How To Finance Investment Property

Financing investment property can be a great way to bring in some steady income. Many people purchase homes with the express intent of renting them and thereby earning a monthly income from their home.

Some investors like to “fix-up” homes, renovate them, and then sell them for a profit. As long as you are correctly financing your property, these and other methods can help you reap an income from your investment property.

Basically, you can finance an investment property one of three ways.
1.Utilize your own resources to purchase the property. You will have to underwrite all costs yourself and you need to use cash to buy the property. This is a great option because you lower your liability. At the same time, it might be difficult to come up with the cash to purchase a home.

2.You can also ask your bank to give you a line of credit. This will help you make down payments and fulfill other large capital requirements. As you earn money from rent or sales, you can repay the bank and still maintain a profit.

3.Setting up a partnership with other investors can also help you fund these properties. This way, you split the costs with others. This is another great alternative. As long as you have a good working relationship with your partners, you can easily divide profits between all of the partners involved.

You should carefully consider all of your options before you decide how to finance your property. Keep your risks low and maintain a high potential for profit.

Ways To Save Your Home When Behind on Mortgage Payments

Many homeowners are struggling with their monthly mortgage rate payments and wondering will they take my home when I’m behind on the mortgage. Thousands of people are dealing with the loss of their job, decreased wages, and possibly mounting medical bills resulting in late payments on their home loan, utilities, and insurance coverage just to name a few.

Most mortgage companies do not want to foreclose and take your house. This costs the lender money and makes them responsible for the property taxes and insurance. The mortgage company would also feel the burden of listing the property with a realtor to sell and recoup some of their costs.

There are several options for homeowners who are behind on their mortgage. An important tip is not to wait until a letter of default is sent from the lender. Contacting the lender when first becoming behind will make them aware of the situation and to offer assistance before it becomes a larger problem.

Re-amortization means that missed payments are tacked onto the balance of the loan. Another method is for the lender to set up a repayment plan for two or three months. A mortgage company can also offer a reinstatement which is one large payment to get caught up. Forbearance is often offered with reinstatement. This is when the lender temporarily decreases or postpones a number of payments with the understanding that a large payment will be paid at a specified time to get the loan caught up.

Two other options include refinancing the interest rate of the loan or going through a loan modification. Both options rely on the submission of financial and other documents and can take time to attain the end result.

A homeowner’s thought of will they take my home when I’m behind on the mortgage can be replaced by one of the above steps to keep their home and prevent this loss of security.

Sallie Mae lowers interest rates as private lenders battle losing billions

Faced with the prospect of losing billions of dollars in subsidies from the federal student loan program, private lenders are looking to making their non-federal student loans more attractive which could result in lower fees and interest rates for borrowers who qualify.

The United States’ leading private student lender Sallie Mae announced that as from the 10th of May it will reduce the rates on its Smart Option Student Loan to a rate based on the London Interbank Offered Rate (known as LIBOR) to a 2.88% to 10.24% range instead of its current rate range of 4.38% to 12.88%.

Non-federal loans are commonly used by families to help pay for college costs that aren’t covered by federal student loans and financial aid. According to the College Board, $11 billion dollars were taken out by borrowers in the 2008-2009 academic year.

Due to a provision in the new health care reform law that states that subsidies for private lenders offering federally guaranteed student laws will end by the 1st of July, private lenders will suffer huge losses. Sallie Mae announced that these loses will result in the institution cutting 2,500 jobs.

The College Board claims that the credit crunch resulted in a dramatic drop in non-federal student loans in 2009. There was a drop of 50% in the volume of non-federal loans given out from 2008.

According to Patrick Kandianis, one of the founders of the website SimpleTuition, the drop in federal student loans combined with a strong economy is reigniting interest in non-federal loans. SimpleTuition helps borrowers compare student loan programs with ten major lenders offering their services on the site as compared to only two or three lenders offering their services a year ago. Kandianis foresees more companies being added to the site in the near future.

The number of credit unions enlisted in the Credit Union Student Choice has nearly doubled in the last year, reaching a membership of 126. The Credit Union Student Choice is a group that offers non-federal student loans to credit unions and according to Mike Webber the vice president of the group, new members are striving to remain in the business of offering federal student loans.

