mortgages http://www.wisebread.com/taxonomy/term/7866/all en-US What to Do If You're Retiring With Debt http://www.wisebread.com/what-to-do-if-youre-retiring-with-debt <div class="field field-type-filefield field-field-blog-image"> <div class="field-items"> <div class="field-item odd"> <a href="/what-to-do-if-youre-retiring-with-debt" class="imagecache imagecache-250w imagecache-linked imagecache-250w_linked"><img src="http://wisebread.killeracesmedia.netdna-cdn.com/files/fruganomics/imagecache/250w/blog-images/old_couple_having_problems_with_their_home_finances.jpg" alt="Old couple having problems with their home finances" title="" class="imagecache imagecache-250w" width="250" height="140" /></a> </div> </div> </div> <p>For a growing number of older Americans, the golden years have been tarnished by debt. If you're retired or will be soon, and too much debt is weighing you down, here are three common sources of senior debt, along with some suggestions for breaking free.</p> <h2>1. Mortgage debt</h2> <p>One of the tenets of wise money management is to be mortgage-free by the time you retire, ridding yourself of what is likely your biggest expense as you enter what may be a lower- and fixed-income season of life. However, for a growing number of older people, that is not the case.</p> <p>According to the Federal Reserve, about 42 percent of households where the head of household is 65 to 74 years old had mortgage debt (a mortgage or home equity loan) in 2013 &mdash; up from 32 percent in 2004 and just 19 percent in 1992. Many such borrowers refinanced their mortgages in order to take advantage of low interest rates, but in doing so, reset the 15- or 30-year mortgage clock.</p> <p>What to do? If your overall housing costs, including taxes and insurance, take up more than 25 percent of your monthly gross income, consider downsizing. Reducing or eliminating your mortgage and lowering what you pay for property taxes, homeowners insurance, utilities, and maintenance could do wonders for your financial peace of mind. (See also: <a href="http://www.wisebread.com/6-ways-you-can-cut-costs-right-before-you-retire-0?ref=seealso" target="_blank">6 Ways You Can Cut Costs Right Before You Retire</a>)</p> <h2>2. Student loan debt</h2> <p>Much has been made of how indebted today's college graduates are. What's less well known is that the fastest-growing segment of the population with education debt is the 60-plus crowd. Most such borrowers took out loans for their kids or grandkids via Parent PLUS loans, or they co-signed on a student loan and now find themselves responsible for the payments.</p> <p>According to the Consumer Financial Protection Bureau, the number of people age 60 or older with student loans quadrupled between 2005 and 2015 to 2.8 million.</p> <p>What to do? Look into loan consolidation or rehabilitation (if you're behind on the payments). Both are preferable to default, in which case the government could reduce your Social Security benefits in order to collect.</p> <h2>3. Credit card debt</h2> <p>The overuse of plastic isn't just something that plagues the young. According to the National Council on Aging, in 2012, nearly one-third of households headed by someone age 60 or older carried a credit card balance. Are these older households simply living beyond their means? Some probably are, but an AARP survey found that over half the older households with credit card debt put their medical care on plastic.</p> <p>What to do? If your credit card debt is unmanageable, consider contacting a local affiliate of the <a href="https://www.nfcc.org/" target="_blank">National Foundation for Credit Counseling</a>. They may be able to negotiate lower interest rates. In addition, if you haven't done so already, don't put medical bills on your credit card. Instead, see if you can work out a payment plan directly with the medical provider, which may offer more favorable terms. (See also: <a href="http://www.wisebread.com/the-fastest-method-to-eliminate-credit-card-debt?ref=seealso" target="_blank">The Fastest Method to Eliminate Credit Card Debt</a>)</p> <h2>Other ways to ditch your debt</h2> <p>No matter how old you are, an important key to getting out of debt is margin &mdash; creating a gap between your income and expenses so you've got the money to make extra payments on your debts. There are only two sides to the margin equation: income and expenses.</p> <h3>Increase income by picking up a part-time job</h3> <p>By definition, retirement means not working anymore, so the idea of going back to work may not fill your heart with joy. However, even a temporary part-time job can make a big difference in how quickly you get out of debt. (See also: <a href="http://www.wisebread.com/6-great-retirement-jobs?ref=seealso" target="_blank">6 Great Retirement Jobs</a>)</p> <p>Start thinking of where you could work. How about consulting with your former employer, hanging out a shingle as a sole proprietor, or simply picking up some hours at a local retailer?</p> <p>Keep in mind that if you started claiming Social Security benefits before your normal retirement age, earning too much from a part-time job may reduce those benefits. Learn more on the <a href="https://www.ssa.gov/oact/cola/rtea.html" target="_blank">Social Security Administration's website</a>.</p> <h3>Decrease expenses by taking your kids off the payroll</h3> <p>It's common for parents to help their adult children with everything from health insurance premiums to cellphone bills. According to a Merrill Lynch study, nearly 70 percent of people age 55 or older with adult children are doing so.</p> <p>Wouldn't it be easier for you to cut them off if you realized that doing so would not only benefit you, but it would benefit them as well? That's one of the key messages in the classic book, <em>The Millionaire Next Door</em>. Authors Thomas Stanley and William Danko found that adults who receive &quot;financial outpatient care&quot; from their parents tend to become dependent on such help and end up saving and investing less than those who do not receive money from their parents. (See also: <a href="http://www.wisebread.com/are-you-ruining-your-retirement-by-spoiling-your-kids?ref=seealso" target="_blank">Are You Ruining Your Retirement by Spoiling Your Kids?</a>)</p> <h2>There's plenty of time to retire debt</h2> <p>It may be discouraging to find yourself buried in bills at a time of life when you had hoped to slow down and enjoy the fruit of all your years of labor. However, increases in longevity mean you probably still have plenty of time to reap those rewards. What'll make all the difference is how quickly you implement the ideas mentioned above.</p> <br /><div id="custom_wisebread_footer"><div id="rss_tagline">This article is from <a href="http://www.wisebread.com/matt-bell">Matt Bell</a> of <a href="http://www.wisebread.com/what-to-do-if-youre-retiring-with-debt">Wise Bread</a>, an award-winning personal finance and <a href="http://www.wisebread.com/credit-cards">credit card comparison</a> website. Read more great articles from Wise Bread:</div><div class="view view-similarterms view-id-similarterms view-display-id-block_2 view-dom-id-1"> <div class="view-content"> <div class="item-list"> <ul> <li class="views-row views-row-1 views-row-odd views-row-first"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/4-of-the-fastest-ways-to-go-broke-in-retirement">4 of the Fastest Ways to Go Broke in Retirement</a></span> </div> </li> <li class="views-row views-row-2 views-row-even"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/4-red-flags-that-your-retirement-plan-may-be-off-track">4 Red Flags That Your Retirement Plan May Be Off Track</a></span> </div> </li> <li class="views-row views-row-3 views-row-odd"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/why-retiring-with-debt-isnt-the-end-of-the-world">Why Retiring With Debt Isn&#039;t the End of the World</a></span> </div> </li> <li class="views-row views-row-4 views-row-even"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/refinance-these-4-common-debts-before-year-ends">Refinance These 4 Common Debts Before Year Ends</a></span> </div> </li> <li class="views-row views-row-5 views-row-odd views-row-last"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/depressed-it-could-be-your-debt">Depressed? It Could Be Your Debt</a></span> </div> </li> </ul> </div> </div> </div> </div><br/></br> Debt Management Retirement adult children co-signed credit card debt expenses giving money increasing income kids mortgages student loans Tue, 19 Sep 2017 08:00:07 +0000 Matt Bell 2021474 at http://www.wisebread.com Here's What's Included in a Home's Closing Costs http://www.wisebread.com/heres-whats-included-in-a-homes-closing-costs <div class="field field-type-filefield field-field-blog-image"> <div class="field-items"> <div class="field-item odd"> <a href="/heres-whats-included-in-a-homes-closing-costs" class="imagecache imagecache-250w imagecache-linked imagecache-250w_linked"><img src="http://wisebread.killeracesmedia.netdna-cdn.com/files/fruganomics/imagecache/250w/blog-images/coins_spilling_out_of_a_glass_bottle.jpg" alt="Coins spilling out of a glass bottle" title="" class="imagecache imagecache-250w" width="250" height="140" /></a> </div> </div> </div> <p>Taking out a mortgage isn't free. You can expect to pay 2 percent to 5 percent of your home's purchase price in closing costs, the fees that everyone from lenders to title insurers charge to originate your loan. If you're buying a home for $200,000, for example, you can expect to pay between $4,000 and $10,000 in closing costs. (See also: <a href="http://www.wisebread.com/8-ways-to-reduce-mortgage-closing-costs?ref=seealso" target="_blank">8 Ways to Reduce Mortgage Closing Costs</a>)</p> <p>At least three business days before you close on your mortgage loan, your lender will send you the closing disclosure. This form lists exactly how much you'll pay each month for your mortgage, when your payments begin, and what your interest rate is.</p> <p>The closing disclosure also lists your closing costs, giving you the chance to review them before you sign any documents at the closing table.</p> <p>Here are some of the costs you might find listed on your closing disclosure.</p> <h2>Appraisal</h2> <p>Before your lender will loan you mortgage dollars, it wants to make sure that the home you are buying is worth what you are paying for it. To determine this, it will send an appraiser to your property to determine its value. You'll have to pay for the appraiser's work. You can expect this to cost about $400.</p> <h2>Escrow</h2> <p>Most lenders will require you to open an escrow account when you take out a mortgage. Under such an arrangement, you will pay extra money with each mortgage payment, with some of that money funneled into your escrow account. Your lender will then use that money to pay your property taxes and your homeowners insurance bills on your behalf when they come due.</p> <p>Typically, your lender will require that you make two to three months of your homeowners insurance and property tax payments at closing to start off your escrow account. So, if you must pay $500 every month for taxes and insurance, you'd have to prepay $1,000 to $1,500 at closing.</p> <h2>Origination fee</h2> <p>The origination fee is one of the bigger closing costs you might pay. This fee covers the costs that your lender incurs when originating your loan. You can expect this fee to be about 1 percent of your home's purchase price. For a $200,000 home, that comes out to $2,000.</p> <h2>Lender's policy title insurance</h2> <p>This insurance policy protects your lender in case the title insurance company made a mistake in its title search and you later discover that there are liens against your home. This can happen if a past owner failed to make property tax payments. This title insurance is not optional. Costs vary depending on your state, but you can expect to pay about $1,000 for this insurance.</p> <h2>Owner's title insurance policy</h2> <p>This form of title insurance protects <em>you </em>if someone comes forward with a claim that they have an ownership stake in your home. This is usually an optional fee. You can expect to pay about $600 to $1,000 if you choose to purchase this insurance. (See also: <a href="http://www.wisebread.com/yes-you-need-home-title-insurance-heres-why?ref=seealso" target="_blank">Yes, You Need Home Title Insurance &mdash; Here's Why</a>)</p> <h2>Title search</h2> <p>Before you close your loan, the title insurance company handling your closing will search the records of your new home. The goal is to make sure that no other individual or government body has an ownership claim against the property. This search usually costs from $100 to $250.</p> <h2>Underwriting fee</h2> <p>Before it approves you for a mortgage, your lender pulls your credit, verifies your income, and verifies your employment to make sure that you can afford your monthly payment. This fee covers those costs. This fee can vary widely, but expect to pay about $150.</p> <h2>Title settlement fee</h2> <p>A title insurance company will run your loan closing. The title settlement fee is what they charge for doing this. This fee can vary greatly, which is why it pays to shop around for a title insurance company. Your real estate agent might recommend a title insurance company, but you can still shop around for one on your own.</p> <h2>Credit report</h2> <p>When you apply for a loan, your lender will run your credit. Your credit reports list such important numbers as what you owe on your credit cards, whether you've made any late auto loan payments, and whether you've lost a home to foreclosure. Your lender will charge about $50 to $80 to pull your credit.</p> <h2>Flood determination fee</h2> <p>A third-party provider will determine if your home is in a flood zone. You'll have to pay this fee even if your home is located nowhere near water. It's not a costly fee, though, usually running from $10 to $20.</p> <br /><div id="custom_wisebread_footer"><div id="rss_tagline">This article is from <a href="http://www.wisebread.com/dan-rafter">Dan Rafter</a> of <a href="http://www.wisebread.com/heres-whats-included-in-a-homes-closing-costs">Wise Bread</a>, an award-winning personal finance and <a href="http://www.wisebread.com/credit-cards">credit card comparison</a> website. Read more great articles from Wise Bread:</div><div class="view view-similarterms view-id-similarterms view-display-id-block_2 view-dom-id-1"> <div class="view-content"> <div class="item-list"> <ul> <li class="views-row views-row-1 views-row-odd views-row-first"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/yes-you-need-home-title-insurance-heres-why">Yes, You Need Home Title Insurance — Here&#039;s Why</a></span> </div> </li> <li class="views-row views-row-2 views-row-even"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/4-surprising-things-lenders-check-besides-your-credit-score">4 Surprising Things Lenders Check Besides Your Credit Score</a></span> </div> </li> <li class="views-row views-row-3 views-row-odd"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/5-mortgage-details-you-should-know-before-you-sign">5 Mortgage Details You Should Know Before You Sign</a></span> </div> </li> <li class="views-row views-row-4 views-row-even"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/how-to-build-equity-in-your-home">How to Build Equity in Your Home</a></span> </div> </li> <li class="views-row views-row-5 views-row-odd views-row-last"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/the-only-5-rules-of-home-buying-you-need-to-know">The Only 5 Rules of Home Buying You Need to Know</a></span> </div> </li> </ul> </div> </div> </div> </div><br/></br> Real Estate and Housing appraisal charges closing costs credit reports escrow fees homeownership insurance lenders loans mortgages title Fri, 01 Sep 2017 08:30:05 +0000 Dan Rafter 2012628 at http://www.wisebread.com 4 Red Flags That Your Retirement Plan May Be Off Track http://www.wisebread.com/4-red-flags-that-your-retirement-plan-may-be-off-track <div class="field field-type-filefield field-field-blog-image"> <div class="field-items"> <div class="field-item odd"> <a href="/4-red-flags-that-your-retirement-plan-may-be-off-track" class="imagecache imagecache-250w imagecache-linked imagecache-250w_linked"><img src="http://wisebread.killeracesmedia.netdna-cdn.com/files/fruganomics/imagecache/250w/blog-images/piggy_bank_and_house_model_for_finance_and_banking_concept.jpg" alt="Piggy bank and house model for finance and banking concept" title="" class="imagecache imagecache-250w" width="250" height="140" /></a> </div> </div> </div> <p>If you're 55 or 60 years old, the end of your working days may be in sight. After all, most people retire somewhere around age 65, so you may assume you will also. But how prepared are you?