Government Increases Mortgage Rates and Fees Under New Payroll Tax

Pertaining to the housing market, the payroll tax legislation will result in an annual charge of at least 10 basis points which is equal to one tenth of one percent of the mortgage loan.

President Obama signed into action on December 23rd, 2011 the new payroll tax cut creating a holiday gift for nearly 160 million workers, but intentionally hidden in the legislation is the fact that new home buyers will be paying higher fees and a higher mortgage rate to pay for the payroll tax.

In a time when the housing recovery is beginning to show signs of recovery, will this move set us back another 2 steps or actually save business’s enough money to hire more employees and decrease unemployment numbers?

To start with, the new payroll tax is temporary and will reduce the amount of taxes paid by 2 percent for individuals making up to $106,800 and is applied through February 29th, 2012 and will likely be extended throughout the remainder of the year. The extension also applies to self employed individuals and the reduction is automatic.

The new payroll tax legislation is great for the hard working Americans who are having a tough time in today’s economy, but to put the extra burden on the housing market is just plain silly.

The housing market has always been the determining factor leading the U.S. into and out of recessions. To topple on extra fees and higher rates as the housing market is showing signs of recovery will impact potential home buyers and will certainly

Pertaining to the housing market, the payroll tax legislation will result in an annual charge of at least 10 basis points which is equal to one tenth of one percent of the mortgage loan. For example, an individual purchasing a home for $200,000 would pay an additional $200 extra a year for the entire lifespan of the loan. On a 30 year mortgage that is an extra $72,000 paid over the life of the loan.

When do the extra charges on a new mortgage start? Here is what the official release had to say, “On Dec. 23, 2011, President Obama signed into law the Temporary Payroll Tax Cut Continuation Act of 2011.

Among its provisions, this new law directs the Federal Housing Finance Agency (FHFA) to increase guarantee fees charged by Fannie Mae and Freddie Mac (the Enterprises) by no less than 10 basis points from the average guarantee fees charged by these companies in 2011 on single-family mortgage-backed securities.

This requirement is effective immediately, meaning that the average guarantee fees charged in 2012 need be at least 10 basis points greater than the average guarantee fees charged in 2011.”

If you are one of the home buyers that have been sitting on the fence waiting for home values to drop or mortgage rates to decrease another quarter of a percent before you purchased a home, you may have just missed the bottom.

By Jeremy Redlinger, a Mortgage Loan Originator #627335 licensed in the state of Minnesota – Newhomemortgagemn.com

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