Eric Risley
President
Advantage Mortgage

This newsletter is designed to keep professionals throughout the New England market informed of current consumer topics and pending economic indicators that effect the mortgage, financial and real estate markets.

U.S. Treasury Bonds

Maturity

Yield

Last
Week

Last
Month

5 Year	3.66	3.53	3.89
10 Year	4.43	4.35	4.69
30 Year	5.16	5.11	5.38

Treasury Market Summary

The market waffled about throughout the session, spending a bit of time down here (just a little bit lower) a little time up here (inch a wee bit higher) all the while flattening the curve and early on chipping away at implied volatilities, only to goose them back up a smidge into the close.

As we noted early in the day, the market would be on a very short leash and likely to go out near 4.43% (session closed at 4.432%), just a bit higher. The upcoming Democratic Convention in Boston has short-side minded players wary of rumors (and real) risks, and therefore unlikely to take bold short positions.

Recycled terror rumors circulated early in the session, but do to their unpersuasive nature, the treasuries just lay there...doing nothing. The only event on the docket today was Federal Reserve Bank of Chicago's Moskow, offering up the same old song and dance that Greenspan had choreographed, citing sustainable growth, tame inflation and noting that the weak June data is but a temporary blemish on the face of the economy.

The talk of the employment data, quite a ways down the road (August 6) has begun, with the debate centering on whether or not the Fed's hopes will be borne out, and the few economists willing to stick their necks out so far range from 165K to 330K on non-farm payrolls. The week ahead has little in the way of top tier data, so the equities, oil and terror will lead the market around by the nose.

Economic Indicators for this week that could impact the mortgage or real estate markets include...

Existing Home Sales	Jul 26
Consumer Confidence	Jul 27
New Home Sales	Jul 27
Durable Orders	Jul 28
Initial Claims	Jul 29
GDP	Jul 30
Chicago PMI	Jul 30

Tax-Wise Methods of

Using Home Equity Financing

Using the equity you have in your home to secure a loan may be a tax-wise method of financing or refinancing some of your personal and business expenditures. Here are a few home equity borrowing techniques that may save you tax dollars:

Financing Personal Expenditures.

The interest you pay on consumer purchases, such as personal loans, car loans, and credit card debt is not deductible for federal income-tax purposes. However, interest paid on a home equity loan of up to $100,000 secured by your personal residence generally qualifies as an itemized deduction, even if the loan proceeds are used to pay off your existing consumer loans or to purchase personal items.You should compare the effective after-tax interest rate on the home equity loan to the interest rate on the particular consumer loan you are considering to determine which deal is more favorable.

To calculate a home equity loan's effective after-tax interest rate, subtract your marginal income-tax rate from 100% and multiply the result times the home equity loan's interest rate. For example, if your marginal income-tax rate is 28% and you can secure a 10% home equity loan rate, the effective after-tax interest rate of the loan will be only 7.2% (100% - 28% = 72%, 10% 72% = 7.2%). Thus, if your consumer loan interest rate is higher than 7.2%, it may be beneficial to take the home equity loan. However, keep in mind that 1) there may be some costs in obtaining a home equity loan, and 2) if your adjusted gross income exceeds the allowable amount for 2004 your itemized deductions will be limited.

Financing Business Expenses.

Interest on business loans is fully deductible against business income. A business owner who uses proceeds from a home equity loan for business purposes may elect to treat the loan as a business loan rather than a home equity loan. Making this election has several potential advantages:

You don't need to itemize to claim the business interest deduction;
For self-employed individuals, reducing business income also reduces self-employment tax;
Transferring home equity debt to business debt in effect allows you to write off interest on more than the $100,000 maximum level of home equity indebtedness.

Example: The only debts a business owner has on her principal residence are two home equity loans: debt A, with a principal balance of $90,000, whose proceeds were used to buy business equipment; and debt B, with a principal balance of $30,000, and whose proceeds were used to purchase a new car for personal purposes.

The aggregate amount of both debts, $120,000, exceeds the $100,000 limit on the amount of allowable home equity indebtedness. However, if the business owner elects to treat debt A as not secured by a qualified residence, the interest on that debt will remain fully deductible as a business expense, and all of the interest on debt B will be deductible as home equity interest.

While home equity loans can be an attractive source of financing from a tax viewpoint, there are risks involved with pledging your home as collateral. Before borrowing, consider your personal financial situation and your ability to repay the loan, as well as the outlook for property values in your area.

The purpose of this newsletter is to stimulate thought for our clients and those professionals we network with. One should consult with a qualified tax planning professional prior to implementing any tax planning strategies. If you are an real estate planning, estate, mortgage or insurance planning professional receiving this newsletter, please call our office and introduce yourself to us. We are always seeking to grow our referral network and expose more service professionals to our client base.

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Advantage Mortgage is a full service mortgage lender licensed to do business throughout New England. Advantage Mortgage provides conventional, non-conforming, jumbo, FHA and VA loans. We assist customers with great credit, bad credit and no credit. Advantage Mortgage can also lend to individuals who are self-employed and require both full documentation and no documentation loans. We can assist individuals and professionals with their financing needs whether buying, selling or refinancing real estate. If Advantage Mortgage can be of assistance, simply contact us at the telephone numbers provided or email Eric J. Risley directly. Your request will be immediately honored.