Tag: money

Should You Consider Refinancing Your Home?

Generally speaking, it may be a good time to consider refinancing your home when you can obtain an interest rate that is at least 2% lower than your current mortgage interest rate.

 

However, there are other considerations that come into play.  With the current economic recession brought about by the sub-prime mortgage crisis, home values have declined.

 

If you decide to refinance based upon the immediate need to pay off high interest rate loans or credit cards, or if you plan on making improvements to your home to increase its value, it may be necessary to wait until the home values increase before taking this step.

 

You may be better off bootstraping now, in order to avoid a whole lot of pain later on.  Better to pay down those credit cards in a disciplined way, than tap into the equity in your home which you’ve worked so hard to build.

 

You will also have to take into consideration the cost of refinancing a mortgage.  Several questions need to be answered, such as:

 

How much will I save if I refinance now?

 

Can I afford to pay the fees associated with refinancing such as PMI (prepaid mortgage insurance), inspections, title search, and points, without having to add these to the initial refinance cost?

 

Research will be required to determine if it is feasible to refinance your home.  This may include visiting your lender and discussing the pros and cons of refinancing at this time.

 

You may also wish to compare the difference between refinancing and the cost of your current mortgage to determine if refinancing will yield a significant saving.

 

There are many online mortgage calculators that can help you in this endeavor, so make sure you do your research in order to look before you leap.

 

Another consideration is the length of time you will remain in your home.  Re-fi for the whole of the house’s equity pretty much wipes you all you’ve put into it. If you are not careful, you could end up in worse shape than before, and without a safety net any longer.

 

Therefore, whether you revisit your current lender or research other mortgage lenders, having accurate accounting of your monthly mortgage versus how much it would cost to refinance (including the aforementioned fees) and whether or not there is an actual savings will be the deciding factor.

 

Most experts advise that if, within seven years, the cost of refinancing does not yield a substantial savings to the homeowner specifically as relates to paying off all the fees incurred during the process, it is not worth the time or the money to refinance.

 

Make sure you look at your financial situation realistically. Have a budget, and stick to it. If you are just trying to re-fi in order to pay off credit card debt, don’t.  The sacrifices you will make now will be worth it in the long run, without adding all sorts of fees and paperwork into the mix.

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Don’t Fall for 0% APR offers

Despite the economic crisis, many people have recently received a mortgage application in the mail offering 0% APR for a specific time, usually phrased as a limited time offer you need to act on now.

 

While this offer may seem attractive, and one you would be a fool to miss out on, it is merely a gimmick the credit card companies and mortgage lenders utilize to entice people by offering an apple when, in fact, the real deal turns out to be a lemon.

 

According to the Federal Reserve, any initial information you receive about mortgages probably will come from advertisements, mail, phone, and door-to-door solicitations from builders, real estate brokers, mortgage brokers, and lenders.

 

Although this information can be helpful, keep in mind that these are merely marketing materials. The ads and mailings are designed to make the mortgage look as attractive as possible, without you ever looking at the fine print.

 

These advertisements may play up low initial interest rates and monthly payments, without emphasizing that those rates and payments could increase substantially later. Indeed, that they would be much more substantial as soon as they check your credit history!

 

So if you are looking to get a mortgage  even in these turbulent times, make sure you get all the facts of the offer being put in front of you, and make sure any offers you consider meet your financial needs.

 

Any ad for a loan or financing of any type that shows a 0% APR introductory interest rate should also show how long the rate is in effect.  If the APR is much higher than the initial rate after the grace period, any money you have borrowed will incur finance charges at a much higher rate,  even if market interest rates stay the same.

 

An interesting article by Carolyn Noel Warren of Mortgage Helper tells about her experience attending a seminar hosted by one of the leading lenders in the U.S.

 

In discussing how they compete for customers who are seeking loans and refinancing, the speaker stated: “Give them apples and oranges to compare, so that won’t know which loan is best.”

 

These are the tactics lenders utilize to steer you towards their company for your financial needs, even though it might not be right for you.

 

If you are considering refinancing and happen to receive an offer where the APR is 0%, yet when it is time to sign the contract you find that the APR is not 0% but a much higher number, you will want to reconsider.