</p> <p>Take a look at the following potential <em>unpreparedness </em>indicators. After reviewing them, if you don't see any concerns, you may, indeed, be headed down the right path toward retirement. However, if you <em>do</em>, it'll be far better to address them now while you're still gainfully employed. (See also: <a href="http://www.wisebread.com/5-financial-moves-you-should-make-five-years-before-retirement?ref=seealso" target="_blank">5 Financial Moves You Should Make Five Years Before Retirement</a>)</p> <h2>1. You haven't run the numbers</h2> <p>Ignorance may be bliss when it comes to the latest neighborhood gossip, but not when it comes to preparing for retirement. Now is the time to estimate your post-career income and expenses.</p> <p>Start with your anticipated monthly expenses. Some of your outgo categories may disappear in retirement, such as contributions to your retirement plan, commuting, and other job expenses. Others may at least decline, such as how much you spend on clothing. (See also: <a href="http://www.wisebread.com/how-much-can-you-afford-to-spend-in-retirement?ref=seealso" target="_blank">How Much Can You Afford to Spend in Retirement?</a>)</p> <p>However, some expenses might actually go up, at least temporarily. Many retirees find that they spend more on travel and entertainment initially, but less as they get older.</p> <p>Next, add up the monthly income you expect to receive. How much is your Social Security benefit likely to be? Find out through the <a href="https://www.ssa.gov/oact/quickcalc/" target="_blank">Social Security Administration's estimator</a>. How much are you likely to have in your retirement account by the time you retire? The <a href="https://www.fidelity.com/calculators-tools/fidelity-retirement-score-tool" target="_blank">Fidelity Retirement Score</a> calculator will give you a ballpark idea.</p> <p>What's a conservative estimate for how much you could withdraw from your retirement nest egg each month? One popular rule of thumb is that you should be able to safely take 4 percent of the balance each year without having to worry about running out of money.</p> <p>What other sources of income will you have?</p> <p>Planning future income and expenses isn't a perfect science, but running some estimates may help you avoid unpleasant surprises. (See also: <a href="http://www.wisebread.com/9-unexpected-expenses-for-retirees-and-how-to-manage-them?ref=seealso" target="_blank">9 Unexpected Expenses for Retirees &mdash; And How to Manage Them</a>)</p> <h2>2. You haven't saved enough</h2> <p>One of the most unpleasant facts you may discover by taking the step above is that you <a href="http://www.wisebread.com/10-signs-you-arent-saving-enough-for-retirement?ref=internal" target="_blank">haven't saved enough</a>. According to the Employee Benefit Research Institute, almost half of workers ages 55 or older have less than $100,000 set aside for retirement. That won't go very far.</p> <p>Let's say you're in better financial shape and are on target to have a $250,000 nest egg by the time you retire. Using the 4 percent rule mentioned above, even that amount will allow you to withdraw just $833 per month. (See also: <a href="http://www.wisebread.com/4-retirement-rules-of-thumb-that-actually-work?ref=seealso" target="_blank">4 Retirement &quot;Rules of Thumb&quot; That Actually Work</a>)</p> <p>What to do? Plan to stay on the job longer. Doing so will increase your Social Security benefits (when I checked my benefits, I found that waiting until age 70 would boost my monthly benefit amount by 28 percent vs. taking benefits beginning at age 67). Plus, that will give you more time to build a larger retirement nest egg. (See also: <a href="http://www.wisebread.com/6-ways-you-can-cut-costs-right-before-you-retire-0?ref=seealso" target="_blank">6 Ways You Can Cut Costs Right Before You Retire</a>)</p> <h2>3. You still have a mortgage</h2> <p>For most people, a mortgage is their biggest monthly expense. Making sure your mortgage is retired by the time <em>you</em> retire is ideal. However, a growing number of older homeowners are bringing mortgages into their retirements. Many of them refinanced into a lower interest rate in recent years, but reset their 15- or 30-year mortgage clock in the process. If that's you, here are some options to consider:</p> <p>If you're planning to move after you retire, and especially if you'll be able to downsize into a home you could buy outright with the equity in your current home, no problem. (See also: <a href="http://www.wisebread.com/5-countries-where-you-can-retire-for-1000-a-month?ref=seealso" target="_blank">5 Countries Where You Can Retire for $1,000 a Month</a>)</p> <p>If you're planning to stay put, you might consider paying extra on your mortgage in order to wipe it out by the time you retire. But you'll have to weigh that against the potentially better benefits of using that money for added contributions to your retirement plan.</p> <p>Keep in mind that this isn't a strictly mathematical exercise. Many people argue that it would be more profitable to invest more through your workplace retirement plan than accelerate payments on a low-interest mortgage. However, you may decide that the emotional benefit of being out from under your mortgage is more valuable. (See also: <a href="http://www.wisebread.com/is-it-safe-to-re-finance-your-home-close-to-retirement?ref=seealso" target="_blank">Is it Safe to Re-Finance Your Home Close to Retirement?</a>)</p> <h2>4. You still have student loan debt</h2> <p>A surprising number of older people have education debt, usually because they co-signed on a loan for a child or grandchild who is unable to make the payments or because they took out a Parent PLUS loan. If that's you, consider consolidating your loans to a lower interest rate (you can even &quot;consolidate&quot; a single loan). Then put your loan payoff on a faster track by paying more than the required amount each month.</p> <p>This list isn't meant to discourage you; it's meant to help you prepare to retire <em>successfully</em>. Where else do you need to shore up your retirement plan?</p> <h2 style="text-align: center;">Like this article? Pin it!</h2> <div align="center"><a data-pin-do="buttonPin" data-pin-count="above" data-pin-tall="true" data-pin-save="true" href="https://www.pinterest.com/pin/create/button/?url=http%3A%2F%2Fwww.wisebread.com%2F4-red-flags-that-your-retirement-plan-may-be-off-track&amp;media=http%3A%2F%2Fwww.wisebread.com%2Ffiles%2Ffruganomics%2Fu5180%2F4%2520Red%2520Flags%2520That%2520Your%2520Retirement%2520Plan%2520May%2520Be%2520Off%2520Track.png&amp;description=4%20Red%20Flags%20That%20Your%20Retirement%20Plan%20May%20Be%20Off%20Track"></a></p> <script async defer src="//assets.pinterest.com/js/pinit.js"></script></div> <p style="text-align: center;"><img src="http://wisebread.killeracesmedia.netdna-cdn.com/files/fruganomics/u5180/4%20Red%20Flags%20That%20Your%20Retirement%20Plan%20May%20Be%20Off%20Track.png" alt="4 Red Flags That Your Retirement Plan May Be Off Track" width="250" height="374" /></p> <br /><div id="custom_wisebread_footer"><div id="rss_tagline">This article is from <a href="http://www.wisebread.com/matt-bell">Matt Bell</a> of <a href="http://www.wisebread.com/4-red-flags-that-your-retirement-plan-may-be-off-track">Wise Bread</a>, an award-winning personal finance and <a href="http://www.wisebread.com/credit-cards">credit card comparison</a> website. Read more great articles from Wise Bread:</div><div class="view view-similarterms view-id-similarterms view-display-id-block_2 view-dom-id-2"> <div class="view-content"> <div class="item-list"> <ul> <li class="views-row views-row-1 views-row-odd views-row-first"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/why-retiring-with-debt-isnt-the-end-of-the-world">Why Retiring With Debt Isn&#039;t the End of the World</a></span> </div> </li> <li class="views-row views-row-2 views-row-even"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/8-signs-its-time-to-retire">8 Signs It&#039;s Time to Retire</a></span> </div> </li> <li class="views-row views-row-3 views-row-odd"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/why-your-daily-latte-wont-sink-your-retirement-savings">Why Your Daily Latte Won&#039;t Sink Your Retirement Savings</a></span> </div> </li> <li class="views-row views-row-4 views-row-even"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/6-ways-you-can-cut-costs-right-before-you-retire-0">6 Ways You Can Cut Costs Right Before You Retire</a></span> </div> </li> <li class="views-row views-row-5 views-row-odd views-row-last"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/half-of-americans-are-wrong-about-their-retirement-savings">Half of Americans Are Wrong About Their Retirement Savings</a></span> </div> </li> </ul> </div> </div> </div> </div><br/></br> Retirement expenses mortgages owing money preparedness red flags saving money student loans unprepared Thu, 31 Aug 2017 08:00:07 +0000 Matt Bell 2012369 at http://www.wisebread.com Why Retiring With Debt Isn't the End of the World http://www.wisebread.com/why-retiring-with-debt-isnt-the-end-of-the-world <div class="field field-type-filefield field-field-blog-image"> <div class="field-items"> <div class="field-item odd"> <a href="/why-retiring-with-debt-isnt-the-end-of-the-world" class="imagecache imagecache-250w imagecache-linked imagecache-250w_linked"><img src="http://wisebread.killeracesmedia.netdna-cdn.com/files/fruganomics/imagecache/250w/blog-images/calculating_our_day_to_day_living_cost.jpg" alt="Calculating our day-to-day living cost" title="" class="imagecache imagecache-250w" width="250" height="140" /></a> </div> </div> </div> <p>In a perfect world, you'll retire with no debt at all. But that might not be realistic. Most U.S. adults carry at least <em>some </em>debt with them into retirement. A majority even die owing money. (See also: <a href="http://www.wisebread.com/who-pays-when-loved-ones-leave-debt-behind?ref=seealso" target="_blank">Who Pays When Loved Ones Leave Debt Behind?</a>)</p> <p>The good news is while retiring with debt might not be uncommon today, it's also not a financial disaster. It mostly depends on the type of debt you bring with you into retirement.</p> <h2>The numbers</h2> <p>In a 2016 study, credit bureau Experian found that 73 percent of consumers died with debt. And these consumers didn't die with just a little debt: Experian reported that these individuals had an average debt of $61,554 when they died. Without counting mortgage debt, that figure fell to a still high $12,875.</p> <p>As you near retirement, you might worry that you'll be saddled with too much debt after you leave the workforce. It's important to realize, though, that there are different types of debt, some better than others. Your monthly income in retirement matters, too: If you can easily cover your debts, and still cover your other expenses, your debt won't be as much of a financial burden.</p> <h2>Start with a budget</h2> <p>You won't know how bad your retirement debt might be until you first draft a household budget for your after-work years. This budget should include all of the money you expect to flow into your hands after you retire, including Social Security payments, pensions, and the income you'll be drawing each month from your retirement savings vehicles.</p> <p>You should then list your monthly expenses, both fixed and estimated. This should include your housing costs, food, utilities, entertainment expenses, medical costs, and, of course, the money you'll have to spend each month to pay off your debts.</p> <p>Once you have your expenses and your income listed, compare the figures. Will you have enough money to cover everything each month? Or will you be short?</p> <p>If you have enough, that's good, though you'll still want to reduce your debt as much as you can before you leave the workforce. The less debt you enter your retirement years with, the better.</p> <p>If you'll be short, it's time to make changes. Figure out ways to reduce your expenses, such as trading in a costly car or maybe selling your expensive home and making the move to a less costly condo or smaller residence. You might also have to scale back your plans for retirement; instead of traveling the world, you might have to be content with catching up on your golf game in your own community.</p> <h2>Good vs. bad debt</h2> <p>Once you've determined your budget, it's time to look at your debt.</p> <p>You might think that all debt is the same. That's not true. Some debt is considered &quot;good debt,&quot; while <a href="http://www.wisebread.com/8-signs-youve-crossed-from-healthy-debt-to-problem-debt" target="_blank">other debt is considered bad</a>.</p> <p>Good debt is debt you owe for something that can grow in value and provide you with financial benefits in the future. A mortgage is the most common form of good debt. If you're fortunate, the house that your mortgage is financing will grow in value while you own it. When you sell it, you might make a profit. Mortgage debt has the added benefit of coming with low interest rates and some tax benefits.</p> <p>The most common form of bad debt is credit card debt. This debt grows over time and doesn't provide you with any possible financial benefits. It also often comes with sky-high interest rates. (See also: <a href="http://www.wisebread.com/5-ways-to-pay-off-high-interest-credit-card-debt?ref=seealso" target="_blank">5 Ways to Pay Off High Interest Credit Card Debt</a>)</p> <p>If you're nearing retirement and you have both mortgage and credit card debt, it makes financial sense to spend any extra dollars you have to reduce your credit card debt. Your mortgage debt, as long as you can afford the monthly payment in retirement, should not be a priority.</p> <h2>Attack your bad debt</h2> <p>If you want to eliminate your credit card debt &mdash; or at least a chunk of it &mdash; before retirement, you'll have to send extra money each month to your credit card providers.</p> <p>Generally, financial experts recommend two main approaches here. You can follow the debt snowball strategy, in which you pay extra each month on the credit card that has the lowest balance. Once you pay off that card, you pay more each month on the card with the next lowest amount of debt, working your way through all your cards.</p> <p>You can also go with the debt avalanche approach. This method works the same way, only you pay extra on your card with the highest interest rate first instead of the lowest balance. This method will save you the most money because you'll be eliminating your highest-interest debt first. (See also: <a href="http://www.wisebread.com/snowballs-or-avalanches-which-debt-reduction-strategy-is-best-for-you?ref=seealso" target="_blank">Snowballs or Avalanches: Which Debt Reduction Strategy Is Best for You?</a>)</p> <p>Again, to free up enough money to pay down your debts &mdash; no matter which debts you choose to tackle &mdash; you might have to make lifestyle changes, such as cutting down on your meals out or your entertainment and travel expenses.</p> <p>You'll have to determine how much of a financial burden your debt will be after you retire. The debt you bring into retirement might not scuttle your after-work plans. But if it might, that's why a bit of sacrifice now can really pay off later. (See also: <a href="http://www.wisebread.com/6-ways-you-can-cut-costs-right-before-you-retire-0?Ref=seealso" target="_blank">6 Ways You Can Cut Costs Right Before You Retire</a>)</p> <h2 style="text-align: center;">Like this article? Pin it!