Advocates of student loans predict that rates for the majority of non-federal loans are variable and subject to surges if interest rates rise. Another risk involved in non-federal loans is that they don’t offer consumer protection as is the case in federal student loans. The president of the Institute for College Access and Success, Lauren Asher, warns of this risk which leaves borrowers in a more vulnerable position.

A Guide to The New Health Care Bill (H.R. 3590) Part Two

This is Part 2 of “A Guide to the New Healthcare Bill.” Here, we continue to provide some of the most crucial mandates found within the new health care bill.

Increased Subsidies and Tax Credits
One of the most drastic adjustments to the bill concerns government subsidies. The new bill provides a large amount of tax credits for acquiring an insurance plan. Actually, the revised bill contains much more tax credits than the original Senate bill contained.

Now, the bill is designed in a sliding scale structure. Tax credits and subsidies are available to households who gain up to four times the federal poverty level. This means that the cap on subsidies ends at $88,200 for a family of four. If you make less than this, then you’ll qualify for tax credits. A family of four that brings in about $40,000 would receive premium caps that would hover around 6 percent of total income.

The Introduction of Exchanges
The bill introduces new state-sponsored purchasing groups which are called exchanges. Uninsured people, freelancers, and even small businesses can decide to purchase coverage through these exchanges. The exchanges basically empower these people to acquire coverage equivalent to that which employees of large companies can acquire. If you currently work for a large firm, you won’t see much of a change. But, if you get fired or laid-off, you might be able to qualify for this subsidized coverage.

Technically, the new bill doesn’t account for a totally government run plan. However, the new exchanges do operate under a federal office that manages governmental employees’ health plans. So you basically are signing up for a national plan if you do go for subsidized coverage. These plans are technically private and nonprofit.

The Exclusion of Abortion
The new health care bill does not allow taxpayer money to be allocated towards abortion or other elective procedures. The bill does not mandate that any plan is required to cover abortion. If a plan does cover abortion, then the insured parties must pay for the abortion coverage separately from the subsidized coverage. The bill also defers some of the decision to the state level, wherein state congressional lawmakers have the option to ban abortion coverage or ease laws pertaining to abortion coverage.

Republican Input for the Bill
President Obama has agreed to implement some Republican provisions into the new health care bill. Originally, Republicans wanted to add a structure by which investigators would pose as patients to attempt to uncover insurance fraud. Also, Republicans wanted the bill to address medical malpractice reform and some tort reform. These additions were not included in the final bill. However, Senator Charles Grassley of Iowa suggested increasing Medicaid payments to primary care physicians, and this appears to have been left in the final bill.

As you can see, the new health care bill has a lot of bells and whistles. We’ll see most of the mandates implemented around 2014 and later. You should take a look at your tax bracket to see how you can qualify for medical tax credits. If you’re self-employed, employed at a small business, or uninsured, then be sure to read up on exchanges. You can still choose from a menu of policies, even though they’re all generally subsidized.

You can also read more about insurance rates for health care on our main site.

A Guide to the New Health Care Bill (H.R. 3590): Part One

While the new health care bill has sparked controversy between liberals and conservatives, a finally amended version was passed by the House in March of 2010.  While a bitter fight continues in the Senate, it’s safe to assume that the major provisions of the bill will remain intact. Here, we’ll provide a general guide to the details of the health care bill.

Total Cost of the Health Care Bill
The Congressional Budget Office released an estimate that the total bill will cost roughly $940 billion over 10 years. As a result, major coverage expansion will begin in 2014. Over 32 million uninsured Americans will be able to secure coverage as a result of the health care bill.

The new bill requires almost every citizen to purchase health insurance. People who are required to purchase insurance but deign not to will be hit with a fine. Some low-income families will receive exemptions to these requirements. This mandate will go into effect in 2014 as well.

New Requirements for Insurance Companies
A major attribute of the law will require insurers to provide affordable insurance to people who have existing medical conditions. This means that insurance companies can’t deny coverage based on previous health history or current issues. Also, women can no longer be charged for higher premiums than men.

The bill also prohibits insurance companies from issuing financial and dollar limits on health insurance policies. They are also required to cover children who may be suffering from existing medical conditions.  The age limit for parents to keep their children on their policy has been extended to age 26.

