Daily Investment Tips

The best thing you can do to improve your financial health is eliminate high-interest debt. To Get out of debt, try to use any bonus, raise or tax refund to pay off credit cards in full. Even adding a few hundred dollars to your payments can make a huge difference in your plan to get out of debt, especially if you can get your credit card company to lower your rate.

Get Out of Debt Example

If your minimum payment is 4 percent of your debt, a $5,000 balance with an 18 percent interest rate would start with a $200 monthly payment, which would take 32 months to pay off and cost $1,314 in interest. If you pay $500 per month on a 5 percent card, you’ll cut your interest charges to $118 and pay off the balance in just 11 months. ..How does this simplify your life?

Once you’re out of debt, you won’t have to juggle minimum payments, and you’ll save a ton in interest, which frees up extra cash to reach the rest of your financial goals.

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An adjustable rate mortgage is a mortgage that starts you off with a low interest rate for the first two to five years. After two to five years the interest rate resets to a higher market rate. But borrowers can just take the equity out of their homes and refinance to a lower rate once it resets.

Advantages Of Adjustable Rate Mortgage

They allow you to buy a larger house than you can normally qualify for and have lower payments that you can afford.

Disadvatage & Risk of Adjustable Rate Mortgage

When housing prices drop, borrowers tend to find that they are unable to refinance their existing loans. This leaves many borrowers facing high mortgage payments that are two to three times their original payments.

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If you own a residential mortgage and you are behind with your monthly payments you can consider a loan modification. A loan modification cuts payment it can either be the monthly interest or the principal.

Banks are reluctant to reduce the principal, because that would require them to recognize losses when reporting quarterly financial results. Their modifications policy is to reduce the interest rate or giving the borrower more time to pay.

One company that specializes in reducing the principal is Selene Residential Mortgage Fund. Selene Mortgage fund buys loans, mostly from banks, at steep discounts to the balance due. Once the company owns the loan it renegotiates the terms with borrower.

In a Wallstreet journal case study, a borrower who worked with Selene Mortgage Fund was able to drastically reduce the principal plus interest.

The balance due was cut to $243,182 from $421,731, and the interest rate was lowered. Those steps reduced the monthly payment to $1,573 from $3,464, allowing the family to stay in their home despite a drop in Mr. Reynolds’ income as a real-estate agent.

written by Constantine Njeru \\ tags: Case Study, Interest Rate, Losses, Mortgage Fund, Mortgage Loan Modification, Mortgage Loans, Mortgage Tips, Mr Reynolds, Principal Banks, Principal Mortgage, Principal Residential, Quarterly Financial Results, Real Estate Agent, Residential Mortgage, Steep Discounts, Wallstreet Journal

When you have separate loans, Auto loans, credit card loans and student loans you pay interest for each loan. You can consolidate this loans into one and be able to reduce your monthly payment.

Home Equity Debt Consolidation

One way of reducing the monthly interest paid is to take out a home equity loan.A home equity loan has three advantages

A lower interest rate: Currently the rates for home equity loans are in single digits. Some experts estimate rates on home equity loans and lines can be lower than credit card rates by 7-10%-or more!

Tax savings: Interest payments on home equity loans or lines are potentially tax deductible, but credit card and auto loan interest payments are not. Please consult your tax advisor about the deductibility of interest with a home equity loan or line of credit.

Time savings : Make a single payment to your debt consolidation home equity loan or line rather than multiple payments to many lenders.

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In this Wall Street Journal article Christopher Jones, a New York financial planner has some clever ideas on how to allocate money during this period of low interest rate.

Mr. Jones is advising clients who can afford to pay cash for a home to take out a mortgage instead and invest the funds in a diversified portfolio. “If you look at where the market is now and where it could be five to 10 years from now, the return potential is significant,” he says. Ideally, investors would want to borrow at rates below 5% and invest the money in a well-diversified portfolio aiming to return 8% a year over 10 to 15 years.

Read the whole article at Wall Street Journal

written by Constantine Njeru \\ tags: 10 Years, Christopher Jones, Clever Ideas, Diversified Portfolio, Financial Advice, Financial Investing, Financial Planner, Interest Rate, Investing Advice, Investors, Money, Mortgage, Street Journal Article, Wall Street, Wall Street Journal

The consensus in wallstreet is that mortgage rates in US will continue to rise in 2010, 2011 and beyond.

According to this New York times article, this is what the analyst had to say:-

Bill Gross (he has made millions, NO! billions, investing in bonds) – It’s been a great thrill as rates descended, but now we face an extended climb.

The Mortgage Bankers Association expects the rise to continue, with the 30-year mortgage rate going to 5.5 percent by late summer and as high as 6 percent by the end of the year.

Morgan Stanley, are predicting that rates could rise by a percentage point and a half by the end of the year.

JPMorgan Stanley are forecasting a more modest half-point jump.

They cant agree mortgage interest rates will go up by how much but the consensus is up.

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