 per month) and you would be able to sell your home for $269,175. So, you would not only save more money than the renter, you would be able to sell your home for a nice profit, which is something a renter would never be able to do.
When considering homeownership as an investment, make sure that you intend to stay in your home for at least five years and that you will continue to make a steady income to pay your mortgage during that period. You should also make sure that the home is in a location that you will be happy with for a while. Shop around to find a home that perfectly suits your needs. If you are in a stage of your career where you may be required to move around a lot, homeownership may not be the best investment for you. Consider all the extra work and expenses that homeownership requires. Renting will get you used to people paying for and fixing things that make your living situation comfortable. Homeownership requires you to spend the money and make the effort to keep your residence in nice condition. If you are willing to make the sacrifices and put the necessary time in, you can reap the rewards of a great investment.
According to US Census Bureau statistics, home equity makes up the majority of American’s net worth. In fact, a staggering 73% of total net worth comes from home equity. Adults under 35 years old is the only age group where total net worth is not made up primarily of home equity. As people get older, and presumably their homes appreciate, home equity makes up a higher and higher portion of their overall net worth. If you have considered all the responsibilities of owning a home and you are ready to make a long-term investment, homeownership could be a great way to build wealth.
Homeownership as an Investment
8 Things That Can Affect Your Mortgage Rate
Most people buying a new home will need to borrow money from a lending institution to pay for the full cost of the house. These loans are referred to as mortgages, and like every other type of loan, they have a cost associated with them known as an interest rate. In mortgage lending, the interest rate is simply called the mortgage rate. The mortgage rate is a small percentage of the loan that you must pay every month to continue living in your home.
Interest rates of every kind, including the mortgage rate, measure the underlying risk that the loan may not be paid back. Lending institutions charge a higher rate when they perceive a higher risk of the loan not being paid back. Alternatively, they charge a lower interest rate when they perceive a lower risk of the loan not being paid back. There are various reasons that lending institutions perceive higher or lower risk when determining what your mortgage rate should be.
One of the most basic pieces of information that almost all lenders use is your credit score and credit report. Before you go in to get a mortgage, get a copy of your credit report to make sure that it’s accurate. If there are any errors that will negatively affect your credit score, get them removed from your credit report as soon as possible. Your credit report provides the lender with detailed information on the level of risk they are taking by lending you money. Your payment history, length of credit history, number of credit accounts, derogatory marks, and other information will help them determine what mortgage rate to charge you. If you plan on buying a house in the near future, monitor your credit report closely and do everything in your power to raise your credit score. The Fair Credit Reporting Act (FCRA) requires each of the three nationwide credit reporting companies (Equifax, Experian, and TransUnion) to provide you with a copy of your credit report, at no charge, once every 12 months. You can request your free copy at annualcreditreport.com.
The loan term is how long it will take you to pay your mortgage back. Shorter terms usually have lower mortgage rates. However, shorter loan terms also have higher monthly payments. The lending institution is taking on less risk because you will be paying your mortgage back much quicker. Longer loan terms have higher mortgage rates because it increases the chances that the loan may not be paid back. More unfortunate circumstances may occur over a longer period of time that may prevent you from paying your mortgage back.
A larger down payment means a lower mortgage rate because lenders perceive you as less risky when you have a higher stake in the property. The standard down payment is typically around 20% of the home value. If you can afford more than 20%, you should consider paying more. It can save you money in the long-run because less interest will accrue over time. You will also build equity in your home much faster because it will take you less time to pay off the total amount of the loan. Your home price will also be a significant factor in determining your mortgage rate. A more expensive home will come with a higher mortgage rate because it will require more money to fully pay off the loan. Get a good sense of your price range to determine what mortgage rate could be associated with the price level of your new home.
Traditional single family homes get the lowest mortgage rates because they have lower historical default rates. On the other hand, multi-family homes, condos, co-ops, and mixed-use developments have higher historical default rates, and therefore higher mortgage rates associated with them. Housing used for a vacation home or a rental also has a higher mortgage rate due to higher default rates.
Mortgage lenders have different pricing depending on what location you live in. If you are planning on moving to a different location, especially another state, check the lenders rates in that specific area. Also, larger lenders often times don't service rural areas. If you are moving to a more remote rural area, make sure and find a lender that will do business with you.
Sometimes your ability to get a lower rate depends on the time you spend shopping around. There are most likely multiple mortgage lenders in your area and you should take the time to get a quote from each one. These are competing institutions that will often have different prices for mortgages. Taking the time to get a quote from each one could save you thousands of dollars in the long-run.
Fixed Rate Mortgages have a mortgage rate that stays constant throughout the life of the mortgage and is based on the factors described above. Adjustable Rate Mortgages are based on the factors described above but the mortgage rate will also fluctuate after a given amount of time. Usually ARMs start out with a lower mortgage rate than a Fixed Rate Mortgage because you are potentially taking on more risk in the future. When the ARMs start to adjust, they adjust based on a specific market, often times the US Treasury market. Once the adjustment period starts, your new mortgage rate will be the market rate plus some margin, maybe 1% or 2%. ARMs can be risky for the borrower, as interest rates can rise significantly over the life of a mortgage. Fixed Rates can be risky for the bank, since it allows the consumer to lock in an amount that may become well below the market rate.
Interest rates fluctuate significantly over time, driven primarily by macroeconomic factors such as inflation and the overall strength of the economy. Current interest rates are near historic lows, but nobody can say for certain how long that will last. As with any investment, there is always an element of luck and timing.
8 Things That Can Affect Your Mortgage Rate