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Archive for the ‘Housing and Real Estate’ Category

Consumers and homeowners in particular tend to think that financial planning is all about investing.  In reality, the key to proper financial planning is making smart moves with your money to protect your hard-earned wealth.  Too often consumers fret about the specific investment’s return and ignore the things that they can control such as how to not lose money.

One of the key parts of a good financial plan is proper estate planning.  And one element of an estate plan is controlling for risks that can wipe out your wealth such as from a lawsuit or a creditor.

To that end the revisions that became effective with the updated Massachusetts Homestead Law will help all homeowners.

New Law in Massachusetts Will Protect Homeowners and Vital for Seniors

As reported in the Boston Tax Institute newsletter of May 31, 2011, the Massachusetts Legislature has enacted a new law that will increase homestead protection for homeowners in Massachusetts. Homestead protects a person’s residence from most creditors. If a homeowner is sued by a creditor or files for bankruptcy, a portion of their equity in their home – the “homestead estate” – is deemed unavailable to their creditors. The new law was passed on December 16, 2010, and became effective on March 16, 2011.

What a homestead exemption does is protect the property against attachment, levy on execution or a court-ordered forced sale to satisfy payment of a debt.

The new law essentially puts in place a minimum amount of coverage for all homeowners (now $125,000) and each homeowner can file the form to gain protection up to the extended amount ($500,000 or $1 million for an elder couple).

Cheap Protection Against Lawsuits or Creditors

This is cheap protection.  And vital for anyone.

Consider this: One lawsuit can not only ruin your day but force you to lose the equity in your home.

If you have teens at home and there is a severe car accident, you can be sued.  If you lose the lawsuit and are assessed a civil judgement by the court, the other party could put a lien on your home or even force the sale of the property to pay the claim.

An elder driver could drive through a wall or onto a sidewalk and cause property damage or personal injury that exceeds their insurance liability coverage.

These are only a couple of examples that could put someone’s home at risk.  This new law at least provides some basic protection and the extended coverage will provide more peace of mind.

Key Updates to the Law

Under the amended Massachusetts Homestead law (Estate of Homestead):

  • Massachusetts homeowners will receive automatic $125,000 protection against debt collectors (if they hold that much equity in their home) without having to do anything.
  • Homeowners can elect to file a homestead declaration with the Registry of Deeds, which will give homeowners up to $500,000 in equity protection from non-exempt creditors.  Homestead forms, or homestead deeds, are filed at the Registry of Deeds in the county in which the residence is located. The filing fee ranges from $35-$100.
  • For married couples, both spouses will now have to sign the form. Before only one spouse signed and protection was only afforded to the spouse who signed.  If a single person declares a homestead and subsequently gets married, the Homestead automatically protects the new spouse.
  • Homesteads now pass on to the surviving spouse and children who live in the home.  The protections also remain for transfers between relatives.
  • There is new protection for homeowners who receive insurance proceeds from fire or other damages.
  • There has always been confusion whether a homeowner had to re-file a homestead after a refinance.  The new law clarifies this issue – homeowners do NOT have to re-file a homestead after a refinance.  Under the new law, Homesteads are automatically subordinate to mortgages, and lenders are specifically prohibited from having borrowers waive or release a homestead.
  • Homesteads are now available for single families, condominiums, coops, manufactured homes and now for 2-4 unit homes; and also for homes that are held in a trust for estate planning or other reasons.
  • Closing attorneys in mortgage transactions must now provide borrowers with a notice of availability of a homestead.
  • There is no need to re-do/re-file an existing homestead under the new law.

The form itself is pretty easy to fill in and file with the registry where your primary residence is located and recorded.  For a $35 registry fee you could get $300,000 in protection from creditors (now up to $500,000).

