Mortgage Problems? Check this out!
To combat the issue of rising foreclosure, Congress recently enacted HOPE for Homeowners. This program is designed to help homeowners who are at least three payments behind on their mortgage but have not filed for bankruptcy.
If you qualify, the program extends the terms of the loan, meaning you will be paying a lot more interest over the term of the loan but will have lower monthly payments. This plan helps the taxpayer by keeping the monthly payments lower so that hopefully the taxpayer will be able to continue to make the payments and avoid foreclosure. Also, the extended term of the loan does increase the interest payments, however, that interest can be deducted from the taxpayer’s federal income tax.
As long as the taxpayer isn’t trying to move anytime soon this sounds like a great alternative. However, for taxpayers who might be moving in the next few years, this option means that you will likely be trying to sell your house for less than your mortgage. Because the program extends the term of the loan, taxpayers are paying less each month on the balance of the loan and instead a large chunk goes to interest. Thus, due to the lower housing values if you try to sell in the next few years, your mortgage will be more than the value of your house.
It is great that Congress is coming up with programs to help prevent foreclose, but this plan won’t fit everyone’s needs and you need to be aware of the limitations when considering whether it is right for you.
Going, Going, Gone. House sold for $10,000!
Pinch me, I must be dreaming. A 4 bedroom 2.5 bath home with over 2,000 square feet built in 2006 is going on auction starting at $10,000. This isn’t just a rare deal, there are plenty of others available as well.
In this current market life is pretty tough if you don’t have any savings to fall back on. For those that do have a little cash lying around though, there are plenty of opportunities to invest for retirement. One of the best options that I have seen is the Florida housing market. Yes, house values are falling like crazy in Florida and getting a mortgage is incredibly difficult, however, rental rates have not fallen and people who have been foreclosed on still need a place to live.
The Cape Coral/Fort Myers area has 58 houses and 44 lots going up for auction this month. Many of these homes have never been lived in and the auctions are starting at $10,000 or $25,000 for houses and $1,000 for a lot. With so many homes being auctioned at once and the market already saturated, it is very possible that people will be walking away next weekend with a house for only $10,000 plus closing costs!
A quick check on Craigslist shows that houses in the area are renting for $950 a month for a house or $500 a month for a two bedroom condo. Even if you rent the house out for $500 a month, the potential for future earnings is enormous.
Florida isn’t the only area in the country with some great auctions going on. Check out the following website for more info.
http://www.williamsauction.com/Search/SearchResultsState.aspx?statusid=1&CategoryID=1&p=1.2
Pay a Little Extra Each Month
Do you have a mortgage? Is it 25 years, 30 years or even longer? The majority of mortgage companies will allow you to pay extra each month if you can. The idea is to make certain to pay on the principle and not the interest. The principle determines the amount of interest that you pay. If you pay a little on the principle each month that is extra, you will in the long run end up fixing your finances and paying a lot less in interest.
Make certain that you pay a minimum of $5.00 extra each month. On the month’s that you can afford to do so pay as much as $100 extra toward the principle. Doing this every month will greatly reduce the amount of interest that you end up paying on the mortgage.
Dealing with HOAs
If you own a condominium in America, this post is for you.
HOA funds were developed in order to create a consolidated area in which individuals in a condo could have all of the maintenance taken care of for lower prices from the consolidated money. They were also created in order to provide a general and upfront space that allowed for one spokesperson to make sure that everything goes right.
However, HOAs are no longer as pretty as the cut lawn or the trimmed trees - if you are even getting that done in your yard. In fact, the corruption of powers has begun to get so bad, that it is expected, with a couple of new laws, these won’t exist anymore.
The reason why is because HOA individuals are not taking care of business like they should and condo owners are paying extra prices for it. You can look just about anywhere and read stories about HOA presidents manipulating for money, not getting the necessary work done or going behind the rest of the condo owners backs in order to fulfill their personal needs.
The result is that 2 new laws, the SB89 and SB100 are coming into effect and are going to completely break the developed structure that has been set up for HOAs. This means that the powers that be in HOA complexes are (hopefully) going to not be able to do anything except follow certain procedures and policies that are set and governed and in some places, HOA’s will not exist at all.
So, if you live in a condo and are paying an HOA fee, you need to check where your money is going. Make sure that you are not putting it in someone else’s pocket that doesn’t need it and that all of the fees are fair and are being paid for. You can also look at alternatives if you do not want to be part of an HOA. This may save you money and headache when it comes down to living in your condo.
