August 28th, 2009
Refinancing your house is a major hassle. You have to produce tax returns, earnings records and all the other miscellaneous documents your lender demands. Your property must be appraised, your credit is run through the ringer, and you have to make sure your lender doesn’t stuff your loan with a boatload of miscellaneous fees and charges. It is time consuming and stressful.
There are also up-front costs. Your lender isn’t going to begin the process without a little cash changing hands, and if your house does not appraise or you are not happy with the terms offered to you, you are out that money.
Should you put yourself through this?
Special caveat — If you are trying to save your home by modifying your loan using one of the bank bail-out programs to lower your payments, stick with it. Once you are settled in your new loan, contact me.
If you are refinancing to shave your interest rate and to save a few dollars a month on your payments, there are a couple of big things you need to consider: the true cost of refinancing and the true savings of your new loan.
1) The true cost of refinancing –
Typically the cost of refinancing is about 1-1/2% of the loan amount. If you are borrowing $200,000, the amount will likely be about $3,000. Compared to the size of the loan, it doesn’t sound like much, does it? But if you are like just about every other homeowner, you will be tacking that amount of money onto your loan. In effect, you will be borrowing $203,000. Over the life of your loan, that $3,000 at 6% will turn into $6,475.15. That still doesn’t sound too costly, does it?
But what if that $3,000 had been doing something else all that time? If instead you had invested the $3,000 in paying down your mortgage, you would have canceled the first fourteen payments of a $200,000 loan at 6%. That would mean fourteen payments that never have to be made, totaling $16,787.40.
Add the $6,475.15 in actual costs and the $16,787.40 lost to payments, and the total of your closing costs is really $23,262.55.
2) The true cost of your new loan –
When you refinance, your new loan resets to Month #1. Once again you are 360 payments away from having your home paid off. The rule of thumb over the past couple of decades has been to refinance when interest rates drop about 1%. That dogma is wrong and is designed to keep you in debt forever. It will help your bank build the largest building in town, but it absolutely will not help you.
Typically people refinance every 5 to 7 years. If you have had a $200,000 loan at 6% for 5 years, you will have paid down $13,891.29 in principal. That doesn’t sound bad, does it? But wait. You also will have paid $58,054.78 in interest. You will have paid 4 times as much interest as you paid in principal. Every month you pay on your mortgage, you pay a little more principal and a little less interest. It will take 18 years and 7 months (223 payments) for the principal part of the payment to finally exceed 50% of the total payment. That means it will take 223 payments before you are finally paying more principal every month than you are interest. If you refinance after 5 years, your new loan will start all over again, and your initial payments will again be weighted toward paying interest.
Let’s assume you refinance your $200,000 loan that was at 6% for 5%. The payments will drop from 
$1,199.10 to $1,073.64, a savings every month of $125.46. Sounds pretty good, doesn’t it? Over 360 months, assuming both loans were held until payoff, the total interest paid on the second loan would be $45,165.60 less than that for the original $200,000 loan at 6%. Pretty good.
But wait. We’re not done. Remember the true cost of the closing costs was actually $23,262.55. And don’t forget the lost interest from the first loan was $58,054.78. Subtract these from the $45,165.60 in potential interest savings and, provided you do not refinance again, the savings over 30 years is no savings at all. It is a loss, and it amounts to $36,151.73. If you refinance again, it will only become worse.
There is a better way. United First Financial came up with it, and the Money Merge Account program is the answer. As with the closing costs above, the cost of the program can also be paid for by your bank, but instead of generating a loss of maybe $36,151, the small investment used to refinance and generate that loss could instead be used to pay off the $200,000 mortgage in about 15 years and save maybe $90,000 in interest. Furthermore, 180 payments do not have to be made, which means $215,838 does not have to go to payments and can be spent on other things.
Does it pay for you to refinance your house? Should you? Based on the figures above, no, it doesn’t. Clearly the better choice is the Money Merge Account program from United First Financial. Of course, results will vary. But doesn’t it make sense to look at the possibilities of what United First Financial and the Money Merge Account program can do for you? Contact me for your FREE, no obligation analysis.
Categories: Personal Finance, Savings tips |
Tags: account, financial, first, house, merge, money, refinance, should, united | No Comments
August 8th, 2009
The lies of the Right Wing Nut Job Extremists are starting to get to me. That and the stupidity and gullibility of the Right Wing Nut Job Extremists.
First off, let’s define “Fascism.” According to merriam-webster.com, it is “a political philosophy, movement, or regime (as that of the Fascisti) that exalts nation and often race above the individual and that stands for a centralized autocratic government headed by a dictatorial leader, severe economic and social regimentation, and forcible suppression of opposition.”
