Tag: shopping and finance
Low interest rates do not necessarily mean owners will save on their mortgages.
When interest rates are low, leading many owners to refinance before assessing the true consequences of their actions. A mortgage refinancing can benefit some homeowners, especially if they intend to stay in their homes for the long term or whether they can significantly reduce their interest rates. Sometimes, however, a mortgage refinance may be the wrong choice.
“People often make bad decisions because of what I call” the envy of interest rates “around the coffee table,” says AW Pickel III, CEO of Financial LeaderOne in Overland Park, Kansas “They jump to refinance just so they can tell their neighbors they got a lower rate.”
Here are five of the biggest mistakes homeowners make when refinancing.
Not comparing the actual rate
“Borrowers should shop around for a mortgage by comparing the APR (annual rate) of each loan, rather than the interest rate quoted,” said Gregg Busch, vice president of First Savings Mortgage Corp. in McLean, Va. “You must look at the actual cost of the loan and compare it to your current APR to ensure that you will really save a half point or more on the new loan. ”
Busch points out that many owners today are finding that their home is worth less than they assumed when they have an appreciation.
“Fannie Mae and Freddie Mac have added fees on loans with high loan to value, so borrowers need to reassess the rates and fees before they decide to refinance,” said Busch.
Borrowers who have little or no action may be eligible for refinancing under Home by the Government of affordable refinancing program, or harp, available to those with an existing mortgage owner or guaranteed by Fannie Mae or Freddie Mac.
“The beauty of the HARP program is that it does not require an appraisal, so if you think you are underwater on your loan, this could be a good option,” said Busch. “Just make sure to compare rates and fees to see if the new loan is worth the cost.”
Choosing the Wrong Loan
Pickel said the first step when deciding to refinance is to establish a clear objective.
“If you think you can lose your job, but you have a moment, your focus should be to reduce your overall payments regardless of the length of the loan,” says Pickel. “If you want to be debt free by some years, then you need to find a loan that meets that goal.”
Pickel said that sometimes, even with a lower interest rate, you could end up making higher monthly payments due to packing in closing costs has increased the size of your mortgage.
Each borrower must look at the cost of refinancing and the financial benefits before choosing a loan, said Busch. Forget that some borrowers to refinance into another 30-year mortgage can add years of payments, especially if they have paid on the loan during a long time.
“A ARM 10 / 1 (variable-rate mortgage) or a 10-year fixed rate loan can sometimes be a better choice depending on the individual circumstances of the borrower,” said Busch.
Not Shopping Around
While many borrowers to compare loan offers from more than one lender, they can also shop for title services and save hundreds or sometimes thousands of dollars on their loan.
“Check at least three lenders and at least three companies before choosing a title,” said Busch. “It can be an advantage to go to the Management Authority that manages your loan the same now, because they may require less documentation, but I recommend also searched at least one other direct lender to compare rates and expense. ”
Ask the company as a reissue rate on title insurance own your vehicle – Busch believes that this can save up to 35 percent on premiums.
When refinancing you should not
Charles A. Myers, president and CEO of Home Loan in Jackson, Mississippi, said refinancing can be a mistake if you do not plan to stay in your home for many years.
“One client wanted to refinance to improve his property and rent it, but it would have ended up with a larger mortgage and then need a different loan because the property is no longer the principal residence,” says Myers. “The key is to ensure that the refinancing has a net tangible benefit to the owner.”
Borrowers must decide how long they intend to stay in the property and determine the break-even as economies outweigh the costs before deciding to refinance, said Myers.
Does not follow the Borrower responsibilities
Owners should rely on a lender to refinance, but they have obligations of their own that they are not met, could derail the mortgage refinancing. Borrowers must have good credit to refinance with most lenders require a credit score of 640 and above even for a loan insured by the Federal Housing Administration, said Myers.
Lenders can check credit borrowers again just before closing, if you need to maintain good credit and avoid a new debt, even after the refi was approved.
“Check the lock-in date to the interest rate on your new loan to make sure you can close before the rate expires,” said Busch. “Be sure to turn in all your documents as soon as it is required, because a delay could mean that your date should be postponed.”
If you’re spending tons of time and gas mileage hunting down coupon deals, think again. Here are some more common financial traps when we aim to be too frugal.
Falling for ‘Free’
It’s one thing if we go for a no-strings-attached free promotion, but buy-one-get-one-free deals or “free shipping with a $150 purchase” advertisements are just marketing gimmicks to get us to spend money we really shouldn’t. As behavioral economist Dan Ariely writes in his best-selling book Predictably Irrational, when something is free, it suggests to the consumer (incorrectly, as it happens) that there is no downside. Unless you had already budgeted for those two hand lotions from Bath and Body Works, that third free bottle is not really a deal.
Overdosing at the Dollar Store
Dollar-store stocks have been outperforming the broader market lately, as consumers seek bargains. But not everything in a dollar store is worth the price tag – and according to Consumer Reports, some items found at dollar stores can actually be dangerous. For example, researchers found that extension cords, lamps and other items may have fake UL labels certifying their safety. Over-the-counter remedies like aspirin may also be on shelves past their expiration date.
Buying in Bulk
The per-unit cost of an item at a Sam’s Club or Costco may be less than at a grocery store, but unless you can consume it all, it’s a waste of money. And although this might be a stretch, I have to think that the growth in the storage-unit industry is thanks to our culture’s obsession with excess. Today, one in 10 households rents a self-storage unit – up 65% over the last 15 years – for which they pay more than $8 per square foot. Are your bulk-buying habits leaving you crowded out of your house?
