Repair My Finances.com

With the New Year having past us by, many of us are starting to think now about our New Year’s financial resolutions, one of the major issues that most of us always promise to address it finances. Most of us find that we could make a number of improvements to our finances, whether it is in terms of managing our finances and budgeting more effectively or whether it is in terms of cutting back and streamlining our outgoings.

With 2008 well under way and our Christmas spending hitting home, now is the time to start thinking about improving our finances, so that we can look at starting the New Year on a more positive financial note. Below are some of the top ways in which you can improve your finances for 2008.

1. Streamline your outgoings

It is amazing just how much money we all waste each year, often without even realizing. If you go through your regular outgoings with a fine tooth comb you could well come across things such as unused subscriptions and useless memberships for services that you no longer really use, and you can cancel these and put the money to better use.

2. Cut back on non-necessities

Of course, we all love to splash out from time to time, but many of us tend to live a champagne lifestyle on beer money. Go through your monthly outgoings and try and make cutbacks wherever possible on non-necessities such as going out and spending on clothes. By spending a few extra nights in - perhaps cooking dinner at home for friends instead of going out for meals - and avoiding the temptation of too much retail therapy you could save a small fortune.

3. Take advantage of the sales

Although this may seem as though it is contradicting the above, you can be really thrifty by taking advantage of the sales. Watch out for them, as many shops have sales at different times of the year, and not just january. This doesn’t mean you should go out and spend on anything that looks like the price has been knocked down even if you don’t really want or need it. However, try and determine whether you will need things such as clothes for work or for the kids in the coming months, and get them during the sales when you can often get twice as much for your money.

4. Improve your financial management

If you are the type of person that hates to look at their bank balance and does nothing to monitor income and outgoings then now is the time to make a change. Keep a track on everything that goes in and out of your account, and check your balance regularly. This will help you to avoid everything from becoming the victim of fraud or theft to accruing costly bank charges for exceeding overdraft limits.

5. Review your debts

Most of us have a number of debts in one form or another, whether it is credit cards, stores cards, or loans. Take a look at how much you owe and see whether you could save yourself hassle and money each month by consolidating your debts - or in the case of just credit card debts by transferring them onto a 0% balance transfer card.

In working through your divorce, don’t forget your most valuable assets: your life and your health. Both directly affect your ability to earn income and to care and provide for yourself and your family. You have several areas to look at to ensure you’ve managed your risks.

Most couples name each other as beneficiaries on their life insurance policies. At a minimum you will need to change your beneficiary designations on all policies, regardless of size. You may need to adjust the amount of coverage, particularly if you were the nonworking spouse and you now plan to work to support yourself and your family. Factors to consider include replacing your income, paying off debt, and leavingenough to care for your family if you die.

Health insurance usually comes with employment, and again, nonworking spouses will be most at risk in a divorce, since they will no longer be considered dependents covered under the employed spouse’s group insurance. If you work and your employer offers health insurance, the divorce is considered a qualifying event, and you can switch to your employer’s coverage without waiting for an open enrollment period. Call the insurance carrier for your spouse’s policy and request a certificate of insurance. This proves that you were insured until the qualifying event, so you can’t be excluded or charged a higher premium for pre-existing conditions.

If you are not employed, the same qualifying event definition makes you eligible for coverage under COBRA, a federal that allows you to continue the coverage for a certain time period under specific conditions. COBRA can be an expensive option, because you pay the full premium yourself, and is temporary at best. Certain professional groups and other associations also offer group insurance for which you may be eligible. You can also purchase individual health insurance privately, although the rates are typically much higher than a group policy with comparable benefits.

Each year, 12 percent of adult Americans suffer a long-term disability. For every seven employed Americans, one will have a period of disability five years or longer before age 65. A 35-year-old has a 50 percent chance of a disability lasting longer than three months before age 65. With two incomes, you have something of a safety net if you are unable to work because of a short- or long-term disability. Going it alone, you may want to consider disability coverage either through your employer or privately, especially if you have no emergency reserve funds or other income to fall back on.

Your homeowners insurance covers your house and its contents. If you decide to move to an apartment, you may need renter’s insurance to cover your possessions. Check limits for jewelry and other high valuables, such as antiques and collectibles, and purchase riders to cover them if necessary.

Risks play as important a part in forming your financial picture as do your assets and liabilities. With all the products and carriers in the market, the choices can be overwhelming. A financial or insurance professional can help you weigh your options and determine the best course of action during and after your divorce.

For many homebuyers, private mortgage insurance may not be the most celebrated form of insurance, but,
for some, it’s an absolute must. For those individuals who wouldn’t typically be able to afford a large 20
percent down payment, it’s a “foot in the door,” allowing for homeownership with as little as a 0-5 percent
down payment.