Mortgages
I was reading that it may not be in everyone’s best interest to pay off their mortgage loans. For example if you have $50000 left to pay and you have the $50000 I read that it would be better to invest your money into something else. Personally, I think the home you have is the best investment you can make. You will not have to worry about those monthly mortgage payments anymore. Why invest in something that may just lose your money! If you are going to invest in something then fix up your house. Personally, if I could pay off my home I would do so immediately. Less monthly payments just makes for a little peace of mind. I wouldn’t have to worry about quite so many monthly bills!
Buying Your Way Out of Foreclosure
With the economy turns and downfalls that are happening right now, several of us are becoming too familiar with the real estate industry and problems with foreclosures. If you are on the edge of getting out of your house and don’t know where to turn, become hopeful. There are options that you can follow and ways to prevent loosing your home.
If you haven’t talked to your mortgage company or bank about your situation, now is the time to start. The more you talk to them and the more you do in terms of communication, the more options you will have presented to you. Each time you call, a record is made that you call. If you do it enough, they can shift your mortgage payment forward, tell you what is going behind the scenes and give you more options.
One of the options that you can look into is a payment agreement. If you are still having a hard time with finances, make sure that you don’t get into something that you can’t get out of. Saying no to a payment agreement is better than not holding to it. What will happen with this is the lending company will shift your payments to bring you back to a $0 balance. This means that the debt you are in will be divided into a certain amount of months. An extra payment will be added onto the mortgage in order to get you caught up.
Say for instance that you are paying an average of $300 a month on your mortgage (wouldn’t it be nice!). You may be 2 months behind, meaning there is an extra $600. They will take the $600 and divide it into the next three months, meaning you would pay an extra $200 on top of the $300 until you come current.
Another option is a modification. Depending on the bank, this will work differently. However, if you are in financial hardship, let them know. You can fill out a form showing your finances. The modification will then be looked over within the next 30 - 60 days. All of the extra money that you are behind with will roll into the principle and bring you current. As long as you are paying, you will buy yourself out of the foreclosure.
Of course, there are also options with home loan programs from other banks that can help out as well as grant and loan programs that can boost your situation. The main idea is to start talking and to know that there are ways to get you out. Even when the finances are looking rough, you can find a way to see the end of the tunnel and into better days, while keeping your home.
“Baby Steps” to Financial Fitness
Thes are finance expert Dave Ramsey’s famous ‘baby steps’ for financial fitness, courtesy of the San Antonio Express-News:
Baby step 1: Start a $1,000 emergency fund.
If you don’t already have one grand on hand, save for it. That means paying yourself before you pay the bills. In fact, you should give, save and then pay the bills. Oh, and this emergency cash is for just that — emergencies only.
Baby step 2: Pay off all debt with the ‘debt snowball.’
This is probably the toughest step of the bunch. List all your debts from least to greatest. (Don’t worry about interest rates.) When you’ve eliminated the smallest debt, add its payment to what you pay on the second debt until that is paid off. Then add those two payments to what you pay on the next debt, etc.
By compounding payments, you get out of debt faster — Ramsey figures two years on average with exception of the mortgage. Naturally, don’t incur debt during this period.
Baby step 3: Three to six months of expenses in the savings.
You should be debt-free at this point (except the house), so the money you spent paying credit cards can now go to building up this emergency fund.
Ramsey figures it takes six months to save ‘Murphy repellant’ — insurance to turn any financial crisis into mere inconvenience. Ramsey suggests money market accounts; they’re accessible and usually don’t penalize for early withdrawal.
Baby step 4: Invest 15 percent of household income into Roth IRAs and pre-tax retirement.
Ramsey loves Roth IRAs and 401(k)s. No surprise, he’s a big proponent of mutual funds as long-term investments. He suggests investing 25 percent in each of these fund types: growth and income, growth, international and aggressive growth.
Baby step 5: College funding for children.
Research the true cost of higher education (tuition, room and board, etc.).
Now the hard part: Pay cash. Why? Because the average college student graduates with almost $28,000 in student loan debt, plus $6,000 in credit card debt.
To bypass loans, go with an ESA (education savings account) or education IRA funded in a growth stock mutual fund. (Again, start early.) Avoid savings bonds and pre-paid tuition. Their rate of return is too low.
Baby step 6: Pay off the home early.
Don’t fall for home equity loans or mortgage tax deductions. Instead, pay off the house pronto with a 15-year fixed mortgage, with payments no larger than a fourth of your take-home pay.