At the beginning of April, the TLC show Extreme Couponing launched its second season. The coupon experts live in homes filled with gallons of housecleaning supplies, closets filled with dry goods and cabinets bursting with toothbrushes, toothpaste, dental floss and anything else you can find down aisle 7 in CVS. Much of this stuff they got for a fraction of the price – maybe even for free. But I do wonder if all this running around and stocking up is really efficient. After adding up all the hours and gas mileage spent hunting down coupon deals, what’s your net profit? And do you really need 18 boxes of laundry detergent just because your coupon let you save 75%?
Dollar menus and fast food may satisfy your hunger for less today, but over time this behavior can carry a much higher price tag. A report by the Cancer Project found that most items advertised on Value Menus are high in saturated fat, sodium and cholesterol. And many items were linked to an increased risk of cancer. And researchers at the Dept. of Agriculture found medical costs stemming from obesity-related problems are about $10,000 higher than they are for those with a healthy weight.
Making Repairs Yourself
Sometimes it’s just cheaper to pay a professional, especially for services that take up a lot of your quality time or that require some serious expertise. Some big examples: reflooring or recarpeting your house, changing your car’s oil and estate planning.
You never want to hear your waiter say, “Sorry, your card was declined.”
For people with bad credit, hard times are inevitable. When they occur, you can dig a deep hole and crawl in, but there are better ways to respond. Here are the most common scenarios involving embarrassing credit and answers most worthy.
1. “I’m sorry sir, but your card was declined.”
When a boy says these terrifying words, you are bound to flush crimson dining companions as speculate on the state of your finances.
Squelch panic, “said John Ulzheimer, president of consumer education. Explain calmly that the tape may have been damaged, and make another card for the purchase. If she was denied because you are maxed out, however, and you have no plastic or other cash, excuse yourself and call the creditor to request an “opt-in for overlimit fees. “” This will allow operations overlimit to fill, “says Ulzheimer. You will be assessed a fee, but your reputation will be saved.
2. “Er, Jane, we need to discuss this issue before you pay.”
It’s awful to be sued for a debt, but it is horrible when your employer receives an order for garnishment of wages, a part of your salary should be given to your creditor.
Do not wait until the sheriff to serve hits the paper, said the trust expert Delores Pressley. Be proactive and request a meeting with your boss, saying: “I am terribly sorry that a personal question has extended to the workplace. I’ll find a solution as quickly as possible. “This straightforward approach may compensate for a negative opinion of your supervisor. Also, you can not be fired for garnishment (unless there was more than one in a period of 12 months), which may inspire some confidence.
3. “Rent to you with your bad credit? Ha!”
Ready to sign a lease? If your credit is terrible, you could be in the same humiliation that Matthew and Fiona Peters, Madison, Wisconsin, experienced.
As newlyweds, Peters thought they had found the perfect apartment. Yet in the rental office crowded, the agent announced loudly: “There is no way that we can rent with your credit. It is bad… very bad. “Every parent called and asked for help in vain.” After the second call, we sat there red-faced, wondering what we were supposed to do or say next, “said Matthew Peters.” It was emasculating!”
Today, Peters offers advice to others in similar situations, “Keep your cool and do not take it personally seen a high level for all residents not only protects the property owner’s investment, but people living there as well.. “Focus on your finer points.” You could say: “My credit is bad, but I’m busy and make it a point to always pay for my first home,” said Peters. You may need to sweeten the deal by offering a co-signer, doubling the deposit or to pay rent in advance.
4. “Great, once we see your credit file, we can complete your job application.”
credit checks pre-employment are the norm today – and you’ll want to hide if yours is full of big balances, late payments and accounts written off.
Sure, you can deny access to your reports, but it could encourage the hiring manager to build your resume. So stand tall and to disclose past problems at the front. Honesty can not increase your chances. And relax on shamefully low credit rating. “The credit bureaus and their professional organization (the consumption data Industry Association) have publicly stated countless times stating that they do not provide credit ratings and audit reports of the working credit” says Ulzheimer.
5. “Darling, I can not wait to start a life with you – buy a house, have children …”
Have terrible credit, but in the beginning of a long term relationship? Assuming it can be scary.
Like it or not, you must reveal the horrible truth. Then, commit to open communication and make amends, “said Joe Rubino, author of” Self-esteem book.” “Contact all debtors, make arrangements to clean the debts, start a savings plan, cut credit cards and take full responsibility for the management of future purchases responsibly.” Strengthen your skills and your faith life partner through financial counseling, therapy or life coaching.
6. “I need to talk with Mary about a bill pending.”
Whether calls or messages collection go to your workplace, roommate or relative, your private situation will become public.
First, the end of the phone calls. The Fair Debt Collection Practices Act prohibits collectors third discuss your debt with anyone but you. And while they may contact you at work if you ask them to stop, they should. Tell them you know the law and that you will file a complaint with the Federal Trade Commission, if they persist. Then, “said Rubino, act with integrity and clean up your mess of money. “This done, he is afraid of anyone except your own. If you feel the need to explain calls to anyone, just say you made financial arrangements to settle debts and the case is supported “.
7. “OK, Phil, go ahead and charge those costs and we will reimburse you.”
A business trip is imminent and you are supposed to book a hotel room, flight or rental car. Uh oh, you have no credit.
Do not worry, you’re not the only one not charging fees. About 29 percent of Americans live without credit. Suffice it to say that you only use cash, and ask to be paid with corporate funds or corporate card. Few employers balk at such a reasonable request.
Is it easy to deal with these credit problems mortifying gracefully? Of course not. But keep in mind that even a show of assurance from the air – and feel – better than avoidance.