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Does It Make Sense To Refinance?
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Mortgage-holders often ask the question, “Does it make sense to refinance?” The answer is complicated. The best answer is that it depends. A homeowner might see that his neighbor down the block just refinanced for a pretty penny, shaving off percentage points of interest from his monthly payments. Just because the person lives in the neighborhood doesn’t mean you’ll qualify for the same refinancing plan. There can be a world of difference between each homeowner’s situation. It makes sense that millions of homeowners are refinancing every year. For some it can be like winning the lottery. As the mortgage is normally a homeowner’s largest monthly expense, cutting down on mortgage costs can put a huge amount of money in pocket. When you also add the bonus of renegotiated interest rates, with more of the monthly bill going to equity rather than interest, it’s no wonder that many a homeowner dreams of refinancing. Refinancing Do’s and Don’ts Hold it right there. You have to make certain that refinancing a mortgage is worth your while. Just changing the interest rate by half a percentage might not make refinancing worthwhile. Yes, it’s a marginally better rate, but the cost of refinancing might outweigh what you’ll save on a monthly basis. Do some calculations about how dramatically the interest rate will change. This means factoring in another type of mortgage plan. If you’re coming to the end of an adjustable rate mortgage and want to set up a longer-term fixed rate mortgage, this makes sense, as refinancing is a necessity. However, if you’re in the middle of a long-term mortgage, changing the mortgage midstream can incur fees for reprocessing the loan. These fees could outweigh your savings. The keyword is “could.” It is just as possible that refinancing works in your favor. The trouble arises when people think of refinancing as another word for savings. It’s just not true. In certain cases, refinancing can actually be more expensive than letting well enough alone, so don’t refinance as a matter of course. Eligibility for refinancing Generally, to be eligible for refinancing, lenders require that you’ve built up at least five percent equity on your home. The trouble here is that homeowners who are most eager to refinance are those who have interest-heavy loans, perhaps a top-heavy, but inexpensive, interest-only loan. It can take several years to build up equity on standard introductory mortgages. However, this is not the case across the board and some lenders may not require five percent equity. If you have yet to build up substantial equity and wish to refinance, you should shop around and determine what deals are available. This may mean refinancing with a different lender than the one that secured your original mortgage. If you are saddled with very high interest rates, refinancing can still be a viable option even if the base rate is surging rather than dipping. You must calculate potential savings from several different lenders. If rates are on an upsurge, it’s important to refinance sooner rather than later, when interest rates make refinancing no longer viable. No Cost Refinancing If you plan to stay in the same home for a number of years, this can be particularly helpful for securing a good refinancing plan, as lenders reward this type of stability. No cost or low cost refinancing is possible in this case. If interest rates are rising, this cost can be offset by a low cost refinancing plan. In addition, calculating how long you plan to stay in the home can help you determine if any upfront costs are worth your while for the long term. Keep in mind that interest rates can fluctuate for each type of mortgage, not just for the base rate as determined by the Federal Reserve. A particular type of mortgage may dip or rise at a different clip than another mortgage. So this, too, can factor into any refinancing plan. Leave Comment |
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Keep The Mortgage Or Pay Off The House?
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One of the biggest financial decisions people make in life is whether to keep their mortgage or pay off the house. It is human nature to try and reduce the amount we pay out in bills. We naturally steer away from debt all our life, but it may be a smart financial move to hang on to a mortgage for a few more years. The decision to pay off your house mortgage or carry it for a span of time is really dependent upon your personal financial situation. There are a few things to consider when making this all-important decision. The Tax Issue If you own a home and have a mortgage, you know what an advantage you have at tax time. Mortgage interest and property taxes are tax-deductible and can add up to quite a break, especially if you live in a large, expensive home. If this is your situation you may find it beneficial to keep your mortgage as opposed to paying of the house; but for many Americans living a middle class existence in a suburban home, it may not add up to that much. There is even the distinct possibility that you have no tax break at all. Remember that every dollar you save in a 401(k), individual retirement account, or any other tax-deferred plan, saves taxes immediately and your money increases tax-free in the long term. The taxes are then due only when you withdraw, usually when your income and tax rate are lower. Where the Funds Come From If you are taking the money from another important account, like a 401(k), to pay off your mortgage, you are probably better off keeping the mortgage. It will actually make you money to pay off the mortgage at a regular pace and put any extra cash into a tax deferred account for saving. It is an especially bad move to pull money out of a retirement plan to pay down a mortgage when the retirement plan is 100 percent taxable upon distribution. It just doesn’t make good financial sense. Limited and Fixed Incomes Most of us will be living off of a fixed and limited income when we retire. This is important to consider and decide if your income after retirement will allow for mortgage payments. Make out a potential budget and figure out if it is even possible to pay your mortgage in the retirement years. Also consider your mortgage’s APR. Debt What if you have no other debt? If you have played your cards right and gotten a little lucky then you may have a mortgage as your only debt. If that is the case it would benefit you to pay of the mortgage as opposed to saving the money in a high yield account. At that point you’d have no debt at all and that would be great to face at retirement. This doesn’t have to be a hard or stressful decision. Take your time and consider your financial situation from all angles. You have all you need to make a careful, informed decision. |