Special note:  Attorney Ed Adamsky provided a clarification (thanks, Ed):

If you have already filed a homestead, you do not have to update it to get the benefits of the updated Massachusetts law. If you have not filed one, you should do so. In New Hampshire there is nothing to file

For specific guidance on legal issues, speak with a qualified attorney. For help in putting in place a financial plan or road map for your money that looks at all the pieces of your plan, then call a qualified financial planner who can help make sense of all the moving parts regarding your money.

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No doubt about it.  This has been a very rough winter that we lived through here in the Boston area.

While the calendar has turned to spring, many of us are still trying to fix the damage left behind by snow and ice from so many winter storms.

As I write this it still seems like we have imported the weather that Seattle or Portland, Oregon might be know for (even if it is true that Seattle has more sunny days than Boston). It is cold, overcast and wet.  Not the best days for cycling (my other passion besides Spencer and Kristin hanging out on the side panel here).  Nor is it good weather to hang out on the back deck which is something that I like to do during my lunch breaks.

But even if the weather were cooperating, I would not be able to use my deck. Why?  Well, let’s just say that Mother Nature left me a souvenir and a reminder about her power.

With all the snow and ice that we got, it was hard to keep up and one too many snowstorms (coupled with a builder who decided to save money on lag bolts) finally collapsed the deck sometime in February.

I came home to a note from my neighbor – Don’t go out on your deck.  Not that I was planning to go out in the middle of a dark night. But that is where the gas grill was located and I guess if I was a grilling fool I might go out and it would have been a long way down after that first step.

Mother Nature is still flexing her muscles especially along the Mississippi River.  Now my deck is a small thing compared to the devastation left behind in the wake of multiple mega-tornadoes that crossed through the South sort of like General Sherman’s March to the Sea and swollen rivers now drowning hundreds of acres of farmland and threatening homes along the Mississippi.

But it is instructive.

A Teachable Moment

Let’s just say that you shouldn’t leave anything to chance.  Sure, you may have a homeowner’s policy and you renew it each year.  But don’t assume that the coverage that you had last year is going to help you this year.  And you really need to review your policies with a qualified agent (or a good financial adviser) regularly.

Do you really have the right coverage?  After you file a claim is not when you want to find out that you’re not covered.

I’m reminded of my neighbor – the same one who left me the note – who had his basement flooded after an ice storm and the power and his generator both went out.  He ended up with an indoor pool in his basement when the sump pump stopped working.  He didn’t know that he could have had a rider on his policy to cover sump pumps.  That was probably a $5,000 mistake for a $50 to $100 rider on his policy.

The Insurance Claims Process

So after my little incident, I called my agent to file a claim.  The insurance company had been very prompt in sending out paperwork and an adjuster.

Because it was tax season, I was unable to get way from the office to meet with the adjuster.  I described the damage to him including the generator located under the deck and the gas grill that was on it. He took his notes but pretty much did his thing when he inspected the property.

In the end, the insurance company adjuster filed his estimate with the insurer and I received a copy.  The insurer quickly cut a check for the amount shown on the estimate.

But I reviewed the estimate and noticed discrepancies.  The dimensions of the deck on his estimate were smaller than the actual size.  There was no note about the higher cost composite decking material that I had.  Instead the estimate covered replacement with regular wood. There was no notation about the damages to the generator and electrical work needed to reinstall it.  Nor was there any allowance for the damages to the items on the deck.

Now I understand that trying to inspect damage when snowbanks are four feet high around the deck and the deck itself is covered makes it really difficult to get a proper view of the damage. Nothing nefarious is going on here. And to their credit, the insurer did note that they would send out the adjuster again.

But there is no incentive on the part of the insurer or their adjuster to come back out.  As far as they are concerned the property damage claim is settled.

This is why it is all the more important for you as a homeowner and policyholder to protect yourself.

How?  Get professional help on your side.

Enter the Public Insurance Adjuster

OK.  You like your insurance company. I’ve seen the ads.  They offer great service and rates. The ads are cute sometimes. And in most cases, the insurance company estimate is more than fair.

