financial checkup

It seems like an obvious question, however, it is often overlooked.  When considering a refinance, what is the health of your finances?  Homeowners often wait until they are in a difficult position to begin making moves.  That could be too late for lenders and yourself!

Questions You Should be Asking:

  • Are my credit card balances above 30% of the available credit line?  For example, if you have a $5,000 credit card, do you owe more than $1500.00? Do you know what that does to your FICO score? Did you know the average US family holds $31,000 in credit card debt?
  • Do you have student loans you are making minimum payments on with more than 5 years remaining?
  • Do you have auto loans in terms of 72 or 84 months?  Are payments becoming unmanageable?
  • Is your business running short on cash flow?  Are your receivables running longer than 90 days?  Considering an expensive loan from Kabbage?
  • Are you hearing rumblings or restructuring at work? The potential loss of time and income in the coming quarter or quarters?
  • Are you experiencing “too much month and not enough paycheck?” In short, the question is, are you outpacing your income in expenses, bills, and payment?
  • Are you overpaying your single biggest expense? Hint it is your mortgage.

A financial checkup is designed to give you a “30,000 foot look” at your money.  Too often, individuals and families spend their time looking at their finances from the 1st through the 15th and 16th through the 31st! They become accustomed to living in the moment.  It is time to break this cycle with our finances once and for all.

It’s Time to Take Action Now

If you fit any of the above scenarios or dozens of other potential financial pitfalls, the time to take action is now, and not wait until the event of the financial situation overwhelms you.

Sit with a professional and talk about your financial situation.  Have an unbiased 3rd party look at your financial picture from a number perspective.  It will be the best smart money move you make!

smart money tips

Often, banks, credit unions, and brokers focus on the “mature” homeowner.  That homeowner that is married with children.  They are talking about upgrading their home for a bigger size.  Paying college tuition for their children.  Buying a retirement property.  However, what about you the 30 and under homeowner?

Under 30 Mortgage Techniques #1

FACT, you have the best of all worlds.  For one, you are building a portfolio faster than any other generation.  You are experiencing historically low-interest rates, which allows you to become more aggressive in your financial approach.  What are goals you can accomplish? 

Let’s review some of our Under 30 Mortgage Hacks:

  1. Retirement.  Yes, we understand retirement is many years off.  However, consider this illustration.  It is called the theory of compounding interest. Get the details here.  That is the clinical definition. Here is a simple one:

Rule of 72: Whichever number you divide into the number of 72, will be the time it will take for your money to double.  12% or 72 divided by 12% equals 6.  That means at an average interest rate of 12%, your money doubles every 6 years.

This is such a powerful concept to commit to. You will make your years of 45 to 60 stress free. Imagine, if you refinance your mortgage in one year’s time, you save $5,000.  At the end of the first year, you invest that $5,000.  Let’s also say you are 28 years old.  At the age of 68, you have saved $1,200,000.00!  Off of a one-time investment of $5,000.

If you refinance your mortgage, that allows you to begin to save your money for retirement or the long term. That is smart money!

Under 30 Mortgage Techniques #2: Let’s stick with the theme of retirement.  If you are a W-2 employee, in many cases you are missing out on free money.  YES, you heard that right!  Free money, in two ways:

  1. In your 401K if you contribute to your retirement, that money is not taxed.  What does that mean?  The government lets you have free money in the form of fewer taxes.
  2. Company match.  On the surface, you may think the company will match my contribution up to 6%.  That is 6% for free, in addition to the tax money! That is a huge amount of money over the course of your life.

Then, if you can refinance your home to free up monthly cash flow to make yourself money, you are going to be light years ahead of other homeowners.

Under 30 Mortgage Techniques #3

Speaking of making money, you have heard the expression “work smart, not hard.”  What that really means is that smart people put their money to use.  This is the perfect time to think about becoming a real estate investor.

Any time there are dramatic changes in the economy, inevitably there are changes in the housing market.  No matter how favorable times are, the opportunity to buy and sell a property is there.  They say it takes money to make money.  Now, you have the money!

Additionally, don’t settle on just a single source of income or a single property.  You can get a cash out refinance that will allow you to purchase a rental property.

So: Smart money makes money.  Becoming a landlord does two amazing things to your bottom line: You are taking the monthly cash flow and reinvesting and your building equity into yet another property.  