</h2> <div align="center"><a data-pin-do="buttonPin" data-pin-count="above" data-pin-tall="true" data-pin-save="true" href="https://www.pinterest.com/pin/create/button/?url=http%3A%2F%2Fwww.wisebread.com%2Fwhy-retiring-with-debt-isnt-the-end-of-the-world&amp;media=http%3A%2F%2Fwww.wisebread.com%2Ffiles%2Ffruganomics%2Fu5180%2FWhy%2520Retiring%2520With%2520Debt%2520Isnt%2520the%2520End%2520of%2520the%2520World.jpg&amp;description=Why%20Retiring%20With%20Debt%20Isnt%20the%20End%20of%20the%20World"></a></p> <script async defer src="//assets.pinterest.com/js/pinit.js"></script></div> <p style="text-align: center;"><img src="http://wisebread.killeracesmedia.netdna-cdn.com/files/fruganomics/u5180/Why%20Retiring%20With%20Debt%20Isnt%20the%20End%20of%20the%20World.jpg" alt="Why Retiring With Debt Isn't the End of the World" width="250" height="374" /></p> <br /><div id="custom_wisebread_footer"><div id="rss_tagline">This article is from <a href="http://www.wisebread.com/dan-rafter">Dan Rafter</a> of <a href="http://www.wisebread.com/why-retiring-with-debt-isnt-the-end-of-the-world">Wise Bread</a>, an award-winning personal finance and <a href="http://www.wisebread.com/credit-cards">credit card comparison</a> website. Read more great articles from Wise Bread:</div><div class="view view-similarterms view-id-similarterms view-display-id-block_2 view-dom-id-1"> <div class="view-content"> <div class="item-list"> <ul> <li class="views-row views-row-1 views-row-odd views-row-first"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/heres-how-you-should-budget-your-social-security-checks">Here&#039;s How You Should Budget Your Social Security Checks</a></span> </div> </li> <li class="views-row views-row-2 views-row-even"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/4-red-flags-that-your-retirement-plan-may-be-off-track">4 Red Flags That Your Retirement Plan May Be Off Track</a></span> </div> </li> <li class="views-row views-row-3 views-row-odd"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/10-things-people-without-debt-do">10 Things People Without Debt Do</a></span> </div> </li> <li class="views-row views-row-4 views-row-even"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/8-signs-its-time-to-retire">8 Signs It&#039;s Time to Retire</a></span> </div> </li> <li class="views-row views-row-5 views-row-odd views-row-last"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/5-money-conversations-couples-should-have-before-retirement">5 Money Conversations Couples Should Have Before Retirement</a></span> </div> </li> </ul> </div> </div> </div> </div><br/></br> Debt Management Retirement bills budgeting expenses income mortgages owing money social security Wed, 30 Aug 2017 09:00:06 +0000 Dan Rafter 2011955 at http://www.wisebread.com 5 Money Moves That Will Ruin Your Mortgage Application http://www.wisebread.com/5-money-moves-that-will-ruin-your-mortgage-application <div class="field field-type-filefield field-field-blog-image"> <div class="field-items"> <div class="field-item odd"> <a href="/5-money-moves-that-will-ruin-your-mortgage-application" class="imagecache imagecache-250w imagecache-linked imagecache-250w_linked"><img src="http://wisebread.killeracesmedia.netdna-cdn.com/files/fruganomics/imagecache/250w/blog-images/housing_market_risk.jpg" alt="Housing market risk" title="" class="imagecache imagecache-250w" width="250" height="140" /></a> </div> </div> </div> <p>When applying for a mortgage, you shouldn't do anything that will cause a bank to question your ability to repay the loan. You don't need perfect finances to get a mortgage, but it's in your best interest to have a basic understanding of loan requirements. The more you know, the less likely you are to make mistakes that can ruin your application. (See also: <a href="http://www.wisebread.com/make-these-5-money-moves-before-applying-for-a-mortgage?ref=seealso" target="_blank">Make These 5 Money Moves Before Applying for a Mortgage</a>)</p> <p>Here are a few missteps to avoid if you're thinking about buying a house.</p> <h2>1. Paying for everything with cash</h2> <p>Using cash for everyday purchases is one way to avoid debt. But just because cash is king in your world doesn't mean you should cast off credit cards.</p> <p>Unless you're fortunate enough to pay cash for a house, you'll need to apply for financing, which requires a credit history. And the only way to build credit is to use credit. Without any type of credit profile, a mortgage underwriter can't assess whether you're capable of responsibly managing a home loan.</p> <p>In the lending world, no credit can be just as damaging as bad credit. So before applying for a home loan, establish credit by getting a credit card or another type of loan. You don't have to drive yourself into debt with it, but you should demonstrate a pattern of timely payments and responsible borrowing. (See also: <a href="http://www.wisebread.com/how-to-use-credit-cards-to-improve-your-credit-score?ref=seealso" target="_blank">How to Use Credit Cards to Improve Your Credit Score</a>)</p> <h2>2. Carrying too much debt</h2> <p>While it's in your best interest to have a responsible credit profile, if you start spending money on stuff you don't need and get in over your head, you could hurt your chances of a mortgage approval. Maxing out credit cards can raise your <a href="http://www.wisebread.com/this-one-ratio-is-the-key-to-a-good-credit-score" target="_blank">credit utilization ratio</a> and lower your credit score. Credit utilization is the percentage of your credit card debt compared to your credit limit.</p> <p>If you go overboard and accumulate too much debt, there's also the risk of falling behind on payments. Late payments are another credit score killer that can destroy any chance of qualifying for a mortgage.</p> <p>To avoid problems with a mortgage approval, get into a habit of paying off credit card balances in full every month. If you carry a balance, keep it small &mdash; ideally below 30 percent of your credit line.</p> <p>If you've already been approved for a mortgage, don't make any major purchases before closing on the home purchase. This includes buying furniture or financing a new car. New debt increases your debt-to-income ratio, which can affect your approval.</p> <p>Since you won't know your actual mortgage costs until a few days before closing, hold off spending money on new furniture or appliances to ensure you have enough cash on hand.</p> <h2>3. Co-signing for someone else</h2> <p>Co-signing a loan for a friend or relative is a noble deed (one that I do not personally recommend), but it's imperative that you're fully aware of the consequences of this decision. Co-signers are not silent partners on loan documents. By signing your name, you become a joint debt holder; as such, a co-signed debt appears on your credit report and counts toward your debt-to-income ratio. This is because you're responsible for the loan if the primary signer stops paying. (And if this happens, you could be in big trouble financially!)</p> <p>Once you are ready to apply for a mortgage, your lender takes a co-signed debt into consideration when calculating your debt-to-income ratio. Unfortunately, with a co-signed debt on your credit file, a lender might say you owe too much to take on additional debt and deny your mortgage application.</p> <h2>4. Not saving enough cash</h2> <p>You need cash for a home purchase &mdash; a <em>lot </em>of cash. Nowadays, many mortgage programs require borrowers to bring cash to the table. This includes a down payment between 3.5 percent to 5 percent or higher, as well as funds for closing (between 2 percent and 5 percent of the sale price). It doesn't matter how much you earn: If you can't show enough assets, you can't get a mortgage. Build up this cushion first before diving into the homebuying process. (See also: <a href="http://www.wisebread.com/4-easy-ways-to-start-saving-for-a-down-payment-on-a-home?ref=seealso" target="_blank">4 Easy Ways to Start Saving for a Down Payment on a Home</a>)</p> <h2>5. Quitting your day job</h2> <p>Don't quit your day job if you're planning to buy in the near future &mdash; at least, not yet.</p> <p>Qualifying for a mortgage involves demonstrating long-term financial stability. This is why lenders require a borrower's most recent paycheck stubs and the previous year's tax returns. Self-employed people can purchase a home like anyone else, but they have to provide one to two years of profitable business tax returns, where their income either increases from year to year or remains roughly the same.</p> <p>It doesn't matter how much you're making today as a self-employed borrower. If a lender has reason to believe that your income isn't consistent or stable, you might not get a loan. So if you're thinking about buying, stick with your job until closing, and then become your own boss. (See also: <a href="http://www.wisebread.com/denied-a-mortgage-heres-how-to-fix-it-fast?ref=seeaslo" target="_blank">Denied a Mortgage? Here's How to Fix It Fast</a>)</p> <h2 style="text-align: center;">Like this article? Pin it!</h2> <div align="center"><a data-pin-do="buttonPin" data-pin-count="above" data-pin-tall="true" data-pin-save="true" href="https://www.pinterest.com/pin/create/button/?url=http%3A%2F%2Fwww.wisebread.com%2Fthe-5-best-travel-adapters&amp;media=http%3A%2F%2Fwww.wisebread.com%2Ffiles%2Ffruganomics%2Fu5180%2F5%2520Money%2520Moves%2520That%2520Will%2520Ruin%2520Your%2520Mortgage%2520Application.jpg&amp;description=5%20Money%20Moves%20That%20Will%20Ruin%20Your%20Mortgage%20Application"></a></p> <script async defer src="//assets.pinterest.com/js/pinit.js"></script></div> <p style="text-align: center;"><img src="http://wisebread.killeracesmedia.netdna-cdn.com/files/fruganomics/u5180/5%20Money%20Moves%20That%20Will%20Ruin%20Your%20Mortgage%20Application.jpg" alt="5 Money Moves That Will Ruin Your Mortgage Application" width="250" height="374" /></p> <br /><div id="custom_wisebread_footer"><div id="rss_tagline">This article is from <a href="http://www.wisebread.com/mikey-rox">Mikey Rox</a> of <a href="http://www.wisebread.com/5-money-moves-that-will-ruin-your-mortgage-application">Wise Bread</a>, an award-winning personal finance and <a href="http://www.wisebread.com/credit-cards">credit card comparison</a> website. Read more great articles from Wise Bread:</div><div class="view view-similarterms view-id-similarterms view-display-id-block_2 view-dom-id-1"> <div class="view-content"> <div class="item-list"> <ul> <li class="views-row views-row-1 views-row-odd views-row-first"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/should-you-pay-your-mortgage-off-early">Should You Pay Your Mortgage Off Early?</a></span> </div> </li> <li class="views-row views-row-2 views-row-even"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/4-surprising-things-lenders-check-besides-your-credit-score">4 Surprising Things Lenders Check Besides Your Credit Score</a></span> </div> </li> <li class="views-row views-row-3 views-row-odd"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/5-mortgage-details-you-should-know-before-you-sign">5 Mortgage Details You Should Know Before You Sign</a></span> </div> </li> <li class="views-row views-row-4 views-row-even"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/4-home-buying-habits-we-can-learn-from-millennials">4 Home-Buying Habits We Can Learn From Millennials</a></span> </div> </li> <li class="views-row views-row-5 views-row-odd views-row-last"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/5-times-buying-a-home-with-cash-is-bad-for-your-budget">5 Times Buying a Home With Cash Is Bad for Your Budget</a></span> </div> </li> </ul> </div> </div> </div> </div><br/></br> Real Estate and Housing cash co-signing credit history credit utilization debt debt to income ratio home buying homeownership money mistakes mortgages quitting Wed, 16 Aug 2017 08:30:07 +0000 Mikey Rox 2003615 at http://www.wisebread.com What to Do if You've Signed Up for a Terrible Loan or Credit Card http://www.wisebread.com/what-to-do-if-youve-signed-up-for-a-terrible-loan-or-credit-card <div class="field field-type-filefield field-field-blog-image"> <div class="field-items"> <div class="field-item odd"> <a href="/what-to-do-if-youve-signed-up-for-a-terrible-loan-or-credit-card" class="imagecache imagecache-250w imagecache-linked imagecache-250w_linked"><img src="http://wisebread.killeracesmedia.netdna-cdn.com/files/fruganomics/imagecache/250w/blog-images/iStock-540503334 (1).jpg" alt="Woman signed up for a bad credit card" title="" class="imagecache imagecache-250w" width="250" height="142" /></a> </div> </div> </div> <p>You thought you were buying your dream home, but now you realize that you'll struggle to afford the monthly mortgage payments. Or maybe you thought that new car would look great in your driveway, only to realize after you signed the sales contract that it barely gets 15 miles to the gallon.</p> <p>We all make bad decisions. But when you sign up for a bad loan or credit card, those bad decisions can come with serious financial repercussions.</p> <p>Fortunately, a bad loan or credit decision doesn't have to be permanent. Here are some financial contracts you might regret signing, and the steps you can take to get out of them.</p> <h2>Refinancing your mortgage</h2> <p>Maybe you thought refinancing your 30-year, fixed-rate mortgage loan to a 15-year version was a smart financial move. A 15-year loan, after all, would give you a lower interest rate and save you thousands on interest payments. Unfortunately, you overestimated your ability to make the higher monthly payments that come with a shorter-term mortgage.</p> <p>You can get out of a refinance agreement easily if you act quickly. The &quot;right of rescission&quot; gives borrowers the right to cancel their refinance agreement if they do it within three days of either closing on their loan, or receiving their loan disclosure documents, whichever comes first. You don't have to provide a reason for backing out of your refinance agreement.</p> <p>These three days are business days, but they do include Saturday. If you want to cancel that refinance, act quickly.</p> <h2>Home equity loans</h2> <p>The three-day right of rescission applies to home equity loans, too. The rules are the same for refinancing: If you want to back out of your new home equity loan, you have to do so within three business days.</p> <p>There is a reason for the right of rescission: The government wants to offer consumers a final way to protect their homes before they take on new loans. Homes are used as collateral in refinances and home equity loans, meaning that lenders can take these assets if their owners stop making payments. The right of rescission gives consumers one last chance to avoid signing up for a new loan that they might not be able to afford.</p> <h2>A single-family mortgage</h2> <p>Consumers often mistakenly believe that the right of rescission applies to buying a single-family home, as well. Unfortunately, it doesn't.</p> <p>Unless buyers include a set cooling-off period in their sales contracts &mdash; specifying a certain number of days in which they can change their mind about buying the home &mdash; walking away from an agreement to buy a single-family home can cause them plenty of financial pain.</p> <p>After buyers sign a contract to buy a home, they write out an earnest money check. This check, which is supposed to show sellers that the buyers are serious about purchasing their home, is deposited into an escrow fund until the home sale actually closes. The amount of earnest money buyers deposit varies, but it is usually 1 percent to 2 percent of a home's sale price. For a $200,000 home, buyers can provide $2,000 to $4,000.</p> <p>If buyers change their mind and walk away from a home purchase, they will usually lose that earnest money, breaking a sales contract could cost them thousands of dollars. But there are exceptions, known in the real estate business as contingencies. If the home inspection turns up serious problems, buyers can usually break the contract and keep their earnest money. If buyers can't qualify for a mortgage loan to finance the purchase of the home, they can again usually break the contract and keep that earnest money.</p> <h2>Buying a condo</h2> <p>Things are different when you sign a contract to purchase a condominium or co-op. You'll still have to provide earnest money. But you also have a window of time &mdash; which varies according to the state in which you are buying &mdash; to break your contract without losing that money.</p> <p>Condo and co-op purchase agreements come with a review period. During this period, you can opt out of the purchase agreement you signed and receive your earnest money back, no questions asked. Just make sure you act within the review period.</p> <p>This review period can vary significantly. In North Carolina, buyers have seven days to back out of a purchase agreement without suffering a financial hit. In Florida, the review period lasts 15 days. Make sure to check what the review period is in your particular state.</p> <h2>Leasing a car</h2> <p>If you buy a car and finance it through a traditional auto loan, you're pretty much stuck, even if you don't like the car. If your car has continual mechanical problems, and is always in the shop, you might be able to turn to your state's lemon law to cancel your purchase contract. But that is a long shot.</p> <p>If you are leasing a car, you have more options. You can transfer your auto lease &mdash; and get rid of that car you don't like &mdash; by using a third-party service such as Lease Trader or Swapalease.com to pass your lease onto another consumer seeking to lease a vehicle.