The ownership of a physical form of precious metal such as platinum and gold will provide an investor with a one to one correlation with commodity price movements. However, owning the commodity in this form presents challenges in terms of storage and liquidity. Platinum mining stocks are a more feasible alternative for some investors and they can be quite a worthwhile investment.
An individual who is interested in investing in platinum stocks should assess several factors prior to making an investment. The company should have a record of consistent profitability, a low beta, low debt ratios, and a low price-to-earnings ratio. The production costs per ounce should be low because this will allow the company to weather platinum market downturns.
The precious metals industry tends to attract fraudulent enterprises so an investor should thoroughly investigate any new mining company that claims to have hit the big one. Mines that have a good production history are much safer bets, especially in an unstable economy. That is not to say that there are not any legitimate new mining companies out there, but buyer beware.
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Wednesday, September 8, 2010
Mortgage Refinance Information
A mortgage refinance is when a consumer or business refinances an existing mortgage loan to either obtain a lower interest rate, different payment terms, to take equity out of the property, or to extend the length of the loan. During the last decade home refinancing has been an extremely common method for consumers to change their monthly payment obligations by taking advantage of historically low costs of borrowing money. This has led to major growth in the mortgage loan origination industry as banks and non-financial lenders have competed to underwrite the greatest share of mortgages.
By far the most common reason for a consumer to consider refinancing is to obtain a lower interest rate on their existing mortgage loan. For example, a person buying a home in 1991, with normal credit would have obtained an interest rate of roughly 9%. The original monthly payment on their mortgage would have been $1,609.25. Ten years later, with 20 years to go on their loan that same person could have refinanced their mortgage when rates were at historic lows and if they changed nothing but their interest rate (that is if they took out no equity in the refinancing and refinanced into a 20 year loan), at a 5.75% interest rate their new monthly payment would be $1,167.15 a $442.10 per month savings in cashflow.
A second major reason for mortgage refinancing is to change the payment terms of one’s present mortgage. This typically occurs when dealing with a non-conventional (not to be confused with non-conforming, which is a credit term) mortgage loan. In the present environment many lenders are comfortable writing interest only loans or loans with balloon payments. In many circumstances such loans are not intended to last more than 5-10 years and are expected to be satisfied through a subsequent refinancing of the property. These type of loans essentially require the consumer to either have some sort of financial windfall near the end of their mortgage, not really need the mortgage, or to refinance at the end of the mortgage loan.
The second largest reason for mortgage refinancing is to take out equity (also called ‘cash back at closing’ or 'cash out') from one’s home. Such refinance mortgages have been incredibly popular in the low interest rate environment of the last 15 years as low mortgage interest rates have spurred both the economy and real estate prices into a long term growth spurt thus causing many people to have previously unimaginable amounts of equity in their homes. American consumers have found these types of arrangements useful for debt consolidation, funding college expenses, funding retirement (reverse mortgages), home improvement financing, and other major expenses.
Finally, the last major reason Americans choose to do a mortgage refinance is to extend the length of their home loan. Over the last decade many consumers have found themselves approaching the end of their mortgage loan and rather than enjoying a life free from a mortgage payment many have chosen to refinance to take out cash and then extend the life of their mortgage over future years. While this was generally a side effect of the previous reason in some cases (such as individuals starting businesses funded largely out of their home equity), this is actually a legitimate tax and financial planning strategy.
By far the most common reason for a consumer to consider refinancing is to obtain a lower interest rate on their existing mortgage loan. For example, a person buying a home in 1991, with normal credit would have obtained an interest rate of roughly 9%. The original monthly payment on their mortgage would have been $1,609.25. Ten years later, with 20 years to go on their loan that same person could have refinanced their mortgage when rates were at historic lows and if they changed nothing but their interest rate (that is if they took out no equity in the refinancing and refinanced into a 20 year loan), at a 5.75% interest rate their new monthly payment would be $1,167.15 a $442.10 per month savings in cashflow.
A second major reason for mortgage refinancing is to change the payment terms of one’s present mortgage. This typically occurs when dealing with a non-conventional (not to be confused with non-conforming, which is a credit term) mortgage loan. In the present environment many lenders are comfortable writing interest only loans or loans with balloon payments. In many circumstances such loans are not intended to last more than 5-10 years and are expected to be satisfied through a subsequent refinancing of the property. These type of loans essentially require the consumer to either have some sort of financial windfall near the end of their mortgage, not really need the mortgage, or to refinance at the end of the mortgage loan.