At this point, you should have paid off your debts and saved a three- to six-month emergency fund. That means the money you were paying in those can now go toward eliminating the mortgage. (This would constitute the ‘early’ part.)
Baby step 7: Build wealth and give.
‘(Wealth) makes you into more of what you are,’ Ramsey says. Jerks become bigger jerks; givers become more generous. Ramsey favors the latter, noting that giving is probably the most fun you’ll ever have with money. And if you’ve made it this far, you should have plenty to give.
Refinancing a HELOC
So, it’s my first post here, and I’ll hopefully be adding more as the ideas come to me.
One thing I thought I’d introduce here is my experience with refinancing a HELOC - a home equity line of credit. This was used as a ‘piggyback’ way of getting in to our current house with only 5% down. The first 80% of the loan was a traditional mortgage, and the remaining 15% was a HELOC. Seemed OK at the time, but in the fine print (and I normally read this stuff, but must have missed it!) the HELOC is variable, adjusting every month. The 5% rate was ‘introductory’, but only for one month. Since then, the rate has gone to 8.25%, and I’m not a happy camper about that. Yes, it’s my own fault, but now that I’m here, what can I do?
I met a loan officer last week, and we discussed that I could possibly refinance through them at no cost. The catch is there’s a $500 fee if you close the account in the first year. Now frankly, we *might* be moving again in the next year, but this would be a reasonable price to pay *if* the interest rate was low enough. She’d told me it was 5% fixed, which seemed too good to be true. It’s a local credit union, so perhaps they play by somewhat different rules. I figure If I can save more than $50/month with no closing costs or fees, it’s certainly worth it.
The only other issue I’ve got to determine is if I have any penalty in my current HELOC for closing it early (just got in in January!). The current mortgage has prepayment penalties of something (don’t know what offhand) if I pay off more than 20% in any one year.
Anyway, I’m planning to meet with the loan officer tomorrow night and I’ll post here to let everyone know about my experiences, pitfalls, things to avoid, and things to look for when refinancing a HELOC. 
Get Rich Slowly! Consolidated tips from all the latest personal finance books.
Nice article summing up quite a few personal finance books the author has read recently. Getting out of debt seems like a really really good start.
Get Rich Slowly! (20)
Today’s entry is long and boring. It’s all about the keys to wealth, prosperity, and happiness. Over the past few months, I’ve read over a dozen books on personal finance. Recurring themes have become evident.
These books have embarrassingly bad titles, seemingly designed to appeal to the get-rich-quick crowd: The Richest Man in Babylon, Your Money or Your Life, Rich Dad Poor Dad, Think and Grow Rich, Wealth Without Risk, Creating Wealth, etc.
Some of the books out there — most of them? — really are as bad as their titles. Others, however, offer outstanding, practical advice. The best books seem to have the same goal in mind: not wealth, not riches, but financial independence. According to Your Money or Your Life, which I consider the very best of the financial books I’ve read, “financial independence is the experience of having enough — and then some”. More practically, financial independence occurs when your investment income meets or exceeds your monthly expenses. Financial independence is linked to psychological freedom.
How is financial independence achieved? Again, the best books all basically agree. (To some of you, this will be common sense, stuff you’ve known all your life. To others, like me, this kind of thinking is a sort of revelation.)
Here, then, is my personal summary of the collected wisdom found in these books.
Read the rest of the article. Some good comments there too.
(Via del.icio.us)
Home Ownership Downside
Owning a home is financially beneficial only if you have enough income to both use the tax deductions and pay for the utilities, taxes, insurances, and maintenance. A large risk associated with property ownership is that it will decrease in value. Yes, I said de-crease. It happens. It happens all the time somewhere. During my married life we managed to purchase and lose money on three homes — two of them in Florida! All of the losses were related to one of us chasing jobs. We owned the first home too short a period of time to overcome the upkeep expenses and closing costs when we had to sell it. Ditto the second and add a slow housing market that year. The third home took us four years to get rid of and yielded a substantial loss due to it being in a rural area that had not recovered from a 20% drop in property values when the major employer folded its tents and crept out of town, along with the breadwinner’s job. Before you buy a house, think about all the events that could happen. How will you pay all the expenses (and the mortgage) if you lose your job? What will you do when the house needs a new roof, plumbing, slides off its foundation, cracks appear in the walls, termites invade, the paint peels, the furnace gives out? Who pays for all those now, where you rent?