</p> <p>Before you do this, make sure that your leasing company allows such transfers. And be sure to read the fine print in your lease. Some leasing companies will list you as guarantor on your lease even after you transfer it. If the person who takes over your lease stops making payments, your leasing company will seek to collect those payments from you.</p> <h2>A credit card</h2> <p>Is there a credit card in your wallet that comes with sky-high interest rates? Or maybe it's just a basic card that doesn't offer any rewards. You might decide to cancel that card. But you should think twice.</p> <p>Canceling a credit card can hurt your credit score, even if you never plan to use that card again. The amount of available credit you have is a determining factor in calculating your credit score. Canceling a card will remove some of your unused, available credit &mdash; and, if you carry a balance on your other cards, automatically increase the amount of available credit that you are using. As a result, your credit score will take a hit. It's often smarter to simply not use that card than to cancel it.</p> <p>If you really do want to cancel the card &mdash; maybe you're worried that having it in your wallet will tempt you to use it &mdash; simply call the customer service number on the back. You will have to pay off your existing balance (or have previously transferred it to a different card) before you can close your account. (See also: <a href="http://www.wisebread.com/how-to-ditch-a-credit-card-without-dinging-your-credit-score?ref=seealso" target="_blank">How to Close a Credit Card Without Dinging Your Credit Score</a>)</p> <h2 style="text-align: center;">Like This Article? Pin it!</p> <div align="center"><a data-pin-do="buttonPin" data-pin-count="above" data-pin-tall="true" data-pin-save="true" href="https://www.pinterest.com/pin/create/button/?url=http%3A%2F%2Fwww.wisebread.com%2Fwhat-to-do-if-youve-signed-up-for-a-terrible-loan-or-credit-card&amp;media=http%3A%2F%2Fwww.wisebread.com%2Ffiles%2Ffruganomics%2Fu5180%2FWhat%2520to%2520Do%2520if%2520You%2527ve%2520Signed%2520Up%2520for%2520a%2520Terrible%2520Loan%2520or%2520Credit%2520Card.jpg&amp;description=What%20to%20Do%20if%20You've%20Signed%20Up%20for%20a%20Terrible%20Loan%20or%20Credit%20Card"></a></p> <script async defer src="//assets.pinterest.com/js/pinit.js"></script></div> <p style="text-align: center;"><img src="http://wisebread.killeracesmedia.netdna-cdn.com/files/fruganomics/u5180/What%20to%20Do%20if%20You%27ve%20Signed%20Up%20for%20a%20Terrible%20Loan%20or%20Credit%20Card.jpg" alt="What to Do if You've Signed Up for a Terrible Loan or Credit Card" width="250" height="374" /></p> </h2> <br /><div id="custom_wisebread_footer"><div id="rss_tagline">This article is from <a href="http://www.wisebread.com/dan-rafter">Dan Rafter</a> of <a href="http://www.wisebread.com/what-to-do-if-youve-signed-up-for-a-terrible-loan-or-credit-card">Wise Bread</a>, an award-winning personal finance and <a href="http://www.wisebread.com/credit-cards">credit card comparison</a> website. Read more great articles from Wise Bread:</div><div class="view view-similarterms view-id-similarterms view-display-id-block_2 view-dom-id-1"> <div class="view-content"> <div class="item-list"> <ul> <li class="views-row views-row-1 views-row-odd views-row-first"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/5-monthly-bills-that-vary-based-on-your-credit-behavior">5 Monthly Bills That Vary Based on Your Credit Behavior</a></span> </div> </li> <li class="views-row views-row-2 views-row-even"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/why-you-need-to-know-the-difference-between-secured-and-unsecured-debts">Why You Need to Know the Difference Between Secured and Unsecured Debts</a></span> </div> </li> <li class="views-row views-row-3 views-row-odd"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/8-valuable-rights-you-might-lose-when-you-refinance-student-loans">8 Valuable Rights You Might Lose When You Refinance Student Loans</a></span> </div> </li> <li class="views-row views-row-4 views-row-even"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/why-your-credit-score-matters-in-retirement">Why Your Credit Score Matters in Retirement</a></span> </div> </li> <li class="views-row views-row-5 views-row-odd views-row-last"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/5-surprising-ways-revolving-debt-helps-you">5 Surprising Ways Revolving Debt Helps You</a></span> </div> </li> </ul> </div> </div> </div> </div><br/></br> Personal Finance auto loans bad loans condos credit score home equity loan interest rates monthly payments mortgages new car refinancing Mon, 07 Aug 2017 08:31:10 +0000 Dan Rafter 1994331 at http://www.wisebread.com 5 Mortgage Details You Should Know Before You Sign http://www.wisebread.com/5-mortgage-details-you-should-know-before-you-sign <div class="field field-type-filefield field-field-blog-image"> <div class="field-items"> <div class="field-item odd"> <a href="/5-mortgage-details-you-should-know-before-you-sign" class="imagecache imagecache-250w imagecache-linked imagecache-250w_linked"><img src="http://wisebread.killeracesmedia.netdna-cdn.com/files/fruganomics/imagecache/250w/blog-images/iStock-475902363.jpg" alt="" title="" class="imagecache imagecache-250w" width="250" height="141" /></a> </div> </div> </div> <p>Taking out a mortgage is a big financial commitment. Not only are mortgage loans expensive, they also represent the biggest monthly payment for most consumers' budgets.</p> <p>That's why it's so important to ask the right questions before signing the documents that officially close your mortgage. Here are five key questions you need to ask your lender when looking over your mortgage documents.</p> <h2>1. What are my closing costs?</h2> <p>Taking out a mortgage isn't free. Your lender and several third-party service providers will charge you what are known as closing costs, the fees you'll have to pay for your mortgage loan. You can expect to pay from 2 percent to 5 percent of your home's purchase price in closing costs.</p> <p>This means for a home costing $200,000, you can expect to pay between $4,000 and $10,000 in closing costs. That's a lot of money, and often consumers roll the amount into their final loan, which can slightly increase their monthly payment.</p> <p>Fortunately, uncovering your closing costs is an easy process. Your lender must send you a form known as a loan estimate within three business days of receiving your loan application. This form includes a list of your estimated closing costs. At least three days before closing your loan, your lender will provide you with another form, the closing disclosure. This form lists your final closing costs.</p> <p>It's important to study both of these forms to make sure your closing costs are what you expected them to be.</p> <h2>2. What is my interest rate?</h2> <p>When you pay a mortgage loan, a good chunk of your monthly payment will go toward interest. In fact, during the earliest years of your mortgage, a far larger percentage of your monthly payment will go toward interest than toward paying down your principal balance.</p> <p>That's why getting the lowest possible interest rate makes such a difference in both the amount of interest you'll pay during the life of your loan, and how much you'll pay each month.</p> <p>Here's an example: Say you take out a 30-year, fixed-rate mortgage loan for $200,000 at an interest rate of 3.76 percent. Your monthly payment &mdash; not including property taxes and homeowners insurance &mdash; would be about $927.</p> <p>If on that same loan your interest rate was 4.76 percent, your monthly payment would shoot up to $1,044, not including taxes and insurance.</p> <h2>3. What is my monthly payment?</h2> <p>Your monthly payment doesn't just include the amount you pay in interest and principal. Most lenders require that you pay extra with each payment to cover the yearly cost of your homeowners insurance and property taxes.</p> <p>Your lender will then take this extra money and deposit it into an escrow account. When your taxes and insurance come due each year, your lender will use this money to pay these bills on your behalf. This can add hundreds of dollars to your monthly payment, so knowing this ahead of time is important.</p> <p>Don't be fooled into thinking that your mortgage payment <em>only</em> includes your mortgage loan. Your property taxes and insurance make a big difference in your monthly bill.</p> <h2>4. What type of loan do I have?</h2> <p>There are several types of mortgages out there. The most common are fixed loans, usually with terms of 30 or 15 years. With these loans, your interest rate remains the same until you pay off the loan, sell your home, or refinance it.</p> <p>You might also opt for an adjustable-rate loan. With an adjustable-rate mortgage, the interest rate remains fixed for a set period &mdash; usually five to seven years &mdash; and then adjusts according to whatever economic indexes your loan is tied to. Your loan's interest rate could adjust every year or it could adjust every five years. It all depends on your loan's specifics.</p> <p>Consumers choose adjustable-rate loans because their initial interest rates are usually lower than those you'd get with a fixed-rate loan. But adjustable-rate loans do come with more risk: When your loan adjusts, your new rate could be higher than the rate you would have had if you had gone with a fixed-rate loan.</p> <h2>5. Is there a penalty for paying early?</h2> <p>They're not as common as they once were, but some loans come with a prepayment penalty. This means that you'll have to pay a penalty &mdash; often about 2 percent of your loan's remaining balance &mdash; for paying off your mortgage before it's due. Often, lenders who charge prepayment penalties assess them if you pay off your loan in the first two to five years.</p> <p>You might not worry about such a penalty. After all, you'll never pay off your mortgage loan in two to five years, right?</p> <p>But a prepayment penalty may also kick in if you decide to refinance your loan or sell your home during the penalty phase. Because of this, it's best not to sign onto a loan with a prepayment penalty.</p> <h2 style="text-align: center;">Like this article? Pin it!</h2> <div align="center"><a data-pin-do="buttonPin" data-pin-count="above" data-pin-tall="true" data-pin-save="true" href="https://www.pinterest.com/pin/create/button/?url=http%3A%2F%2Fwww.wisebread.com%2F5-mortgage-details-you-should-know-before-you-sign&amp;media=http%3A%2F%2Fwww.wisebread.com%2Ffiles%2Ffruganomics%2Fu5180%2F5%2520Mortgage%2520Details%2520You%2520Should%2520Know%2520Before%2520You%2520Sign.jpg&amp;description=5%20Mortgage%20Details%20You%20Should%20Know%20Before%20You%20Sign"></a></p> <script async defer src="//assets.pinterest.com/js/pinit.js"></script></div> <p style="text-align: center;"><img src="http://wisebread.killeracesmedia.netdna-cdn.com/files/fruganomics/u5180/5%20Mortgage%20Details%20You%20Should%20Know%20Before%20You%20Sign.jpg" alt="5 Mortgage Details You Should Know Before You Sign" width="250" height="374" /></p> <br /><div id="custom_wisebread_footer"><div id="rss_tagline">This article is from <a href="http://www.wisebread.com/dan-rafter">Dan Rafter</a> of <a href="http://www.wisebread.com/5-mortgage-details-you-should-know-before-you-sign">Wise Bread</a>, an award-winning personal finance and <a href="http://www.wisebread.com/credit-cards">credit card comparison</a> website. Read more great articles from Wise Bread:</div><div class="view view-similarterms view-id-similarterms view-display-id-block_2 view-dom-id-2"> <div class="view-content"> <div class="item-list"> <ul> <li class="views-row views-row-1 views-row-odd views-row-first"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/heres-whats-included-in-a-homes-closing-costs">Here&#039;s What&#039;s Included in a Home&#039;s Closing Costs</a></span> </div> </li> <li class="views-row views-row-2 views-row-even"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/is-it-safe-to-re-finance-your-home-close-to-retirement">Is it Safe to Re-Finance Your Home Close to Retirement?</a></span> </div> </li> <li class="views-row views-row-3 views-row-odd"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/how-long-does-it-take-break-even-with-a-home-refi">How Long Does it Take Break Even With a Home ReFi?</a></span> </div> </li> <li class="views-row views-row-4 views-row-even"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/4-surprising-things-lenders-check-besides-your-credit-score">4 Surprising Things Lenders Check Besides Your Credit Score</a></span> </div> </li> <li class="views-row views-row-5 views-row-odd views-row-last"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/5-times-buying-a-home-with-cash-is-bad-for-your-budget">5 Times Buying a Home With Cash Is Bad for Your Budget</a></span> </div> </li> </ul> </div> </div> </div> </div><br/></br> Real Estate and Housing closing costs home buying home loans homeownership interest rates lenders monthly payments mortgages penalties questions Fri, 04 Aug 2017 08:00:06 +0000 Dan Rafter 1990976 at http://www.wisebread.com 5 Monthly Bills That Vary Based on Your Credit Behavior http://www.wisebread.com/5-monthly-bills-that-vary-based-on-your-credit-behavior <div class="field field-type-filefield field-field-blog-image"> <div class="field-items"> <div class="field-item odd"> <a href="/5-monthly-bills-that-vary-based-on-your-credit-behavior" class="imagecache imagecache-250w imagecache-linked imagecache-250w_linked"><img src="http://wisebread.killeracesmedia.netdna-cdn.com/files/fruganomics/imagecache/250w/blog-images/man_screaming_papers_599701902.jpg" alt="Man&#039;s bills varying based on credit behavior" title="" class="imagecache imagecache-250w" width="250" height="140" /></a> </div> </div> </div> <p>Your credit score is one of the most important numbers in your financial life. Because it incorporates data about your past behavior with credit &mdash; how much credit and debt you have and how good you are at paying those bills off &mdash; it's deemed as a good predictor of how you'll behave with future bills.</p> <p>A <a href="http://www.wisebread.com/what-does-your-credit-score-mean-good-bad-or-excellent" target="_blank">low credit score</a> can hurt you in many ways: It makes it more difficult to qualify for mortgages, car loans, or credit cards. And when you do qualify for a loan or credit card, you'll be stuck with higher interest rates and the higher monthly payments that come with them. Poor credit behavior can also cost you money each month in the form of higher student loan and insurance payments. (See also: <a href="http://www.wisebread.com/15-surprising-ways-bad-credit-can-hurt-you?ref=seealso" target="_blank">15 Surprising Ways Bad Credit Can Hurt You</a>)</p> <p>Most lenders today still consider a credit score of 740 or higher to be a strong one. Anything at 640 or lower, though, is considered weak.</p> <p>Here's a look at five monthly bills that you'll pay more for if your credit score is low.</p> <h2>1. Mortgage payment</h2> <p>Your credit score has a big impact on your mortgage payment. If your score is high, odds are good that you'll qualify for a lower interest rate, which will, in turn, lower your monthly mortgage payment. If your score is low, the opposite will happen.</p> <p>Here's an example of the difference that a high or low interest rate can have on your monthly mortgage payment: If you take out a 30-year, fixed-rate mortgage loan of $200,000 at an interest rate of 3.80 percent, you'll have a monthly payment of about $931, not counting what you might pay for homeowners insurance and property taxes.</p> <p>If you take out that same loan with a higher interest rate of 4.80 percent &mdash; which you may have gotten due to a low credit score &mdash; your monthly payment, again not counting taxes and insurance, will be about $1,049. That's $118 more a month, or about $1,416 a year. (See also: <a href="http://www.wisebread.com/4-smart-ways-to-lower-your-monthly-mortgage-payment?ref=seealso" target="_blank">4 Smart Ways to Lower Your Monthly Mortgage Payment</a>)</p> <h2>2. Auto loans</h2> <p>You'll face the same situation when applying for an auto loan with a lower credit score. Auto lenders, like mortgage lenders, rely heavily on your credit score. If they see a low score, they'll protect themselves financially by charging you a higher interest rate. This higher rate will result in a higher monthly payment.