Hawaii | Home Loan | Mortgage | Refinance

Archive for March, 2010

Today, we are living in tough times. The entire global economy is on a downswing and we must do what we can to save our money as much and as early as possible even if it wants us to “force” ourselves for doing it. Yes, we can’t change the big scenario alone, but we at least can take hold of our own circumstances and make changes now to help ensure the security of our household.

Here are some major steps you can take in order start saving money.

1-FOCUS ON SPENDING

I-Write down every penny you spend on a daily basis and regularly so that you can see and check what, where and why you are spending your money on.

II-Get rid of what you don’t need, wander around your home, search and choose the things that you don’t need, sell them.

III-Refinance the mortgage on your home to decrease your house payments by several hundred dollars.

IV-Cut back on entertainment expenses. For example, instead of purchasing your favorite DVD, you can either look online for used versions or rent the movie. You can do the same with music and video games.

V-Educate your kids about how to save money. Make them understand how important money is and the impact that it will have on their lives.

2- DEPOSIT AT BANK

I-Open a saving account and determine how you will be saving everyday, month, quarter, mid year and every year and you will be well-prepared and equipped economically, especially when unseen circumstances arise.

II-You can ask your employer to put at least 10% of payment into a high interest bank account, after a while you won’t miss it.

III-You can think of putting your funds into a term deposit to keep them there for several months and not withdrawing.

IV-If your life partner is a good saver, you can ask him / her to open a personal bank account where you can deposit and secure your money without having your own access to it.

V-Using an interest-based current account will give you an advantage of withdrawing with cheques or ATM. You will have to always leave some balance in the account daily and it will yield interest.

3- GET DISCOUNTS

I-Get the best discounts on the things you buy and need to buy so that you do not over pay and you are satisfied with your purchase.

II-Look for freebies, rent instead of buying and buy things in bulk, use recycle papers and look for used good off the internet.

III-Utilize package deals on cable, internet, and phone from cable companies at a discounted rate.

IV-Clipping and using coupons is a great way to save money on everyday expenses. Coupons are abundant through local newspapers and the mail and are very easy to collect, and you can really get quite a few fairly quick.

V-During shopping, get benefit of various consumer offers and sales.g. buy one get one free. For grocery shopping, check if you can search for some big whole sales stores instead of making expensive purchases at typical retail shops.

4-SAVE ENERGY AND FUEL

I-Reduce your electricity bills by turning off the lights when not used or turning up the temperature of your refrigerator. Use florescent light bulbs in your house. Only use the dishwasher when it is full.

II-Think of replacing your old appliances with energy-saving devices which carry labels being an energy saver.

III-If you insulate your home, it will reduce the cost of heating and cooling.

IV-If you’re a homeowner, consider converting over to a gas water heater. They are very efficient and hence will help you save your money over a course of time.

V-You can save gasoline for your car by checking tires regularly, accelerating and decelerating gradually while moving and unloading the extra weight. Keep filters/converters clean and if possible, try to keep windows and sunroofs closed especially at high speeds.

5-INVEST WISELY

1-You can lend money to financial institutions for a specified time so that, later, your money can be repayed to you with interest. A lot of investing options are available nowadays, such as bonds, insurances, stocks, etc.

2-Avoid being in debt and manage your investment plans well. Refrain from debts that involve high interest rates.

3-If you like a long-term saving plan, you can also choose the insured money market account. As it is for a long time period, the financial institute offers a good interest rate.

4-You can also invest your money in collectibles and other items that will grow in value over time. You know that they are going to grow, so you hold on to them until the time comes that you need to sell them.

5-You should also focus on the primary investment areas e.g. stock market, share market, real estate, business, partnerships, joint ventures etc. Select an option that is best suitable for you.

In short, if one knows the right way, it’s not hard to save money. With some thinking, innovation and self-restraint, you can hold your precious money to a big extent.

Rob Grant is a writer for many finance related articles on the internet and writes for the Bank Savings Account Australia site where you can get a savings account online

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… year, fixed-rate closed-term mortgage rate would rise by 60 basis points to 5.85%, matching the rate increase posted on Tuesday by CIBC, National Bank, and on Monday by Royal Bank of Canada, Toronto-Dominion Bank and Laurentian Bank. Scotiabank …
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DES MOINES, Iowa — Shares of mortgage insurers surged to new 52-week highs Wednesday as a trade group said in a monthly report that for the first time in four years, borrowers catching up on loans outnumbered those who fell behind. Mortgage …
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Freddie Mac CEO on the Fed’s retreat from mortgage-backed securities.
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An extremely popular and efficient way to borrow is using the roof over one’s head as collateral for sizable amounts of credit. To define a few terms, equity is the difference between your home’s appraised — or fair market — value and your outstanding mortgage balance. A loan refers to the amount of money you borrowed from a lender providing you with the mortgage. So basically, the idea with home equity loans is to borrow against your home’s equity as a very effective way to get some things you need at a good price.

Why Home Equity Loans are popular

To be sure, borrowing against the value of a home has become increasingly popular. Why, you ask. There are two key reasons for this surge: low interest rates and tax deductibility.