The second largest reason for mortgage refinancing is to take out equity (also called ‘cash back at closing’ or 'cash out') from one’s home. Such refinance mortgages have been incredibly popular in the low interest rate environment of the last 15 years as low mortgage interest rates have spurred both the economy and real estate prices into a long term growth spurt thus causing many people to have previously unimaginable amounts of equity in their homes. American consumers have found these types of arrangements useful for debt consolidation, funding college expenses, funding retirement (reverse mortgages), home improvement financing, and other major expenses.
Finally, the last major reason Americans choose to do a mortgage refinance is to extend the length of their home loan. Over the last decade many consumers have found themselves approaching the end of their mortgage loan and rather than enjoying a life free from a mortgage payment many have chosen to refinance to take out cash and then extend the life of their mortgage over future years. While this was generally a side effect of the previous reason in some cases (such as individuals starting businesses funded largely out of their home equity), this is actually a legitimate tax and financial planning strategy.
How to pay off debt quickly
Carrying a heavy debt load for many years can prevent you from truly enjoying your money. Large debt payments can make it impossible to save for retirement, and the pressure of all those bills can tie you to a job you don’t enjoy. That’s why making debt repayment a priority can be hugely rewarding. Here’s how to get started.
If you have a lot of consumer debt -- a car loan, several credit cards, maybe a line of credit -- your first step is deciding on the best strategy for paying it down. Let’s say you have four different debts and can afford $600 a month in payments. Should you throw $150 at each one?
No, say financial experts who teach the “snowballing” method. It’s better to attack the debt with the highest interest rate first. Each month, pay the minimum on the other three debts, then take whatever’s left of your $600 and apply it to your high-interest target. When that debt is paid off, move on to the one with the next highest rate and do the same thing. You’ll always be paying $600 a month, but you’ll reduce your debt much faster than if you had spread that money evenly.
If you’re not carting around much high-interest debt, you can turn your attention to your mortgage. After all, although your home loan probably has a lower rate than any of your other debts, you’re probably still paying thousands of dollars a year in interest. Let’s assume you’re borrowing $150,000 at a fixed rate of 6 percent. Consider these three strategies for paying down this mortgage quickly:
• Refinance to a shorter term. Paying off your mortgage in half the time doesn’t mean paying twice as much each month -- not even close. With a 30-year term, your monthly payment would be $900. Choosing a 15-year term, however, will cost only $365 more per month. The shorter term will enable you to own your home a decade and a half sooner and would save you a staggering $96,000 in interest.
• Annual prepayments. Some lenders allow you to make a “prepayment” once a year to reduce your principal. These top-ups can help you pay your mortgage off much more quickly. Using the above example, an annual $2,400 lump-sum payment would knock more than 10 years off your term and save you $67,000 in interest. If coming up with $2,400 all at once is difficult, try tucking away $100 with every bimonthly paycheck.
• Make biweekly payments. If you get paid every other week, consider making biweekly mortgage payments of $450. You’ll probably notice no difference in your cash flow, but you’ll be paying an extra $900 a year. That’s because, since there are 52 weeks in the year, you will be making 26 biweekly payments -- the equivalent of 13 monthly mortgage payments instead of 12. That will allow you to pay down the loan five years faster and save you more than $38,000.
Of course, all of these debt-reduction methods require coming up with extra money each month. Where are you going to find it? One way is to reconsider the car you’re driving. If you’re leasing or buying new wheels every four years, you can save a bundle of money by choosing a used vehicle instead. If you’re a two-car family and you live in a city with good public transportation, you might consider getting rid of your second car. What you save in car payments, gas, parking, maintenance and insurance will allow you to direct hundreds of dollars toward your debt every month.
You can also make small daily sacrifices to free up extra money. Exchange your morning latte for a mug of home-brewed coffee and you can probably pocket $50 a month. If you’re a couple that goes to the movies twice a month, rent DVDs instead and you’ll be up another $60 or so. Use the library, cancel unnecessary phone and cable services and buy and freeze meat when it’s on sale. If you can find little ways like this to save $20 to $30 a week, you’ll be well on your way to ramping up your debt payments and getting out of the red.
No, say financial experts who teach the “snowballing” method. It’s better to attack the debt with the highest interest rate first. Each month, pay the minimum on the other three debts, then take whatever’s left of your $600 and apply it to your high-interest target. When that debt is paid off, move on to the one with the next highest rate and do the same thing. You’ll always be paying $600 a month, but you’ll reduce your debt much faster than if you had spread that money evenly.