Smart Money for 30 and under homeowners opens you to a world of options in cash and asset accumulation you never thought possible.  However, you were smart enough to become a homeowner, now be smart enough to use your home as a financial tool

House Photo

It seems that you couldn’t go online, read the paper (if that is still a thing), or watch the news without hearing about the historically low interest rates.  Yet, with all the news and noise around mortgage interest rates, maybe you have not taken advantage of this opportunity.

According to Bankrate, a leading consumer and industry website, 8 out 10 homeowners have not refinanced.  However, to take it a step further:  27% of current mortgage holders have no idea what their interest rate is!  Maybe that is you.  If it is, here is what you need to know.

Payment

Do not fall in love with your payment.  Payments are deceiving.  Too often when it comes to cars and homes, people settle in on a payment that is comfortable to their lifestyle.  However, that “payment” could be costing you a fortune, and you end up losing real dollars day in and day out.

Rate

If you have been a reader to our site and socials for some time, you may hear say, interest rate doesn’t matter.  In a sense, we still hold that to be true.  We believe as a financial tool, the interest doesn’t matter, as your mortgage needs to be achieving a financial goal for you.  If it is, then the rate is irrelevant.

On the other hand, if your mortgage is simply just a mortgage for you and you have no idea what you are paying, then the interest rate becomes critical.  Why “donate” money to a bank or mortgage company.  Even if your mortgage will never be used to help save for retirement, college, or debt reduction, then you should have the cheapest possible rate and mortgage you can get.

Example would be: Say you were buying the new iPhone.  One store had a brand new iPhone for $3,000 and another had the iPhone for $1,000.  They were both precisely the same. Would you spend $3,000?  Of course not, as that would be foolish.  In the case of your mortgage we are not talking about $1000 or $2000, we could be talking about $100,000+ dollars!

Experience

Was your first experience in getting a mortgage a nightmare?  We understand.  However, that should never stop you from getting yourself a better deal.  In fact, for every 10 mortgages, only 1 ends up being challenging.  Chances are whatever the issue was in your prior mortgage will not rear its ugly head again.

In fact, mortgages through technology have become streamlined, making the process simple and easy.  Most are now being done online, through email, and without all the paperwork and endless hours of conversations.  Smart money lenders are in place to make that happen!

There are many reasons why people don’t refinance their mortgage.  The above should not fall into that category.  In the end, there has never been a better time to get the “cheapest money” that has been offered in history.  You could be passing up on cutting years off your mortgage and up to $100,000 dollars in mortgage savings.  Take that information and imagine not knowing your interest rate or your terms. 

If you have a mortgage with an interest rate of 4 percent or more, which about a third of mortgage holders do, you should almost certainly refinance soon. Even if your mortgage rate is between 3 and 3.99 percent (29 percent of mortgage holders based on the survey), it’s probably worth at least getting quotes for a refi, because current interest rates are below 3 percent on average, before factoring in fees and points.

It is time to know your financial situation!

business, finance, savings, property ladder or mortgage loan concept : wood house model on computer laptop

As homeowners and families, there are plenty of large financial decisions we are faced to make.  One of the biggest decisions?  College.  College (and the real cost of college) stare parents in the face of a huge six-figure investment they must be prepared to make.

Often parents realize the cost far too late in the process for traditional college savings.  Then when they have to borrow money, it becomes out of necessity instead of making the best financial decisions.  So, this begs the question:

With the cost of money being at its lowest level in a lifetime, is now the time to borrow?

You may be saying, “but my son or daughter isn’t ready yet!” They may be a year or two away. That is fair, however there are bigger questions to ask right now: 

  • What will your finances look like then?  
  • What will interest rates be?  
  • Value of your home? Will it be on the high end like today, or will values dip?
  • Employment. Could your employment change? Increase or decrease?  Loss of employment?
  • Counting on a scholarship? Don’t. In fact, due to COVID, universities are slashing scholarships by 40% over the next 5 years.
  • My business should be taking off, right? If you are counting on earning the money, that is great! However, what if?

There are questions abound in terms of what your financial status will be in the future.  Here is what you do know: you know exactly what it is like today!  The ability to refinance a mortgage is better done when there isn’t a sense of urgency when you are not on a strict timeline.

What is the next big part of the process?  The actual cost of college.  Fact: most families underestimate the true cost of college by 52%.  52%!  That is significant.  In our 3-part series, we will break down, by year, what you can expect to pay for college. Then in part 3, we will break down how you can start today in funding that college investment with ease!