But you owe it to yourself to get a second opinion. (Heck, that’s good advice on most things in life especially those concerning money).

This is where you call in the help of a Public Insurance Adjuster.

In my case, I called on the help of  Matthew Alphen of Lynnfield, Massachusetts.  I first met Matt years ago at a Kiwanis event and stay connected to him through BNI connections we shared.

Like other Public Insurance Adjusters, Matt is licensed by the state’s Division of Insurance. He represents consumers with claims.

He came out and did his inspection and his cost estimate is higher.

Granted the deck wasn’t covered in snow by that time so he didn’t have to trudge through the snowbanks that once surrounded it.

Granted he and other public adjusters have an incentive to provide an estimate that may be higher than the first because of the way that he gets compensated. Like most public adjusters he receives ten percent (10%) of the amount a homeowner collects from the insurance proceeds.

But that also means he has an incentive to do a thorough job when representing a homeowner.

Reasons for the higher estimate:

  • He used correct dimensions
  • He noted the materials used
  • He researched the city building code and noted changes that would require upgrades needed once the deck is rebuilt

What You Can Do to Protect Yourself

Like I said: This is a teachable moment.

So here is a short list of actionable items to consider when dealing with insurance for your home. It can also be applicable for other types of insurance claims as well such as autos, rental property and business.

  • Review your policies regularly with your agent.  (While I do not sell insurance, I do help clients review their policy terms and coverages as part of my financial planning services). This is especially important to make sure that the agent has a correct description of the property and any changes or additions made are properly covered.
  • Make sure your coverage includes a rider for inflation protection.  Without it you may out-of-pocket to cover more of the repair costs yourself.
  • Make sure your coverage also provides for updated building code protection so that any repairs that need to be done to meet the new rules are covered.  Otherwise, it’s going to be out of your pocket.
  • When you have a damage claim call a public insurance adjuster for a second opinion.
  • Get a financial plan in place.  A good fee-based or fee-only financial planner can provide a second set of eyes to help you review and find the right kinds of insurance coverage.

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Reverse Mortgage Basics

A reverse mortgage is a type of loan that certain eligible homeowners can get to tap into the equity in their home. Unlike traditional loans, they do not require the same sort of underwriting so no income, asset or credit checks are needed.  And unlike a traditional loan, there is no monthly repayment for any amounts borrowed.  Repayment of the loan’s principal and interest starts only after the homeowner dies or the home is sold.

To be eligible for such a loan, all owners on the property title need to be at least age 62.

For the most part, reverse mortgages, also referred to as RMs, are backed by the federal government through the FHA (Federal Housing Administration) that administers the program.

Myth: The Bank Keeps the House

These types of mortgages have been around for many years (since the late 1970s) and have gone through many changes.

One misconception about these types of loans is that a homeowner loses the house to the bank because of certain terms of such loans when they first came out. In the way way past, banks would take the title to the home.  But that is far from the reality for these types of loans now. The property title remains with the homeowner.

How A Reverse Mortgage Limit Is Set

The amount of money that a homeowner gets is based on current age, life expectancy, and appraised value.  With this information, the bank will determine the credit line or limit that the homeowner can tap.  The lender will apply an interest rate to the amounts outstanding and add it to the balance owed (and subtract the interest accrued from the amount of credit line that is available).  Eventually, when the homeowner dies or moves out of the home then the lender will require repayment.

The total amount that is owed is capped as a percentage of the property value which is assumed to appreciate at a certain rate during the owner’s life expectancy.

A homeowner can move out and sell the property and keep the proceeds above whatever the payoff amount is.  If the homeowner dies and the property passes to his estate, his heirs can sell the property or refinance it and keep it.