 

Any credit card offer in the mail that is similar, and offers you a balance transfer, might also be tempting, BUT look at the length of the grace period, and the APR if you are deemed to default, and any fees associated with the balance transfer (often 3 to 6%, in which case it is NOT  0% APR, now is it?)

 

I know of people who have had TERRIBLE  experiences with Discover card precisely through that kind of misleading advertising, with their APR up to 22% now, even though landing is at 1/2%!

 

The sub-prime mortgage crisis has made homeowners more aware of the problems associated with mortgages and refinancing when dealing with unscrupulous lenders.  If an offer sounds too good to be true, it usually is.

 

The same is true of credit card companies. If you must have a credit card in case of emergencies, know which one you have has the least percentage rate. Make sure you also pay off more than the minimums each month, and go out of your way to pay them down NOW, as fast as possible, so you are not getting zapped with a lot of monthly finance charges.

 

Research your lender thoroughly, ask questions, and don’t fall for 0% APR. Be smart with your money, and reap the rewards.

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Comparing Reverse Mortgage Offers

 

If your parents or grandparents are considering a reverse mortgage, it pays to do your research in order to know exactly what they are getting into, in order to stay safe, and avoid scams.

 

Currently there is only one type of reverse mortgage available.  It is called the HECM, or Home Equity Conversion Mortgage. This mortgage is insured by FHA.

 

You can obtain this type of mortgage from a HUD lender.  Since the credit crunch, there are new rules and regulations these lenders must abide by.  The fees are specific, and set by law.  There are some HUD lenders, however, who may offer some type of discount.

 

The maximum amount a lender can offer for a reverse mortgage is $417,000.  In addition, the origination fees will be charged as follows: 2% on the first $200,000 and 1% on any amount above $200,000.

 

What are the fees associated with a reverse mortgage?  As an example, let’s assume a house is valued at $200,000.  The origination fee would amount to $2500; the Mortgage Insurance Cost would be $4,000; the Closing cost is estimated at $2,200; and the Service Fee is approximately $5,345.

 

The origination fee is charged by the lender to implement the loan.  Again, it is 2% of the first $200,000 and 1% thereafter.

 

The mortgage insurance cost is a requirement of HUD and is based on 2% of the home’s value up to $417,000. There is an additional .05% of the loan balance attached.

 

The closing costs encompass services that are performed prior to the reverse mortgage’s finalization, for example, the appropriate surveys, inspections, title searches, taxes, and credit checks.

 

The service fee is used to cover the costs of any future service fees, and they can range from $20 to $35.

 

You can compare a reverse mortgage to home equity loans, second mortgages, or a home equity line of credit.  However, while a home equity loan may incur lower interest rates, since it is a variable rate, it is also possible that the monthly payments will be significantly higher.

 

Considering a reverse mortgage requires a great deal of research.  Before the credit crunch, there were three types of Reverse Mortgage loans: HUD, Fannie Mae, and the Jumbo Reverse Mortgage.  Due to decreases in home values at present, a result of the economic crisis, the only reverse mortgage now available is through HUD.

 

Do your research, and if you really think a reverse mortgage is right for your family, move forward with caution only through HUD. Avoid scammers or anything that sounds too good to be true. A reverse mortgage can help many seniors, but only if they don’t fall prey to reverse mortgage scammers.

 

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Family Meal Planning To Save Money

 

There are several ways in which meal planning can save money.

 

Whether you purchase groceries on sale or at a warehouse, always buy in bulk.  Buy those items that you can prepare in one meal which you can then make last several means.

 

For example, whole chickens are reasonably priced.  You can purchase two and make a pot of chicken stew, a pot pie, a roast chicken, a stir fry, a chicken salad, and so on. Vegetables on sale or from the local farmers market can be added to the meal as well as well. Whatever you don’t eat, freeze.

 

(And if you have ANY spare room in your house, I suggest you invest in a small to medium sized chest freezer for the same reason, to save money.)

 

Any type of home-made soup or stew can be easily frozen for lunches or dinners, and helps  meat  stretch much further.

 

There are a myriad of recipes online that offer tips and suggestions on how to prepare meals for up to a month in advance. Do your research based on a main ingredient, book up the dishes, and then eat or freeze into meal sized portions for the family.

 

With the current recession, more and more families are utilizing coupons, Sunday circulars, and store circulars to purchase items on sale. This is a great idea that can help you save bit, especially if you get double coupons.