Refinance

In the mortgage industry or personal finance industry, “experts” like to overcomplicate the process with insider terms, graphs, charts, and complicated products and services.  In the end, it is a hype machine to make things out to be more than what they are.

Albert Einstein once said, If you cannot explain it simply, you don’t understand it well enough yourself!”

Albert Einstein is 100% spot on.  A mortgage professional has two jobs: To understand your financial situation and goals, and keep it simple. Refinancing your mortgage is about keeping more of your own money.  Think about the lengths we will go to save money:

FACT: People love saving money!  Industries are built around this very concept. So it begs the question, why would you not take advantage of the same concept with your single biggest expense?  Outside of being self-employed, your home will likely be your biggest expense, so it needs to be the item that is financed properly!

Remember, it is about a goal, not a rate. If you have a rate of 3% or higher should you consider a refinance?  Yes, 100%, but not solely for the reasons you may think off the top of your head.  You single biggest expenses are:

  • Term? Instead of 30 years, you could save hundreds of thousands in changing your term.
  • PMI? If you pay mortgage insurance, you could be saving $100 a month. This is real money that is not going to your home.
  • FHA? Same deal, hundreds per month is being spent that is not a direct benefit.
  • Credit cards? The single biggest expense of your home is also your single biggest resource.  You can become debt-free, especially when rates and terms are historically low!

Make it simple.  You have the opportunity to keep more of your own money.  Create and commit to a financial goal that will eliminate debt and provide more retirement and college savings all done through a simple refinance. 

Mortgage Debt

If you speak to 100 people, chances are you may get 90 different answers.  As consumers and homeowners, we look at our bills differently.  What is the most expensive?  What is the one that nags at you the most?  Let’s break it down:

–  Credit Cards.  Without question, we all feel the burden of credit card debt.  It seems like no matter how hard we try, we simply cannot get off the roller coaster of pay off, max out scenarios.

–  Auto Loans. Auto loans or leases is one bill that many regret.  Possibly the better way to put it, buyer’s remorse.  Today, consumers are more apt to accept an 84-month loan and a car payment upwards of $800 dollars a month.  No doubt this is an expensive bill. 

–  Student Loans. Student loans can be suffocating at times.  Because of the amortization schedule, it is a big monthly payment.  You are staring down the barrel at years paying off $100K worth of debt.

Credit cards are often mistaken for your most costly expense. A day does not go by that you hear about eliminating credit card debt.  You may see interest rates at 12%, 14%, or even 21%.  On the surface that would “feel” like your most expensive monthly bill.

There are many examples we could run through.  However, there is a notable exception: your mortgage.  Often we think of our mortgage in terms of payment and rate.  Rarely do we look at our mortgage as our most expensive monthly bill.  In the end, it truly is.

Mortgages often get lost in just being seen as a payment.  Many people are comfortable on some level with their 30-year or 40-year mortgage.  However, the overall cost is what makes it the most expensive monthly bill.

We are conditioned not to overspend.  We research cars on carfax and other resources.  We use websites to find a low balance transfer option for the lowest cost to our credit cards.  However, we forget a simple exercise to understand our mortgage.  Try this:

 

Mortgage:  $336,000

Term:  30 Years

Rate: 4.5%

Payment: $1651.39 – just principal and interest only.

Take $1651.39 x 360 =  $594,572.40 

 

OR

Mortgage: $336,000

Term: 30 years

Rate: 2.5%

Payment: $1287.78

Take $1278.78 x 360 = $463,600.80

 

First, your monthly payments decrease by almost $400 per month, great savings!  However, overall you are saving almost $132,000.00!  This is why your mortgage is your biggest monthly expense.

As homeowners, it is easy to get caught up in the “here and now” mentality.  Credit cards and student loans.  However, you are better positioned to deal with those payments once you deal with your biggest expense, your mortgage.  Start at the top and work your way backward. The solution both short-term and long-term starts and ends with your mortgage.  

House Refinance

There is a popular narrative being floated in the financial world that if you refinance your mortgage, you are digging a deeper hole!  That starting all over again, you are in fact going backward.  However, is this really the case?