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For Sale By Owner Best Practices
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After you’ve made the difficult decision to sell your home, there’s so much to think about and do. You may find yourself overwhelmed, especially with the actual, nitty-gritty details of selling your home. A number of today’s homeowners are opting to sell their homes by themselves, offering the property “FSBO” - for sale by owner. The advantages of this kind of home sale are numerous, as long as you follow the best practices at every turn. Below are some of the “for sale by owner” best practices to follow, ensuring your home will not only be sold, but that you’ll be able to save a significant amount in agent commissions and other fees. 1. Low-Cost Advertising Free and low-cost advertising methods are out there, and you’re not just limited to signage on your front lawn and major thoroughfares. Find places in your town where you can hang a detailed listing - complete with photo. Ads in neighborhood newspapers are usually inexpensive, and folks looking in your area will pick up these local publications to find hidden gems. The Internet offers several free listing services and resources for the FSBO set. A one-page brochure Web page is easy to create, and doesn’t cost much; there are even several free hosting companies that will house your site. 2. Showing Your Home in the Best Light Showing your home the wrong way to prospective buyers could cost you a sale. When you are the “agent” for your home, you need to make sure you do everything a true real estate agent does to sell your home. In addition to staging your home, add the little touches that make things stand out. Finish all repair work. Look at your home with a critical eye, and emotionally remove yourself (and overly personal items like family photos and loud paint colors) from the home. Virtual tours are another magnificent marketing tool used by Realtors, and they’re fairly simple to put together with a digital camera and a little bit of time. Learning how to show your home in the best light also means learning how to sell it. Answer all obvious questions in your for sale ads, and try to think about - and answer - the not-so-obvious ones. 3. Finding the Right Buyer Selling your home yourself means you’ll be the first person buyers see upon entering your home. Alternately, you’ll be the one screening visitors from the very first moment they arrive. Learn how to read credit reports, and deduce which info is (and isn’t) important. Know which buyers are ‘looky-loos’ and which buyers have one hand on their checkbooks. Find a lender you trust and send them buyers for prequalification. Ideally, you should be showing your home only to prequalified buyers. When you are on a mission to sell your home it should go much faster than the standard process. This speed and efficiency is helped in no small part by the fact you’re not selling other houses, as well (like a real estate agent who splits their focus would). Acting as your own agent is a great way to save money and time, and utilizing the best FSBO practices will undoubtedly lead to success. |
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Why It’s A Good Idea To Review Your Life Insurance Policy
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A life insurance policy will pay off at time of death, and that’s sometimes decades from when the policy was first initiated. Because it’s for the future, many people might ignore their policy once it has been created. They just send in their premiums and don’t think about the policy again. But should you keep tabs on your life insurance policy just as you would a mortgage, credit card bill or any other outstanding debt? The answer is that you should never completely ignore a life insurance policy, and this is for one simple reason: you could be paying too much. Just as homeowners look to refinance their mortgage with better terms, life insurance policyholders should look to do the same. There is a misconception that a life insurance policy is a lifetime contract and cannot be changed. However, it is your policy, so it is in your right to have the terms work within your favor. Reviewing a Life Insurance Policy There are several questions you need to ask yourself when examining a life insurance policy. Is it a good value?聽 Are you paying an arm and a leg for premiums that are not fading over time?聽 Do you need to switch the life insurance policy from term to whole life insurance?聽 Finally, has your health changed considerably so you want to ensure a better death benefits package in a shorter amount of time? These are the necessary questions you need to ask your insurance provider. Comparing your policy to other available policies will help you determine if you’re getting the best rate for your current policy. If you set up the policy many years before, a number of things as changed in the life insurance industry, such as secondary markets for life insurance, which came to prominence in the ’80s. With secondary markets for life insurance, a policyholder can cash out a life insurance policy without the policy reaching full term. This is just one example of how the life insurance industry has changed. Premiums may be better than when you first established the policy as well. Level Term Life Insurance, Whole Life, and Universal Policies One mistake that policyholders make is securing a level term life insurance policy and thinking their work is done. A level term policy promises to stay at a level rate for a period of 5 to 30 years. Policyholders set the term for a predetermined period and think that premiums will indeed remain level. This is not always the case. As with credit cards, payments can go up without warning. If your level term life insurance policy does not contain a guarantee to stay level, you need to periodically review the policy to make sure it has stayed with the original terms. Whole life insurance policies by and large stay at the same level for the life of the policy. However, this does not mean you cannot get a policy with better terms from another life insurance provider. A Universal life insurance policy will change over time so it is vital that you keep tabs on the level of premiums. Remember, reviewing life insurance policies isn’t just about reviewing the policy itself, but the industry on the whole, as there could be favorable deals out there that did not exist in the past. |
