Posts Tagged ‘interest rates’

I Have To Build Onto the House for the New Baby

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November 13th, 2011

Advance Loan Finance What’s the deal with a Second Mortgage?

We’re having another baby and I have no solution other than to add a room to the house. I need to know all about second mortgages. I can’t afford to pay heavy fees and charges.

Check the Terms

Every lender is different, so do some comparison shopping. Run the figures and figure out which deal is best for your needs, not the needs of the lender. Compare several lenders, and ask them to make proposals based on your credit reports and financial situation.

Compare offers

Once you have various offers, sit down and assess the fees, terms, interest rates, and any other relevant data. A lower interest rate on a short loan may not be worth the higher fees, but it can make a big difference on a long-term loan. Pay particular attention to early payment fees, penalties, and other hidden fees.

Choose Carefully

If the sub-prime mortgage crisis taught us nothing else, it has made us aware that adjustable rate mortgages can be a real problem if you aren’t careful. Under most circumstances you will get better terms as well as consistency by applying for a fixed-rate loan. With interest rates at historically low levels, there is virtually no reason not to lock in. Discuss how long it will take to pay the loan, when, and how. Sometimes you can get an additional interest discount if you agree to have your payment taken out of your checking account automatically. Find out what other options you have to reduce your rates.

Negotiate

While a lender may try to make you feel as if they are doing you a favor by loaning you money, the fact is that you are the one doing the favor. Their income depends upon your interest. Just about everything can be negotiated, from application fees to rates and right on down to postage. Be aggressive but remain polite. Remember, the contracts are drawn up in such a way as to separate you from as much of your money as possible; your goal is to prevent that from happening. Being able to show other offers you received during your search will provide a good incentive for your loan officer to work harder for your business.

Specials

While it may seem strange to get a special on a loan, they do exist. From reductions in fees to discounts for applying online instead of in person, there is almost always a way to reduce how much you spend for your second mortgage application and process.

Hidden Savings

One of the advantages to taking a second mortgage instead of a line of credit or racking up debt on credit cards is being able to deduct your application expenses and interest payments from your income taxes. While this is certainly not a good reason to incur more debt, it can alleviate some of the stress involved in taking out a second mortgage. With good negotiation, proper arrangements, and an eye to the additional benefits of taking a loan instead of accumulating bad debt, it is possible to save money.

Tags: interest rates, Mortgages, Repayment terms, Second mortgages
Posted in Business, Cash Advance, Economy, Employment, Mortgage, Payday Advance, Payday Loans | No Comments »

This Is the Right Time to Finance

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October 14th, 2011

If you qualify, here’s how

Mortgage rates are at their lowest levels ever, making this a great opportunity to refinance. However, those who want to refinance in today’s tough lending environment face hurdles. Credit scores must be higher than they used to be. Debt loads must be smaller. Employment must be documented. The biggest obstacle is a lack of home equity. Some people owe more on their mortgages than their homes are worth. They’re considered "underwater." Banks aren’t inclined to lend to them. But for those with stable jobs, extra cash, little debt and some home equity, low rates could allow for sharply reduced mortgage payments.

When refinancing is impossible

The lowest rates are generally reserved for those with credit scores of 720 or more, said Mark Goldman, a Southern California mortgage broker who lectures at San Diego State University. About 40 percent of US homeowners have scores that high.

You’ll also typically need at least 10 percent equity in your home. Depending on where your home is, the required equity might be as high as 20 percent. “Only the select few can qualify," said Goldman.

When to refinance

If you’ve been paying your mortgage for 15 years or more, it’s sometimes not wise to refinance. In the latter years of a mortgage, a larger portion of your payment applies to principal. That builds equity. If you refinance late in your loan and don’t reduce the loan’s duration from, say 30 to 15 years, you’ll build less equity. In some states, you might also face prepayment penalties if you pay off your mortgage early or refinance. In some cases, though, these penalties can be waived.

What you may need

Homeowners need to produce pay stubs and bank statements to document assets and income. Lenders generally frown on household debt that exceeds 45 percent of a family’s gross income. A solid credit score of at least 680 is also important, said Mike Anderson, a broker. That’s because lower credit are typically subject to higher extra fees. "Once you get below 680, it gets dicey," said Anderson. "With all the add-on fees, it may not be worth it." The low rates, if they can be had, can produce big savings. A homeowner would have to pay roughly $1,074 a month for a 30-year, $200,000 fixed mortgage at 5 percent. If that rate were cut to 4 percent, the payment would drop to $955. The savings would be $119 a month, or $1,428 a year.

What will it cost?

Homeowners typically pay a few thousand in closing costs. An appraisal fee can cost 1 percent of the loan value. Extra costs include application, inspection, notary and recording fees. These fees, called points, now average 0.8 point on a 30-year fixed mortgage. One point equals 1 percent of the loan amount. That means the 0.8 percent in extra fees on a $200,000 loan would run $1,600. An example of how fees can increase costs: This week’s average rate on the 30-year fixed mortgage is 3.94 percent. It’s the first time it’s ever been below 4 percent. But once extra fees are added in, the effective average rate rises to 4.12 percent.

Tags: Credit ratings, interest rates, Mortgages, Refinancing
Posted in Business, Economy, Employment, Finance, Money, Personal / Internet | No Comments »

Why Is My Retirement Different from My Dad’s?

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August 14th, 2011

How much do you need to invest to live off your money?

It’s a long time ago and I don’t have the details, but I remember that my Dad quit working when he was 65 and spent the next 18 years pruning the roses, tearing up the golf course and reading the papers.

I’m 73 and still working and trying to stretch my salary from one end of the month to the other. Somehow, my retirement is different and it’s not me that’s to blame. Other things have changed and left me out in the cold. So I work and the truth is, I enjoy it. I like waking up in the morning knowing that I have something to do.

On the other hand…

I often think about stopping work, especially on the days when things don’t go so well. I find myself making mistakes and I find myself not understanding a conversation or argument as I used to. Perhaps it’s time to quit…

Question: How much money do I need?

Answer: How much longer do you intend living?

Many people think there’s some magic number of how much they need to have to be set for life financially. And I suppose there is a number that’s big enough that it would cover the financial needs of most people. But the amount of money we must have to get us by in life depends on how much we spend or need each year. And there’s just no way to give a pat answer that will be appropriate for all investors.

I’d also like to maintain my standard of living

Let’s say I want $50,000 a year. Inflation is about 3.5% a year and income returns about 5% a year. Using these numbers as a guide shows that I have to put away $1.2 million dollars at the beginning of the 30 year period. No good for me. In any case where can you get a 5% return? That’s a key to the puzzle. With U.S. Treasury rates so low, you’ll need to take some risk to achieve 5% yields in the current environment.

A portfolio

One example portfolio that might get you there could be a mix like IFA.com Portfolio 10, which is the safest one the investment firm offers. This portfolio holds 8% in U.S. large company stocks, 4% in small company stocks, 2% in real estate, 4% in international, 2% in emerging markets and 80% in bonds. Historically, which isn’t a predictor of future success, over time this portfolio generated a long-term average return of 5.6% on average a year. But with the added risk, including the exposure to stocks, investors need to be aware that a few bad years in the market could curtail your gains.

Do the exercise

Again, the above scenario may not be right for you or for most people. However, the exercise of backing into how much money an investor needs to reach a goal, and understanding what risk must be taken to get that return, is a valuable exercise for all. Guess I’ll just keep on working, mistakes and all.

Tags: Income, inflation, interest rates, Investments, Retirement
Posted in Business, Economy, Employment, Finance, Retirement | No Comments »

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