Monthly Archives: September 2014

Mortgage Refinance: how to know whether it is a good deal or not

Mortgage Refinance Mailer

Have you ever received one of those letters in the mail that tells you how you can save nearly $250 per month if you refinance your mortgage with their company? No closing costs, low rate—sounds great, right? Well, before you sign the paperwork on this, you need to read the fine print. Saving $250 a month sounds great. With the ever-increasing costs of food and other consumer goods, getting a break in the budget can be quite tempting. There are three major details of the offer that are important to know before deciding if it is a good deal or not:

  1. Rate—Make sure that the low rate the bank is offering is fixed, so that it doesn’t fluctuate after an introductory period. If it is only a three-year fixed rate and then adjustable after that, your $300 per month savings will dwindle quickly once the rate adjusts. In fact, depending on the terms of the loan, the rate can adjust, only a certain amount each year, but could end up being several percentage points higher than the original introductory rate.
  2. Loan Points—Are you having to pay points to buy the rate down to the low rate that is being advertised. If it is going to cost you several thousand dollars, even if the amount is rolled into the loan, then the costs could end up out-weighing the benefits.
  3. Closing Costs—Does $0 closing costs really mean there are no closing costs? While you may not be expected to come up with closing costs out-of-pocket, they may be rolled into the loan or there may even be a large pre-payment penalty if you sell your home or refinance within a certain amount of time.
  4. Term—what they don’t usually point out in big, bold print on those marketing letters is that it in order to achieve the $250 per month savings, you are going back to a 30 year term on your mortgage. If you have already been paying on your current mortgage for 10 years, going back to a 30 year term may actually cost you money.

How do you know if the letter you are getting is a good deal? Follow these simple calculations, and you will know for sure:

Scenario: Current mortgage—30 year fixed rate of 5.5%, $150,000 original loan amount, with an $852 monthly payment (principle and interest only—do not include any portion that is paid to homeowner’s insurance), and you have been paying on it for 10 years (120 payments). What you need to calculate is how much you have already paid (total of payments), what you have left (mortgage payoff balance), and total cost of payments of both mortgages.

Calculate Total of Payments:

Monthly Payment x Number of Payments = Total of Payments

$852 x 120 months = $102,240

Calculate Mortgage Payoff Balance:

This is easy because the remaining balance should show up on your monthly mortgage statement. However, you would want to call your mortgage company for an exact payoff amount because if there is any prepayment penalty that would have to be added to the balance. You can also use an amortization calculator to estimate a payoff balance.

$123,527 Mortgage Payoff Balance

Calculate Total Cost of Payments of Current Mortgage: (Yes, this is a big number! You should have seen it on the Truth-In-Lending when you signed your original mortgage papers)

Monthly Payment x Term of Loan = Total Cost of Mortgage

$852 x 360 months = $306,720

Calculate Total Cost of Payment of New Mortgage: If your new mortgage is going to save you approximately $250 per month, (with a lower rate of around 4.17%), then your new principle and interest payment would be $602 per month.

Monthly Payment x Term of Loan = Total Cost of Mortgage

$602 x 360 months = $216,720

The cost of this new loan is lower, however, you need to add the amount that you have already paid to this balance because it is actual cost to you—which you have already paid.

$216,720 + $123,527 = $340,247

Now, just compare the two Total Cost of Mortgage values:

Current mortgage, total cost of mortgage: $306, 720

Potential New Mortgage, total cost of mortgage: $340,247

So even though the new loan offers a lower rate and monthly savings, by taking you back to a 30 year term, you will actually pay more than if you kept the current mortgage that you have. So if you are comfortable with your current payment, keep the current mortgage that you have; if however, your situation has changed and you absolutely need the monthly savings it might make sense to make the change. You can always pay more toward the principle once your financial situation allows it again.

*This scenario is for illustrative purposes only.

*This article is also published on my Examiner.com page.

2014 Holiday Gift Guide

Bloggers 2014 Holiday Gift Guide Sign Up

Bloggers sign up Today to get

listed on the “2014 Holiday Gift Guide” that will roll out full force Oct 25 thru

Dec 25, 2014 . Many bloggers will be participating so its going to be huge!

Right now Sign up is

Free and Limited !

**

Why Should you Sign Your Blog Up?**
Most of the Business’s that have listing on here are ones who hire bloggers for Reviews and PR Jobs through the year, so a great way to get noticed as a PR Blogger and get on the Reps Blogger Lists for when they have reviews and sponsor post jobs etc.

 

** Does My Blog have to be a Big Blog **
NO – this is the great part, any size blog , any nitch is welcome. The only
restriction we have is , your blog can not have pornographic material on it. If it does – Do not sign up – we are Family Friendly !