If you’re not carting around much high-interest debt, you can turn your attention to your mortgage. After all, although your home loan probably has a lower rate than any of your other debts, you’re probably still paying thousands of dollars a year in interest. Let’s assume you’re borrowing $150,000 at a fixed rate of 6 percent. Consider these three strategies for paying down this mortgage quickly:
• Refinance to a shorter term. Paying off your mortgage in half the time doesn’t mean paying twice as much each month -- not even close. With a 30-year term, your monthly payment would be $900. Choosing a 15-year term, however, will cost only $365 more per month. The shorter term will enable you to own your home a decade and a half sooner and would save you a staggering $96,000 in interest.
• Annual prepayments. Some lenders allow you to make a “prepayment” once a year to reduce your principal. These top-ups can help you pay your mortgage off much more quickly. Using the above example, an annual $2,400 lump-sum payment would knock more than 10 years off your term and save you $67,000 in interest. If coming up with $2,400 all at once is difficult, try tucking away $100 with every bimonthly paycheck.
• Make biweekly payments. If you get paid every other week, consider making biweekly mortgage payments of $450. You’ll probably notice no difference in your cash flow, but you’ll be paying an extra $900 a year. That’s because, since there are 52 weeks in the year, you will be making 26 biweekly payments -- the equivalent of 13 monthly mortgage payments instead of 12. That will allow you to pay down the loan five years faster and save you more than $38,000.
Of course, all of these debt-reduction methods require coming up with extra money each month. Where are you going to find it? One way is to reconsider the car you’re driving. If you’re leasing or buying new wheels every four years, you can save a bundle of money by choosing a used vehicle instead. If you’re a two-car family and you live in a city with good public transportation, you might consider getting rid of your second car. What you save in car payments, gas, parking, maintenance and insurance will allow you to direct hundreds of dollars toward your debt every month.
You can also make small daily sacrifices to free up extra money. Exchange your morning latte for a mug of home-brewed coffee and you can probably pocket $50 a month. If you’re a couple that goes to the movies twice a month, rent DVDs instead and you’ll be up another $60 or so. Use the library, cancel unnecessary phone and cable services and buy and freeze meat when it’s on sale. If you can find little ways like this to save $20 to $30 a week, you’ll be well on your way to ramping up your debt payments and getting out of the red.
How do I pay off my holiday credit cards?
Consolidate or transfer your balance: Take advantage of a lower interest rate
If you have multiple credit cards or an account with a high interest rate, you may want to consider consolidating and/or transferring your existing balance(s) to a new card with a lower interest rate. There are a variety of credit card deals out there, so shop around and see what offers are available. However, pay particular attention to all of the terms and conditions of the new card to make sure there are no strings attached or hidden fees. (To learn more, read: Finding the best credit card deals.)
If you have multiple credit cards or an account with a high interest rate, you may want to consider consolidating and/or transferring your existing balance(s) to a new card with a lower interest rate. There are a variety of credit card deals out there, so shop around and see what offers are available. However, pay particular attention to all of the terms and conditions of the new card to make sure there are no strings attached or hidden fees. (To learn more, read: Finding the best credit card deals.)
Maximize your payments: Create a budget
The best way to pay off your credit card is to maximize your monthly payments. Creating a simple budget can provide you with insight as to where you can cut costs in your everyday and monthly expenses, freeing up cash to put towards your credit card bill. (To learn easy ways to cut costs, click here.) If you need help setting up a budget, there are several different computer applications available that can guide you through the process.
The best way to pay off your credit card is to maximize your monthly payments. Creating a simple budget can provide you with insight as to where you can cut costs in your everyday and monthly expenses, freeing up cash to put towards your credit card bill. (To learn easy ways to cut costs, click here.) If you need help setting up a budget, there are several different computer applications available that can guide you through the process.
Don’t add fuel to the fire: Use cash
Although using a credit card may be the easiest way to shop for groceries, go out to lunch or pay for gas, it may not be the smartest option when your balance is already higher than normal. Instead, consider using cash or at least a debit card as a means of limiting your spending and keeping a handle on your credit card bill.
Although using a credit card may be the easiest way to shop for groceries, go out to lunch or pay for gas, it may not be the smartest option when your balance is already higher than normal. Instead, consider using cash or at least a debit card as a means of limiting your spending and keeping a handle on your credit card bill.