How much does it cost?
The average costs of mortgage insurance premiums vary, but typically they fall between one-half and one
percent of the loan amount, depending on the size of the down payment and loan specifics. On a $200,000
loan with a $10,000 down payment, you might expect to pay somewhere around $85 a month, or about
$1000 a year, in addition to your mortgage payment. Unlike your mortgage interest, these premiums are not
always tax deductible.1 Mortgage insurance is one of the few types of insurance products that doesn’t
underwrite it’s premiums based on individual default risk, rather the size of the borrower’s mortgage and the
amount of money put down determine the mortgage insurance quote. So, two individuals—regardless of
credit—with the same mortgage amount and down payment can expect to pay about the same PMI
premium.

Private Mortgage Insurance and Mortgage Protection Insurance
Private mortgage insurance and mortgage protection insurance are often confused.
Though they sound similar, they’re two totally different types of insurance products.
Mortgage protection insurance is essentially a life insurance policy designed to pay
off your mortgage in the event of your death. Whereas, private mortgage insurance
protects your lender, allowing you to finance a home with a smaller down-payment.
These two products should never be construed as substitutes for each other.

Canceling or Terminating PMI
So, you don’t like the idea of making those extra mortgage insurance payments?
Here are a few ways to eliminate mortgage insurance altogether:

Appraisal
If the value of your home has risen in recent years you may be able to terminate
your mortgage insurance. Once the equity in your home falls below the 80
percent  loan-to-value-ratio required by your  lender,  you can eliminate your
private mortgage insurance. You would, of course, have to present your lender
with a valid home appraisal before final termination. The costs associated with
getting an appraisal may or may not be worthwhile, depending on your unique
mortgage situation.

Remodel
It’s the same principal as above. By making home improvements, you’re
increasing the market value of your house, getting you that much closer to the
all-important 80 percent “LTV” level.

Pay down your mortgage
Paying down your mortgage may also be a viable option. Making even small
additional payments each month can make a big difference over time. Once
you get that loan-to-value-ratio below 80 percent, you’ll no longer be required to
make PMI payments.

Piggyback loan
Utilizing a piggyback loan such as a “80/20 loan” will allow you to avoid private mortgage
insurance. And by doing so, you typically avoid any “out of pocket” down payment, with the added         
benefit of a tax deduction. By piggybacking a second mortgage onto your first mortgage, you’re
achieving the desired 80% “LTV” on the first mortgage, and avoiding the PMI. The downside with
these types of mortgage vehicles is that the second mortgage usually comes at a substantially higher
interest rate, making PMI savings negligible. However, by utilizing a 80/10/10 type loan with the last  
10 percent going towards the down payment, you’ll often pay less than a straight loan with mortgage
insurance.

Automatic termination
Thanks to The Homeowner’s Protection Act (HPA) of 1998, you have the right to request private
mortgage insurance cancellation when you reach a 20 percent equity in your mortgage. What’s more,
lenders are required to automatically cancel PMI coverage when a 78 percent loan to value is reached.
Some exceptions to these provisions, such as liens on property or not keeping up with payments, may
require further PMI coverage.

1 Recent legislation has passed making PMI insurance tax deductible, much like mortgage interest and property
taxes. There are some restrictions, such as the property must be your primary residence, your adjusted gross
income must be $100k or less for full deduction (partial deductions up to $109K), and the origination of your
mortgage must have occurred on or after January 1, 2007. Lawmakers have extended this private mortgage
insurance tax deduction through 2010. Please consult a tax advisor regarding your specific situation.

By federal laws, credit card fees cannot actually be “hidden” from consumers, but that doesn’t mean that all credit card users fully understand how they are charged or what instances will result in fees or increases to existing rates. Sometimes, the fees are provided in the small print of the back of your statements, or only in the account disclosure statement you receive when you first open the account- so it’s easy to over look the fine details of credit card fees- and that is how they got the name “hidden”.

The only sure way for someone to skip the sometimes ridiculously high fees associated with credit cards is to pay their bill before it’s due, each and every month. In 1998, cardholders paid about $4.8 billion in penalty fees- which seems like a lot until you consider the fees of 2005- a whopping $12 billion. This leads to the conclusion that people are not paying their credit card bills on time and are not avoiding the penalties associated with late payments!

You’ll want to take a close look at your card member agreement. Some credit card companies are now recording receipt of payments received in envelopes other than the pre-printed envelopes up to 5 days after they receive them! In addition, where as just a few years ago you could be counted as “on time” if your payment was postmarked by the due date, now the majority of companies require that the payment must arrive before noon on the day it is due to be counted as on time. As if that wasn’t stringent enough, there are even many card issuers who have decided to shorten the billing periods from 31 days to 20 days!