The tax changes that occurred in 1986 have eliminated deductions for most consumer purchases. As a way to get around these changes in tax, consumers began borrowing up on their home value in order to make purchases. Home equity loans thus became a method adopted by homeowners to buy goods and still get a deduction.

For instance, let’s say that you bought your home for $95,000 and made a 20 percent down payment of $19,000. To pay the remaining $76,000, you then took a first mortgage. On the day you closed on your home, you automatically had 20 percent equity. As you pay off the principal, you gain equity and your home grows in value.

Now, let’s say that you have paid $12,000 toward the principal and your property. Remember that you property was valued at $95,000 when you bought it. Now, since you have made the payment on your principal, your $95,000-home is now worth $115,000. Your beginning equity ($19,000), plus the principal you have paid ($12,000) and the increase in your property value ($20,000) gives you $51,000 in equity.

Home Equity Loans: Equity as a Valuable Asset

Banks and borrowers both benefit from home equity loans. The reason for this is that equity is a valuable asset to have. You can put it to use without having to sell your home. And because most people’s domicile is their biggest asset, lenders regard home equity loans as secure. For that reason, interest rates for home equity loans are lower than for other loans.

Who are the best borrowers of Home Equity Loans?

Earlier in the article, we have made mention that home equity loans are beneficial to both the lender and the borrower. However, like all things, home equity loans also have their downsides. The disadvantage to home equity loans is that if you default on the loan, the lender could foreclose on your home. For this reason, home equity loans are statistically most suited to stable, middle-aged borrowers.

These days, there has been a lot written about the benefits of term life insurance over mortgage life insurance. As most people already know, term life insurance insures the life of someone over a given term. With mortgage life insurance, the life of someone is insured while the mortgage is in existence. (Credit insurance can also be applied to credit card balances, loans, and lines of credit, but we will look solely at mortgage life insurance here).

The benefit to mortgage life insurance is that it normally comes at a fair rate and does not require a comprehensive medical test compared to a similar term life insurance policy. However, the disadvantage is that the insured pays the same premiums for this policy for the entire duration of the mortgage (unless it is canceled) even though the balance of the mortgage gets reduced with every payment.

Like term life insurance, the mortgage policy will pay out once the insured (or one of the insureds) passes away. The big difference is that the proceeds of the policy can only be used to pay out the mortgage. As noted above, if you start with a $500,000 mortgage and die in the last years of your mortgage, your policy will pay out only what is remaining.

The best way for people to approach mortgage life insurance is to look at it as credit protection and not as a regular insurance product. In fact, look at it as a separate insurance altogether. The term life insurance policy (or whole life, or any and all other policies) exist to replace the insured’s income so that surviving family members do not need to sacrifice the things that would have come to them if the insured had not passed away. Items to consider would be the insured’s contribution to the monthly household expenses, contributions to retirement and child-education savings programs, and so on. (Indeed, the costs are high which explains why people normally obtain insurance in the hundreds of thousands or millions, instead of tens of thousands).

With mortgage life insurance, the insureds should evaluate whether the surviving spouse/partner can manage the payments without the spouse. Since the term life insurance policy will often replace the deceased’s income in the event of death, there is a good chance that the mortgage life insurance policy may not be required.

However, if the term life insurance policy (or whole life, etc.) does not allow for the surviving family members to enjoy the same material benefits that would have existed if the insured were alive, then mortgage life insurance is highly recommended.

To illustrate, let’s look at a traditional family of four. Both husband and wife work and earn an easy $75,000 each. They contribute equally to the household expenses. Their mortgage of $500,000 carries payments of $2,300. They each have term life insurance of $300,000 (arguably quite low given their earnings and assets). Each month, they contribute $750 to a savings plan because they anticipate paying for their children’s education. In the event of one spouse’s death, the surviving spouse could expect to draw on the term life insurance policy’s payout and continue paying for household expenses. But even at an aggressive 7.5% annualized rate of return on those proceeds (excluding funeral expenses) the funds would be completely exhausted after a short 7 years.

Depending on the family, is it reasonable to expect the surviving spouse to replace the deceased’s income (in this case, double his/her own salary of $75,000 to $150,000) in that time period? Once the funds are gone, the mortgage will still need to be paid, the bills will still be around, etc., etc..

With mortgage life insurance paying out the mortgage, the surviving spouse in the illustration above could make that life policy last an additional 15 years and 6 months, clearly long enough to see some of the children off to school. In fact, with the children leaving the house, that asset could even be sold and downsized to offset shortfalls in the tuition and other expenses.

Of course, different people will have different needs when it comes to mortgage life insurance. There are substantial drawbacks, as noted here. However, as a financial planning essential, considering all insurance sources and needs is mandatory in order to be properly hedged the risk of loss.

Michael Wruch has five years of experience in the insurance industry, specializing in life insurance underwriting and sales. His website, Free Life Insurance Policy deals to a large degree with Term Life Insurance and other forms of life insurance.

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