Comments Off

Are Mortgage Rates Going Up?

A mortgage is a specific kind of loan. It is a loan that is already collaterized, meaning it has tangible assets that the lender can seize if the borrower defaults. Mortgage rates have been in use for centuries but today the term has taken on a special meaning. A mortgage is seen as a homeowner’s ticket to wealth. Land speculation has been present in America since the colonial period, but the financial crisis of 2008 – onward has presented a unique situation. Speculation, whether in stocks, bonds or real estate, has always resulted in recessions or depressions. The current crisis, however, resulted from speculation in multiple areas all related to a specific form of mortgage – subprime mortgages.

Consequently the real estate market has been undergoing a tremendous deflationary period, with home prices falling by 2.3% in the last three months of 2009 alone. Over the past three years home prices have fallen by 27%, according to CNN. This has resulted in increased foreclosures as many borrowers now owe more than what their house is worth. Foreclosures, in turn, mean that the deflation of home prices will only continue as the market tries to find solid ground.

What homeowners are really worried about is this: will the interest rate on their mortgage go up? The answer depends on the type of mortgage the homeowner has. Interest rates on fixed mortgages will not go up due to the terms of the loan. Adjustable rate mortgages will likely increase considerably since ARMs fluctuate according to market conditions. With the market in deflation and recession, falling home prices indicate to lenders increased risk, so interest rates will probably rise on mortgages with adjustable rates because banks want to prevent any further losses.

Comments Off

A Brief Guide to Short Sales

While short sales are not ideal outcomes for mortgage rates, it’s important to be aware of the ins and outs of the sometimes-practiced event. Here, we’ll give you the basics on short sales and how they affect lenders and borrowers.

A Way to Mitigate Risk
When a borrower is facing imminent foreclosure, lenders have the option to sell the house for less than what is still owed on the loan. Some lenders choose this option to cut their losses, since it can be difficult to press on a borrower who simply can’t come up with any money.

This option is often attractive to lenders and borrowers since they can avoid foreclosure and the hefty fees that go along with foreclosure. Most of the time, short sales are structured so that the borrower still owes money, even after the short sale has completed.

Supposed Benefits for Both Parties
First of all, the lender has to agree to downplay loan balances based on a borrower’s inability to pay. When the borrower then sells the property, he or she immediately forfeits all of the funds to the lender. This way, the lender loses less money, and the borrower doesn’t get such a nasty blemish on his or her credit report.
Usually, it’s possible to conduct a short sale in a much briefer period of time than a foreclosure.  Most lenders have in house loss mitigation departments wherein actuaries and other financial professionals evaluate the risks of short sales. So, expect lenders to be fully prepared whenever a short sale is proposed.
Short sales can be a good way to avoid foreclosure. Be sure you read the fine print, and take advantage of the opportunity if it means no one will foreclose.

Comments Off

How Lenders Set Mortgage Rates

Many people who are looking for a mortgage want to know exactly how much they can borrow before they become involved in a mortgage. The fact is, banks and lenders use a variety of complicated factors to evaluate your ability to repay any loan.

Income and Cash Reserves Will Affect Your Eligibility
Lenders will take a look at your income to make initial determinations about your mortgage. Obviously a high income will help you qualify for more money in loans. However, banks and lenders also investigate your job security. If you’ve been working somewhere for a long time, you’re likely to be received favorably by lenders.

Many banks and lenders will also check to see what your cash reserves are. If you’ve got a checking account with a sizable amount of available funds, the bank will be more likely to offer you a high loan. They’ll also take a hard look at your credit history. People with good credit are likely to receive loans, while people with little to no credit will have a hard time even with a small bank loan. This is due to banks restricting their loan process during the economic crisis.

The Front-End Ratio and Back-End Ratio
Lenders will analyze something called the “front-end ratio.” The front-end ratio is actually a measurement of how much of your income will go to paying your mortgage. They want to make sure that your total payment doesn’t exceed 28% of your pre-tax monthly salary.

They’ll also take a look at the “back-end ratio.” The back end ratio is a number that refers to how much of your gross income will be needed to pay all debts combined. This will include all of your payments, such as your mortgage, car payments, alimony, etc.

Only Borrow What You Need
Remember, you don’t have to take every offer you get. If a lender agrees to lend you a sizable chunk, only take it if you absolutely need it. If often makes sense to borrow less money and put down a higher down payment on a home. Only sign a mortgage that you can afford, and that gives you the freedom to put away money for other expenses.

Comments Off

You Should Refinance If…

With interest rates near all-time lows, many people would benefit by refinancing their mortgage. While many people could benefit from receiving a lower interest rate, many are swayed away from a mortgage refinance due to the lengthy and tedious process as well as the costs associated with refinancing. While many people try to avoid refinancing, there are various situations where you absolutely should refinance your mortgage.

