Knowing When to Refinance
April 2, 2018
When a borrower is looking to refinance, it is often hard to decide if it is worth the expense. According to the Federal Reserve, the average closing costs for a mortgage refinance can range from 3 to 6 percent of the loan amount. This can get quite costly, especially for mortgages over $100,000. It is always a good idea for a borrower to negotiate any closing costs with the lender, in order to receive the best deal in the long run. Lenders typically have a few suggestions to help borrower make a solid decision on refinancing.
First and foremost, the borrower needs to look at the current interest rate versus his mortgage interest rate. If the difference is at least one full percentage point, it is worth considering the refinance. However, if it is 2 or more percentage points lower, the borrower should seriously consider refinancing. This difference in interest rate could save him thousands over the life of the loan.
Next, the borrower should consider his break even point on the refinancing closing costs. The borrower should ask the lender for a Good Faith Estimate, which outlines the closing costs associated with loan. He should take the total closing costs and divide it by the amount of savings in the monthly payment each month. For example, if the mortgage will cost the borrower $3,000 to close and it save him $200 a month, it will take him 15 months to break even. It is usually a good idea to refinance if the break even point is within 2 years, or 24 months of the refinance’s closing date.
Lastly, the borrower needs to consider the length of time he is planning on being in the residence. If the borrower is not going to be in the residence long enough to break even on the closing costs, or will break even within a year of a planned move, refinancing is probably not in his best interest. Additionally, if the borrower is looking to refinance from a variable or adjustable rate mortgage to a fixed rate product, this is only a good idea if the rate will be fixed in for a considerable length of time before an eventual move.
Adolescent Banking Tips
February 5, 2018
The banking practices of a six-year old are quite simple. Finding quarters on the sidewalk equals hoarding quarters in a pillow case, an old tuna jar, or the bathroom drawer. The banking practices of a fifty-year old, though considerably more complex, are almost as well defined. For the astute researcher, there is a myriad of information about IRAs, 401(k)s, retirement plans, social security planning, home equity, low-risk investment, etc. However, adolescents traverse a tricky field; they don’t have $10,000 to invest in blue-chip equities, but they have considerably more than eleven nickels they pocketed from their older sister. With enough information, however, an adolescent is more than capable of creating an action-oriented financial plan that does more than keep the nickels and dimes safe – it becomes an introduction to the more complex but ultimately more rewarding world of adult finance.
Don’t Be a Lazy Bum.
A balance should be struck between sweat-shop labor and habitual laziness, where inactivity is tempered only by slurping soda or switching channels. Adolescence is simply the best opportunity for maturing children to learn responsibility, finances and time management. After adolescence, a job becomes a necessarily lifeline. It’s no longer of question of funds for parties, movies, or treats – it’s a choice between housing and homelessness. This pressure is not present for an adolescent. Life lessons can be learned without the drains of financial needs. Most importantly, part-time employment teaches responsibility and personal management, as well as imparting self-esteem. Young adults learn to contribute to society, while making personal gains.
Which jobs are best for teenagers? Be creative – sadly, many teenage jobs require no intellect, no enthusiasm and no talent. However, there are several welcome opportunities encouraging independence and entrepreneurship. For girls, try baby-sitting. For guys, try lawn-care and home maintenance. Fan the creative flame – if the teenager is an artist or a performer, transform that artistic energy into a cash-making enterprise. Don’t be a lazy bum – engage, learn, and grow.
My Sock Is Too Small
It’s a happy day when the hard-gained sums of cash and dollar bills overflow the sock bank. This is the great transition from childhood to adolescence; now, what to do with all that money? Banks are the saviors of overfilled socks, coin jars, and other assorted storage containers. This is for two reasons: first, they provide monetary security. With very exceptions, banks are the safest places to keep your money. With the ever-flowing international river of credit, assorted contracts, and incredible quantity of money floating around, the days of banks suddenly “going under” are long-gone. With that said, some banks are better than others. Choose institutions that have been around for a while and also review customer satisfaction. In addition, banks will generally specialize in certain areas – cash loans, equities, real estate investment, etc. Find a bank that specializes in a reliable field. Most importantly, choose one with lots of money. Then select the best type of account. For individuals with less than ten thousand dollars, the practical options are limited. First, there is a basic savings account. This, in terms of investment, is nearly worthless. Rarely even matching inflation rates, savings accounts will rarely breach 2% annual interest. They are a proper choice for a mere introduction to the banking system, but look for ways to improve your money management. Second, check out CDs (Certificate of Deposits). Although not the choice if you plan on withdrawing funds often (a pre-mature withdrawal typically entails loss of all interest gained over a specified period), they can be a great way to turn compound interest to your advantage. For many teens, who want easy access to cash but also want to be able to make money through interest, consider a dynamic duo: a savings account (or a checking account) and a three to six month CD. Third, for more aspiring (a.k.a. richer) adolescents, consider instituting an IRA (Individual Retirement Account) or even an investment portfolio – although, if you’re under eighteen, parents will set to set up an overseer account. There are several programs set designed to specifically address equity or bond investment for teens with low amounts of cash but high amounts of curiosity.
