Mortgage Refinancing Tips

Mortgage Refinancing

Consider refinancing your mortgage if you can get a rate that is at least one percentage point lower than your existing mortgage rate and plan to keep the new mortgage for several years or more. Ask an accountant to calculate precisely how much your new mortgage (including up-front fees) will cost and whether, in the long run, it will cost less than your current mortgage.

Consider utilizing a 'Money Merge Account' if you do not desire to refinance. In most cases, refinancing is not required to use this program, and your mortgage payoff will be as little as 1/3 the conventional payoff time. The 'Money Merge Account' focuses on "term" rather than "rate" which saves you not only future interest on a mortgage, but considerable time.

Eliminate Unnecessary Insurance. If the down payment on your house was less than 20% of its appraised value, you are most likely paying private mortgage insurance (PMI). For example, suppose you bought an $80,000 home a few years ago and put $10,000 down, leaving $70,000 on a mortgage. If the house today would be apprised at $95,000 and you have paid the $70,000 mortgage down to $68,000, refinancing (assuming the interest rate and refinancing changes are favorable) can save the need for PMI since the difference between the mortgage ($68K) and the value ($98K) is now more than 20%.

Tips on Utilities

Energy Efficiency Programs for Replacement Furnaces, Water Heaters and Air Conditioners

Check with your local utility company for grants or low interest loans that are rolled into your utility bill when you purchase energy efficient units. Energy savings could largely pay for the cost of the item.

Installing an insulating jacket around your water heater can result in savings, as can turning the temperature of your water heater down to 110-120 degrees (no need to run it hotter).

Electricity

To save as much as hundreds of dollars a year on electricity, make certain that any new appliances you purchase, especially air conditioners and furnaces, are energy-efficient. Information on the energy efficiency of major appliances is found on Energy Guide Labels required by federal law.

Enrolling in load management programs and off-hour rate programs offered by your electric utility may save you up to $100 a year in electricity costs. Call your electric utility for information about these cost-saving programs.

Water

A lot of the water used in your home is used in the bathroom. A toilet uses four to five gallons for each flush and a shower uses five to ten gallons per minute. Do not use the toilet for a trash disposal and flush only when necessary. Fix faucet leaks and leaks in the toilet tank or bowl that can waste thousands of gallons of water a day. Check to see if your water department is offering rebates on replacement of 4-5 gallons per flush toilets with 1.6 gallons per flush toilets. Long, hot showers are nice, but run up your utility bills. Shorten your showers. Turn off the water while soaping or shampooing and install flow restrictors and water-saving showerheads. Don't let the sink faucet run while shaving, washing, or brushing your teeth.

The kitchen is also a large user of water. Reduce the time you let water stream from the faucet. Use a stopper for the drain or use a pan of water when washing vegetables. The water can later be poured onto houseplants. Use the garbage disposal sparingly. Load the dishwasher to capacity. A partially filled washer wastes water and energy. Use the shortest cycle necessary to get your dishes clean and use the air-dry cycle.

Water can also be saved outdoors. Washing sidewalks and driveways with a hose is costly - use a broom. Water your lawn sparingly and only during cool morning or evening hours. Don't waste water by letting it run on sidewalks, the driveway and into the street.

Home Heating

A home energy audit can identify ways to save up to hundreds of dollars a year on home heating (and air conditioning). Ask your electric or gas utility if they can do this audit for free or for a reasonable charge. If they cannot, ask them to refer you to a qualified professional.

Conserve fuel by keeping your house cooler than normal. Temporarily "close off" heat to rooms you use rarely. Windows and doors are places where large amounts of heat escape. Stuff cracks around windows and doors with towels or other such materials.

Use kitchen, bath, and other ventilating fans wisely; in just one hour, these fans can pull out a houseful of warmed or cooled air. Turn fans off as soon as they have done the job.

Home Air Conditioning

Don't set your thermostat at a colder setting than normal when you turn on your air conditioner. It will not cool your home any faster and could result in excessive cooling and, therefore, unnecessary expense.

Consider using an interior fan in conjunction with your window air conditioner to spread the cooled air more effectively through your home without greatly increasing your power use.

Plant trees or shrubs to shade air-conditioning units but not to block the airflow. A unit operating in the shade uses as much as 10% less electricity than the same one operating in the sun.

Local Telephone Service

Check with your phone company to see whether a flat rate or measured service plan will save you the most money.

You will usually save money by buying your phones instead of leasing them.

Check your local phone bill to see if you have optional services that you don't really need or use. Each option you drop could save you $40 or more each year.

Long Distance Telephone Service

Long distance calls made during evenings, at night, or on weekends can cost significantly less than weekday calls.

If you make more than a few long distance calls each month, consider subscribing to a calling plan. Call several long distance companies to see which one has the least expensive plan for the calls you make.

Whenever possible, dial your long distance calls directly. Using the operator to complete a call can cost you an extra $6.

Tips on First Mortgage Loans

First Mortgage Loans (The Federal Reserve Board publishes a Home Mortgage Guide with valuable information on the subject.)

Although your monthly payment may be higher, you can save tens of thousands of dollars in interest charges by shopping for the shortest-term mortgage you can afford. On a $100,000 fixed-rate loan at 8% annual percentage rate (APR), for example, you will pay $90,000 less in interest on a l 5-year mortgage than on a 30-year mortgage.

