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
February 19th, 2009
I am so tired of television and radio pundits who talk about how we are “addicted” to oil and borrowing and on and on. Talk about piling on the victims of this economic meltdown.
I breathed a sigh of relief when gas prices slipped back down to about $1.60, but I didn’t change my driving habits. I can’t change my driving habits. My grocery store is about 4 miles from my house. I have to drive to it on a divided highway. Even if I felt like walking along the side of the highway to get there, I’d still have to haul my 10-12 bags of groceries back home. Not to mention other necessary errands. Addicted to oil, my foot. When someone comes up with something to replace it that I can afford, the “addiction” will go away almost instantly.
Recently I’ve been hearing a lot about how we in this country have become “addicted” to credit and living beyond our means. Come on, really? Yes, there are those among us who when they get their first credit card go nuts. They learn very quickly that this isn’t the best path, and they suffer mightily for years with trashed credit. This behavior has been around for many years, and it’s hardly new or news.
What we have now is a population that was deliberately targeted by people who stood to make billions in salaries, bonuses and Lord knows what else. These people are some of the sharpest and most conniving out there, and they cultivated legislators and regulators to promote bills and rules that would specifically benefit themselves. Not happy with the interest you are paying on your credit card or how your credit card company changes the terms of your agreement? Thank these guys. Blindsided by the galloping interest rates that have ballooned your mortgage payments? Thank them again. Crushed by a mortgage that’s more than the value of your home? Yup, it’s them.
I read somewhere that several of the architects who devised the tools that made their way into the credit markets were the same folks who brought us Enron and that huge energy ripoff in California a few years ago. When you stop and think about it, it makes perfect sense. There had to have been a lot of people involved in those scams who learned plenty. Very few went to jail, and the rest would be highly sought after by the unscrupulous who would love to perpetrate the same type of scams on a larger population. How perfect.
And we’re “addicted?” Hardly. We were the rubes at the snake oil show. Let’s call it like it is. Then maybe we’ll get angry enough to go after the snake oil salespeople once and for all.
A moment for a little self-promotion — If you would like to earn extra money helping people escape the ravages of the debt, please visit United First Financial.
Categories: Commentary, Economy |
Tags: addicted, borrowing, economic, financial, first, meltdown, united | 3 Comments
February 1st, 2009
Don’t you just love it. The same people who had no problem with doling out hundreds of billions of dollars to the Lords of Wall Street with no strings attached have an issue with providing help to beekeepers. I guess those guys don’t read National Geographic. Without bees we won’t have crops to harvest, and a mysterious disease has been killing the bees. But I suppose it resonates nicely in a sound bite to call this small bit of assistance in the Economic Stimulus Plan pork.
Conservative ideology is sounding mighty mean-spirited these days. The Economic Stimulus Plan is not perfect, but it’s a far sight better than anything the Bush administration and Henry Paulson came up with. The Conservative message of cut, cut, cut has the feel of Marie Antoinette picking our pockets as she admonishes us to quit whining.
I just heard Mitch McConnell on CNN complain about spending $600 million for government-owned cars and say that’s not appropriate for this bill. What? That’s roughly 30,000 cars that would have to be built by someone. Sounds like job stimulus to me. And since the government doesn’t build cars, it sounds to me like that money will be going to big business. I really don’t understand their problem with it.
Conservatives consistently argue against bigger government. That’s their code for taking our taxpayer dollars and parcelling it out to their pals in the private sector to provide the services that government otherwise would. Which is fine, to a point. Some services are not suited to lumbering bureaucracies. But paying excessive sums to politically connected companies with little or no oversight is not. Halliburton’s Iraq contracts come to mind.
The Conservative argument isn’t about spending money; it’s about whose fingers it sticks to on the way past. For the last eight years there was a huge transfer of wealth to the richest Americans via tax cuts and decreased regulation. That was just peachy with Conservatives. But the Economic Stimulus Plan with its extending benefits to unemployed Americans who buy the goods that generate the profits for big business, not so much.
I don’t understand the logic, and if there isn’t any logic, it might mean it’s just plain old greed. Maybe those Barons of the Conservative movement and our Lords of Wall Street consider us peasants.
Not so long ago in England, a gentleman was someone who owned property. They were the gentry. Today very few of us actually ownproperty. It’s mortgaged, and that’s the biggest reason for our peasanthood. The way to free ourselves from this predicament is to get ourselves out of debt.
I can help. Please visit United First Financial to learn more.
Categories: Commentary, Economy, Government, Politics |
Tags: beekeepers, bees, conservative, economic stimulus, financial, first, ideology, plan, united | 2 Comments
January 11th, 2009
Some things just seem to require a little common sense, and fixing the mortgage crisis is one of them. I heard a story on National Public Radio a couple of weeks ago. I haven’t heard anything about the concept since, and it really requires more discussion.
