Refinancing Your Home

Refinancing your home can be a bit tricky and the bank or broker who tries to sell it to you will undoubtedly be savvy in doing so. I constantly hear some of my best customers say they don’t want to refinance because they don’t want to add to their principal balance; but for some reason, they still want some equity and a lower monthly payment. It’s really funny from a broker’s perspective. The bottom line is, if you don’t plan on staying in the house for the full term of the loan (30 years typically) and you have some equity, refinancing can be beneficial.

There are 2 reasons people refinance:
1) lower monthly payment or
2) cash out.

Sometimes people want the best of both worlds, but you can’t get both. No matter your reason for refinancing, I suggest you have at least 25 % equity in your house before you move forward. For example if you have a $100,000 balance, your house should be worth at least $125,000 (or 25% more than the value). Why? Well, the first thing is that in this market you’re only going to be able to refinance at about 85% loan to value (LTV) of the market value. Meaning, you’ll only be able to refinance for $106,250. That leaves you with $6,250 to work with. Most, if not all, of that money will be eaten up in closing costs. If you actually want to pull out some cash, I’d say you need to have 35% equity in your home. Using our example from earlier would mean your house should be worth $135,000. At 85% LTV, your new loan would be $114,750; subtract your payoff ($100,000) and 5% closing costs ($5,000) and you’re left with $9,750 to play with.

Equity is the key component when deciding whether to refinance. I suggest waiting 2 to 5 years before considering a refinance, unless your home came with equity. If you play your cards right, the only disadvantage to your new refinance should be the fact that you’re adding to your principal balance. However, if you’re like most Americans, you’re not going to live in the house for 30 years so adding a little to your balance with equity left over shouldn’t put you in a bind. In fact, you can use it as a means to cash out twice: during the refinance and once you sell.


Should You Refinance Your Home Mortgage?

Since the economy is in trouble, interest rates are great right now, and refinancing your lumbering loan fan be a fabulous reset to your financial history, and can even save your home if you are currently in financial peril. Refinancing your loan can save you money in interest and can even be used to consolidate credit card debt, student loans, and other debts. However, there are a number of things you should know and do to protect yourself and your investment when refinancing your mortgage.

According to the folks over at Refinancing Right, a website dedicated to guiding the consumer toward a financially successful and well-planned mortgage, there are several steps you should take before you seek to refinance your home mortgage. For one, you need to sit down with a Mortgage Loan Calculator and a Refinance Calculator and figure out whether refinancing your home is right for you.

Since the economic slump has caused a significant drop in interest rates, chances are that you will probably benefit from refinancing your mortgage. However, mortgage rates do largely depend on your credit, so make sure you do some research and find out the state of your credit before you begin to consider refinancing your mortgage.

You may want to make improvements to your credit to save yourself some money in interest when you refinance. Many financial collections companies are able to make a settlement on a debt that will save you interest in the long run; some even offer a service to remove the negative report from your credit entirely.

It is possible for a mortgage to save you thousands of dollars in payments on your home. Another benefit to refinancing your home is that you can use a refinanced mortgage to consolidate and get a lower interest rate on your debts. If your credit rating is good, you can even get cash to make improvements or additions to your home, such as new appliances for the kitchen, or a new room for the baby.

When refinancing your home, you have to remember that there are unethical Mortgage Brokers out there, and it is your responsibility to protect yourself by keeping informed. You must know the advantages and disadvantages of the refinancing deal they’re offering you. If you feel that you don’t trust your mortgage broker in any way, seek a new mortgage broker. A refinancing mistake or omission can cost you thousands, so make sure you keep on top of your money.


Mortgage Rates Are Low -Should You Refinance?

Mortgage rates are lower than they’ve been in years, and are close to the lowest in decades. Refinancing your mortgage is once again becoming attractive. But how do you know if they’re low enough for you to refinance now?

Why refinance your mortgage?

Is your mortgage interest rate over 6%? Did you buy into that sneaky mortgage broker’s line and get an adjustable rate mortgage, or ARM? If you did, your rate may be about to reset, increasing your monthly payment by up to 50%!

Refinance now into a new 30 year fixed mortgage and you could cut hundreds of dollars off your monthly mortgage payments. Even better, with a fixed rate you don’t need to worry about future rate increases.

When you might be better off not refinancing

Refinancing a mortgage means taking out a new mortgage to pay off the old one. Like last time you signed the dotted line, there are closing costs to consider. Even for a refinance, these will be substantial. Get a “good faith estimate” from your lender to see the best estimate for those costs.

Fees you need to consider include appraisal, credit check fee, and various service fees, all numbered from 801 to 899. Add taxes and government fees along with title company charges. These are all numbered from 1101 to 1399. Sum up all these costs to see how much refinancing will actually cost you.