Save Smart, Live Happy
Living frugally does not mean going with wants or desires. In fact, in the long run, saving smart allows you to purchase what you really want. A Snickers bar may look quite delectable at ten o’clock at night, but a bass guitar looks fantastic for years. Financial management doesn’t simply mean how to earn money; it also entails how to save and spend money. For many teens, especially pre-teens and young adolescents, these lessons may be new and unfamiliar. Parental supervision in these instances is not inappropriate interference but necessary direction.
So what are the key methods of saving smart and living happy? Take time and consider every purchase. A good rule of thumb is don’t buy what you hadn’t planned to buy. When evaluating a purchase, consider its long-term importance and enjoyment. A $10 football can give much more enjoyment than $10 worth of donuts and bagels. Prioritize: what is needed, what is wanted, and what is really wanted? And don’t be stingy – treat yourself occasionally to an exciting movie, tasty pizza, or eye-turning pair of jeans. The secret to financial happiness is simple: save lots, prioritize, spend little.
Adolescent banking and finance doesn’t have to be confusing. When pursued in a proper manner, it is well worth the time and effort. The teenage years are a phenomenal opportunity to develop character, financial management, and a sizeable personal piggy bank. It is time to put those quarters – and the sock – to some good use.
Arbitrage in the Real World
January 22, 2018
When getting into the investment game, you might hear about arbitrage. It’s a fancy word that basically means making a profit without any risk. Well you may ask yourself how this can happen, and of course how you can get in on it. Sadly it doesn’t occur very often in the market, but it can and does occur. To better understand why we will look at areal world example and then translate that into the world of finance.
If you were to go to a flea market and see a Mickey Mantle rookie card selling for $5, you may quickly realize that its worth more elsewhere. The simple idea would be to buy it and go sell it later. This isn’t really arbitrage because you would then have risked your $5 in hopes of earning more. In this situation you would need to find a buyer on the other side of the flea market who wants to purchase the card from you for $50, take their money and use it to buy the card and bring it back to them. This way your money was never at risk, and you still made an incredible profit. It may seem a little dishonest, but in all reality the customer you sold to wanted to pay $50 for the card, and the person you bought it from wanted $5 for it, so everyone got what they wanted and you were simply able to broker a deal with some nice gain for yourself.
These situations may be few and far between, but in the world of finance they can be found. In this age of technological advancement it becomes harder and harder since more information is available to more and more people. Arbitrage is based on that difference in available information, you are essentially earning by knowing more than the other two parties involved.
One place where this still occurs in finance is in monetary exchange rates. Sometimes when these exchange rates change they don’t all change at the same time allowing for some arbitrage until they catch up to each other. For example if the exchange rates are all even between the US dollar the Euro and The Canadian Dollar, lets say 1=1=1 and then the rate changes between the US Dollar and The Euro, lets say $1.50 to One Euro the Canadian exchange rates between the two, before it catches up to the new rate would create an ideal method for arbitrage since it would still be 1=1=1. You could essentially, by exchanging dollars into Canadian dollars then into Euros still get the old rate of return and get profit when you convert those Euros into dollars using the new rate of 1 to 1.5. No risk and great return, the perfect example of arbitrage.
How Can I Refinance a Car Loan?
January 8, 2018
Vehicle owners from past generations had to rely on industry professionals and published books with regards to refinancing. Although, today’s car owner can seek out refinancing and find an abundance of helpful facts regarding the various types of loans and refinancing options available online. Vehicle owners can also use the net to access calculators which perform the involved equations you previously had to leave up to the trained professionals. These same calculations which may have taken a considerable period of time to conclude and right are now solved within a fraction of a second.
Selecting a Reputable Lender
Vehicle owners who’re doing most of their refinancing investigation and searches online should carefully consider the lender they choose. This is important because whether a lender is found online or offline, care should be taken to make sure the lender is respectable. The best way to perform this is to stick with a better established lender who comes highly recommended by friends and family members. This doesn’t signify new lenders and smaller lenders are not respectable but there is importantly less risk engaged in choosing a founded lender than there is in picking out a new lender. Make sure you validate that the application you compete online is secure. OpenRoad Lending is a new player in the refinance market but has an extensive background in auto finance and data security.