According to an article in Wikipedia on the subprime mortgage crisis, “As of August 2008, 9.2% of all mortgages outstanding were either delinquent or in foreclosure.” (The source is the Mortgage Bankers Association website, http://www.mbaa.org/NewsandMedia/PressCenter/64769.htm.) Think about this for a second. Almost 10% of all mortgages are in trouble.
- Would you buy a toy for your child if there was a 10% chance the toy contains lead?
- Would you buy an electrical appliance if there was a 10% chance that faulty wiring will cause a fire?
- Would you buy a car from a manufacturer whose air bags fail 10% of the time?
Yet this is precisely what we’re being asked to do when we buy today’s mortgage “products.” (And that is the term lenders use.)
Current mortgage regulations date from the days when borrowers and lenders negotiated loan terms face to face. Those days are long gone, and yet the laws assume borrowers and lenders are on an equal footing. Not long ago I sat next to clients who were purchasing a home. We were at the closing, and they were seeing their loan documents for the first time. (Lenders now fax the documents to the closing attorney or escrow at the last possible moment.) They had gotten their loan through one of those Internet companies that promise cheap rates, and the terms of the loan were not what they had been told. Not even close. They called the 800 number and argued with the clerk at the other end. In the end they were told that if they didn’t like the loan they could refinance at a future date or they could go somewhere else.
Here’s the problem –
- You can’t get a new loan at the drop of a hat. It would probably take a minimum of 3-5 days under the best of circumstances. The property will need to be re-appraised, and the buyer would have to pay out more money.
- The seller may not be willing or able to extend the contract, and there’s no provision in a typical real estate contract for this type of circumstance.
- The buyer has made commitments. In this case, the buyers’ moving van was parked in the driveway of the new house. The buyer would have to pay storage for their household goods and incur the expense of staying somewhere else temporarily. Depending on how prudently they packed, they might have things they badly need for personal or business reasons buried in a box at the back of the truck.
Negotiating a mortgage loan is a far cry from negotiating face to face, and it can be a far cry from fair and ethical behavior from entities that hold all the power. If we’ve learned nothing from all the various corporate scandals that have come our way lately, it’s that we can’t count on large corporations to be fair and ethical with their customers.
The speaker on NPR had a brilliant solution, and I sure wish I’d gotten her name. Here’s how to fix the mortgage crisis once and for all: Mortgage lenders refer to the loans they make as “products,” and it’s true. They are. As such they should be overseen by the Consumer Product Safety Commission. Forget the Treasury Department and the SEC and all those agencies who haven’t lifted a finger to protect consumers from these mortgage products. Let’s put oversight where it belongs — the Consumer Product Safety Commission. And let’s give them the budget and the inspectors they need to get the job done.
Lastly, here’s my little self-promotion — if you want to take power back from lenders who clearly don’t care about you or your interests, please visit my website: United First Financial. I can help you get out from under. Instead of contributing to what is probably the largest building in your town, I can help you keep your hard-earned money for yourself and your family. Basically, you can stick it to them by cutting down on their income. Perfect.
Categories: Commentary, Economy, Government, Personal Finance, Taxes, Uncategorized |
Tags: commission, consumer product, crisis, financial, first, fix, Mortgage, safety, united | 2 Comments
January 4th, 2009
Competence. Is it so much to ask? And how about a little honesty and ethics. Along with millions of others, I am counting down the days to Mr. Obama’s inauguration. It can’t come soon enough.
I have sat across the breakfast table and talked to people who are about to lose their homes. It’s heartbreaking. The people I spoke with had done nothing wrong. Some were in trouble because of medical bills; others had been undone by mortgage brokers who sold them a bill of goods.
It makes me angry when people talk about how citizens got greedy and somehow expected something for nothing. That’s not what happened at all. Many low-income people do not have the understanding of personal finances that those who make a more comfortable living do. They have aspirations to be more than they are, but many don’t have the first clue about money management. Shoot. My husband and I have had to teach young adults how to use a checkbook, for God’s sake. They sure don’t know enough to second guess that suit-wearing church member who promises to look after them when he puts them into a sub-prime loan. And they certainly don’t grasp the finer points of bundling loans and selling them to overseas investors.
These people, our friends and neighbors and fellow taxpayers just like us, are now not only losing their homes but also their jobs. Their futures are pretty bleak indeed. And where is the Bush administration in its waning days? Certainly not looking out for anyone who makes less than $1 million per year.
Here’s where competence comes in. Henry Paulson I’m sure took more than a few economics courses when he was in school. These courses teach basic things like the fact that when people spend money in their neighborhood grocery store, that money goes to pay the workers in that store, who then go on to pay taxes and spend their money in other stores, and on and on. At each step of the way, a little money goes to the owners of those stores who then use the money to hire more people and invest to make their stores bigger, better and more efficient. The money touches many hands and multiplies all the way up. This is Econ 101, and it’s basic. Money moves up the chain, and a little sticks to everyone’s paws on the way up.