Special Provisions for High-Risk People
The bill creates an interim high-risk pool that offers specialized insurance to people who are uninsured and suffering from medical conditions. This high-risk pool covers people until 2014, at which point the expansion of coverage would sufficiently cover these people.

The bill expands Medicaid coverage for people who live within the poverty level as defined by the federal government. The new Medicaid policies are designed to cover people for 133 percent of the current poverty level coverage.

More taxes will be levied to pay for this expansion in coverage. Investment income and wage income will be taxed at a rate of 3.8 percent. Only individuals who make more than $200,000 a year or married couples who pull in over $250,000 will be subject to this tax increase.

Filling the “Gap” for Seniors
Seniors will be able to acquire a $250 rebate on prescription drugs once they have spent $2,830 on pharmaceuticals, thereby reaching the coverage gap. Seniors who are in the coverage gap will also receive discounts to brand-name drugs starting in 2011. In 2020, the gap is expected to disappear, meaning seniors will only have to pay 25% of the cost of their prescription drugs.

These are the most prominent changes that are found in the health care bill. Still, there are a few additional attributes that need to be addressed. As a result, I’ve added a second part to this article. Read part 2 for more information about the new health care bill.

The NYSE vs. The NASDAQ: When You’ve Gone beyond Money Market Accounts

Since money market accounts are offering very low interest rates currently, many investors are turning to stocks and bonds as an alternative way to earn interest. Many people are unaware that there are some very striking differences between the major market indexes. Here, we’ll take a look at these indexes and explain some of the differences.

Both the NYSE and the Nasdaq contain some powerhouse companies. While you can find some household names such as Johnson and Johnson, Coca-Cola, American Airlines, and many others on the NYSE, you’ll find tech giants like Microsoft, Oracle, and Cisco on the Nasdaq. In general, the Nasdaq tends to contain more tech oriented companies than the NYSE

However, there are some fundamental trading differences between the two.

NYSE
In the NYSE, floor traders who have access to the securities floor bid on trades through an auction market. A specialist is assigned to every single stock in the NYSE. This means that in order to buy a stock on the NYSE, a broker has to either purchase it on a DOT system, or call it in to a floor broker.

Nasdaq
While the NYSE has a physical location, the Nasdaq is a wholly electronic trading market. Market makers rather than specialists oversee stocks on the Nasdaq. These market makers manage the liquidity and trading for each stock. The Nasdaq is run as an Over the Counter trading market, which basically means buyers and sellers are connected to one another via the Nasdaq network.

Brokers still have to place calls to market makers on the Nasdaq network, but all trades are processed through an online system that is sponsored by Nasdaq.

Your broker can give you more details regarding index terminology, so don’t be afraid to ask.

Mortgage Rate Trends for May 11-18, 2010

While national mortgage rates are generally falling, we are seeing a trend of mortgage rates remaining above 5 percent. According to Freddie Mac, the national average for a 30-year fixed mortgage stayed above 5 percent for the fifth straight week.

Rates for May 2-9th and This Week
While last week’s rate was noted at 5.07 percent, this week’s rate fell to 5.06 percent. Compare this to 2009, when the national average for fixed rate mortgages was about 4.8 percent.

In December, when the Federal Reserve and the government released new FHA guidelines and federal loans, rates tumbled down to 4.71 percent. Consumers were then able to borrow more without worrying about a high, spiked interest rate. Since the program ended in March, rates have steadily crept above 5 percent.

Protecting Against Home Price Decline
Generally, these rates are still considered low rates, as they protect the real estate market from suffering large declines in home prices. Most of the time, Freddie Mac will survey private and semi-private lenders across the country to calculate national averages.

They’ll do this research on Monday through Wednesday so they can release the results on Thursday.
The rate on 15-year fixed rate mortgages remained the same as last week, at 4.39 percent. Five-year adjustable rate mortgages fell somewhat significantly, from 4.03 percent to 4 percent.

Including Fee Assessments and Points
None of Freddie Mac’s above calculations include fee assessments for loan points. Generally, points are considered to be equivalent to 1 percent of the amount of the loan.

These points are calculated separately. As you can see, rates are generally hovering between 4.7 and 5 percent nowadays.

Numerous Factors That Determine Mortgage Rates

The calculations and actions that go into setting prevailing mortgage rates are quite complicated, but it’s possible to break these down into a few major influences. Actually, local banks and lenders don’t have much influence on mortgage rates. Rather, these rates are largely determined by more general and broad factors.