</p> <p>The higher rates make sense if you look at your loan from your lender's point of view. A lower credit score means you have a history of making bad financial choices, whether that means paying bills late or missing them entirely. Lenders then levy a higher interest rate to make up for the danger of lending to riskier borrowers.</p> <h2>3. Credit cards</h2> <p>Interest rates on credit cards can be high &mdash; 20 percent or higher in some cases. But if your credit score is high, you'll increase your chances of qualifying for a lower rate on your cards. This is important: If you carry a balance on your cards each month, a lower interest rate will mean a lower required minimum monthly payment. It also means your debt will grow at a slower rate.</p> <p>How you use credit cards has a big impact on your credit score. If you always pay your cards on time, and if you don't run up too much debt on them, you will steadily boost your score. (See also: <a href="http://www.wisebread.com/how-to-pay-less-interest-on-your-credit-card-debt?ref=seealso" target="_blank">How to Pay Less Interest on Your Credit Card Debt</a>)</p> <h2>4. Student loans</h2> <p>There are two types of student loans: federal and private. Your credit score won't affect your interest rate on federal loans. But lenders originating private student loans will look at your credit score. If your score is low, they'll charge you higher interest rates and fees. This will result in a higher monthly student loan payment.</p> <h2>5. Homeowners insurance</h2> <p>Insurance companies don't rely on your credit score to set your homeowners insurance rates. They do, however, use a similar metric known as an insurance score. This score includes information about your past payment history, your debts, and your number of open credit accounts, just like your credit score. It can also include information about any safety features &mdash; such as fire alarms and security systems &mdash; protecting your home and whether you've made a high number of insurance claims in the past.</p> <p>If your insurance score is high, you'll qualify for a lower insurance bill. If that score is low, you can expect to pay more for your homeowners insurance.</p> <h2 style="text-align: center;">Like this article? Pin it!</h2> <div align="center"><a data-pin-do="buttonPin" data-pin-count="above" data-pin-tall="true" data-pin-save="true" href="https://www.pinterest.com/pin/create/button/?url=http%3A%2F%2Fwww.wisebread.com%2F5-monthly-bills-that-vary-based-on-your-credit-behavior&amp;media=http%3A%2F%2Fwww.wisebread.com%2Ffiles%2Ffruganomics%2Fu5180%2F5%2520Monthly%2520Bills%2520That%2520Vary%2520Based%2520on%2520Your%2520Credit%2520Behavior.jpg&amp;description=5%20Monthly%20Bills%20That%20Vary%20Based%20on%20Your%20Credit%20Behavior"></a></p> <script async defer src="//assets.pinterest.com/js/pinit.js"></script></div> <p style="text-align: center;"><img src="http://wisebread.killeracesmedia.netdna-cdn.com/files/fruganomics/u5180/5%20Monthly%20Bills%20That%20Vary%20Based%20on%20Your%20Credit%20Behavior.jpg" alt="5 Monthly Bills That Vary Based on Your Credit Behavior" width="250" height="374" /></p> <br /><div id="custom_wisebread_footer"><div id="rss_tagline">This article is from <a href="http://www.wisebread.com/dan-rafter">Dan Rafter</a> of <a href="http://www.wisebread.com/5-monthly-bills-that-vary-based-on-your-credit-behavior">Wise Bread</a>, an award-winning personal finance and <a href="http://www.wisebread.com/credit-cards">credit card comparison</a> website. Read more great articles from Wise Bread:</div><div class="view view-similarterms view-id-similarterms view-display-id-block_2 view-dom-id-3"> <div class="view-content"> <div class="item-list"> <ul> <li class="views-row views-row-1 views-row-odd views-row-first"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/why-you-need-to-know-the-difference-between-secured-and-unsecured-debts">Why You Need to Know the Difference Between Secured and Unsecured Debts</a></span> </div> </li> <li class="views-row views-row-2 views-row-even"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/what-to-do-if-youve-signed-up-for-a-terrible-loan-or-credit-card">What to Do if You&#039;ve Signed Up for a Terrible Loan or Credit Card</a></span> </div> </li> <li class="views-row views-row-3 views-row-odd"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/pay-these-6-bills-first-when-money-is-tight">Pay These 6 Bills First When Money Is Tight</a></span> </div> </li> <li class="views-row views-row-4 views-row-even"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/8-valuable-rights-you-might-lose-when-you-refinance-student-loans">8 Valuable Rights You Might Lose When You Refinance Student Loans</a></span> </div> </li> <li class="views-row views-row-5 views-row-odd views-row-last"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/3-ways-student-loan-debt-can-affect-your-mortgage-application">3 Ways Student Loan Debt Can Affect Your Mortgage Application</a></span> </div> </li> </ul> </div> </div> </div> </div><br/></br> Personal Finance auto loans bills credit score fico homeowners insurance interest rates mortgages payments student loans Tue, 01 Aug 2017 07:47:46 +0000 Dan Rafter 1990977 at http://www.wisebread.com It's Now Easier to Get a Home Loan Even If You Have Student Loan Debt — Should You? http://www.wisebread.com/its-now-easier-to-get-a-home-loan-even-if-you-have-student-loan-debt-should-you <div class="field field-type-filefield field-field-blog-image"> <div class="field-items"> <div class="field-item odd"> <a href="/its-now-easier-to-get-a-home-loan-even-if-you-have-student-loan-debt-should-you" class="imagecache imagecache-250w imagecache-linked imagecache-250w_linked"><img src="http://wisebread.killeracesmedia.netdna-cdn.com/files/fruganomics/imagecache/250w/blog-images/house_and_keys.jpg" alt="House and keys" title="" class="imagecache imagecache-250w" width="250" height="140" /></a> </div> </div> </div> <p>Student loan debt has snowballed to the point where many young people are delaying the purchase of a home. On one hand, it's hard to save up for a down payment when you're already $37,172 in debt &mdash; the average for class of 2016 graduates. On the other hand, student loan debt can make it hard to qualify for a mortgage at all.</p> <p>Fannie Mae, the nation's largest purchaser and guarantor of mortgages, recently addressed the second problem by changing two key rules for borrowers. Because Fannie Mae buys mortgages from about 1,800 lenders that follow its rules, these changes at Fannie Mae affect potential home loan borrowers all over the country.</p> <h2>Debt that someone else is paying off no longer counts against you</h2> <p>For example, your parents or your employer might be making your student loan payments. In the past, a lender would still count those payments as part of your <a href="http://www.wisebread.com/3-ways-student-loan-debt-can-affect-your-mortgage-application" target="_blank">debt-to-income ratio</a>, a key figure used to determine whether you can afford to make mortgage payments. But now, Fannie Mae will recognize that if you're not the one paying the bill, that loan won't actually affect your ability to pay your mortgage.</p> <p>This new rule will also apply to other kinds of debt that someone else is paying for you, such as car loans or credit card balances. To qualify, you'll need to provide documentation showing that someone else has made payments on the debt for the past 12 months.</p> <h2>Flexible payment plans are recognized</h2> <p>One of the benefits of carrying a federal student loan is that you may qualify for an income-based repayment program, lowering your monthly obligation to a certain percent of your available income. This is great &mdash; until you apply for a mortgage and find out that Fannie Mae uses the standard payment amount, not the lower amount you're actually paying, to determine your debt-to-income ratio.</p> <p>From now on, lenders working with Fannie Mae can instead use the lower, flexible payment amount &mdash; meaning that more applicants with student debt will qualify to buy a home.</p> <p>With these two changes, many more young people will qualify to buy homes &mdash; a change that is probably good for the economy and the housing market. But is it a good idea for<em> you</em>? Some questions for graduates who will be affected by the Fannie Mae decisions &mdash; and for other student loan borrowers &mdash; to ask.</p> <h2>What would you do if you had to take over your own student debt payments?</h2> <p>For people who have their loans paid by employers or others, investing in a nice house may seem like a no brainer. Say you're a young doctor practicing at a hospital that covers student loan payments as part of its compensation package. Great! You are able to buy a four-bedroom home with a swimming pool.</p> <p>But then the hospital files for bankruptcy and you are let go. You can get another local position with a private practice, but it won't pay for your student loans. Will you be able to pay your new mortgage and student loans at the same time?</p> <h2>What if the government changes student debt repayment rules?</h2> <p>If your income is already so limited that you qualify for a modified loan repayment plan, it's worth pondering whether buying a home is the right move at this stage in your life. Congress could decide to end that program in order to save money. Think about if and how you could make a standard debt payment and a mortgage payment if the rules change.</p> <h2>Do you have enough saved for a down payment?</h2> <p>It used to be that buyers routinely plunked down 20 percent of a home's value upfront. Nowadays, most buyers make down payments of between 5 percent and 10 percent. If you've been making large student loan payments, you may not have this money saved up. (See also: <a href="http://www.wisebread.com/4-easy-ways-to-start-saving-for-a-down-payment-on-a-home" target="_blank">4 Easy Ways to Start Saving for a House Down Payment</a>)</p> <h2>Will you be able to afford maintenance?</h2> <p>When working out your hypothetical budget as a homeowner, don't stop after accounting for your student loan payments and the mortgage. You need to set aside money for things that break and systems that wear out, from the doorbell to the roof. You never know when something is going to need replacing, but a rule of thumb is to budget 1 percent of a home's value for maintenance each year. So if you plan to buy a $200,000 home, make sure you can afford to set aside $2,000 annually for repairs.</p> <h2>How will you handle a financial emergency?</h2> <p>A financial emergency can be bad enough if you're renting and are forced to break your lease and move somewhere cheaper. But once you're committed to owning a home, a loss of income could mean losing the home as well. And homeowners with hefty student loan debt are that much more vulnerable.</p> <p>Before you sign that purchase contract, it's a good idea to have several months of mortgage payments in an emergency fund. If you <a href="http://www.wisebread.com/where-to-turn-for-help-when-you-dont-have-an-emergency-fund" target="_blank">don't have an emergency fund</a>, at least have a plan for how you would pay the mortgage if you lose your job. Could you turn to a relative for support? Could you advertise for roommates? Sell your car?</p> <p>Taken altogether, it's clear that there is no one-size-fits-all answer to whether you should buy a house before your student loans are paid off. Homeownership comes with a lot of benefits, such as the mortgage interest tax deduction, so it may not be something you want to put off for the years it could take to pay off the student loans.</p> <p>But rushing into homeownership before you have a stable income and emergency reserves would be a mistake for anyone &mdash; and that much more so for folks with heavy student debt.</p> <h2 style="text-align: center;">Like this article? Pin it!</h2> <div align="center"><a data-pin-do="buttonPin" data-pin-count="above" data-pin-tall="true" data-pin-save="true" href="https://www.pinterest.com/pin/create/button/?url=http%3A%2F%2Fwww.wisebread.com%2Fits-now-easier-to-get-a-home-loan-even-if-you-have-student-loan-debt-should-you&amp;media=http%3A%2F%2Fwww.wisebread.com%2Ffiles%2Ffruganomics%2Fu5180%2FIt%2527s%2520Now%2520Easier%2520to%2520Get%2520a%2520Home%2520Loan%2520Even%2520If%2520You%2520Have%2520Student%2520Loan%2520Debt%2520%25E2%2580%2594%2520Should%2520You-.jpg&amp;description=It's%20Now%20Easier%20to%20Get%20a%20Home%20Loan%20Even%20If%20You%20Have%20Student%20Loan%20Debt%20%E2%80%94%20Should%20You%3F"></a></p> <script async defer src="//assets.pinterest.com/js/pinit.js"></script></div> <p style="text-align: center;"><img src="http://wisebread.killeracesmedia.netdna-cdn.com/files/fruganomics/u5180/It%27s%20Now%20Easier%20to%20Get%20a%20Home%20Loan%20Even%20If%20You%20Have%20Student%20Loan%20Debt%20%E2%80%94%20Should%20You-.jpg" alt="It's Now Easier to Get a Home Loan Even If You Have Student Loan Debt &mdash; Should You?" width="250" height="374" /></p> <br /><div id="custom_wisebread_footer"><div id="rss_tagline">This article is from <a href="http://www.wisebread.com/carrie-kirby">Carrie Kirby</a> of <a href="http://www.wisebread.com/its-now-easier-to-get-a-home-loan-even-if-you-have-student-loan-debt-should-you">Wise Bread</a>, an award-winning personal finance and <a href="http://www.wisebread.com/credit-cards">credit card comparison</a> website. Read more great articles from Wise Bread:</div><div class="view view-similarterms view-id-similarterms view-display-id-block_2 view-dom-id-1"> <div class="view-content"> <div class="item-list"> <ul> <li class="views-row views-row-1 views-row-odd views-row-first"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/3-ways-student-loan-debt-can-affect-your-mortgage-application">3 Ways Student Loan Debt Can Affect Your Mortgage Application</a></span> </div> </li> <li class="views-row views-row-2 views-row-even"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/8-valuable-rights-you-might-lose-when-you-refinance-student-loans">8 Valuable Rights You Might Lose When You Refinance Student Loans</a></span> </div> </li> <li class="views-row views-row-3 views-row-odd"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/make-these-5-money-moves-before-applying-for-a-mortgage">Make These 5 Money Moves Before Applying for a Mortgage</a></span> </div> </li> <li class="views-row views-row-4 views-row-even"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/do-you-really-need-a-20-percent-down-payment-for-a-house">Do You Really Need a 20 Percent Down Payment for a House?</a></span> </div> </li> <li class="views-row views-row-5 views-row-odd views-row-last"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/everything-you-need-to-know-about-freddie-mac-and-fannie-mae">Everything You Need to Know About Freddie Mac and Fannie Mae</a></span> </div> </li> </ul> </div> </div> </div> </div><br/></br> Personal Finance Real Estate and Housing debt payments debt to income ratio down payments emergency funds fannie mae flexible payment plans home loans mortgages rule changes student loans Mon, 31 Jul 2017 08:30:04 +0000 Carrie Kirby 1981838 at http://www.wisebread.com Why You Need to Know the Difference Between Secured and Unsecured Debts http://www.wisebread.com/why-you-need-to-know-the-difference-between-secured-and-unsecured-debts <div class="field field-type-filefield field-field-blog-image"> <div class="field-items"> <div class="field-item odd"> <a href="/why-you-need-to-know-the-difference-between-secured-and-unsecured-debts" class="imagecache imagecache-250w imagecache-linked imagecache-250w_linked"><img src="http://wisebread.killeracesmedia.netdna-cdn.com/files/fruganomics/imagecache/250w/blog-images/casual_man_paying_bills_at_home_with_laptop.jpg" alt="Casual man paying bills at home with laptop" title="" class="imagecache imagecache-250w" width="250" height="140" /></a> </div> </div> </div> <p>You might think that all your debts are equal. In your mind, there might not be any difference between your auto loan, student loan, and credit card bills.</p> <p>But there is one major difference: Some of your debts are unsecured, and some are secured. It's important to know the difference if you run into a financial crisis and you don't have enough money to pay all your bills on time. (See also: <a href="http://www.wisebread.com/pay-these-6-bills-first-when-money-is-tight?ref=seealso" target="_blank">Pay These Bills First When Money Is Tight</a>)</p> <p>If you stop paying secured debt, you might lose your home, car, or other assets. If you stop paying unsecured debt, your credit score will take a major hit, but you won't lose your shelter or your car.