Try to lower your current rate: Negotiate with your credit card provider
Believe it or not, a lower credit card interest rate could be only a phone call away. That’s right, your current credit card provider may be willing to work with you to lower your interest rate. This could not only help you now, but in the future as well. It’s as simple as phoning your credit card company and asking what they can do.
Believe it or not, a lower credit card interest rate could be only a phone call away. That’s right, your current credit card provider may be willing to work with you to lower your interest rate. This could not only help you now, but in the future as well. It’s as simple as phoning your credit card company and asking what they can do.
Use your rainy day fund: Cash out your holiday bonus, tax return or emergency money
We know – you had it all planned. That holiday bonus, tax return or rainy day fund was supposed to be a trip to the Bahamas or a new flat screen TV. However, with a looming credit card balance that is growing by the second, you may want to rethink that vacation or big ticket item and use your extra savings to pay off your credit card.
We know – you had it all planned. That holiday bonus, tax return or rainy day fund was supposed to be a trip to the Bahamas or a new flat screen TV. However, with a looming credit card balance that is growing by the second, you may want to rethink that vacation or big ticket item and use your extra savings to pay off your credit card.
Dust off that DVD collection: Sell or return what you don’t need
You know that iPod you haven’t used in six months or that sewing machine you just can’t figure out – sell or return them. Doing this can not only earn you a little extra cash, but can also help you get organized and free yourself (and your home) of extra stuff you don’t use. Check out online auctions, local consignment shops or newspaper classifieds to learn more about personal sells. Just remember, if you are selling items for a profit, the Internal Revenue Service may want to know about it depending on the amount made, as your earnings are considered a taxable source of income.
You know that iPod you haven’t used in six months or that sewing machine you just can’t figure out – sell or return them. Doing this can not only earn you a little extra cash, but can also help you get organized and free yourself (and your home) of extra stuff you don’t use. Check out online auctions, local consignment shops or newspaper classifieds to learn more about personal sells. Just remember, if you are selling items for a profit, the Internal Revenue Service may want to know about it depending on the amount made, as your earnings are considered a taxable source of income.
Lesson learned: It’s easy to get caught up in the holiday spirit. Use these tips to pay off your credit card bill before it becomes a long-term financial burden. And, when next December rolls around, consider using cash or a debit card instead of your credit cards. Your wallet will thank you.
3 ways to pay off credit cards
Cash-out refinancing
If your goal is to pay off credit cards, one option is to use cash-out refinancing -- taking out a mortgage with a larger principal than your current one. Say you have a home worth $200,000, and you owe $100,000 in principal. Suppose you also have $20,000 in high-interest credit card debt. This leaves you with the option to refinance with a mortgage of $120,000, getting the $20,000 difference between the two principals back in cash. You can then use that $20,000 to pay off your credit cards.
If your goal is to pay off credit cards, one option is to use cash-out refinancing -- taking out a mortgage with a larger principal than your current one. Say you have a home worth $200,000, and you owe $100,000 in principal. Suppose you also have $20,000 in high-interest credit card debt. This leaves you with the option to refinance with a mortgage of $120,000, getting the $20,000 difference between the two principals back in cash. You can then use that $20,000 to pay off your credit cards.
Once you do this, you will no longer have any credit card debt and, therefore, you will not have monthly credit card payments. The lower interest rate on the mortgage means you could save quite a bit in interest each month. Although you may be paying a bit more for your mortgage payment, you were able to pay off your credit cards, alleviating that monthly payment.
Home equity loan (HEL)
A home equity loan allows you to borrow against the equity in your home and use the money to pay off credit cards. How much you can borrow depends on several factors, including an equation that lenders use. Lenders take the appraised value of the home and multiply it by a percentage known as the loan to value ratio, or LTV. The LTV is usually between 80 and 100 percent. However, the higher the percentage, the greater the risk to the lender, so there will be a higher interest rate. From this product, the lender subtracts the existing mortgage to determine the credit limit for the HEL.
A home equity loan allows you to borrow against the equity in your home and use the money to pay off credit cards. How much you can borrow depends on several factors, including an equation that lenders use. Lenders take the appraised value of the home and multiply it by a percentage known as the loan to value ratio, or LTV. The LTV is usually between 80 and 100 percent. However, the higher the percentage, the greater the risk to the lender, so there will be a higher interest rate. From this product, the lender subtracts the existing mortgage to determine the credit limit for the HEL.