Watch The Fed
The Federal Reserve exerts a pretty powerful influence over mortgage rates. When the Fed adjusts its funds rate, then banks also modify their interest rates. Some lenders set rates based on 10-year T bill projections, while others evaluate indexes and other bonds.

So, you’ll notice that when 10 year bonds fluctuate, mortgages will follow suit. This can be particularly damaging for people who have adjustable mortgages, if rates increase.

The Secondary Market
When a bank or financial institution gives you a loan, it’s not often that they hold onto the loan. In fact, it’ll probably travel to what’s called the secondary mortgage market. Here’s how this works:
The bank will sell your loan to a third party or outside investor. Often, the bank will sell it to a mutual fund. The purchaser of the loan is usually called the aggregate.

Then, the aggregate puts your loan in a basket with many other loans to form what’s called a mortgage-backed security, or MBS.

The aggregate will probably divide up the security into a variety of different stocks, called tranches, to sell back to investors.

How Do Investors Earn Funds On Tranches, and How Does It Affect Me?
Investors purchase these tranches so that they can get a return on what they’ve invested, which is theoretically supposed to come from mortgage payments. So, you can see already that it’s the best interest of the lender and the aggregator to balance the financial interests of investors as well as buyers.

If a mortgage rate is unilaterally low, then it will attract a lot of buyers. But, if the rate is higher, then more investors are likely to jump on board and invest. Both the buyer and the investor are competing to acquire what’s in their best interest.

So, the secondary mortgage market plays a huge role in determining mortgage rates. But there’s more to it. Often, the mortgage rate will be determined by the price at which the aggregator is willing to purchase any loan. Remember, that price is dependent upon the success of selling mortgage-backed tranches. Therefore, since investors determine the rate of tranches, you can see that individual investors can have a huge effect on mortgage rates.

A Variety of Factors
Factors such as the Federal Reserve, the strength of the U.S. economy, the rate of inflation, and many other things affect investors’ willingness to take risks. Huge inflation will deter investors, while moderate inflation is actually a sign of a good economy.

Remember, since investors can freely choose where to invest, competition with other investments will also determine mortgage rates. If investors can find a good return on mortgage-backed securities, then they’ll be more likely to purchase them.

Most investors are hip to adjustments made by the Federal Reserve, which is basically why this institution has such a profound influence on mortgage rates.

As you can see, investors are really the main factor that affects mortgage interest rates and home loans.

How to Retire Debt-Free

Dept is a problem that has reached epidemic proportions in the US.  A 2009 study conducted by the public policy research group Demos, showed that the average American aged 65 or older carries a credit card balance of $10,235, this is up by 26% compared to four year ago.  If you are pushing retirement but you have a lot of debts to settle, here are some strategies you should be adopting:

Don’t spend above you means -  We all want to retire in that beautiful beach house or that rustic log cabin by the lake, with enough tucked away to keep us comfortable.  The reality is most of us just can’t afford it, and if you can’t afford it, you shouldn’t buy it, no matter what the credit card companies tell you.

Throw away your credit cards – The numbers don’t lie; the surest road to retirement debt is maxed-out, high interest credit cards.  By spending only cash, it is much easier to keep your spending within sane limits.

Make some extra money – If you can handle it, take on an extra job, or work extra hours at your existing job.  A part time job, an online job, or even a side business can be great for earning some extra cash.  It may seem difficult now, but you will need the additional cushion in the future.

Sell what you can – Websites like Craigslist and eBay now make it much easier to sell stuff that would not have been possible to move 10 – 15 years ago.  An old car or two, even ones that don’t run, a boat you never use anymore, antique furniture, toys, anything of value that you don’t really need.  If you are intimidated by computers, you can have a relative help you out, or you can even have an old fashioned garage sale.

Start saving up – Most people simply prefer to spend money recklessly on things they want now rather than plan for the future.  This mentality is probably the single biggest cause or retirement debt.  Start saving a portion of your income, and invest it wisely.  Bankrate.com has a savings calculator to help you figure out how best to budget your money to prevent retirement debt.  You’ll find that if managed correctly, you will probably be pleasantly surprised at just how much you have saved when you do retire, and how much your investments have earned for you.