Vehicle owners who are investigating their refinancing options online may find the web site OpenRoadLending.com to be a very valuable resource. This site offers articles and calculators which the vehicle owner can use to gain the knowledge they require to make an informed decision. The articles on the internet site are written in clear and concise language which is easy to comprehend and the loan calculator is extremely user genial and allows the borrower to enter in a few variables to acquire the desired results.
Another great feature of this site is the inclusion of a link which provides access to obtaining a free of charge credit status. This is done to safeguard homeowners from identity theft or other acts of fraud. This is significant because vehicle owners are likely to realize the terms of their refinance will rely largely on their credit rating. Vehicle Owners who have good credit will likely be offered favorable rates and terms while those with not up to perfect credit will not be offered favorable rates and terms.
All the same, the most significant feature of this site is the skills to obtain a loan decision rapidly and you can complete the refinance process in minutes. The information that is requested is basic in nature and is information you will have readily available. Once this application is submitted, the loan decision is received virtually instantly.
Beware of Credit Card Traps when Financing Purchases
December 11, 2017
This is important for just about everyone as we all buy things. Some countries, as I understand it, do not have the same concept of credit cards that Americans do, so I will be writing this from an American perspective. I worked in the credit industry for quite some time and have extensive experience in these matters.
Obviously when you buy something you have to pay for it. If you have the money you can pay for it then and there, or if you don’t you can choose to finance it. Some things are normal to finance. Things such as student loans, cars, and a home are things that just about every person will finance. There are also things that are being financed much more in these times than in the past such as vacations, trendy clothes, video game systems and the like. There is argument that the “we want it now, but pay later culture has another financial shock coming the economy’s way in the credit card meltdown” I have been a credit analyst that approved loans and credit cards and collected them in my career. I do think there is going to be problems with the credit card system one day and greater than the problems we are already seeing.
There are different ways that items can be financed. One of the best ways is 0% interest financing. Here you borrow money and don’t pay any interest. Companies usually do this when they are trying to drum up business. They also have no interest and no payments for a year or longer. This is the banker’s way to make money. How? Easy. Most people will put off and put off paying the payment while it is interest free. By doing this at the end of it you get hit with all that interest. Most companies also compound the interest. All credit cards compound interest.
Compounding interest basically means that the interest you owe
Is calculated at the end of the day with a daily periodic rate (see your credit card statement. It will be really small like less than .01% in some cases. When you borrow money you do not want it to compound, but in savings you do want it to compound. To put it simply you are charged interest on top of interest every single day.
You also can just use a credit card. I realize it has to be done, but can be a bad idea. I personally have several credit cards, but owe a balance on none. This is because I learned the value of “want versus need”. I always ask do I want something or need it. If you want it I make sure I am getting the best price and quality and deal. If I need it I check out the same but you need what you need. If you car needs repairs you cant really skimp on that, but if I need a new video game I can wait until the price goes down or buy one used.
Now when people run a business there will almost always be financing. Not many people can buy everything they need all the time. This is especially true of raw materials or goods to resell. If you sell toys on eBay on a very big scale it is very possible that you may have to run a balance on a card to get your inventory. When you sell it you then pay the card off, hopefully at least. The main thing is to not get caught in a bad situation. It is very easy to do. Always look around if you have good credit someone is always offering a deal in order to get your business.
A final tip deals with automobile financing. Get your own. The car finance manager almost always will charge you more than you can get if you get it prior to the purchase. The reason is they make money off that. Typically you will pay at least .5% higher with good credit than what you would find on your own. If you have “challenged credit” it can be up to 5%. This can add up to several hundred to several thousand dollars over the long runs. In all fairness the dealerships do this because that is how they make money there. Not all do this and often times if you are financing through the companies own finance (BMW finance, Toyota ect ect ect) then you may not pay any spread (the difference between what you can get and what they charge you). Hope these tips help.
There are exceptions of course to this. Not everyone will listen also. I am sure there are grandparents who would not deny a present even if they could not afford it, but that is a choice people make. Sometimes you may finance a wedding. To each their own. When I got married I told the boss (wife) that with the marriage failure rate I was not going in debt for it. We had a great time and I took it all out of savings. I have spoken to people who have had to file bankruptcy after paying thirty thousand dollars for a daughters wedding. I believe in “judge not less ye be judged” but the people I was speaking to had a house and car what was not worth that much adding the value of both together. There is such a thing as living above your means. The bad thing is that they got divorced about a year prior to speaking with me about a mortgage trying to fix the mess they were in.