For this purpose ignore items from 901 to 1099, covering interest on the new loan and setting up a new escrow account. These will be made up by the monthly payment you’ll skip and the refund of your old escrow account.

If you’re planning to sell your house in a few years, you may not have enough time to fully recoup your refinancing costs. Even if you roll the closing costs into the new mortgage, you’ll still pay them back over 30 years, with interest.

The bottom line – should you refinance now?

Ask your lender how much your monthly payment will drop. Once you’ve summed up your actual costs of refinance, divide that by the reduction in your monthly payment. The result is the number of months it will take you to recoup your refinance closing costs. If you can recoup your costs before you’re likely to sell the house, by all means consider doing so. Otherwise, wait and see if rates drop far enough to change that answer.


First Time Home Buyers

Once you decide that you do want buy a home and you can afford it, the next step is to figure out how you’re going to pay for it. Most buyers seek financing either through a mortgage broker or through a bank. What exactly is a mortgage broker? A broker comes in many shapes and sizes and they go by many names. Some are called loan officers, mortgage consultants, mortgage planners, etc. Essentially, brokers are third party representatives who finance home loans for borrowers.

Brokers provide a distinct advantage over simply getting financed through the bank. The primary advantage they provide is the ability to shop your loan around to different lenders. There is a stigma out there that brokers use the same 2 or 3 lenders; however, as a broker myself, I must disagree. Brokers have certain lenders that they are comfortable with because they may do a lot of business with them and know their programs better than others. But there are those other lenders that brokers turn to when they run into a difficult file.

The lender chosen by the broker depends a great deal on the borrower. If a borrower has excellent credit and wants the best rate, there are a group of lenders the broker will go to for that. If a borrower has bad credit and few assets, there are a group of lenders brokers will go to for that. In some cases, a broker may send your file to 2 or 3 banks at the same time just to see who’s more eager to do the loan.

On the other hand, getting financed through a single bank these days can be very risky business. A total of 95 banks have gone out of business this year including one of the biggest, Taylor Bean amp; Whitaker. Applying for a loan through 1 bank is akin to putting all your eggs in 1 basket; if the bank fails, you can kiss your loan goodbye. A good broker should already have your loan pre-approved with several banks so that if 1 fails, they can quickly shop it to the other. Whether you decide on a bank or a broker, do your research on the company beforehand because in this financial market stability is everything.


Handling Household Finance when Adult Children Return Home

In many families adult children who were living independently are coming back to live with their parents due to many reasons. This puts a lot of pressure on household finance, especially in cases where these children return due to loss of job, because of divorce or simply because they are not earning enough to live independently. This obviously will change the family’s finance structure and the household budget where the parents are just getting by themselves. In such cases addition of even one adult person can make a lot of difference.

The effects of the changed circumstances can cause unnecessary conflict and misunderstanding in the family if the problems that may arise due to the change in the household finance situation are not anticipated and properly sorted out early. From the outset it must be made clear how much money the parents are able to or are prepared to spare to help the child and how much money the child can contribute to household expenses?

It is also important to make it clear at the outset whether the financial help provided during this period by the parents constitute a loan ot gift so that no misunderstanding remains about this. Also the parents should be clear about the time period for which they are expected to provide the support so that they can make adjustments in their financial commitments accordingly. It should also be clarified whether the child (or children) are expected to help in household chores especially those that are being paid for like minor repairs, lawn mowing, etc.

It is important for everyone that these arrangements are spelled out clearly, if possible in writing, so that no misunderstanding remains that can put a strain on the relations or result in unnecessary conflict later. In case the child is prepared to pay his or her share of the household finances it must be made clear what expenses will be shared and how much will be paid. The time when the payment will be made should also be made clear as many bills may come up for payment at the beginning of the month. If the adult child will not be paying for room and board then this must be clearly understood at the outset.

Usually many household expenses like heating, air-conditioning, laundry, cost of fuel and power increase with the addition of a member to the household. This can be a major consideration if the child is not a frugal user of the facilities. A major increase in the utility bills can put a lot of pressure on household finance. It should be clearly understood who is going to foot the increased utility costs so that there is no confusion when the time comes to pay the bills. Infact there will be an all round increase in living expenses with the addition of even a single adult member into the family.

Although in most cases the rent will not be affected one must be sure of the provisions of the lease agreement. Some lease agreements specify the maximum number of members in which case it may violate the terms of the lease if additional members are accommodated. In such a case the owner can cancel the lease. However, where the parents are owners of the house such things don’t arise at all. In case the child will use the family car you must find out if you need to make changes in the insurance coverage for the car. To conclude, when an adult child comes back to live with parents, everything including household finance must be discussed and sorted out so that no misunderstanding remains.