Now we’ve come to pay the price for this idiotic ideology of “trickle down” economics. If money starts at the top, it’s going to stay at the top. Always has; always will. Ask any medieval lord who benefited greatly from his serfs. Those lords had a great deal of wealth to spend of private armies and great estates; the serfs didn’t do so well. The people who strive to become lords aren’t planning to look out for the interests of those they wish to make their serfs.
If ever there was a fraud perpetrated on the American public, “trickle down economics” was it. Where were the people who were supposed to make us aware of this flimflam? Where was Sixty Minutes and the investigative journalism that should have brought this to light? And if this was such a big part of the Republican agenda, why weren’t Democrats speaking loudly in opposition?
Of course, maybe I missed it. I was busy in the eighties when the whole thing began under the Reagan administration. Things felt relatively okay under the Clinton administration. I didn’t really start paying attention until this administration. I’ve been keeping a pretty close eye on things for the past eight years, though, and I don’t remember anyone criticizing Bush’s economic policies until it all started to fall apart a few months ago.
My husband and I have had stocks, and we’ve had investment property. We’ve managed to lose a ton of money on both over the years. It’s enough to make one just a tad cynical. What I have learned is what the fat cats aren’t telling us. Yes, it would be nice for their bonuses and stock options if we all go out and spend money we don’t have, provided we can borrow it. But no, that’s not the wisest thing to do. What I have learned the hard way is that the only security in this world is having a home that’s paid for and being debt free. Then your capital is locked in, and the whims of the markets and the idiocies of the powers that be can’t touch you.
I know of an honest-to-God program that will do this. It’s proven. It’s tested. It’s recommended by experts. Click here to see what it’s about — United First Financial. We can’t always protect ourselves when the idiots who have power over us have little competence, honesty or ethics, but we sure can help ourselves by erecting a cash wall around us. And then, we should complain loudly and often to our elected officials that protections need to be put in place for us.
Categories: Uncategorized |
Tags: competence, economics, ethics, financial, first, honest, trickle down, united | 1 Comment
December 19th, 2008
Conservative politics makes me sick. I could never have conceived of a philosophy or ideology that is so morally bankrupt as to manipulate and abuse just about everyone it encounters. But that is what Conservatives have become.
Lie about going into Iraq? To quote Vice President Cheney, “So?”
To show some small element of support and empathy for the immediate aftereffects of Hurricane Katrina? I know. I know. Don’t leave your ranch and only do a quick flyby several days later.
To blithely turn over $350 Billion to big banks and Wall Street firms with almost no oversight and with a nifty loophole to allow big bonuses for those who broke their companies? Just peachy.
The fact that all that money is doing absolutely nothing to free up credit and help homeowners in danger of losing their homes? Sound surprised but don’t make any fundamental changes.
How about playing a big role in the downfall of the American auto industry because of the lack of credit caused by the companies above and then laying the blame on the United Auto Workers? Yeah, of course. What’s the problem?
I’m reading an excellent book by Bob Moser entitled Blue Dixie: Awakening the South’s Democratic Majority. It took thirty years for Conservatives to get us to where we are now, and there are some who don’t think they’ve brought us far enough. Until I read this book I didn’t know anything about Dominionists, but there are Republicans out there who actually think we should become a Christian version of Iran.
D. James Kennedy was quoted as saying, “Our job is to reclaim America for Christ, whatever the cost. As the vice regents of God, we are to exercise godly dominion and influence over our neighborhoods, our schools, our government, our literature and arts, our sports arenas, our entertainment media, our news media, our scientific endeavors — in short, over every aspect and institution of human society.” Their goal is to “rewrite schoolbooks and curricula to reflect a history of America as a ‘Christian nation’; pack the courts with judges who follow Old Testament law; post the Ten Commandments in every courthouse; and make it a felony for gay men to have sex and women to have abortions under any circumstances.”
Does any part of this sound familiar? We’ve had fiscal Conservatism with it’s belief that companies and management come first and everyone else be damned. We’ve had social Conservatism with it’s belief that if you don’t follow their most unChristlike dogma, you are damned. Hmmm. Not too much room for most of us, is there?
P.S. Please allow me a little pitch for something that isn’t likely to turn you into Warren Buffett but could definitely put you in a position to provide for your kids’ education or your retirement. We can’t count on government to be there when we need it, and it is imperative that we find ways to protect ourselves. This is such a way. Please click this link to learn more — United First Financial.
Categories: Commentary, Government, Politics |
Tags: bankrupt, conservatism, conservative, Dominionism, financial, first, ideology, Politics, united | 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.