The first situation when you should refinance your mortgage is if you could save money on your monthly payment. With the average 30-year mortgage rate around 5.10%, millions of people across the country could save considerably by refinancing their mortgage. Just a few years ago, the average 30-year mortgage rate was over 6.50%. If a person with a 30-year, $300,000 mortgage was able to reduce their interest rate from 6.25% down to 5.10%, their monthly payment would reduce from $1,264 down to $1,085, a savings of $179 per month. This would save over $64,000 in interest charges over the course of a 30-year mortgage.

Another situation when you should refinance your mortgage is if you plan on staying in your home for a long period of time. Due to the high rate of foreclosure and mortgage defaults, many mortgage lenders are forced to charge high origination fees to compensate for their risk. These fees often cost up to 2% of the principal borrowed. For example, a $200,000 mortgage refinance will often come with fees of around $4,000. Using the example from above, the borrower would not break even on the transaction for 22 months ($4,000 / $179 = 22.34 months) if they were to refinance. Therefore, if the borrower thinks that they will stay in their home for more than 22 months, then they should refinance their mortgage.

Comments Off

What is Comprehensive Car Insurance?

For those looking for a new car insurance plan, deciding whether or not to purchase comprehensive car insurance can be a difficult decision. Comprehensive car insurance coverage is a level of coverage which insures a vehicle in the event of loss or damage that is not caused by a typical car accident or collision. For example, comprehensive car insurance covers loss or damage that results from incidents of fire, theft, attempted theft, weather damage, vandalism, or in the event that a driver make impact with an animal.

Depending on the location of where the car is kept, comprehensive coverage can be quite expensive. The cost of comprehensive coverage relies heavily on historical insurance rates of auto theft and vandalism. The overall replacement value of the car also has a large effect on the cost of comprehensive coverage. In some situation, adding a comprehensive coverage to an insurance policy could cost up to a third of the overall insurance policy.

Due to the high cost of comprehensive coverage, many people consider not adding that level of coverage. In some situations, adding comprehensive coverage may not be a good financial decision. If a driver has a car that is old, inexpensive, and would be easy to replace, then adding comprehensive coverage may not make sense. On the other hand, if the driver has a new car that still has a loan on it and would be expensive to replace, then getting comprehensive coverage may almost be a necessity. In fact, some auto loans require a borrower to carry comprehensive auto insurance coverage.

While comprehensive coverage is expensive, there are ways to reduce the monthly premiums. By increase their deductible, a driver could save considerably on the cost of comprehensive coverage. If the drive does increase their deductible, they should ensure that they keep the deductible in a liquid account in the event that they need to make a claim.

Comments Off

Learn about Brokered CDs

If you’re willing to do some research, then you might find that a brokered CD offers the best CD rates on the market. Many people invest in brokered CDs in order to find strong CD interest rates that they might not have been able to find with a bank CD rate. Here’s a brief overview of brokered CDs.

How to Find and Buy Brokered CDs
When dealing with brokered CDs, a broker such as a financial consultant or adviser can shop around to find the best CD rates that are currently available. You can essentially bypass the banks and look at the entire market for your CDs.

The vast array of investment options attracts many investors to brokered CDs. This way, you can view CD competitiveness in the entire market. There is one major difference between standard CDs and brokered CDs. You actually have to purchase and sell brokered CDs, similar to fixed-income investments such as real estate (although brokered CDs are still a conservative investment.)

Only people who have a securities license can have access to brokered CDs. Typically, financial advisers, consultants, brokers, and brokerage firms can all survey the brokered CD market for you.

Advantages and Disadvantages of Brokered CDs
Also, brokered CDs generally pay off investors at intervals instead of only at maturity. Brokered CDs can also be traded in the secondary market for prevailing prices. These trades can have an overall positive or negative effect on your investment. Since you can sell brokered CDs on the market, brokered CDs offer a bit of freedom that bank CDs don’t.

There are risks associated with brokered CDs, as they are susceptible to market fluctuations. But, if you invest in strong brokered CD, you might just see a strong return that pays you off incrementally, instead of only at maturity.

Comments Off

E&O Insurance Rates, Claims, and Processes

When you’re comparing E&O insurance rates, it’s definitely important to take a look at annual premium costs and deductibles. Many people overlook how claims are made when they are shopping for insurance rates.

Claims Made vs. Claims Made and Reported
E&O insurance covers and errors or omissions made by professionals when said professionals fail to effectively perform a service for a client. There are generally two types of E&O policies. These are “claims made” and “claims made and reported” policies.

These types of claims determine how and if a certain incident will be covered. Every policy will have a certain policy period. If you own a ‘claims made’ policy, then a claim must be made while you are covered by the policy. If you own a ‘claims made and reported’ policy, then an official report must be sent to the insurance company during your policy period.