The Basics of Mortgage Refinancing

Refinancing a home mortgage is a serious financial decision and should not be taken lightly. With easy, simple research you can make sure that when you refinance your home mortgage you will save as much money as possible. A mortgage refinance is simply replacing your current home loan with a new, better, one. Usually homeowners refinance in order to secure a new lower mortgage rate or to get out of an ARM (Adjusted rate mortgage) loan.

Generally, it is recommended that a minimum of 2% savings in the interest rate can save you a lot of money. It really only takes a few percentage points to make a big difference, especially long term. However, do not forget to account for terms, conditions, and the length of the loan, not just the rates. Another thing to watch out for is no cost or low cost refinancing options. Usually these type of offers replace the closing costs with a slightly higher interest rate for you, which adds up to a lot over time.

Closing costs can go into the thousands of dollars and vary from lender to lender. Make sure to research potential lenders before applying. Check if they have a local office close to you, or check their business record. Make sure they have a license to do business in your state, even if the law does not require a state specific license it is good to have one. Once you get a refinance quote that you like from a lender you have researched, make sure to get it in writing. Once you have it in writing you can use that quote to compare other potential mortgage lenders and banks. Often times the lender or bank will meet or beat the quote your bring by making something less expensive or a slight rate adjustment.

Most of all practice patience when going through this process. Make sure you are not in a hurry to get anything done. That is how people fall into costly mistakes. Always take into account all closing costs into your final calculations. Ask plenty of questions and take your time. Remember your ultimate goal should to be home ownership. Odds are this is the most expensive bill you have monthly and to be able to save on it would add up to a lot. You will be able to refinance the right way and save hundreds or thousands with patience and a little research.


Managing Money in a Single Parent Household

I am a single mother of two children and work as a travel agent approximately 5 hours per day. We own our home, our vehicle, and I manage to take my children on vacation every couple of months. How do I do this on one income? We don’t skimp on groceries or new clothes if we want them. We have IPod’s, cell phones, and I bought my twelve year old diamond earrings for her birthday. It is possible to be thrifty and not do without the things you enjoy. This is how I accomplish what many single mothers feel is impossible.


Money Matters:
I will not work for minimum wage or anything close to it; I am worth more than that and so are you. Just because you are young and may not have finished college or have the most experience, you still have some things going for you. For instance, you are energetic and teachable. If you aren’t making what you want to at this point then do something about it. Remember that you have to be a step ahead of the competition in your field. Why should you make more than other people? Figure it out and make it happen.

Budgeting:
I do not buy $5 coffee or eat lunch at the great Thai place around the corner from work. I treat every dollar like it’s a lot of money. Those dollars add up. I never spend change. This may sound strange but last year I had $4,326 in change I had saved. That’s paying for a trip to Peru this summer with my children. I know it sounds old fashioned but a penny saved is a penny earned. Make a budget and follow it. Always, always save something…even if it’s just your pocket change. It’s my opinion that rich people are rich because they are really thrifty.

Downsize:
What do you really need? There is a big difference between needs and wants. You can only have the extras if you can afford it. No credit cards, no extra cars, no $60 jeans, and no buying things that you are going to throw away in 6 months. We recently downsized our home for this reason. I was stressed paying for what I didn’t need. The home we bought is a fixer-upper. We aren’t even throwing the old baseboards away; we are painting them a gorgeous cottage white and they look great. If you don’t need it then sell it!

Extra Income:
I do make a fairly good living working as a travel agent and I absolutely love it, but more money is never a bad thing. If you work one extra day a week for a year you are going to add a lot of cash to your bank account. I work writing for Yahoo and Textbroker from home. I save every bit of that extra cash for emergencies and extras for my children. It adds up fast. I don’t care if you recycle aluminum cans and get paid for it, extra money is extra money.

Simple rules to follow;
Make what you are worth, budget everything, save, get rid of what isn’t important, and always look for ways to earn more. If you follow these steps, things will improve financially in a short period of time to some degree.


Why Planning For Financial Turmoil Is Important Even with Job Security

In the first quarter of 2009 as the realization that the economy was spiraling downward and out of control I suddenly found myself unemployed and unprepared for the immediate future. For me the loss of my job as a truck driver was sudden and unexpected, making things worse was the fact that my wife and I had no money saved due to our poor financial habits.

When a financial emergency happens it is to late to change your situation and you live with questioning what will happen next or if you will have enough money to make that next payment. Sometimes the first step is accepting and getting over the fact that you put yourself in a weak position and swallowing your pride. As my wife and I tried to figure out how we would being paying the bills of a couple making over $60k a year while we were making $35k a year one thing became clear, we should have been saving money. Luckily for us my wife had continued to work outside the home which with my unemployment check of $400 a week helped us make it through until I was able to get another job. There was no way that we could have made it through the financial storm without these two sources of income because we never thought of this possibility. As a truck driver my skills were in high demand and I always felt confident that it would not matter if I lost my job because another was just a phone call away. We never prepared for the fact that I would lose my job due to an unpreventable accident caused by a strong wind pushing my empty trailer on an icy road which combined with the weakening economy caused great difficulty for me to get another job in the truck driving industry. The loss of my job was a very humbling and sobering experience because I always thought it would never happen to me since I was a safe driver. The idea that you have job security is only in your mind, anything could happen including a company being sold or your job being consolidated.