</p> <h2>Secured vs. unsecured debt</h2> <p>Secured debt is tied to an asset. Think of mortgages and auto loans.</p> <p>In a mortgage, the money you borrow is connected to your home, which your lenders consider collateral. If you stop making your payments, your lender can start foreclosure proceedings to take possession of your home.</p> <p>In an auto loan, your car serves as collateral. If you stop making payments on this debt, your lender can take possession of your car.</p> <p>The collateral on secured debts is a way for lenders to protect themselves when passing out large loans. Borrowers aren't as likely to stop making payments if they know doing so could cost them an asset. And if borrowers do stop making payments, lenders can recover some of their losses by taking possession of the collateral and selling it.</p> <p>Unsecured debt does not have any collateral behind it and is not tied to any asset. The most common kind of unsecured debt is credit card debt. Student loan debt and medical bills are also examples of unsecured debt.</p> <p>If you fall behind on unsecured debt, your lenders generally have no collateral to take over.</p> <h2>The consequences</h2> <p>This doesn't mean that falling behind on your unsecured debt payments comes without consequence. First, your credit score will take a hit. If you make a credit card payment or payment on another unsecured debt more than 30 days past due, your payment will be considered officially late. You can expect your credit score to fall by 100 points or more. (See also: <a href="http://www.wisebread.com/5-simple-ways-to-never-make-a-late-credit-card-payment?ref=seealso" target="_blank">5 Simple Ways to Never Make a Late Credit Card Payment</a>)</p> <p>This is a big deal: Lenders rely on your credit score to determine if you qualify for loans and at what interest rate. If your score is too low, you'll struggle to earn approval for loans. And if you do get that approval, the higher interest rates will make borrowing money more expensive.</p> <p>Lenders can also take steps to force you to start paying what you owe on unsecured debts. They can hire a debt collector. They can also sue you to garnish your wages or put a lien on your assets to get you to pay.</p> <h2>Which should you pay first?</h2> <p>If you are hit with a financial crisis, and you can't pay all your bills on time for the month, it usually makes sense to pay your secured debts first. You don't want to take the chance of losing your home, car, or other assets.</p> <p>Secured debts tend to be larger, too. For most people, the mortgage payment is the biggest bill they pay each month. It can be more difficult to catch up on missed payments if you fall behind on these larger bills.</p> <p>The most common type of unsecured debt, credit cards, also come with more flexibility. You only have to pay the minimum required monthly payment on your credit card debt to avoid being hit with a late fee. You might pay off your secured debts first and then have enough money to pay at least the minimum on your credit cards.</p> <p>Interest rates might play a role, too. Unsecured debt generally comes with higher interest rates. If you fall behind on these payments, the amount you owe can build quickly because of these higher rates. Skipping two or three credit card payments can quickly boost your overall debt on your cards.</p> <p>Ideally, you'd never have to prioritize unsecured or secured debts, but would rather pay all your bills on time each month. But if you must make the difficult decision of which bills to pay and which to wait on, knowing the difference between secured and unsecured debt can help you make that call.</p> <h2 style="text-align: center;">Like this article? Pin it!</h2> <div align="center"><a data-pin-do="buttonPin" data-pin-count="above" data-pin-tall="true" data-pin-save="true" href="https://www.pinterest.com/pin/create/button/?url=http%3A%2F%2Fwww.wisebread.com%2Fwhy-you-need-to-know-the-difference-between-secured-and-unsecured-debts&amp;media=http%3A%2F%2Fwww.wisebread.com%2Ffiles%2Ffruganomics%2Fu5180%2FWhy%2520You%2520Need%2520to%2520Know%2520the%2520Difference%2520Between%2520Secured%2520and%2520Unsecured%2520Debts.jpg&amp;description=Why%20You%20Need%20to%20Know%20the%20Difference%20Between%20Secured%20and%20Unsecured%20Debts"></a></p> <script async defer src="//assets.pinterest.com/js/pinit.js"></script></div> <p style="text-align: center;"><img src="http://wisebread.killeracesmedia.netdna-cdn.com/files/fruganomics/u5180/Why%20You%20Need%20to%20Know%20the%20Difference%20Between%20Secured%20and%20Unsecured%20Debts.jpg" alt="Why You Need to Know the Difference Between Secured and Unsecured Debts" width="250" height="374" /></p> <br /><div id="custom_wisebread_footer"><div id="rss_tagline">This article is from <a href="http://www.wisebread.com/dan-rafter">Dan Rafter</a> of <a href="http://www.wisebread.com/why-you-need-to-know-the-difference-between-secured-and-unsecured-debts">Wise Bread</a>, an award-winning personal finance and <a href="http://www.wisebread.com/credit-cards">credit card comparison</a> website. Read more great articles from Wise Bread:</div><div class="view view-similarterms view-id-similarterms view-display-id-block_2 view-dom-id-2"> <div class="view-content"> <div class="item-list"> <ul> <li class="views-row views-row-1 views-row-odd views-row-first"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/pay-these-6-bills-first-when-money-is-tight">Pay These 6 Bills First When Money Is Tight</a></span> </div> </li> <li class="views-row views-row-2 views-row-even"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/5-monthly-bills-that-vary-based-on-your-credit-behavior">5 Monthly Bills That Vary Based on Your Credit Behavior</a></span> </div> </li> <li class="views-row views-row-3 views-row-odd"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/heres-why-you-shouldnt-freak-out-if-you-miss-a-payment-due-date">Here&#039;s Why You Shouldn&#039;t Freak Out If You Miss a Payment Due Date</a></span> </div> </li> <li class="views-row views-row-4 views-row-even"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/how-late-payments-affect-your-credit">How Late Payments Affect Your Credit</a></span> </div> </li> <li class="views-row views-row-5 views-row-odd views-row-last"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/who-pays-when-loved-ones-leave-debt-behind">Who Pays When Loved Ones Leave Debt Behind?</a></span> </div> </li> </ul> </div> </div> </div> </div><br/></br> Personal Finance Debt Management assets auto loans bills Cars credit score late payments mortgages secured debt unsecured debt Wed, 26 Jul 2017 08:30:14 +0000 Dan Rafter 1988258 at http://www.wisebread.com How Long Does it Take Break Even With a Home ReFi? http://www.wisebread.com/how-long-does-it-take-break-even-with-a-home-refi <div class="field field-type-filefield field-field-blog-image"> <div class="field-items"> <div class="field-item odd"> <a href="/how-long-does-it-take-break-even-with-a-home-refi" class="imagecache imagecache-250w imagecache-linked imagecache-250w_linked"><img src="http://wisebread.killeracesmedia.netdna-cdn.com/files/fruganomics/imagecache/250w/blog-images/woman_s_hand_putting_house_model_on_coins_stack.jpg" alt="Woman&#039;s hand putting house model on coins stack" title="" class="imagecache imagecache-250w" width="250" height="140" /></a> </div> </div> </div> <p>Refinancing your mortgage loan to one with a lower interest rate makes good financial sense &mdash; usually. It all depends on how much lower your interest rate will be, how much you owe on your loan, and how long you plan to stay in your home.</p> <p>Refinancing a mortgage isn't free. Costs vary by lender, but you can expect to pay from 1.5 percent to 2 percent of your outstanding loan balance to close a refinance. If you owe $200,000 on your mortgage loan, that comes out to $3,000 to $4,000 &mdash; no small amount. But if your monthly mortgage loan drops by enough, you'll recoup those costs quickly. Then, the savings you enjoy each month will start adding up.</p> <p>Determining how long it will take you to break even on your refinance requires a bit of math. Let's crunch the numbers.</p> <h2>Finding the break-even point</h2> <p>Say you have been paying off a $250,000 30-year, fixed-rate mortgage with an interest rate of 4.50 percent. Your monthly mortgage payment &mdash; not including the extra costs of property taxes and homeowners insurance &mdash; will be about $1,266.</p> <p>Now, say when you're ready to refinance, your mortgage balance is down to $200,000. If you refinance that balance to a new 30-year, fixed-rate mortgage with an interest rate of 3.85 percent, your estimated monthly payment, again not including taxes and insurance, will fall to about $937 a month. That's a savings of about $329 a month, or $3,948 a year.</p> <p>If you spent $3,000 in closing costs on your refinance, you'd hit the break-even point on your loan in less than a year.</p> <p>But refinancing doesn't always come with such a quick payback period.</p> <p>For example, if you have been paying off a 30-year, fixed-rate loan of $200,000 at an interest rate of 4.15 percent, your monthly payment, not including taxes and insurance, would be about $972. Say you now owe $190,000 on this loan and you refinance it to a 30-year, fixed-rate loan with an interest rate of 3.85 percent. This will drop your monthly payment to about $890, a difference of $82 a month or about $948 a year.</p> <p>If it costs you $3,000 to refinance that mortgage, it will take you a little more than three years to hit the break-even point. If you plan on living in your home and paying off your new mortgage for more than these three years, this refinance might still make financial sense. The payback period, though, won't be quite as quick.</p> <h2>Speeding up break-even</h2> <p>You can reduce the amount of time it takes you to reach the break-even point in several ways.</p> <p>First, you can shop around for a mortgage lender that charges lower fees. You are free to close your refinance with any lender that is licensed to do business in your state. You don't have to work with the lender to which you are already sending your monthly mortgage payments. Obviously, the lower your upfront costs to refinance, the quicker you'll hit your break-even point.</p> <p>Nabbing the lowest possible interest rate also will help speed up the break-even point. The lower your rate, the lower your monthly payment will be. Getting a lower rate, though, requires a strong credit score.</p> <p>Before applying for a refinance, order free copies of your credit reports from AnnualCreditReport.com. These reports won't give you your credit score, but they will show you whether you have any late or missed payments on your record. Such financial dings will lower your credit score. If you have blemishes on your credit reports, qualifying for an interest rate low enough to make a refinance worthwhile might not be possible.</p> <p>You can also order your FICO score from the three national credit bureaus: TransUnion, Equifax, or Experian. This will usually cost you about $15, but will let you know for sure how high or low your credit score is. If you want to get your score for free, you can call a lender and explain that you want to refinance. This lender will often check your current score, and can let you know immediately whether it is high enough to justify a refinance.</p> <p>Finally, the more you've paid off on your existing mortgage before you refinance, the quicker you'll reach your break-even point. Most lenders won't approve you for a refinance unless you've already built up 20 percent equity in your home. So don't run to refinance just a year after taking out your existing mortgage. Unless your home has shot up in value dramatically, you probably won't have enough equity to qualify for a refinance, or to make it financially worthwhile.</p> <h2>Other factors to consider</h2> <p>Of course, lowering your monthly payment isn't the only reason to refinance. You also want to reduce the amount of interest you pay on your loan.</p> <p>That's why you might consider refinancing from a longer-term loan to one with a shorter term. Doing so will usually increase your monthly payment because you are cutting the number of years it takes you to repay your mortgage. But refinancing from a 30-year, fixed-rate loan to a 15-year, fixed-rate loan could save you plenty in interest.</p> <p>If you take out a 30-year, fixed-rate mortgage of $200,000 at an interest rate of 4.2 percent, you'll pay more than $150,000 in interest if you take the full 30 years to pay off your loan. If you instead take out a 15-year, fixed-rate loan for $200,000 at an interest rate of 3.5 percent, you'll pay less than $60,000 in interest if you take the full term to pay off this loan.</p> <p>The best move to make when considering a refinance is to go over the numbers with a mortgage lender. A lender won't charge you for a preliminary look at your mortgage and credit. But a lender will be able to tell you how long it will take to recover the costs of refinancing and whether you'll qualify for a low enough interest rate to make refinancing a viable choice.</p> <h2 style="text-align: center;">Like this article? Pin it!</h2> <div align="center"><a data-pin-do="buttonPin" data-pin-count="above" data-pin-tall="true" data-pin-save="true" href="https://www.pinterest.com/pin/create/button/?url=http%3A%2F%2Fwww.wisebread.com%2Fhow-long-does-it-take-break-even-with-a-home-refi&amp;media=http%3A%2F%2Fwww.wisebread.com%2Ffiles%2Ffruganomics%2Fu5180%2FHow%2520Long%2520Does%2520it%2520Take%2520Break%2520Even%2520With%2520a%2520Home%2520ReFi-.jpg&amp;description=How%20Long%20Does%20it%20Take%20Break%20Even%20With%20a%20Home%20ReFi%3F"></a></p> <script async defer src="//assets.pinterest.com/js/pinit.js"></script></div> <p style="text-align: center;"><img src="http://wisebread.killeracesmedia.netdna-cdn.com/files/fruganomics/u5180/How%20Long%20Does%20it%20Take%20Break%20Even%20With%20a%20Home%20ReFi-.jpg" alt="How Long Does it Take Break Even With a Home ReFi?" width="250" height="374" /></p> <br /><div id="custom_wisebread_footer"><div id="rss_tagline">This article is from <a href="http://www.wisebread.com/dan-rafter">Dan Rafter</a> of <a href="http://www.wisebread.com/how-long-does-it-take-break-even-with-a-home-refi">Wise Bread</a>, an award-winning personal finance and <a href="http://www.wisebread.com/credit-cards">credit card comparison</a> website. Read more great articles from Wise Bread:</div><div class="view view-similarterms view-id-similarterms view-display-id-block_2 view-dom-id-4"> <div class="view-content"> <div class="item-list"> <ul> <li class="views-row views-row-1 views-row-odd views-row-first"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/5-mortgage-details-you-should-know-before-you-sign">5 Mortgage Details You Should Know Before You Sign</a></span> </div> </li> <li class="views-row views-row-2 views-row-even"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/how-to-make-ends-meet-when-youre-house-poor">How to Make Ends Meet When You&#039;re House Poor</a></span> </div> </li> <li class="views-row views-row-3 views-row-odd"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/should-you-pay-your-mortgage-off-early">Should You Pay Your Mortgage Off Early?</a></span> </div> </li> <li class="views-row views-row-4 views-row-even"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/is-it-safe-to-re-finance-your-home-close-to-retirement">Is it Safe to Re-Finance Your Home Close to Retirement?</a></span> </div> </li> <li class="views-row views-row-5 views-row-odd views-row-last"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/stop-believing-these-5-home-refinance-myths">Stop Believing These 5 Home Refinance Myths</a></span> </div> </li> </ul> </div> </div> </div> </div><br/></br> Real Estate and Housing break-even point home loans homeownership interest rates mortgages payments refinance Tue, 25 Jul 2017 08:30:14 +0000 Dan Rafter 1986882 at http://www.wisebread.com 5 Things to Consider Before Buying a Home When You're Single http://www.wisebread.com/5-things-to-consider-before-buying-a-home-when-youre-single <div class="field field-type-filefield field-field-blog-image"> <div class="field-items"> <div class="field-item odd"> <a href="/5-things-to-consider-before-buying-a-home-when-youre-single" class="imagecache imagecache-250w imagecache-linked imagecache-250w_linked"><img src="http://wisebread.killeracesmedia.netdna-cdn.com/files/fruganomics/imagecache/250w/blog-images/woman_with_keys_standing_outside_new_home.jpg" alt="Woman With Keys Standing Outside New Home" title="" class="imagecache imagecache-250w" width="250" height="140" /></a> </div> </div> </div> <p>It's become increasingly common for people to buy a home by themselves instead of as a couple. According to the National Association of Realtors' <em>Profile of Homebuyers and Sellers</em>, new homeowners in 2016 were comprised of 17 percent single females and 7 percent single males.