Home mortgage interest rates in 2013 rose as the year came to a close. Rates closed around 4.65% for a 30 year mortgage.
Even though this was an increase from 2012, the yearly average of 4.25% for all of 2013 was the 2nd lowest average interest rate in the past few decades.
Below are the average interest rates for the past few years:
2008 - 6.0%
2009 - 5.0%
2010 - 4.75%
2011 - 4.5%
2012 - 3.75%
2013 - 4.25%
Source of information and great reading is found at Mortgage News Daily
This is bad news in 2014 for homeowners who are "underwater" on their home loans.
The issue is that when a homeowner has a home value that is less than the current market price, and the homeowner gives the home back to the mortgage lender; then a potential tax liability occurs.
An example. A homeowner has a mortgage of $300K. The homeowner is allowed by the mortgage lender to sell the home for $200K. The difference is a loss of $100K. The mortgage lender "forgives" the $100K loss. However, the IRS does not forgive the loss as the IRS considers the $100K as income and requires the homeowner to pays taxes on the $100K.
For the past few years, including 2013, Congress passed a special law known as the Mortgage Forgiveness Debt Relief Act, which saved homeowners from this tax burden.
The Mortgage Forgiveness Debt Relief Act expires at the end of this year and Congress has not renewed the Act. This is bad news for homeowners who are underwater as not only will the homeowner in 2014 lose their home but to add insult to injury the IRS will require taxes to be paid on the loss.
More info.