I was unemployed for 5 months before I was able to find a job as a customer service representative which does not pay nearly as well but at least it is a job and helps provide financially. During these 5 months of unemployment we set some goals to find out what we could live without and saving money on the essentials by using coupons or buying generic brands. We had to get a list of priorities setup on what needed to be paid first based on what we needed to survive which includes things like shelter, food, and car. I found the important thing is to take an honest look at your life and determine what is not necessary which includes things like TV, cell phones, and entertainment. We always paid the necessities first because if we had no gas for the car there was no way for my wife to get to work or me to get to an interview. We took each week one check at a time and cut the budget down to a minimum until we found we were able to actually pay for the necessities every week and not have to worry about a bill going unpaid. We were not living comfortably by any stretch of the imagination but it took some of the stress out of the situation which I believe made me seem a little more at ease in the interviews.

The important thing for us to remember is that just because I was able to get a new job does not mean that we can breathe a sigh of relief and start spending without planning for each check. If we were to forget about the suffering we went through we would be making a major mistake and this would just cause us to return to our previous financial habits which will stop us from advancing our future financial security.


How to Pay for an International Move

An international move is not cheap (unless you are moving at the government’s expense) which means you will need to plan how to finance your international move, preferably without going into debt in the process. What are some ways to pay for an international move?

Host Moving Sales

Proceeds from moving sales can help you to add extra funds to your international move kitty, which will bring you that bit closer to your move. Many make the mistake of hosting a moving sale a week or two before their move. If you do that, you are more likely to settle for rock bottom prices from customers on the lookout for super cheap deals.

But if you host a moving sale a few months prior to your move, you are more likely to hold out for better offers. You can also say “no” to pushy customers trying to take advantage of your move who offer you low ball offers and place items on EBay or Craiglist if they do not sell. Or you can host several smaller moving sales up to the time you move.

Travel with passport and map

Work Out Moving Costs

Moving costs can quickly add up, which can eat into your budget if you are not careful. Before you start to pack up and bring in the movers, work out how much it will cost to move. Shop around by looking into several different moving companies. Ask for free quotes on how much it will cost to pack up and move your home, rather than settling for the first moving company you come across in the Yellow Pages.

Moving costs involve a lot more than packing costs. You also need to factor in additional moving expenses such as shipping vehicles, pets, the use of a rental car and paying for immigration benefits such as a visa and/or work permit, amongst other expenses along the way.

Start a Moving Fund a Year in Advance

It is easy to underestimate the costs associated with an international move until you are in that situation and you have to fork out thousands of dollars to move. As soon as you know that you will be moving, start a moving fund, ideally a year or six months in advance so that you can set aside any extra funds and help those funds to grow.

Financing an international move can be especially hard when you have to pay for all moving expenses out of your own pocket. But before you go into debt, take stock of the situation. Work out roughly how much it will cost to move, not forgetting additional moving expenses such as the cost to ship vehicles and pets and work toward saving and coming up with the necessary funds to finance your move.


Pending Home Sales Index Increased 4.3% in August

The Pending Home Sales Index, a forward-looking indicator, rose 4.3% to 82.3 based on contracts signed in August from a downwardly revised 78.9 in July. Pending home sales are 20.1% below August 2009’s rate when it was 103.0.

The data reflects contracts and not closings, which normally occur with a lag time of one or two months. “Attractive affordability conditions from very low mortgage interest rates appear to be bringing buyers back to the market,” he said. “However, the pace of a home sales recovery still depends more on job creation and an accompanying rise in consumer confidence,” said Lawrence Yun, NAR chief economist.

“Current low consumer price inflation has helped keep mortgage interest rates very attractive this year. However, recent rising trends in producer prices at the intermediate and early stages of production, along with very high commodity prices, are raising concerns about future inflation and future mortgage interest rates,” he said. “Higher inflation would mean higher mortgage interest rates. In the meantime, housing affordability is hovering near record highs.”

Pending home sales in the Northeast declined 2.9% to 60.6 in August and remain 28.8% below August 2009. In the Midwest, the index rose 2.1% in August to 68.0 but is 26.5% below a year ago. Pending home sales in the South increased 6.7% to an index of 90.8 but are 13.1% below August 2009. In the West, the index rose 6.4% to 101.1 but remains 19.6% below a year ago.

The Pending Home Sales Index is a leading indicator for the housing sector, based on pending sales of existing homes. A sale is listed as pending when the contract has been signed but the transaction has not closed, though the sale usually is finalized within one or two months of signing.