</p> <p>Buying a home is a big undertaking, whether or not you're doing it as a single person. I spoke to Markus Brown, a realtor in Orange County, California, about some things to consider before buying a home by yourself.</p> <h2>1. Understand the risks</h2> <p>As a single person, is it better to pay rent or to own a home? The monthly costs of owning a home may be higher than what you pay in monthly rent when you consider costs like insurance, property tax, maintenance, and higher utility bills. You're also taking on greater risk by taking on a loan. (See also: <a href="http://www.wisebread.com/why-i-choose-to-rent-instead-of-buy?ref=seealso" target="_blank">Why I Choose to Rent Instead of Buy</a>)</p> <p>However, according to Brown, there can be significant advantages to owning a home, the biggest of which is the ability to fix your housing costs in the future. When you own your home on a fixed-rate, 30-year mortgage, you remove unknowns such as your rent going up, being asked to move because the landlord wants to renovate or sell, and more. This allows you to make concrete plans for the future without worrying about housing.</p> <p>If you're planning to stay in the area for several years, you should consider buying a home. &quot;Historically, you need to own for at least five to 10 years before market appreciation helps you to make a profit,&quot; Brown says, &quot;[but] if you're going to be relocated in a year or two, don't buy.&quot;</p> <h2>2. Review your finances</h2> <p>Having only one income to rely on in purchasing a home can stretch you financially, so it's a good idea to go over your finances before considering a home purchase. You'll also want to take steps to <a href="http://www.wisebread.com/5-ways-to-improve-your-credit-score-fast" target="_blank">improve your credit score</a> before buying a home. Consider the stability of your income and whether you have enough savings to see you through if something happens to that source of income.</p> <p>As a single person, you will want to have a large savings buffer, because you won't be able to fall back on another person's income if yours is disrupted. The rule of thumb is that your emergency fund should have at least six months of income &mdash; nine if your income is unpredictable.</p> <h2>3. Calculate the hidden costs</h2> <p>Don't be surprised by the &quot;hidden&quot; costs of owning a home, including the closing costs, property taxes, insurance, possible homeowners association fees, utilities, maintenance, and potential renovations. Factor all these extra costs into your budget before deciding on a home that you can afford. According to Brown, many people think they can buy more than they actually can when all these costs are factored in. (See also: <a href="http://www.wisebread.com/10-hidden-housing-costs-new-homeowners-dont-expect?ref=seealso" target="_blank">10 Hidden Housing Costs New Homeowners Don't Expect</a>)</p> <h2>4. Talk to a mortgage broker</h2> <p>As a single person, it can be more difficult to quality for a loan because you can only count on one income. If it's your first time buying, you may be able to qualify for an FHA loan, which allows you to purchase with a lower down payment (only 3.5 percent down) and lower interest rates, and doesn't require as high of a high credit score.</p> <p>Another option is the HomeReady Mortgage Program through Fannie Mae, which only requires as little as 3 percent down, and allows greater flexibility in qualifying for a loan, including income from co-borrowers, family members who are not on the loan, gifts from family members, and even &quot;boarder&quot; income from a roommate.</p> <p>Talk to a mortgage broker or financial adviser about whether it makes sense for you to pay a lower down payment. You may have to purchase mortgage insurance if you don't put enough money down, so factor those costs into your decision.</p> <p>&quot;Low down-payment loans make sense for people who have a solid job and stable income, but don't have a lot of savings because they've just started out, such as new grads or young couples,&quot; Brown recommends.</p> <h2>5. Choose the right home</h2> <p>In his experience, Brown sees single people going for condos, because the maintenance and chores are simpler and easier to deal with. Brown suggests buying only what you need at the moment and getting a foot in the market, instead of trying to buy a family home when you don't know what you'll need later. Look for a condo in a community that has other working professionals, and allows you to enjoy your single life.</p> <p>However, it's better to buy a two-bedroom rather than a one-bedroom if you can afford it, according to Brown, because it gives you what he calls &quot;future-proofing.&quot; If you lose your job or the economy tanks, you can take on a roommate to help you share the costs. On the other hand, if you get married or have your partner move in, you have enough space for the next step in building your family. Either way, you won't have to sell immediately if something changes in the future.</p> <p>In addition to potential financial benefits, there are a lot of intangible benefits to owning your own home. Pride in your own home, the ability to control things about your living situation that you couldn't control as a renter (such as decorations and renovations), and the feeling of being more settled, are all attractive reasons to buy a home as a single person.</p> <h2 style="text-align: center;">Like this article? Pin it!</h2> <div align="center"><a data-pin-do="buttonPin" data-pin-count="above" data-pin-tall="true" data-pin-save="true" href="https://www.pinterest.com/pin/create/button/?url=http%3A%2F%2Fwww.wisebread.com%2F5-things-to-consider-before-buying-a-home-when-youre-single&amp;media=http%3A%2F%2Fwww.wisebread.com%2Ffiles%2Ffruganomics%2Fu5180%2F5%2520Things%2520to%2520Consider%2520Before%2520Buying%2520a%2520Home%2520When%2520Youre%2520Single.jpg&amp;description=5%20Things%20to%20Consider%20Before%20Buying%20a%20Home%20When%20Youre%20Single"></a></p> <script async defer src="//assets.pinterest.com/js/pinit.js"></script></div> <p style="text-align: center;"><img src="http://wisebread.killeracesmedia.netdna-cdn.com/files/fruganomics/u5180/5%20Things%20to%20Consider%20Before%20Buying%20a%20Home%20When%20Youre%20Single.jpg" alt="5 Things to Consider Before Buying a Home When You're Single" width="250" height="374" /></p> <br /><div id="custom_wisebread_footer"><div id="rss_tagline">This article is from <a href="http://www.wisebread.com/camilla-cheung">Camilla Cheung</a> of <a href="http://www.wisebread.com/5-things-to-consider-before-buying-a-home-when-youre-single">Wise Bread</a>, an award-winning personal finance and <a href="http://www.wisebread.com/credit-cards">credit card comparison</a> website. Read more great articles from Wise Bread:</div><div class="view view-similarterms view-id-similarterms view-display-id-block_2 view-dom-id-1"> <div class="view-content"> <div class="item-list"> <ul> <li class="views-row views-row-1 views-row-odd views-row-first"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/make-these-5-money-moves-before-applying-for-a-mortgage">Make These 5 Money Moves Before Applying for a Mortgage</a></span> </div> </li> <li class="views-row views-row-2 views-row-even"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/how-to-build-equity-in-your-home">How to Build Equity in Your Home</a></span> </div> </li> <li class="views-row views-row-3 views-row-odd"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/everything-a-first-time-home-buyer-needs-to-buy-a-house">Everything a First-Time Home Buyer Needs to Buy a House</a></span> </div> </li> <li class="views-row views-row-4 views-row-even"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/5-times-buying-a-home-with-cash-is-bad-for-your-budget">5 Times Buying a Home With Cash Is Bad for Your Budget</a></span> </div> </li> <li class="views-row views-row-5 views-row-odd views-row-last"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/watch-out-for-these-5-last-minute-home-buying-costs">Watch Out for These 5 Last Minute Home Buying Costs</a></span> </div> </li> </ul> </div> </div> </div> </div><br/></br> Real Estate and Housing buying a home credit score down payments hidden costs homeownership income mortgages qualifying single Tue, 18 Jul 2017 09:00:09 +0000 Camilla Cheung 1985091 at http://www.wisebread.com Stop Believing These 5 Home Refinance Myths http://www.wisebread.com/stop-believing-these-5-home-refinance-myths <div class="field field-type-filefield field-field-blog-image"> <div class="field-items"> <div class="field-item odd"> <a href="/stop-believing-these-5-home-refinance-myths" class="imagecache imagecache-250w imagecache-linked imagecache-250w_linked"><img src="http://wisebread.killeracesmedia.netdna-cdn.com/files/fruganomics/imagecache/250w/blog-images/color_question_mark_in_drawing_house.jpg" alt="Color question mark in drawing house" title="" class="imagecache imagecache-250w" width="250" height="140" /></a> </div> </div> </div> <p>You might think, because of rising interest rates, that it no longer makes sense to refinance your home mortgage. Or maybe you are certain you don't have enough equity in your home. Perhaps you don't think you have enough available cash to afford a refinance, so what is the point of trying?</p> <p>Here's the truth: Those are all refinancing myths.</p> <p>Don't let these common falsehoods stop you from trying to refinance your existing mortgage into one with a lower interest rate or a shorter term. Refinancing can boost your financial health, either by lowering your monthly payment or reducing the amount of interest you'll pay during the life of your loan.</p> <h2>1. I don't have enough equity in my home</h2> <p>Traditionally, mortgage lenders have required that homeowners have at least 20 percent equity in their residences before refinancing. It might not be easy to hit that mark if your home has lost value since you purchased it.</p> <p>But the 20 percent rule isn't quite as absolute as it once was. The federal government's <a href="https://www.harp.gov/" target="_blank">Home Affordable Refinance Program</a>, better known as HARP, allows homeowners to refinance even if they have no equity or negative equity in their homes. You will have to meet certain requirements, but if you are low on equity, HARP can help.</p> <p>To participate in HARP, ask the lender that is handling your refinance. This lender will help you determine if you qualify for the program.</p> <h2>2. I can't afford it</h2> <p>No one disputes that refinancing is expensive. Lenders vary, but you can expect to pay about 1.5 percent of your loan's outstanding value in closing costs. If you are refinancing a loan with a balance of $200,000, you'll pay about $3,000 in fees.</p> <p>Don't panic, though: Most lenders will allow you to roll these fees into the balance of your new loan. This means you won't have to pay them upfront when you close on your refinance. Instead, they'll be paid out over time, every time you make a monthly payment on your new mortgage.</p> <p>Of course, if you can afford the costs of refinancing, you can also pay the closing fees upfront in one lump sum.</p> <h2>3. I was turned down before, so there's no reason to try again</h2> <p>Maybe you tried refinancing a year ago, but your lender rejected your application. This doesn't mean that you can't ever qualify. The reason for your rejection is key.</p> <p>Did your lender reject your application because your credit score was too low? If you start a new history of paying all your bills on time and <a href="http://www.wisebread.com/the-fastest-method-to-eliminate-credit-card-debt?ref=internal" target="_blank">cutting down on credit card debt</a>, your score might be high enough today to secure a &quot;yes&quot; from a lender. Maybe your lender rejected you because your monthly debt obligations were too high for your gross monthly income. If your income has risen or you've reduced your monthly debts, you might qualify if you try again. (See also: <a href="http://www.wisebread.com/5-ways-to-improve-your-credit-score-fast?ref=seealso" target="_blank">5 Ways to Improve Your Credit Score Fast</a>)</p> <h2>4. It's easier to refinance with your existing lender</h2> <p>You are free to refinance with any mortgage lender that is licensed to do business in your community. This means that you don't have to close your refinance with the lender to which you are already sending your monthly payments. You might think it's easier to work with your existing lender, but this isn't really true. You'll still have to send paperwork to your current lender verifying your job status, salary, and yearly income. This information, after all, might have changed since you first took out your mortgage. Your current lender will want to verify that your income is still high enough to afford your new monthly mortgage payments.</p> <p>Also, it makes sense to get quotes from several lenders when refinancing. You might nab a lower interest rate or fees from a new lender.</p> <h2>5. Interest rates are too high to make refinancing worthwhile</h2> <p>Mortgage interest rates are still at historic lows, but they have risen in the last year. You might think that it no longer makes sense to refinance. That's not necessarily true.</p> <p>It all depends on where your current interest rate stands. If the interest rate on your 30-year, fixed-rate loan is 5 percent and you can refinance to a new loan with a rate of 4 percent, you will save money each month. Sure, you would have saved even more had you refinanced earlier, when you might have nabbed an interest rate of 3.5 percent. But if you can still drop your rate by a full percentage point, you will still save a significant amount of money in a refinance.</p> <p>There are also other reasons to refinance besides chopping your monthly payment. You might consider refinancing to a mortgage with a shorter term. By refinancing from, say, a 30-year, fixed-rate loan to a 15-year, fixed-rate loan, you can reduce the amount of interest you pay over the life of your loan by $100,000 or more, if you hold onto your loan for its entire term. Your monthly mortgage payment will go up because you are paying your loan back at a faster rate, but your interest rate, and the interest you pay in total, will fall.</p> <h2 style="text-align: center;">Like this article? Pin it!</h2> <div align="center"><a data-pin-do="buttonPin" data-pin-count="above" data-pin-tall="true" data-pin-save="true" href="https://www.pinterest.com/pin/create/button/?url=http%3A%2F%2Fwww.wisebread.com%2Fstop-believing-these-5-home-refinance-myths&amp;media=http%3A%2F%2Fwww.wisebread.com%2Ffiles%2Ffruganomics%2Fu5180%2FStop%2520Believing%2520These%25205%2520Home%2520Refinance%2520Myths.jpg&amp;description=Stop%20Believing%20These%205%20Home%20Refinance%20Myths"></a></p> <script async defer src="//assets.pinterest.com/js/pinit.js"></script></div> <p style="text-align: center;"><img src="http://wisebread.killeracesmedia.netdna-cdn.com/files/fruganomics/u5180/Stop%20Believing%20These%205%20Home%20Refinance%20Myths.jpg" alt="Stop Believing These 5 Home Refinance Myths" width="250" height="374" /></p> <br /><div id="custom_wisebread_footer"><div id="rss_tagline">This article is from <a href="http://www.wisebread.com/dan-rafter">Dan Rafter</a> of <a href="http://www.wisebread.com/stop-believing-these-5-home-refinance-myths">Wise Bread</a>, an award-winning personal finance and <a href="http://www.wisebread.com/credit-cards">credit card comparison</a> website. Read more great articles from Wise Bread:</div><div class="view view-similarterms view-id-similarterms view-display-id-block_2 view-dom-id-5"> <div class="view-content"> <div class="item-list"> <ul> <li class="views-row views-row-1 views-row-odd views-row-first"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/heres-whats-included-in-a-homes-closing-costs">Here&#039;s What&#039;s Included in a Home&#039;s Closing Costs</a></span> </div> </li> <li class="views-row views-row-2 views-row-even"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/5-mortgage-details-you-should-know-before-you-sign">5 Mortgage Details You Should Know Before You Sign</a></span> </div> </li> <li class="views-row views-row-3 views-row-odd"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/how-long-does-it-take-break-even-with-a-home-refi">How Long Does it Take Break Even With a Home ReFi?