The cost for such a loan can be pricey.  Even with recent administrative changes reducing origination fees from the standard 2% of the loan amount, these loans can cost upwards of $12,000 for a $250,000 or $300,000 credit line amount.  Although traditional credit and income underwriting are not required, all the other costs associated with a closing like title work, title insurance, recording fees, mortgage insurance and underwriting are still needed.

Why Would A Homeowner Consider A Reverse Mortgage? Comparing Some Options

Why would a homeowner opt for this? Let’s face it.  Most folks would prefer not to move into an assisted living facility or a nursing home if they can avoid it. So a reverse mortgage is a good option for those who want to age in place in their home.

It provides a cash flow to help support the costs of running the house. And it taps the equity that a homeowner has built up over time that can be used to pay for essentials like medicine or home renovations to make the home safe and useful for an aging homeowner.

Yes, home equity lines or loans are also an option.  They can be even cheaper certainly on the origination side since so many banks offer them with no closing costs.  But the homeowner must make a payment each month even if it is just the interest only that is typically required for the first five or 10 years of the line.  And if the owner doesn’t have the cash to make that payment, then there is the risk of a foreclosure.

As a former mortgage banker, I would see situations where an elder couple would call me after having refinanced the loan several times. Each time they had to incur closing costs and because their income or credit may have slipped they would only qualify for more costly loan terms that could put them at greater risk of losing the house down the road.

Downsides for A Reverse Mortgage

Setting up a reverse mortgage as a line of credit will not jeopardize Social Security benefits and is not counted as an income source for tax purposes. On the other hand, if the homeowner is receiving Medicaid, then it could be counted as an assessable asset that may limit qualification for such benefits.

Some folks who are facing bankruptcy have opted to go the reverse mortgage route.  Jesse Redlener and David Burbridge, attorneys who specialize in these matters, told me of the case where a couple transferred the title from joint ownership (husband and wife) to just the wife.  Then they completed the reverse mortgage process.  And the husband who now owned no other property filed for bankruptcy.  The courts considered this a fraudulent transfer of the property and the assets available for the credit line now became eligible to pay off the husband’s other creditors.

Get More Information From Your Planning Team

The bottom line here is that before making a serious money move you really need to bring in the professionals to help navigate through the minefield.  Actions have consequences and this is an area where a good team of advisers (banker, financial planner, attorney) can help.

For more information on reverse mortgages, you may want to call Bob Irving of First Integrity Mortgage, LLC, a licensed reverse mortgage originator.

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Let me offer the classic unsatisfying answer:  It depends.

Before you offer your John Hancock you should understand the risks involved.

Just like any other financial decision, it’s best to try to do this without the emotion, drama and angst that can complicate a relationship.  Easier said than done, I know.

But like your investments, you should do your own due diligence and follow your own values.

Sometimes it’s absolutely necessary to get a cosigner for a loan, credit card or apartment lease.  The best terms are offered to those with the lowest credit risks.  A credit card issuer, mortgage lender or landlord will rightly offer someone with an established good credit history and deeper pockets a whole lot better set of terms than a newly minted college grad or someone with a bunch of blemishes on their credit report.

I remember a favorite uncle of mine.  He was single, very responsible with money, a great saver.  He once went to buy a car but needed a younger nephew to consign for him for the auto loan because our uncle had no established credit.  He had paid cash for everything all his life making him an invisible man to a loan underwriter.

I also remember once walking across campus and a friend stopping me as I passed the financial aid office.  He asked me for a favor.  He needed a cosigner for his student loan and it was my lucky day to be the guy to help him.  Don’t worry about a thing, he told me.  I’m good for it, he had said.

Luckily he was but that’s not always the case.  The FTC reports that three out of four cosigners are asked to pay because the primary borrower hasn’t.

Know the Risks

There are risks in life and in every decision we make.  It’s not a matter of avoiding all risks but managing them, understanding them. Don’t just think that you can walk away once you’re on the hook for the loan.  Just because your signature may not appear first doesn’t mean that you won’t be the person they turn to collect the debt.