Late penalties on credit cards are anywhere from $15 to $39. If the late fee puts you over your maximum limits, you’ll also get slammed with an over limit fee. Going over your maximum amount can also cause the card issuer to increase your interest rate as much as 24%.

Here’s a penalty you probably didn’t know about: if you are late on any of your creditors, a credit card lender could raise your interest rate. So even if you pay your credit card bill on time religiously, if you are late once with one of your other lenders, your credit card lender has the right to raise your interest rate! The institute for Consumer Financial Education in San Diego reports that about 40% of car issuers raise rates if they find their cardholders are late on other accounts.

How about companies that charge you a fee for having a card without a balance on it? Wells Fargo’s prime rate card will charge you $2 a month in minimum finance charges if you do not have a balance on the card!

Wonder what they do with all the fees they collect? Banks will explain the fees are there in order to cover their costs. It’s difficult to think they need these “hidden” fees when the regular and more well known charges like interest charges are bringing in over $80 billion each year, and an additional $31 billion a year is collected in cash-advance fees, balance transfer fees, annual fees and merchant fees!

Can you prevent yourself from having to pay these “hidden” fees if you use credit cards? Some of them. Try writing your check for at least your minimum amount due (more whenever possible) the very same day you receive the credit card bill. Put it in the mail the next day and you’ll never have a late payment. Even better than doing that would be to pay your bills online automatically each month, so there’s no way to forget to mail it.

You can also save considerably by choosing the right card for your spending needs and payment habits. Check for the best card on creditorweb.com, where there are hundreds of cards to choose from and information available on each to help you make the best selection. Make sure to keep an eye on changing terms of your card- if the interest rate increases or they begin charging an annual fee - transfer the balance to a better card.

Dorothy, the main character of the movie, The Wizard of Oz, once exclaimed, “There’s no place like home!” Even in a world much different than the one that existed when The Wizard of Oz was filmed, that old adage still holds true. If you’ve lived in a home even for a short amount of time, it’s probably filled with memories that will always be with you. Your walls are filled with pride and covered in photographs which document life’s many accomplishments. All of these memories, the good and the bad, come together to form your home. The place you’ve lived, and maybe even raised a family in, has given you a lot over the years, and with reverse mortgages, it can give you even more.

As many Americans plan for retirement and turn to alternative sources of post work income, one that may come to mind is a reverse mortgage. The concept of a reverse mortgage is rather simple: someone pays you, based on the value of your home. There are many options available as to how you wish to receive this money. You may choose to take monthly payments, take a lump sum, or receive a line of credit.  

When you purchased your home you probably had to make mortgage payments. As you did, you gradually decreased the amount of debt owed and gradually increased the amount of equity in your home. Reverse mortgages are the opposite. As time goes by, you gradually receive more and more money from the lending company. Thus, your debt increases and your equity decreases.

The purpose of a reverse mortgage is to have an added source of income, especially if you plan on selling your home near the end of your life or after you die. It allows you to receive the equity from your home and enjoy it in retirement.

The amount you receive in the reverse mortgage is based on the value of your home, current interest rates, and your current age. Once you’ve received the amount your home has been determined to be worth, less any fees charged by the lender, you then owe that amount to the lender.

You can pay that back any way you wish, but in many cases, the idea is to sell your home and repay the debt. Often, this is done by an estate after a person passes away and still has debt. As long as you’re permanently living in your home, you don’t have to pay the lender back.

Reverse mortgages do have a lot of details and can get complicated, which is why it’s best to ask a financial professional for advice before looking into them much further. While they may have a lot of technical details, they don’t have many requirements. In general, you must be 62 years of age or older, and own your own home. Those are the two basic requirements of a reverse mortgage.

Beyond that, there are a few other basic things to keep in mind.

Reverse mortgages do have upfront costs, just like a regular mortgage. They also have monthly service fees. However, all of the money you receive from the lender is tax-free. To get a better estimate of how much a reverse mortgage would pay you, it’s wise to meet with a financial professional.

Unfortunately, reverse mortgages aren’t for everyone. Reverse mortgages can provide a valuable resource to individuals when the circumstances are right, but there are many considerations to be taken before choosing one, including: fees, restrictions, estate planning considerations, need for income, other assets, health considerations, insurance coverage, and so on.  

Often times a reverse mortgage is a last resort for income for many individuals and many individuals decide that reverse mortgages aren’t for them. And in some situations, for instance, if you want the house to stay in your family for many generations, then it may not be for you.

There truly is no place like home and the reverse mortgage reminds us of that. It’s one of the few places on earth that can be filled with so many memories. So if a reverse mortgage sounds right for you, contact a financial professional today and discuss your options for proving the old adage right, “there’s no place like home.”