Get smart with your money
Today’s top story: 7 ways to lower your cable bill. Also in the news: The rate of mortgage approvals in each state, 5 steps for tracking your monthly expenses, and a beginner’s guide to filling out a W-4.
7 Ways to Lower Your Cable Bill
Cutting the cord.
The Rate of Mortgage Approvals in Each State
Where does your state rank?
5 Steps for Tracking Your Monthly Expenses
Keeping a detailed record.
A Beginner’s Guide to Filling out Your W-4
Taking it one step at a time.
Today’s top story: Smart business ideas for veterans. Also in the news: the average amount of checking account fees over a decade, why a quarter of homebuyers are unhappy with their mortgage lender, and the factors banks consider when applying for a loan.
3 Smart Business Ideas for Veterans
Thank you for your service.
Study: Average Checking Account Fees Cost $1,000 Over a Decade
Don’t pay for access to your own money.
A Quarter of Homebuyers Unhappy With Their Mortgage Lender, Survey Finds
Finding the right lender.
The Factors Banks Consider When You Apply for a Loan
Know what they’re looking for.
Dear Liz: Regarding the 57-year-old woman who wanted to refinance to a 15-year mortgage, why didn’t you present the benefits of keeping the low interest and low payments available on a 30-year loan and investing the difference? In 30 years the house would be paid off, but there would also be a pot of cash available if the difference were invested in a diverse portfolio. Too many people make the emotional decision that a paid-off house is necessary in retirement, then they end up having no cash when they might need it.
Answer: You’re right that when cash is tight, keeping a mortgage can make sense. Given her teacher’s pension, other savings and desire to pay off the home faster, the 15-year loan is a reasonable option. The faster payoff schedule also means that she can turn around and tap more of the equity in the unlikely event she needs a reverse mortgage later in life.
Today’s top story: Mortgage application forms will look different next year. Also in the news: 5 times you shouldn’t use a credit card, why you should say no to 72-84 month auto loans, and why you need to stop being delusional about debt.
It’s Coming: The First Change to Mortgage Application Forms in 20 Years
An easier to understand application is on the way.
5 Times You Shouldn’t Use a Credit Card
High interest rates could leave you in a debt spiral.
5 Reasons to Say No to 72- and 84-Month Auto Loans
Long term loans set you up for years of negative equity.
Don’t be debt delusional: Quit buying stuff you can’t afford!
Time for a reality check.
Dear Liz: Is it true that we can’t refinance our home until seven years after a foreclosure? We lost a rental property six years ago. Our credit scores now are in the 740 range, and we are anxious to take advantage of lower rates since our mortgage rate is 5.75%. Other than the foreclosure, our credit is perfect.
Answer: As foreclosures surged, the agencies that buy most mortgages increased the amount of time troubled borrowers had to spend in the “penalty box” before being allowed another mortgage.
Fannie Mae and Freddie Mac still have a seven-year waiting period after foreclosures. But that has been shortened to three years when borrowers can prove “extenuating circumstances,” such as a prolonged job loss or big medical expenses. Waiting times for other negative events, such as bankruptcy or short sale, have been reduced to two years with extenuating circumstances. Otherwise, it’s four years.
There are other loan programs that are even more forgiving. For example, the FHA has a three-year waiting period that can be shortened to one year if borrowers participate in its “Back to Work” program, which requires they document a significant loss of household income, that their finances have fully recovered from the event and that they’ve completed housing counseling. The Veterans Administration, meanwhile, makes loans available one to two years after foreclosure.
Dear Liz: I am considering refinancing my home from a 30-year mortgage to a 15-year loan and wondered if it would be a wise decision. I am 57, divorced and make a little over $100,000 a year as a high school teacher (and I plan to keep working until at least age 65). Other than a car loan, I have no debts and an excellent credit rating. I will receive a pretty decent teacher’s pension and I have about $150,000 in mutual funds in retirement accounts. I can afford the larger payment on a shorter loan. Do you think this would be a good move for me?
Answer: For most people, a 30-year mortgage is a good option. People can always make extra principal payments to pay down the loan faster, but the lower monthly payment is easier to handle if they face financial setbacks such as a job loss.
Your employment situation seems pretty stable, though, and you’re in good shape with a pension plus savings. If you can swing the payments, you’d be building equity much faster and while paying less interest. You’ll still have home debt into your 70s, which isn’t ideal, but it’s certainly better than having a mortgage in your 80s.