Landlords typically require a parent to cosign on an apartment for a child.  They know if the kid skips or the keg party gets too wild that Mom and Dad will not want to risk their good credit and will be there to cover the bill.

Remember that each loan or credit card you have will have an impact on your own credit score.  The payment history and amount utilized compared to the maximum line of credit can have a potential adverse impact on your own credit score.

And the amount of the debt will be counted as if it were your own.  This may make it difficult or impossible to get a loan when you need one.  I had a client who had cosigned for a car loan for her adult son.  The son has made every payment on time.  But when his mom applied for a home equity line of credit the car loan fixed payment was included in calculating the underwriter’s debt ratios.  Combined with her other debts it was enough to push her over the maximum qualifying debt ratio allowed resulting in a loan decline.

Put Yourself in the Lender’s Shoes

If you treat this like an investment or a loan, you should be prepared to ask questions.

You should be asking the same sort of questions that any would.  Why do they need the money?  What’s the default risk? Can they afford the debt?  How will they manage to pay it back?

Curb Your Enthusiasm … Set Limits

Like all financial decisions, consider the risk and find ways to limit it.

For a credit card you can request that the limit be set low so that the card can only be used for emergencies and not big ticket discretionary purchases that will leave you on the hook.

For apartment leases with roommates, make sure that all the parents are also listed on the lease so you’re not the only one that the landlord will call when there’s a problem.

For other large ticket items requiring a loan, consider being listed on the title for the car for example.  If there is a default, you’ll have the right to sell the car.

At the very least you can ask to receive duplicate statements so that you can monitor that payments are being made as promised.

For larger loans like a mortgage, you may even want to consider offer your help in the form of an intra-family loan.  There are services that will manage the payment processing so that it avoids getting ugly if there ever is a payment problem.  Just remember that if you choose to lend a hand to someone to buy a home in this way, they will need to declare it on the application as a debt and they’ll have to qualify for the new loan with this payment as well.


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Secrets are dangerous.  Money secrets can be the worst kind for families.  What should you do if you have a child struggling financially or just needs a helping hand when it comes time to buy a home?

The trend toward “boomeranging” among newly minted college graduates to return to the family nest is a well-known phenomenon. With persistently high unemployment and an ongoing crisis in real estate, it’s now not uncommon to hear of adult children with families of their own seeking a helping hand from parents.

This is certainly not something that was on the radar screen when thinking about retirement.  But more often I’m hearing of parents at or in retirement helping out their adult children who in turn are trying to help out their college age kids, too.

In the past, when I was a mortgage banker I would often need to ask about the source of a down payment for a home purchase.  Many times I would hear that mom and dad or a grandparent or uncle would be helping out to fill in the gap.  Sometimes I would make the suggestion and probe to find out if there was any chance for a family gift.

Because of lending rules, there was a certain way that such gifts needed to be documented.  On more than one occasion, I would find a family member who was not just reluctant but downright belligerent about sharing any information needed to document the gift.

Other cultures while just as secretive were more willing to provide such a helping hand. I found that it was especially common for those who were part of first generation immigrant families to gift money to family members literally from money stashed away in coffee cans and mattresses.

Many people may find it easier to talk about health or sex problems than to talk or share information about money.

Unfortunately, this kind of climate perpetuates poor money management skills.

If you’re in the fortunate position to have extra resources to help a child or family member, then you should consider it a “teaching moment.”

Yes, there are those who will say that it’s your money and you don’t have to tell anybody about what you’re doing.  But consider this:  You could be sowing the seeds of some kind of rift between family members if not know then later when you pass away.

The key here is communication. While you don’t have to tell your children to the penny what kind of gift you’re planning, you should inform them so as to avoid hard feelings later.  Your kids probably know that you wouldn’t offer if you couldn’t afford it.  They may even recognize that one child is in tougher straits than others or that they have other resources as a safety net such as their own in-laws if need be. But don’t assume anything. If they have your best interests at heart, then they may just want confirmation that you aren’t putting your own financial security at risk.