 

In addition, stock up on store brand items.  They are often  just as good as brand-name items, and are sometimes manufactured by the very same company that makes the premium brands.

 

If you budget accordingly, you can prepare meals that are affordable and easy to prepare.

 

Here’s another example on how you can save money.  Instead of ordering a pizza (the price and delivery are quite expensive), buy English muffins on sale, or a large loaf of French bread, a jar of pasta sauce (or use your own homemade sauce), and a small mozzarella cheese package (low fat is best to save money and calories too).

 

With the muffins, or bread slices, you can make mini pizzas for your family!  They are even more delicious than regular pizza and cost half the price.

 

Utilizing the items in your home can assist you in preparing creative meals.  One-pot stew is always a favorite, for which you can purchase inexpensive pieces of meat.  Just add vegetables from your garden or farmer’s market.  You can also freeze this, so why not make enough for several servings.

 

It even makes a great pet food; all you have to do is run it in the blender to desired consistency, and you can get very high quality but inexpensive dog vitamins as chewables or ones you can throw into the food before you blend it, for a cheap,  nutritious meal that will save a ton on pet food bills.

 

Meal planning done well in advance, in conjunction with whatever is on sale, is an affordable way to save money over the long term

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Reverse Mortgages

Except for seniors who require long-term care, most are fiercely independent.  Many seniors who feel they might be a burden to their family are opting for a reverse mortgage.

 

With seniors living longer than ever before, and baby boomers dealing with their own financial and senior issues, and possibly having to take on the added responsibility of caring for their older parent if they become ill, many older people would rather take out a reverse mortgage than submit their children to this fate.

 

According to statistics, approximately 40% of long-term care is paid for by seniors.  If there are those who cannot afford to do so, the children are forced to pay for these services.  This poses a problem for a senior who wishes to live out his or her life independent of their children.  It also raises issues among the children such as who will care for mom or dad, and other sibling issues.

 

One woman writes, “My parents are 86 and 87 respectively, and both living alone now.  If either one or both became ill and needed financial assistance, it seems to me that a reverse mortgage is a viable alternative in these difficult economic times.  My sister and I agree that we would never put them into a nursing home.  Their independence is crucial to their mindset and way of life.  To deny them that independence would be cruel. At the same time, though, we need to worry about our own families, college, and making ends meet. A reverse mortgage, when done correctly, can make all that possible.”

 

Reverse mortgages alleviate the burden felt by seniors and their children.  Imagine living in a home most of your adult life, and then suddenly becoming ill and discovering that you cannot afford to pay the bills or other expenses associated with home ownership any longer.

 

One of the things some of us fear, and seniors in particular, is change.  Our parents usually have a schedule they live by.  They receive their monthly social security and pension checks and try to stick to their budgets.  They treasure every moment of life in ways only they can appreciate. But any bump in the road financially can threaten all that.

 

They ask for nothing other than being allowed to live out their lives in comfort and financial stability.  However, if they become ill and cannot afford medical expenses or prescription drugs, their world can turn topsy-turvy.

 

A reverse mortgage can free their minds from worry, since it will help them secure day to day living expense. However, it is good to check out the latest options first before pinning your hopes on a reverse mortgage as the solution to your difficult problems. Given the current economic climate, the credit crunch is affecting even this area of the market.

 

However, if your parents or grandparents are struggling to make ends meet, it is an alternative that is well worth investigating.

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Research for Asset Management Do’s and Don’ts

 

When you are trying to manage other people’s assets, there are things that you must and must not do. Asset management is a very tricky job, since it involves having to go through sometimes private details of the personís life.

Asset management research doesn’t have to be for other people. It is far easier to do asset management research for yourself. To begin with, you will have no qualms whatsoever in getting your own details together.

Asset Management Research Tip 1: Understand the Scope

The very first challenge for a researcher in asset management is to understand not just your goals for conducting research, but also the scope in which you are allowed to operate. Avoid taboos from the very beginning by inquiring the degree of penetration that you can have as far as the pertinent information is concerned. This is crucial because it will dictate the depth of your research. The purposes of the research must also be kept in mind: is it to confirm existing sets of research or to start entirely from scratch? These questions may seem minor but they are important to having a productive set of research.

