Plan Mortgage Payoff Via Tables or Computer
Q: We have a new, 30-year fixed-rate mortgage of $77,000 at 7.3%. Our payments are about $525 a month. If we want to pay off the loan in just eight years, how much extra do we need to pay each month toward the principal? Is there some way for us to check this for ourselves? --A.M.
A: According to our calculations, you are going to have to pay an additional $535 a month--a total of about $1,060--to pay off your mortgage in eight years.
You can come up with this figure on your own in a number of ways. The quickest and easiest--but not 100% accurate--is to scan “Interest Amortization Tables,” an inexpensive paperback book that lists payment amounts required to pay off loans of various amounts and rates over different lengths of time. This reference guide, published by McGraw Hill, and others just like it are a handy source of loan information. However, be advised: Because the tables in these books don’t cover every possible loan rate, amount and duration, they can only offer, at best, a close approximation of payments that would be owed monthly, quarterly or annually.
If you want to be absolutely sure of your numbers--and are a bit of a whiz with computerized spread sheets--you can get an answer from your personal computer. Most spread sheet programs (we used Quattro Pro from Borland to do the above calculation) can come up with the accurate numbers in less than a second. Mortgage and real estate professionals may want to purchase personal computer programs specializing in mortgage amortization schedules. Check with your local software store, or call Heizer Software at (800) 888-7667. This mail order company carries several loan payment, tracking and amortization programs.
Of course, the easiest way to get the answer you want is to ask your lender for help. Even if you calculate the extra payment amount on your own, you should talk to the lender anyway, to be sure the institution will accept accelerated payments and to learn how those payments will be credited to your account.
You should also be sure to keep careful track of additional payments toward the loan principal to ensure that they are being accurately recorded by the lender.
New Hires Tracked for Support Payments
Q: My business just received a notice from the California Employment Development Department requiring us to notify them every time we hire a worker. They said it’s a reporting requirement under a new law. What’s this all about? --H.G.
A: Beginning April 1, the state began operating an employee registry to help locate so-called “deadbeat” parents who are behind on child support payments. Companies in 17 industries that have five or more workers are required to report all new employees and their Social Security numbers to EDD within 30 days of their hiring or rehiring. EDD will then match this information against records of parents who are in arrears and pass it on to local district attorneys for collection efforts.
The industry groups affected by the law are motion pictures, health services, engineering, accounting, landscaping and horticultural services, building, heavy construction, motor freight transportation, water transportation, wholesale trade, automotive dealerships and gasoline stations, food and beverage establishments, hotels and other lodgings, auto repair shops, investment offices and business services. New employees younger than 18 and those who are paid less than $300 a month are exempt from being reported.
The state says the goal of the program is to get children the support they need and deserve as well as to reduce single parent families’ dependency on the welfare system. According to state records, two-thirds of the 1.4 million active child-support cases now being handled by county agencies involve families who receive Aid to Families with Dependent Children (AFDC).
For further information, call EDD at (916) 657-0529.
How to Calculate Taxes on Stock Sales
Q: I am buying shares of a stock through a monthly purchasing program as well as a dividend reinvestment plan. As a result, I am buying at a range of differing prices. Although I know my total cost basis in the shares, how do I handle the tax calculations when I sell all or some of them? --T.S.
A: If you sell all your shares at once, your calculation should be rather easy. Simply deduct your purchase prices and your already-taxed dividends from the sale proceeds. For example, let’s say you bought 100 shares over the years for a total cost of $7,500 and purchased 25 more shares by reinvesting $2,000 in dividends. Your total cost basis in the shares is $9,500. (Remember, you have paid taxes on your dividend income already.) If you sell the 125 shares for $15,000, your taxable gain is $5,500.
However, if you sell your shares in bits and pieces, you must identify at the times of selling which shares you are unloading. This is relatively easy when you hold the certificates, but when a company’s agent or your stockbroker holds the shares, you must tell the holder which shares you want sold. Perhaps the easiest way is to identify the shares by their purchase dates and prices.
Occupancy of Home Is Key to Tax Break
Q: My mother deeded her home to my brother and me many years ago, although she continued to live there until just last year. We are now selling the home. My brother and I are both over 65 and neither of us has used the $125,000 profit exclusion from income taxes on the sale of a home. May we use it here? --L.I.K.
A: No. In order to invoke the exclusion, the home in question must have been your primary residence for three of the last five years. It clearly wasn’t. Although the property was your mother’s residence, she can’t use her exclusion here because she no longer owns it.