Back to the teaching moment.  Here is an opportunity to ask questions that may help them think about what they are doing.  Are they short on cash because of something beyond their control or do they have trouble handling money?  Are they gambling or overindulging?  You could impart some added wisdom from experience here such as when my aunt told my mother about how she always saved any raises she got instead of counting on it for spending money.

I’ve had a couple of clients who invested money in their son’s businesses.  Each formalized it with a loan agreement and an equity stake. If it’s a business, then treat it like one.

If it’s help for a home purchase, you could help provide some perspective.  Is this really a good neighborhood to invest in? Are there problems with the property that will become an issue when trying to resell later? (Think here about the time you bought the house with the shared driveway).

Remember to be equitable with your family.  You don’t have to offer help in equal amounts since every child’s circumstances is different.

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Mortgage interest rates continue to be at historic lows.  Rates for 30-year fixed rate loans are hovering in the 4% to 4.2% range. There’s no real whiff of inflation in the air that could lead to a spike in interest rates any time soon.

So should you refinance?  Crunching the numbers is crucial.

When I was a mortgage banker, the rule of thumb would be it made sense when prevailing interest rates were 2% or more below your current rate.  With the availability of zero point and zero closing cost loans, it even made sense when the rate was a mere 1/2% difference.  It was common for homeowners to get calls from their mortgage brokers alerting them that the rates had dipped and they should refinance even before the homeowner may have made their first mortgage payment on their new loan.  It was even common for mortgage brokers to keep current copies of income, credit and asset verification forms on file in order to start a new application quickly.

Things have certainly changed since the refinance booms of the 1980s and late 1990s.

Property market values have fallen throughout many parts of the country.  The number of jobless are at historic highs.  Credit has been strained by more than two years of economic crisis and now malaise. Banks are in much less tolerant moods now to offer special deals or bend the rules when underwriting a loan.

Since buying and owning a home is one of the largest investments for many, it pays to consult with a professional who can help you sort all of this out.

Break Even

One of the first things that an adviser can help you do is make an informed decision about how this refinance will impact the total picture for your personal finances.

Paying off debts and consolidating credit cards may look good but if you’ll just end up running up the tabs on these accounts right after the refinance, then you’re no further ahead.

Assuming you will not be tempted into debt again, then you need to figure out what the refinance will cost compared to the potential interest savings.  The “break even” point in terms of months or years is calculated by dividing the costs by the projected savings.

For example, if you took out a $400,000 loan three years at a 30-year fixed rate of 5.5%, then your principal and interest payment(P&I) is $2,271.16 per month.  After three years of payments, your balance is about $382,905 if you made no additional payments to principal.

Let’s assume that the prevailing rate now for the same loan term is 4.5% and your new loan will be just enough to pay off the old balance and any closing costs for this loan.  Assuming a new loan amount of $395,000 to cover 1 point (or 1% of the loan), plus the various fees and the payoff balance of about $385,200 (payoff balances are higher than statement balances because of accrued interest), then the new monthly payment is estimated at $2,001.41 for P&I.

The $9,800 in closing costs divided by the estimated monthly savings of $269.75 translates to a break even of 36 months. So if you think you’ll likely remain in the home for at least 3 years, then it may mean more cash flow into your pocket.

Selling or refinancing before then means that you will not be better off and your actual effective interest cost for borrowing (the Annual Percentage Rate) will actually be much higher than the stated coupon rate.

What’s not taken into account by this calculation is the additional interest that you are going to pay because you will be extending the term of the loan by three years. Sure, the new loan will be written for a 30-year term.  But so was the last one you had started three years ago in this example.  So instead of being mortgage-free in 2037, you’ll be paying on this loan until 2040 if you don’t refinance before then or sell the property.