There are many factors to consider in a refinance of a mortgage.  Let’s consider a few questions:

  • Have you been making payments on a current credit card or credit cards only to see the balance stay the same or increase?
  • Have you recently or within the last 18 months did balance transfers from multiple credit cards to one?
  • Do you have a home equity line of credit or a home equity installment loan?
  • Do you have more than 2 years remaining on student loans?
  • Do you have multiple no payments finance deals getting ready to expire in 12 months?
  • Do you expect to move in the next 16 months?
  • Is this your “forever” home?

Now, did you answer yes to 3 of any of the above questions?  If so, then let’s talk about a refinance.  Before we do, let’s talk about the appreciation of your home.  Most homes in the United States appreciate in value year over year.  In fact, the nationwide average is 3% to 5% yearly.  This is a conservative estimate, especially in today’s real estate market.

If you have been in your home for 2 years now, let’s consider a scenario:

The value of your home in August 2018 was $300,000.

The value of your home (as an estimate) in August 2020 is approximately $330,750.

You have built equity and that has nothing to do with your mortgage.  In essence, you are $30,000 to the plus!  You won’t be going backward.

Now let’s consider debt:

$15,000 in credit card debt: average monthly payment is approximately $450.00 per month.

$45,000 in student loan debt: the average monthly payment is $460.00

$275,000 mortgage payment for principal and interest and is approximately $1196.00 monthly.

Just these three items come to $2100.00.  Plus, $910.00 per month may not be tax deductible.  However, for this post, let’s not complicate that calculation.

If you refinanced right now at today’s current rate, assuming good credit: $1383.00  Your savings in real money is almost $850.00 a month!  $850.00 a month. This is over $10,000 a year in real cash in your pocket.

Let us be clear, this is not an offer for a mortgage.  The calculations above are for illustration purposes only.  A mortgage professional will assist in helping you understand rates, terms, credit scenarios, and appraisals.  However, with that being said: are you starting over?

Imagine what your finances would like with an additional infusion of cash at a level of $600, $800 or $1000 dollars monthly!  It would be significant and would have an impact. You are not starting over.  In fact, in doing a refinance the proper way, you will be light years ahead in debt, savings, and the elimination of massive interest charges.  It’s time to meet with a mortgage pro!

Mortgages photo

Making smart financial decisions at times requires you to work from the finish to start.  To do everything backward to ensure you are getting exactly what you want.  So as a smart mortgage customer, please finish this sentence:

“I want my mortgage payment to be ___________.”

Sounds simple enough.  This is something that the automotive industry has been using for decades.  However, theirs is for all the wrong reasons.  In the mortgage industry, this happens on the front end of transactions (purchase) often leading to the wrong product, term, and even the wrong home.

However, as a current homeowner, it’s now time to pick your plan it’s time to pick your mortgage payment.  Do you have the ability to do that? Of course you do.  Banks, lenders, brokers should not be picking this for you.  They don’t have the full scope of your financial situation, you do.  Or at the very least you will.

“I want my mortgage payment to be ___________.”

Now it is time to work backward:

  • By having this mortgage payment_______ and paying off _______ I can save towards _______ and fund _______ I accomplished _________________.
  • By having this mortgage payment and paying off _____ I can save towards ________ and fund_______.
  • By having this mortgage payment and paying off_____ I can save towards __________.
  • By having this mortgage payment I will payoff ____________.
  • I want my mortgage payment to be ____________________.

The goals can be many.  From retirement to debt-free living to ensure your children have no student loans.  All of these goals and many more can be accomplished by asking one single question and starting backward (at the goal) and come back to the sentence you just completed.

“I want my mortgage payment to be ___________.”

There are many tools that will help you get there!  To get there, it is breaking things down to the smallest detail.  Down to the number of bags of Doritos you buy on a monthly basis.  Goals financial or otherwise have to be broken down to the smallest detail to fully be reached.  Then, you commit to that goal.

There is an old saying, “the devil is in the details.”  Let get into that detail here <CLICK HERE FOR YOUR FINANCIAL ROADMAP>

Your monthly mortgage payment has the potential to become a serious financial burden, especially if your circumstances change suddenly. Knowing how to lower your mortgage payment each month helps you keep control of your cash flow. Here are five simple ways to make a big change.

A refi calculator, also known as a mortgage calculator, isn’t at all like one of those solar-powered devices you have stashed away in your kitchen drawer. Instead, a refi calculator is a powerful online tool designed to provide you with valuable information that could save you money. It’s the first item you should use when you’re investigating refi rates and options.