In other words, fascism perfectly describes what the Right Wing and George Bush tried to do to this country during their 8 years in power –
- A phony war to drum up nationalistic fervor.
- Suppression of the Bill of Rights and individual liberties. At the low end during the Bush administration, the Republican Party cherry picked audiences at town halls and forced dissenters off camera and out of range. At the high end, it was spying on all of our emails and phone calls, imprisoning citizens and others without charges, and torture.
- Autocratic government with power being concentrated in the executive branch. Bush’s signing statements made legislation moot. Warrantless wiretapping ignored the rule of law. They corrupted the Department of Justice.
- Severe economic and social regimentation. The Right Wing promotes the concentration of wealth among the few at the top. Witness the lack of regulation of the banks and insurance companies and the obscene compensation packages. The rest of us pay the bulk of the taxes and have no recourse to fight for our rights against abusive corporate practices. Supposedly the Right is for individual liberties, but that’s incorrect. In their world the individual has no rights against their government or corporate interests.
- Then there’s the forcible suppression of opposition. It began with the ugly Republican rallies during the 2008 campaign. Remember the video where you can hear someone in the audience yell “kill him?” Then there were the teabaggers, the birthers and now the health care nuts. With each case, they are striving to shout down and intimidate any opposition. A Democratic congressman has received death threats, and threats against Obama have been spiking. And what are the leaders of the Republican party doing to calm things down? Nothing. These are Brown Shirt tactics straight out of Hitler’s playbook.
- And of course, they are exalting race. The vast majority of the people we see on TV opposing the current administration are white. The Republican Party almost unanimously opposed the nomination of Sonia Sotomayor. There’s the whole birther movement. Clearly these people are not happy if their leaders are not lily white. There’s a reason the Republican Party now appears to have its core in the South.
It is not the Democrats who are the Fascists; it is the KKK, private militias, Skinheads and now the Republican Party.
Meanwhile, Democrats are having to fight a continuous stream of lies, misinformation, threats and intimidation to get out their message of preserving individual rights. It’s outrageous really. Who could argue against health care reform when we are spending twice as much as any other country and having results that indicate that on balance we have some of the worst health care in the world? What’s to argue about?
But the Right Wing is out to defeat our first black president no matter what the cost, and they are funded by the insurance industry and corporations whose interests lie in maintaining the status quo. If you are a true patriot who cares about America, you must stand up against them. Write and call your legislators. Attend town halls. Write letters to the editor. Write blogs. Call in to talk shows.
We can’t let them get away with this.
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P.S. Americans pay roughly 34% of their income to interest on their debts. I can help you change that by turning banking techniques in your favor. — www.debt2zip.com
Categories: Commentary, Politics |
Tags: Democrats, extremists, Fascists, Left Wing, Republicans, right wing | 1 Comment
August 5th, 2009
One thing I’m totally fed up with is how Republicans and Conservatives wrap themselves in the flag and call themselves patriots. No, they aren’t. The real patriotic Americans are the Democrats, Moderates, Liberals and Progressives, and I think it is high time that we take our symbol back.
When Conservative talk show hosts call for the failure of the Obama administration, that’s not patriotic. When Republicans call for the failure of health care reform so that it might become Obama’s “Waterloo,” that’s not patriotic. When Republicans and Conservatives conspire with lobbyists to disrupt town hall meetings, that’s not patriotic. All these things are diametrically opposed to the principals of our democracy. They are evil.
I don’t know what’s gone wrong with these guys, other than the fact that they trashed the Constitution, screwed up the country, lost an election and are now throwing themselves on the floor having a tantrum, but they should no longer be the keepers of the flag.
I would like to see every Democrat, Moderate, Liberal and Progressive carrying a flag at every town hall meeting. I would like to see them flying flags from their homes, cars, bumpers and clothing. It’s time we took our symbol back.
Categories: Politics |
Tags: conservatives, Democrats, flag, Liberals, Moderates, patriotic, patriots, Progressives, Republicans | No Comments
Typically people refinance every 5 to 7 years. If you have had a $200,000 loan at 6% for 5 years, you will have paid down $13,891.29 in principal. That doesn’t sound bad, does it? But wait. You also will have paid $58,054.78 in interest. You will have paid 4 times as much interest as you paid in principal. Every month you pay on your mortgage, you pay a little more principal and a little less interest. It will take 18 years and 7 months (223 payments) for the principal part of the payment to finally exceed 50% of the total payment. That means it will take 223 payments before you are finally paying more principal every month than you are interest. If you refinance after 5 years, your new loan will start all over again, and your initial payments will again be weighted toward paying interest.