Try a Different Term

Just because you’ve always had a 30-year fixed rate doesn’t mean that you have to always get the same term.  Usually, a term of 20-year or 25-years is offered at the same interest rate.  Assuming you can handle the higher payment for the shorter term, it may make sense.

In this example, a 25-year term fixed rate loan at 4.5% for $395,000 will mean a P&I payment of $2,195.54 each month.  Compared to the original loan payment of $2,271.16, this means your monthly cash outflow will increase by $75.  But you will save two years in interest payments over the old loan.

Cash In or Cash Out

Instead of “cashing out” equity and walking away from the closing table with a check, it’s becoming common to see people “cashing in” and come to the closing table with a check to pay towards the loan payoff.

This may be because the homeowner wants a lower payment.  Or it could more likely be because of the drop in property value and the lender’s loan-to-value limits.

In either case, you now need to consider whether locking up this cash by paying it to the bank makes sense. Will it still leave you with sufficient emergency cash reserves? Besides flexibility, what else are you giving up?  Could this money be invested somewhere else and what could you expect as a return?

This is the kind of comparative analysis that a qualified financial adviser can provide when making such financial decisions.

Home Equity Value: Another Potential Problem

These are best case scenarios.  What happens if the property value has dropped?  If you had less than 20% equity in your property when you bought or last refinanced, it’s quite possible that you may not have enough equity to do a refinance.  Or you might be underwater with your current loan above the market value.

Even if there is equity to do a refinance, there are new risk-based lending guidelines that require the lender to tack on an additional amount to the interest rate or the closing costs or both if the loan amount is higher than 75% of the appraised value.

And depending on the area, some lenders are not taking the appraised value provided by the appraiser without reducing it by a 5% “haircut” which may make it economically unfeasible to do the loan or qualify under the lender’s counter-terms offered.

Staff Crunch, Delays and Legal Issues

Given the low rates, lenders are swamped with applications and may not be able to process an application within your rate lock period.

And recent issues regarding the proper filing of mortgage documents that is now resulting in some homeowners challenging their foreclosures could spill over to good credit quality borrowers as well.  In addition to the drain on lender resources to fix this problem, it could delay conveyance attorneys or title companies in tracking down the records needed to do a proper title search.

So should you refinance? If it fits into your financial plan, then yes.  If you don’t have a financial plan, then call a qualified adviser to get one before trying to figure all this out on your own.


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Remember leisure suits? Remember bell bottoms? How about skinny ties?

Fashion sense changes. And so has money sense over the last couple of decades. But like the old song title: Everything Old Is New Again.

Over the past couple of decades we loaded up on debt, used our homes as piggy banks and became part of the “ownership” society investing more in real estate, mutual funds, stocks and our 401(k)s.

Like a pendulum, things change and old fashions that fell out of favor seem to come back into style.

Unfortunately, some of those fashions when it comes to money should never have been forgotten.

1.) Live Below Your Means: Easier said than done especially if living in a high tax or high cost state. But it’s worth remembering mom’s advice on this one.

2.) Skip the McMansion: They cost too much to heat, furnish and maintain. And they don’t produce any income for you (unless you consider taking on roommates). And who are you gonna get to buy the McMansion anyway when you want to downsize?

3.) Protect Your Credit: Use it sparingly and only if you can pay it off soon. Consider using a snowball method to get yourself out of debt (focusing on a credit card balance and then as that one gets paid off redirecting your payments to the next balance). And keep your credit score high by not closing out accounts. Use them every once in a while to keep them active. This will help maintain your credit score and allow you to qualify for better terms.

4.) Pensions Are A Thing of the Past: Secure your retirement income by saving in whatever tax-efficient options are available to you. This includes your 401k and IRA. Add a Roth IRA to stay diversified regarding future income taxes. Consider a lifetime income annuity – no frills, no bells and whistles, low expenses, laddered and divided among different insurers to reduce your risk.

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