 

** Where will my Link to my Blog Be Seen **
We will have a page specific listing ” PR Friendly Bloggers ” on the
2014 Holiday Gift Guide Web Site – Visible to all on the landing page and other guide pages.  Your Link will be linked to your blog or media kit page ( your choice). This Gift guide will be promoted by many bloggers, as well as the businesses on their sites and social media too during the 2 months. Also we may even feature YOUR Blog in our Special Mailings from time to time.

 

** Perks **

  • PR Marketers for Businesses See Your Page – These are the people who Hire Bloggers to promote Products for reviews, sponsor posts, ambassador programs, etc- all year long !
  • There will be special giveaway promotions during this time , Fun Secret Santa for Bloggers Only. ++

** HOW DO I

SIGN MY BLOG UP**

Click HERE to Sign UP Today !

 

 

Calculate the best age to start receiving your Social Security Income benefit

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How do I know at what age to start receiving my Social Security benefit?
This is one of the most common questions that people have that are nearing retirement. If you have ever examined “Your Social Security Statement” prepared specifically for you by the Social Security Administration, you know there are three different figures that show up for your retirement amount, based on the age that you decide to start receiving your benefit—before full retirement age, at full retirement age, or after full retirement age.

What is full retirement age?

• Born 1937 or before that, full retirement age is 65.
• Born 1943-1954, full retirement age is 66.
• Born 1960 and later, full retirement age of 67.

A detailed chart can be found at SSA.gov for further reference.

What is the best age to start receiving my Social Security benefit?
To calculate the age at which one should start receiving their Social Security Benefit, it takes a bit of math in order to calculate the breakeven point. If we calculate the breakeven point, we can tell how long it will take before all benefits are equal. From this point on, we can tell which age would be the most beneficial. Each individual’s situation is unique and needs to be calculated based on those circumstances. While other factors may be considerations as to when to start receiving the benefit, such as potential pension income, 401k, or IRA income, this example will only look at the social security benefit alone.

Hypothetical Scenario:
Early retirement, age 62……………..benefit $600 a month
Full retirement, age 67………………..benefit $900 a month
After retirement, age 70………………benefit $1100 a month

The first breakeven point that we reach is at age 77. At this point, if you had started receiving benefit at early retirement age of 62 or waited until age 67, you have received an equal amount of benefit payments, in this case the total amount of payments would be $108,000. This means that any payment the recipient receives after turning age 77, it would have beneficial to wait until age 67 to collect social security because that is a higher payment than if they had started at age 62. From this point on, the best option is the benefit payment starting at age 67, until the recipient would reach age 83.5, at which point, we reach another breakeven amount. At age 83.5, the total amount of payments for starting to collect social security at age 67 or age 70 both total payments of $178,200. Beyond this point, the best option, the one that yields the highest total amount of benefit for the recipient, is to have waited to collect until age 70.

Considerations to take into account when deciding to collect
Obviously, no one know exactly how long they are going to live and be able to collect benefits, so this factor is always going to be an unknown. Each person’s situation is different, so the time that is best to start collecting your social security will be individually based. Probably the biggest factor to consider is the current financial situation at each retirement age—early, full, late. For example, if you are still working and don’t really need the income at early retirement, it may make sense to wait until full retirement age to collect a higher amount once you do actually retire. Talking with your tax accountant or financial advisor—along with your spouse or other family members—regarding these choices, to determine your specific needs will enable you to make the most informed decision possible.

*The scenario used in this article is for illustration purposes only and is no indication of advice for a specific situation.

This article was previously published on my Examiner Personal Finance Page.

Enter to win a $325 gift card from Branson Tourism Center AND a Money Savvy Living Giveaway!

The kids are heading back to school and summer’s ending… and Branson Tourism Center is giving away a $325 Branson gift card to one lucky winner!
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Branson is known for the great shows like, The Duttons, Pierce Arrow, and Shoji Tabuchi, but also offers a wide variety of family fun, including museums, lake cruises, historical sites, and family amusement parks/centers.
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The $325 gift card can be used at the Branson Tourism Center for the purchase of any lodging or show/attraction tickets that they sell.

To enter just click on this contest link!

Follow these links for more information on the Branson Tourism Center, Shows, or Lodging.

 

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Now, about the Money Savvy Living Giveaway! Help me spread the word about the Branson drawing and you could win $25 gift card from the Branson Tourism Center! Just share this on Facebook or Twitter. (Make sure you are following me on Facebook and Twitter, and comment or tag me in your share post!)