Posted: June 6th, 2011 | Author: Joe | Filed under: spending | Tags: Cable, Healthcare costs, medical costs, refinancing home mortgage, Saving, Saving Money, spending, Tips, video | No Comments »
The beautiful Farnoosh Torabi is at it again. This time, she stopped by the CBS Early show to share some tips for managing through your own personal cash crisis. Here are the highlights:
- The average American spends 6-12% of their annual income on gas & electricity. She talks about ways to lower that, especially for seniors and low-income households. If someone in your family has lost their job during the recession, you may now qualify.
- Cut back on cable or ask for freebies. I did this, and saved $40 a month. It’s not that difficult, and really only takes some time so why not try it?
- Medical bills. Medical bills are often times negotiable – and you may not have to go to the extreme that Farnoosh did when she saved $400 off her dental bill!
- College tuition – lost income can mean big discounts, but you need to use the “special term” mentioned in the video when dealing with the financial aid office.
- Refinancing – interest rates keep hitting record lows, if you have the equity you could save $200 per month. My wife and I were lucky enough to have enough equity to do this a few months back, and now rates are back down to where they were then so consider this your second chance if you missed the first one.
Watch the video for all the details (it’s only 4 minutes long)
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Posted: December 29th, 2009 | Author: Joe | Filed under: Debt, Tips | Tags: loan modifications, Mortgages, NPV, refinancing home mortgage | No Comments »
Those homeowners looking for a mortgage modification may have a new hurdle to clear. It’s called the NPV test, and it’s largely a mystery to all but the lenders using it. While the inner workings of the test are hidden from the outside world and may be complex, the result is simple: pass or fail.
If you pass, you are still on the road to modification, but if you fail you are done.
NPV stands for Net Present Value. It’s a method for determining which action is more likely to make a profit, or lose less money.
In the case of mortgage modifications, the lender uses the NPV to determine whether modifying the loan and accepting lower monthly payments is more cost effective than possibly foreclosing on the property.
It may not be as simple as it sounds because many homeowners who have had their mortgage modified simply delay the inevitable and end up in foreclosure anyway. So, it seems likely that the NPV formula takes the risk of re-default into account.
What you can do about it.
Unfortunately, not much. Since the formula is a closely guarded secret (on par with that of FICO) it’s impossible to know exactly what information is used and how it is weighted. This makes it very difficult to affect the outcome. Still, there are some actions that Bankrate.com recommends taking if you find yourself in this situation:
- Declare loudly and repeatedly that you are determined to remain in your home (assuming, of course, that you are). Be sure to explain why you don’t want to lose your home, and how you’ll do just about anything to keep it.
- The government’s home value projection figures are updated at the beginning of every quarter. If the trend is headed in your favor and you’re close to the end of the quarter, you may try to delay until the next quarter begins.
In addition to the redefault rate, there is speculation that the NPV makes guesses about the following:
- How long until the average redefault
- How likely you are to catch up on your current mortgage if it is not modified.
- How much your home is currently worth
- How much your home will likely be worth 12 months from now.
- How much a foreclosure would cost the lender
- How much your house might sell for at foreclosure
As you can see, much of those questions are difficult if impossible to know for any single case, so the NPV formula must be some sort of actuary table much like the kind used for insurance; taking the likelihood of each in the aggregate of mortgages to make a “best guess” at each answer.
The bottom line is that your life would be much better if you can avoid this situation.
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Posted: December 10th, 2009 | Author: Joe | Filed under: Debt, Tips | Tags: HARP, Making Home Affordable, mortgage debt, refinancing home mortgage | No Comments »
With mortgage rates at historic lows, it’s a great time to refinance. The only problem for many people is that they owe more than the house is worth. This is sometimes called “being upside down on the loan” or “being underwater”, but no matter what you call it you don’t want to be in this situation. But that’s exactly where a growing number of homeowners are finding themselves in the current market and economic conditions – the house is worth less than their current mortgage. This is especially a problem if you have an adjustable rate mortgage, or ARM, with an interest rate that is set to go up sometime soon.
That’s where the Home Affordable Refinance Program comes into play. The Home Affordable Refinance Program (HARP) is a federal program meant to help borrowers who are underwater on their mortgage, but not yet behind in their payments.
If you’re current on payments, but your home’s value has decreased to where it is now less than your mortgage, then you may qualify for the HARP if you meet the following criteria:
- You are the owner of a one- to four-unit home.
- You have a loan owned or guaranteed by Fannie Mae or Freddie Mac.
- You are current on your mortgage payments.
- You believe that the amount you owe on your first mortgage is about the same or less than the current value of your house.
One further restriction is that your 1st mortgage cannot exceed 125% of the current market value of your home. For example, if your mortgage is $250,000 then your current market value cannot be below $200,000.
HARP is part of the Making Home Affordable Program implemented by the Obama administration to help stabilize the housing market and stem the tide of foreclosures. HARP is directed toward helping underwater borrowers refinance their mortgage, while the Home Affordable Modification Program (HAMP) targets mortgage loan modifications.
You can get more information as well as apply for the HARP by visiting the Making Home Affordable web site.
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Posted: December 4th, 2009 | Author: Joe | Filed under: Economy | Tags: Mortgage Mess, Mortgage Rates, refinancing home mortgage | 1 Comment »
It seems like only a few weeks ago that mortgage rates were near all time lows, but now they’ve actually hit new lows. The new record low rate for a 30 year fixed mortgage is 4.71%. Much of the cause for this record drop is the historically sluggish housing market and government efforts to spur an increase in home buying.
For example, the Federal Reserve has released over $1 trillion into mortgage-backed securities in an effort to lower mortgage rates. It seems like those efforts are working, but that infusion of cash is set to end next spring. It’s unlikely that home sales will be sustainable if unemployment also remains a record levels, so we’ll have to see if the fed will try something new at that point or just leave well enough alone.
Even though rates have dropped, qualifying for a loan is tougher than it has been in a very long time. Still, if you have good credit and 20% for a down payment, you should be able to snag rates close to these for some time to come.
Other rates.
The average rate for a 15 year fixed mortgage is also at a record low 4.27%, down from 4.29% just a week ago.
5 year ARMs average about 4.19% and this is actually up from 4.18% last week. 1 year ARM rates also fell to 4.25%, so it’s interesting that 5 year ARMs were up, albeit a very small amount.
All of this rate dropping has led to increased mortgage applications and refinancing. The Mortgage Bankers Association reports that mortgage applications are up 2% from a week earlier, due to an increase of more than 4% in purchase applications, and a 2% increase in mortgage refinancing applications on existing loans.
source
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