You can save thousands of dollars in interest charges by shopping for the lowest-rate mortgage with the fewest points. On a 15-year, $100,000 fixed-rate mortgage, just lowering the APR from 8.5% to 8.0% can save you more than $5,000 in interest charges. On this mortgage, paying two points instead of three would save you an additional $1,000.

If your local newspaper does not periodically run mortgage rate surveys, call at least six lenders for information about their rates (APRs), points, and fees. Then ask an accountant to compute precisely how much each mortgage option will cost and its tax implications.

Be aware that the interest rate on most adjustable rate mortgage loans (ARMs) can vary a great deal over the lifetime of the mortgage. An increase of several percentage points might raise payments by hundreds of dollars per month.

To maximize the use of every penny to your mortgage, and in virtually every case pay off years earlier, look into a 'Money Merge Account', which uses special software and support to give homeowners the greatest savings available. This unique system gives you increased financial security with flexibility.

Housing Tips

Real estate agents often work for the seller, not the buyer. You can often negotiate a lower sale price by employing a buyer broker who works for you not the seller. If the buyer broker or the broker's firm also lists properties, there may be a conflict of interest, so ask them to tell you if they are showing you a property that they have listed.

Real estate agents often have a variety of letters after their name to indicate the special training and certifications they have. All other things being equal, you might want to have the best qualified agent. Here is a list of the common credentials.

Do not purchase any house until it has been examined by a home inspector that you selected.

Renting a Place to Live

Do not limit your rental housing search to classified ads or referrals from friends and acquaintances. Select buildings where you would like to live and contact their building manager or owner to see if anything is available.

Remember that signing a lease probably obligates you to make all monthly payments for the term of the agreement.

Home Improvement

Home repairs often cost thousands of dollars and are the subject of frequent complaints. Select from among several well established, licensed contractors who have submitted written, fixed-price bids for the work.

Do not sign any contract that requires full payment before satisfactory completion of the work.

Major Appliances

Consult Consumer Reports, available in most public libraries, for information about specific brands and how to evaluate them, including energy use. There are often great price and quality differences among brands.

Once you've selected a brand, check the phone book to learn what stores carry this brand, then call at least four of these stores for the prices of specific models. After each store has given you a quote, ask if that's the lowest price they can offer you. This comparison shopping can save you as much as $100 or more.

Tips for your financial future

1. Get Paid What You're Worth and Spend Less Than You Earn

It sounds simplistic, but many people struggle with this first basic rule. Make sure you know what your job is worth in the marketplace, by conducting an evaluation of your skills, productivity, job tasks, contribution to the company, and the going rate, both inside and outside the company, for what you do. Being underpaid even a thousand dollars a year can have a significant cumulative effect over the course of your working life.

No matter how much or how little you're paid, you'll never get ahead if you spend more than you earn. Often it's easier to spend less than it is to earn more, and a little cost-cutting effort in a number of areas can result in big savings. It doesn't always have to involve making big sacrifices.

2. Stick to a Budget

One of my favorite subjects: budgeting. It's not a four-letter word. How can you know where your money is going if you don't budget? How can you set spending and saving goals if you don't know where your money is going? You need a budget whether you make thousands or hundreds of thousands of dollars a year.

3. Pay Off Credit Card Debt

Credit card debt is the number one obstacle to getting ahead financially. Those little pieces of plastic are so easy to use, and it's so easy to forget that it's real money we're dealing with when we whip them out to pay for a purchase, large or small. Despite our good resolves to pay the balance off quickly, the reality is that we often don't, and end up paying far more for things than we would have paid if we had used cash.

4. Contribute to a Retirement Plan

If your employer has a 401(k) plan and you don't contribute to it, you're walking away from one of the best deals out there. Ask your employer if they have a 401(k) plan (or similar plan), and sign up today. If you're already contributing, try to increase your contribution. If your employer doesn't offer a retirement plan, consider an IRA.

5. Have a Savings Plan

You've heard it before: Pay yourself first! If you wait until you've met all your other financial obligations before seeing what's left over for saving, chances are you'll never have a healthy savings account or investments. Resolve to set aside a minimum of 5% to 10% of your salary for savings BEFORE you start paying your bills. Better yet, have money automatically deducted from your paycheck and deposited into a separate account.

6. Invest!

If you're contributing to a retirement plan and a savings account and you can still manage to put some money into other investments, all the better.

7. Maximize Your Employment Benefits

Employment benefits like a 401(k) plan, flexible spending accounts, medical and dental insurance, etc., are worth big bucks. Make sure you're maximizing yours and taking advantage of the ones that can save you money by reducing taxes or out-of-pocket expenses.

8. Review Your Insurance Coverages

Too many people are talked into paying too much for life and disability insurance, whether it's by adding these coverages to car loans, buying whole-life insurance policies when term-life makes more sense, or buying life insurance when you have no dependents. On the other hand, it's important that you have enough insurance to protect your dependents and your income in the case of death or disability.

9. Update Your Will

70% of Americans don't have a will. If you have dependents, no matter how little or how much you own, you need a will. If your situation isn't too complicated you can even do your own with software like WillMaker from Nolo Press. Protect your loved ones. Write a will.

10. Keep Good Records

If you don't keep good records, you're probably not claiming all your allowable income tax deductions and credits. Set up a system now and use it all year. It's much easier than scrambling to find everything at tax time, only to miss items that might have saved you money.

Reality Check

How are you doing on the top ten list? If you're not doing at least six of the ten, resolve to make improvements. Choose one area at a time and set a goal for incorporating all ten into your lifestyle.