Options to Re-Financing Your Mortgage

According to most personal finance articles that I have come across, they don’t recommend re-financing your mortgage unless you can get a rate that is 1 percentage point (1%) less than your current rate. That makes sense. If you only get like a 0.25% decrease, it will take a long time to make back all of the expenses related to a re-fi. And, let’s face it, most people won’t stay in their house long enough to reap the benefits of the smallish rate decrease.

Well, I just realized that there is another option.

Here’s the story. The other day I came home from work and discovered a UPS letter that was sitting at my front door. In it was a rate reduction kit from my existing mortgage company. They wanted to reduce my current rate from by 0.375% As I read the details, there was only a small (relatively speaking) fee of $325. At first I thought it was too good to be true and I actually called my mortgage company to verify the authenticity of this offer as I was somewhat worried that maybe someone was trying to steal my hard earned $325 from me. The good news was that this was legit.

So, here is how it works. For the processing fee of $325, my company simply adjusts the terms of my mortgage so that my rate is lower. It is that simple. It’s just like a re-fi but without all the hassle and it costs WAY LESS (duh) money. For me, it was a no-brainer because with the rate reduction, I literally make my money back in 1.5 months as my payment was reduced quite a bit.

I came to find out that my mortgage company has a whole “loan adjustment” department. If you haven’t been lucky enough to receive the offer from your company, you may want to try to calling them and see if they offer such a program. If they do, it could be well worth your effort. I will say that I can imagine that I was offered this rate reduction because I’ve been a very consistent borrower, always paying on-time and I even pay extra principle each month. I just wish I had known about this before because I would have been more proactive about getting rate reductions earlier in the life of my mortgage.

Anyway, good luck. I hope this information helps.

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Federal Reserve Cuts Rates Again

Today, the Federal Reserve Board cuts rates again. This time they cut rates by a quaerter point. Many people incorrectly think that the rate cut directly, positively impacts home mortgage rates but it doesn't. Since home mortgage loans are usually tied to bonds, Fed rate cuts tend to hurt mortgage rates. Generally, mortgage rates are impacted by economic direction. A bullish market helps stocks and hurts bonds so mortgage rates goes up. A bearish market hurts stocks but helps bonds, making mortgage rates fall. Obviously, there are tons of factors that influence rates so don't think this simple explanation explains it all.

I will say that the rate cut does positively HELP credit card rates, home equities loans and car loans. It just doesn't help mortgage rates.

Also keep in mind that there is a difference between the Federal Funds Rate and the Discount Rate. In addition to the Federal Funds Rate, the Board aslo cut the discount rate today by a quarter point. The Federal Funds Rate and it is the rate at which banks pay to borrow from the marketplace and the rate that affects credit cards, home equity lines of credit, car loans and other consumer loan rates. The other rate that the Feds control is the "discount rate". This is the rate that the Fed charges to lend money directly to banks and other lending institutions.

Federal Reserve Helps You

On November 19, 2007, the federal reserve board announced a new program for consumers that need help in regards to bank problems. It's called Federal Reserve Consumer Help and the link is www.federalreserveconsumerhelp.gov.

The board says, "To make it more convenient for consumers to contact us, we created a one-stop complaint and inquiry site where consumers know they can go to get help."

The website allows for easy navigation and the ability to submit complaints electronically.

Here is all the contact information:

Online: http://www.federalreserveconsumerhelp.gov/
E-mail: ConsumerHelp@FederalReserve.gov
Toll-free: 888-851-1920 (8 a.m. to 6 p.m. CT)
Toll-free TTY: 877-766-8533
Toll-free fax: 877-888-2520
Mail: Federal Reserve Consumer Help, P.O. Box 1200, Minneapolis, MN 55480

Great Finance Tools for Kids

Unfortunately, many schools don't teach basic personal finances. As parents, it's critical that we educate our children about money and managing money. Recently, a program was featured on The Today Show. The program is called "PAYjr" and it is a website that allows teens to get pre-paid Visa cards. For kids under 13, there is a feature that allows for tracking of allowance and chores. I think it's a great idea as it allows kids to start learning about money at an early age.

Money Magazine's "25 Rules to Grow Rich By"

article: http://money.cnn.com/magazines/moneymag/moneymag_archive/2006/11/01/8392426/index.htm

Home
1 For return on investment, the best home renovation is to upgrade an old bathroom. Kitchens come in second.
2 It's worth refinancing your mortgage when you can cut your interest rate by at least one point.
3 Spend no more than 2½ times your income on a home. For a down payment, it's best to come up with at least 20%.
4 Your total housing payments should not exceed 28% of your gross income. Total debt payments should come in under 36%.
5 Never hire a roofer, driveway paver or chimney sweep who is going door to door.
Invest
6 All else being equal, the best place to invest is a 401(k). Once you've earned the full company match, max out a Roth IRA. Still have money to invest? Put more in your 401(k) or a traditional IRA.
7 To figure out what percentage of your money should be in stocks, subtract your age from 120.
8 Invest no more than 10% of your portfolio in your company stock--or any single company's stock, for that matter.
9 The most you should pay in annual fees for a mutual fund is 1% for a large-company stock fund, 1.3% for any other type of stock fund and 0.6% for a U.S. bond fund.
10 Aim to build a retirement nest egg that is 25 times the annual investment income you need. So if you want $40,000 a year to supplement Social Security and a pension, you must save $1 million.
11 If you don't understand how an investment works, don't buy it.
Plan
12 If you're not saving 10% of your salary, you aren't saving enough.
13 Keep three months' worth of living expenses in a bank savings account or a money-market fund for emergencies. If you have kids or rely on one income, make it six months'.
14 Aim to accumulate enough money to pay for a third of your kids' college costs. You can borrow the rest or cover it from your income.
15 You need enough life insurance to replace at least five years of your salary--as much as 10 years if you have several young children or significant debts.
16 When you buy insurance, choose the highest deductible you can afford. It's the easiest way to lower your premium.
17 The best credit card is a no-fee rewards card that you pay in full every month. But if you carry a balance, high interest rates will wipe out the benefits.
18 The best way to improve your credit score is to pay bills on time and to borrow no more than 30% of your available credit.
19 Anyone who calls or e-mails you asking for your Social Security number or information about your bank or credit-card account is a scam artist.
Spend
20 The best way to save money on a car is to buy a late-model used car and drive it until it's junk. A car loses 30% of its value in the first year.
21 Lease a new car or truck only if you plan to replace it within two or three years.
22 Resist the urge to buy the latest computer or other gadget as soon as it comes out. Wait three months and the price will be lower.
23 Buy airline tickets early because the cheapest fares are snapped up first. Most seats go on sale 11 months in advance.
24 Don't redeem frequent-flier miles unless you can get more than a dollar's worth of air fare or other stuff for every 100 miles you spend.
25 When you shop for electronics, don't pay for an extended warranty. One exception: It's a laptop and the warranty is from the manufacturer.

Family of 9 Lives Debt Free on $35K per Year

I just read the article on abcnews.com site (20/20) about America's Cheapest Family. They live on $35,000 per year and there are 2 adults and 7 kids. The most amazing thing is that that they live DEBT FREE. There was a video on yahoo.com this morning as well. As most personal finance blogs seem to re-iterate, it's the small things that add up. This family goes to the store once a month and they literally save hundreds of dollars each trip using coupons. Over the course of a year, that's thousands of dollars. Thousands of dollars adds up to a huge percentage when the total salary is only $35K! They even wrote a book called America's Cheapest Family Gets You Right on the Money: Your Guide to Living Better, Spending Less, and Cashing in on Your Dreams