Asset Management Research Tip 2: Make an objective inventory and update it

When you are trying to make an inventory, make sure that it is updated. The inventory will help you show whatís there to begin with. Having an inventory is a handy tool that will help you address the issues that might come up in an individualís asset management program. Remember that it is usually on a case to case basis, and what might work for one may not necessarily be as effective for another. The objectivity in inventory is also important for it will be a good basis of facts only if it is not selective in nature.

Asset Management Research Tip 3: Deal only with the recent sources

The recent sources will tell you the present state. This is the very first thing that you have to inspect and incorporate in your research. If you have to backtrack more for establishing credibility, read the next tip.

Asset Management Research Tip 4: Observe past circumstances as well for patterns

Patterns may only be found from past recurring experiences. Now, if you are after some intense research on asset management, trailing the past will also be as effective. Pair the findings of the past with the present situation and know its implications for your overall efficiency as a researcher.

Asset Management Research Tip 5: Have a working set of recommendations

The purpose of research is not just simply to report whatís out there. It will also be helpful if there are solutions offered in form of recommendations. Researching for asset management is not just about outlining a list of things that are present in oneís asset bin. It also involves giving the initial directions under which effective asset management may thrive.

Asset Management Research Tip 6: Be flexible for changes that may happen

Research will not tell everything, especially if it is just preliminary research. Changes may still be introduced. A new event may actually challenge your assessments. While there is a limit to editing research works, you may have to design your research in such a way that it will accommodate changes as they come along.

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A Real Life Example of Asset Management

During the dark ages of computers and asset management, the 1970’s and early 1980’s, there was a company that operated large ocean going integrated tug/barge systems.

The tug engines were twin 5560 HP V-12 diesels.

There were 5 parts of these engines that were tracked. There was an index card for each item and notations were made whan any piece was changed.

The vessels had no computer systems but the First Assistant Engineer brought a personal IBM type computer aboard while the Captain had purchased a Commodore 64 and was writing programs for it in Basic.

Each engine had a counter attached that gave cumulative operating hours and each piece tracked had the engine hours at installation noted.

The pieces and guidelines for changeout were:

Heads 10,000 hours, later changed to 12,000 hours

Right hand intake valve 3,000 hours

Left hand intake valve 3,000 hours

Right hand exhaust valve 3,000 hours

Left hand exhaust valve 3,000 hours

The above items were for each cylinder for both engines, giving 120 items to be accounted for.

The First Assistant Engineer wanted to create a program to track the data and find out the status of each part. He bogged down on his program and mentioned the problem to the Captain.

The Captain wrote a fast and dirty basic program that compared the engine hours at installation to the present engine hours for each item and gave a printout of the status of each item.

It took about 2 days to enter the data and write the program which ran through it all in about 30 seconds.

Conditions were, “OK”, if under the replacement hours, “Will need replacement in XXX hours” or “Overdue for replacement by xxx hours”

The entire Port Engine was overdue by no less than 1000 hours and sometimes quite a bit more.

This sent a shockwave through all Engine related personnel.

Although information had been entered on the index cards, no one had ever made any practical use of it.

The economics:

These vessels cost about $2,000 per hour to operate.

The failure of an exhaust valve meant stopping the engine and changing it out and took about one hour.

(In a true disaster, the Engineers had bypassed the air/oil interlock that prevented the engine from starting when it had no oil pressure. The interlock had failed and there was no replacement immediately available. They shut down for a failed exhaust valve and when they restarted, no one turned the lube oil pump back on. The engine was destroyed and replacement cost $1 million.

In addition, about 1/4 of the revenue of the vessel for a whole year was lost while waiting for a replacement engine to be built and delivered.)

The failure of an intake valve would be another disaster. In general, the valve head would drop into the cylinder where it would get mashed into pieces about the size of a marble. In the process, it would destroy the other intake valve, the head, the piston and liner. This would generally cause an emergency port call and take a full day or two to repair.

In about 14 years of operation we never experienced a head failure.

So preventive maintenance was essential but before the advent of computers there was no good way to keep track of it.

The end of this story is that the Company went into high gear and replaced every part that was overdue. Right after they finished, the engines were started one morning and the lube oil pump failed to provied full pressure to the Port engine. It was severely damaged but not destroyed as was the Starboard one on the previous occasion. But the money was not there to repair it and the Company went bankrupt.

 

 

 

 

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