</a></span> </div> </li> <li class="views-row views-row-4 views-row-even"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/4-surprising-things-lenders-check-besides-your-credit-score">4 Surprising Things Lenders Check Besides Your Credit Score</a></span> </div> </li> <li class="views-row views-row-5 views-row-odd views-row-last"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/how-to-make-ends-meet-when-youre-house-poor">How to Make Ends Meet When You&#039;re House Poor</a></span> </div> </li> </ul> </div> </div> </div> </div><br/></br> Real Estate and Housing equity fees HARP interest rates lenders mortgages myths refinance turned down Fri, 07 Jul 2017 08:01:04 +0000 Dan Rafter 1976047 at http://www.wisebread.com Stop Thinking of Your House as an Investment http://www.wisebread.com/heres-why-your-house-is-not-an-investment <div class="field field-type-filefield field-field-blog-image"> <div class="field-items"> <div class="field-item odd"> <a href="/heres-why-your-house-is-not-an-investment" class="imagecache imagecache-250w imagecache-linked imagecache-250w_linked"><img src="http://wisebread.killeracesmedia.netdna-cdn.com/files/fruganomics/imagecache/250w/blog-images/saving_to_buy_a_house_or_home_savings_concept.jpg" alt="Saving to buy a house or home savings concept" title="" class="imagecache imagecache-250w" width="250" height="140" /></a> </div> </div> </div> <p>Your house is many things: It's a place to raise your children, hold family parties, relax on weekends and, maybe, rent out for a bit of extra cash.</p> <p>But here's one thing that many economists believe it is not: an investment.</p> <p>That flies in the face of what you might believe. After all, if you buy your home for $200,000 and then sell it 15 years later for $270,000, you've made $70,000, right? That sounds like a good return on investment, but it's actually not.</p> <p>That profit doesn't include all the property taxes you've paid on your home, the interest you've paid on your mortgage loan, or all the money you've spent on maintaining your residence.</p> <p>The fact is, the only time a home might truly be a good investment is when you're downsizing or moving to an apartment after selling it.</p> <h2>Sobering numbers</h2> <p>In a 2014 interview with USA Today, economist and housing expert Robert Shiller explained why consumers should not think of housing as an investment.</p> <p>From 1890 through 2012, <a href="https://www.usatoday.com/story/money/personalfinance/2014/05/10/why-your-home-is-not-a-good-investment/8900911/" target="_blank">home prices adjusted for inflation</a> did not grow at all, according to Shiller's research. During the same period, though, stocks did. Shiller found that the S&amp;P 500 increased by more than 2,000 times during those same years, adjusted for inflation.</p> <p>Shiller found that there have been long periods of time in which housing values when adjusted for inflation fell. He said that from 1890 through 1980, real home prices dropped by about 10 percent.</p> <p>Personal financial blog Observations also looked at inflation-adjusted housing prices from 1900 through 2012. According to these numbers, the average annual price for U.S. homes was just <a href="http://observationsandnotes.blogspot.com/2011/07/housing-prices-inflation-since-1900.html" target="_blank">0.1 percent a year</a> after inflation.</p> <p>These numbers make it clear: You should buy a house because it's a house, you need a place to live, and you don't want to rent. You shouldn't buy a house thinking that you're making a great financial investment. (See also: <a href="http://www.wisebread.com/rent-your-home-or-buy-heres-how-to-decide?ref=seealso" target="_blank">Rent or Buy a Home? Here's How to Decide</a>)</p> <h2>It's not easy to get your cash from an investment in housing</h2> <p>There are other aspects of houses that make them less-than-ideal as investments. The biggest? It's not easy to turn your home into cash.</p> <p>Sure, your home might have risen in value during the 10 years you've owned it. (Even if, as shown above, when adjusted for inflation, that appreciation might be negligible.) But accessing this appreciation isn't easy. You'll have to sell your home to get at whatever money it's made.</p> <p>Selling a home is no simple task. It's time-consuming. It's expensive, too, as you'll probably invest in everything from fresh coats of paint to major appliance repairs before you put your home on the market. And what if you don't want to sell your home? Then you won't be able to nab that cash.</p> <p>You can take out home equity lines of credit or home equity loans to tap the equity in your home. But you'll have to pay back the money you borrow, with interest, each month. If your home should lose value after you take out our home equity loan, you could end up underwater, owing more on your combined mortgage loans than what your home is worth.</p> <h2>If it's an investment, it's an expensive one</h2> <p>It's expensive to own a home. And that, too, makes housing a less attractive investment.</p> <p>Consider homeowners insurance. If you are using a mortgage loan to finance your house, you're required to invest in this insurance. Even if you're not financing your home, you should take out a policy to protect yourself. Realtor.com estimates that the average homeowners insurance premium across the country is $952.</p> <p>Then there are property taxes. The U.S. Census Bureau said that in 2017 the average household was spending $2,149 in property taxes.</p> <p>Finally, there is maintenance. This will vary, of course, but Realtor.com says that you can expect to pay from 1 percent to 4 percent of your home's value in maintenance each year. If your home is worth $200,000, that comes to between $2,000 and $8,000 a year.</p> <p>If you do sell your home for a profit, you need to factor in these costs of ownership when patting yourself on the back for making such a wise investment.</p> <h2>Housing's not bad, though</h2> <p>This doesn't mean that buying a house is a bad financial move. You do have to live somewhere, and depending on where you live, it might be less expensive to own a home than it is to rent an apartment.</p> <p>Owning a home also gives you some financial flexibility. You can rent out a portion of your home, for instance, to earn additional cash. You'll also be able to claim tax write-offs for the interest you pay on your mortgage loan each year and the property taxes you pay.</p> <p>Housing does provide this other benefits, too: shelter for your family, a gathering place for relatives and friends, and a respite at the end of a tough day.</p> <p>It's important to be realistic about housing's investment potential. If you want to invest, buying stocks or investing in mutual funds might be a better choice. Even low-interest, but safe investments such as bonds or CDs make more sense as an investment.</p> <h2 style="text-align: center;">Like this article? Pin it!</h2> <div align="center"><a data-pin-do="buttonPin" data-pin-count="above" data-pin-tall="true" data-pin-save="true" href="https://www.pinterest.com/pin/create/button/?url=http%3A%2F%2Fwww.wisebread.com%2Fheres-why-your-house-is-not-an-investment&amp;media=http%3A%2F%2Fwww.wisebread.com%2Ffiles%2Ffruganomics%2Fu5180%2FStop%2520Thinking%2520of%2520Your%2520House%2520as%2520an%2520Investment.jpg&amp;description=Stop%20Thinking%20of%20Your%20House%20as%20an%20Investment"></a></p> <script async defer src="//assets.pinterest.com/js/pinit.js"></script></div> <p style="text-align: center;"><img src="http://wisebread.killeracesmedia.netdna-cdn.com/files/fruganomics/u5180/Stop%20Thinking%20of%20Your%20House%20as%20an%20Investment.jpg" alt="Stop Thinking of Your House as an Investment" width="250" height="374" /></p> <br /><div id="custom_wisebread_footer"><div id="rss_tagline">This article is from <a href="http://www.wisebread.com/dan-rafter">Dan Rafter</a> of <a href="http://www.wisebread.com/heres-why-your-house-is-not-an-investment">Wise Bread</a>, an award-winning personal finance and <a href="http://www.wisebread.com/credit-cards">credit card comparison</a> website. Read more great articles from Wise Bread:</div><div class="view view-similarterms view-id-similarterms view-display-id-block_2 view-dom-id-1"> <div class="view-content"> <div class="item-list"> <ul> <li class="views-row views-row-1 views-row-odd views-row-first"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/6-questions-to-ask-before-selling-your-house">6 Questions to Ask Before Selling Your House</a></span> </div> </li> <li class="views-row views-row-2 views-row-even"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/yes-you-need-home-title-insurance-heres-why">Yes, You Need Home Title Insurance — Here&#039;s Why</a></span> </div> </li> <li class="views-row views-row-3 views-row-odd"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/rent-your-home-or-buy-heres-how-to-decide">Rent Your Home or Buy? Here&#039;s How to Decide</a></span> </div> </li> <li class="views-row views-row-4 views-row-even"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/the-only-5-rules-you-need-to-know-about-investing-in-real-estate">The Only 5 Rules You Need to Know About Investing in Real Estate</a></span> </div> </li> <li class="views-row views-row-5 views-row-odd views-row-last"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/4-home-buying-habits-we-can-learn-from-millennials">4 Home-Buying Habits We Can Learn From Millennials</a></span> </div> </li> </ul> </div> </div> </div> </div><br/></br> Investment Real Estate and Housing homeownership housing market maintenance mortgages property taxes renting return on investment selling a home Thu, 06 Jul 2017 08:30:16 +0000 Dan Rafter 1976048 at http://www.wisebread.com 6 Signs a Seller Should Pass on a Home Offer http://www.wisebread.com/6-signs-a-seller-should-pass-on-a-home-offer <div class="field field-type-filefield field-field-blog-image"> <div class="field-items"> <div class="field-item odd"> <a href="/6-signs-a-seller-should-pass-on-a-home-offer" class="imagecache imagecache-250w imagecache-linked imagecache-250w_linked"><img src="http://wisebread.killeracesmedia.netdna-cdn.com/files/fruganomics/imagecache/250w/blog-images/loan_for_house_concept.jpg" alt="Loan for house concept" title="" class="imagecache imagecache-250w" width="250" height="140" /></a> </div> </div> </div> <p>There's no way to predict how long it'll take to sell a house. I'm in the process right now, and it's excruciating. When you get an offer from a buyer, your first inclination may be to seize it. The sooner you accept an offer, the sooner you can move into a new place, right?</p> <p>But not every offer is a good offer &mdash; and if you accept the wrong one, the deal could collapse (which has happened plenty of times in my amateur real estate dealings). Learning how to recognize the red flags of an iffy buyer is the best way to protect yourself.</p> <p>Here are six warning signs to consider before accepting an offer on your house.</p> <h2>1. Buyer isn't preapproved</h2> <p>There's no rule that says a buyer must be preapproved before submitting a bid. But when a person has taken steps to secure a mortgage loan, you know you're dealing with a serious buyer.</p> <p>On the other hand, if you receive an offer from a buyer who hasn't met with a lender, you don't know if they meet the requirements for a mortgage. If you accept this offer only to learn that they can't get financing, you're back to square one.</p> <h2>2. Buyer is inflexible</h2> <p>Be wary of buyers who have nonnegotiable time constraints for closing and moving into the home. A buyer may want a quick close, which isn't a bad thing if you already have another place. But if it doesn't complement your own timeline, you could end up living with family, or worse, in a hotel, which chips away at money that could go toward your new home.</p> <p>Then again, a buyer may not want to take possession of the house for 60 or 90 days. This can delay closing on your next property, and if you've already signed a purchase agreement for another property, you could end up juggling two mortgages for a couple of months. Ideally, you should work with a buyer who's able to close and take possession of the house around the same time you're scheduled to close on your new property.</p> <h2>3. Buyer's offer is contingent on selling their house</h2> <p>If a buyer has yet to sell their current house, they may submit a purchase agreement that's contingent on the sale of their home. Accepting this offer is tempting, especially if your property hasn't had a lot of interest. But it's a risky move.</p> <p>You don't know if or when the buyer's home will sell. If the buyer's property doesn't sell within the agreed upon time frame, you'll have to cancel the purchase agreement. This wastes time and you could potentially miss out on other offers.</p> <h2>4. Buyer offers an amount above list price</h2> <p>A buyer who has a strong interest in your property might submit an offer above your list price. This is good news for your wallet, but you could run into appraisal problems if the offered price is more than your home's value.</p> <p>As a rule of thumb, a bank will only lend up to a home's appraised value. If your list price is $200,000 and your home's worth $205,000, yet you receive an offer for $210,000, the buyer's mortgage lender will not approve financing unless the buyer pays the difference between the sale price and appraised value out-of-pocket.</p> <p>An appraisal issue isn't the end of the world, but it's a hassle because you have to renegotiate the sale price. To avoid this hang-up, know your home's market value and select offers within this range.</p> <h2>5. You receive an offer from a cash buyer</h2> <p>A cash buyer can be a home seller's dream. You don't have to worry about the buyer qualifying for financing, appraisals, and many cash deals close relatively quickly. But if you receive an offer from a cash buyer, don't take their word for it. Ask for proof of funds before accepting the offer, such as a bank statement or other documentation. The last thing you want to do is take your house off the market, and then find out a so-called cash buyer doesn't have enough funds to complete the purchase.</p> <h2>6. Buyer requests too many concessions</h2> <p>Some homebuyers are bold and ask for concession after concession. This is typical if your home has been on the market for a while and buyers smell your desperation. They may submit an offer well below your asking price, ask for seller-paid closing costs, request appliances like the washer and dryer, and some go as far as requesting repairs in their purchase agreement.</p> <p>It's tempting to give in to these requests, but at the same time, don't get in over your head financially. Keep in mind that the buyer will likely also request a home inspection, which could uncover costly hidden problems with the home. If you agree to drop your sale price, pay a buyer's closing costs, and take care of their requested home repairs, this can leave you with little money to address any issues found by a home inspector. If you don't correct issues on the home inspection report, the buyer could pull out of the deal.</p> <p>When reviewing your purchase agreement, be realistic and don't feel you have to submit to a buyer's every wish.</p> <h2 style="text-align: center;">Like this article? Pin it!</h2> <div align="center"><a data-pin-do="buttonPin" data-pin-count="above" data-pin-tall="true" data-pin-save="true" href="https://www.pinterest.com/pin/create/button/?url=http%3A%2F%2Fwww.wisebread.com%2F6-signs-a-seller-should-pass-on-a-home-offer&amp;media=http%3A%2F%2Fwww.wisebread.com%2Ffiles%2Ffruganomics%2Fu5180%2F6%2520Signs%2520a%2520Seller%2520Should%2520Pass%2520on%2520a%2520Home%2520Offer.jpg&amp;description=6%20Signs%20a%20Seller%20Should%20Pass%20on%20a%20Home%20Offer"></a></p> <script async defer src="//assets.pinterest.com/js/pinit.js"></script></div> <p style="text-align: center;"><img src="http://wisebread.killeracesmedia.netdna-cdn.com/files/fruganomics/u5180/6%20Signs%20a%20Seller%20Should%20Pass%20on%20a%20Home%20Offer.jpg" alt="6 Signs a Seller Should Pass on a Home Offer" width="250" height="374" /></p> <br /><div id="custom_wisebread_footer"><div id="rss_tagline">This article is from <a href="http://www.wisebread.com/mikey-rox">Mikey Rox</a> of <a href="http://www.wisebread.com/6-signs-a-seller-should-pass-on-a-home-offer">Wise Bread</a>, an award-winning personal finance and <a href="http://www.wisebread.com/credit-cards">credit card comparison</a> website. 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