Know Your Retroactive Date
Any claims made before the policy went into action will not be covered by the insurer. So, make sure to look at the retroactive date on your policies. This is why it is beneficial to obtain a retroactive date that goes far back.

You need to acquire a policy that will cover defense expenses and punitive damages. Some policies explicitly exclude coverage for these expenses. So, carefully analyze your policy to make sure you are covered for these issues.

Go With a Company with E&O Experience
It’s a good idea to investigate specialty insurance companies that have experience in E&O. This is a very specialized field, so you should only entrust your company to top-notch professionals. Ask around and check your insurer’s rating before you purchase E&O insurance.

Comments Off

Banks Market Savings Accounts With Bonuses

Bonuses added to savings accounts are often a great way for banks to attract customers. However, you should be very wary of savings account bonuses. Often, banks use savings account or checking account bonuses simply to trap customers into accounts with low interest rates.

Look at the Bare Numbers
First and foremost, you should analyze the interest rate of whatever account you intend to open. Compare this interest rate with prevailing interest rates at other banks. Of course, savings accounts are a very conservative form of investment, so it’s not likely that you’ll receive sizable interest. Still, your interest rate should be competitive with the marketplace.

Read the fine print and make sure you are aware of any restrictions or special rules that apply to your account. While an initial cash bonus might seem great, you don’t want to be trapped into an account that is full of various fees.

Be Fully Informed
In fact, you should ask the banker a lot of questions before you open a new account. You need to be fully aware of all the fees, or lack thereof. You should also be fully educated regarding overdraft activity and overdraft fines.

Usually large, multinational banks are the ones that offer bonuses. Many banks will offer referral programs, wherein if you refer a friend and that friend opens an account, you have money credited to your account. This is even more reason why you should carefully evaluate the specifications of these bank accounts.

Bonuses should be an added incentive to opening the account. However, you should want to open the account independent of the bonus. That way, the bonus is just like a cherry on top.

Comments Off

How Students Should Handle Credit Card Offers

Student credit card offers can help first time cardholders establish a line of credit. Most credit card offers tailored to students have certain requirements and benefits. These credit cards are often easier to pay off than standard credit cards.

Starting out Slow
Creditors sometimes offer student credit cards even if the potential student has no credit history. Of course, the credit card company will probably set a low credit limit. This is a good thing, because the cardholder can learn to pay off regular credit card bills without incurring debt.

Interest rates are sometimes quite high on student credit cards, especially since the credit card company isn’t sure whether the cardholder will pay bills on time. Make sure to pay your balance in full, and you might see your interest rates drop as you start to build good credit.

Do Your Research
Make sure you select a student credit card that doesn’t have an annual fee. You can find many credit cards that don’t include an annual fee. It goes without saying that it’s important to shop around.

Study all of the fees included in your credit card. Read the fine print so that you’re not taken by surprised when the bill arrives. Avoid hidden fees and prepare yourself.

Other Options for Students
If you absolutely must, include a cosigner on the bill. If your parents are willing to cosign, they can help pay balances on time. Of course, if you want to learn to be responsible, it’s best not to include a cosigner.

Most credit card companies have introduced credit cards especially for students. Ask around and do your research. Once you’ve found the right card, make sure you keep your charges low and make your payments on time. After a while, you’ll qualify for a credit card with lower interest and a higher credit limit.

Comments Off

Teach Your Kid about Banking with Children’s Savings Accounts

One of the best ways people can teach their children about saving money is by opening savings accounts for the kids. Savings accounts for children work to educate young ones on the basics and importance of saving money.

Imparting Life Lessons
Parents can teach kids about the basics of banking by opening up a children’s savings account. First of all, the child learns that deposits and withdrawals are made at the local bank. Parents can teach their children about the bank’s functions.

Parents can also teach children the basic concepts surrounding interest. You can explain to your child the essential issues about lending and borrowing.

Also, you can show your child deposit and withdrawal slips and how they work. You can even give your child a blank slip and ask him or her to fill it out.

One of the best lessons you can teach involves safety. You can teach your child that the bank keeps your money safe. In fact, you can even explain that the government will insure all bank accounts up to $100,000. Explain what ‘insurance’ is to the child clearly.

Finally, you can teach the child about liquidity, and explain that some accounts allow you to take money out freely, while others don’t because they need time for the money to grow.

Types of Children’s Savings Accounts
You can open either a statement account or a passbook account for your child. Kids can learn a lot by looking at bank statements. In fact, it’s a great habit for them to get started with. You can also give your child a passbook account, which will make them responsible to document transactions.

Either way, opening a children’s savings account is a great way to teach children about banking and saving money.