For example, on a home that has been appraised at $150,000 where the owner owes $50,000 on the mortgage, the equation would work as follows.
| Appraised value of home | $150,000 |
| Multiplied by LTV of 80 percent ($150,000 x 0.80) | $120,000 |
| Subtract existing mortgage ($120,000 – $50,000) | $70,000 |
This means that the borrower here could get a home equity loan for up to $70,000.
HELs usually have a fixed interest rate and payment, and the term is usually 15 years. Although the interest rate is typically higher than that of a first mortgage, it also is lower than a personal loan and is usually tax deductible.
It is important to note that a home equity line of credit (HELOC) is not usually considered a good choice for paying off credit card debt. Although it borrows from your home equity like a home equity loan, you do not receive the money at once with a HELOC. Therefore, this type of loan is a better choice when you need the money in installments instead of all at once, like when you’re making home improvements, for instance.
Personal loan
If you do not own a home or do not want to use your home equity to pay off credit cards, another option may be a personal loan. A lender can approve you for a personal loan, which you can then use to repay your debts, much like you would with a home equity loan. This difference is that the loan is not secured by your home. That means that you will pay higher interest rates than you would on a home equity loan, however, the rate is generally still lower than those associated with credit cards.
If you do not own a home or do not want to use your home equity to pay off credit cards, another option may be a personal loan. A lender can approve you for a personal loan, which you can then use to repay your debts, much like you would with a home equity loan. This difference is that the loan is not secured by your home. That means that you will pay higher interest rates than you would on a home equity loan, however, the rate is generally still lower than those associated with credit cards.
Pay off credit cards
You can pay off credit cards using any of these options. Simply obtain the loan or refinancing of your choice and use those funds to pay your credit card lenders. The key is to avoid incurring more credit card debt after you do this. The plan to pay off your credit cards needs to be accompanied by a plan to use self-control with your spending, too.
You can pay off credit cards using any of these options. Simply obtain the loan or refinancing of your choice and use those funds to pay your credit card lenders. The key is to avoid incurring more credit card debt after you do this. The plan to pay off your credit cards needs to be accompanied by a plan to use self-control with your spending, too.
5 reasons to pay down debt
The old adage, "neither a borrower nor a lender be," doesn't always apply in today's consumer economy. Still, it doesn't pay to carry more debt than absolutely necessary. Here are five compelling reasons you should pay down any outstanding loans as quickly as possible.
- You'll pay less total interest. Interest is essentially rent you pay a lender for the use of its money. The longer you keep the money, the more rent you'll pay. If, for example, you borrow $50,000 for 15 years at a rate of eight percent per year, you'll pay a total of $36,009 in interest charges. The same loan amortized over 30 years would cost $82,078 in interest. Refinancing your mortgage or auto loan over a shorter term can save you big bucks -- but only if you can afford the higher monthly payments.
- You'll be able to borrow more economically. When lenders calculate the rate of interest at which you can borrow, they take into account the amount of debt you are currently carrying and your ability to repay it. The greater your debt load, the greater the risk you will default on your payments and the higher the interest rate the lender will charge, to offset the risk. Pay off some debt -- particularly high-interest debt such as credit-card balances -- and you may qualify for a lower interest rate on the rest if you refinance it.
- You'll have greater credit to draw on. When lenders calculate how much you can borrow, they look at the amount of debt you have outstanding now and how much more you can afford to service, given your current income. If you have a big mortgage or a lot of credit-card debt and pay high monthly installments, lenders will be wary of letting you borrow much more. Pay down your debts and free up some cash each month and you'll qualify for more credit.
- You'll have better cash flow. By paying down debt, you'll reduce the amount of your monthly installments going forward. You'll have more money in your pocket for current expenses and extras -- and less need to borrow from high-interest lenders, such as credit card companies, for day-to-day needs.
- You'll reduce your opportunity cost. You could put the money you're paying in interest each month to better use if you pay off your loans. If you deposit the same amount in a savings account, you will earn interest. If you invest it in a home that appreciates in value or brings in rental income, you will make a capital gain when you sell or earn extra income while you are renting it out. You'll be better off by the annual rate of return you make on your investment plus the annual rate of interest you've been paying on your loans.
Student Credit Cards: Good Or Bad
You see them walking around campuses with their big smiles and clipboards- people trying to get students to open credit card accounts. They lure students with shiny free gifts and before you know it, your child has just gotten his or her first credit card. Aside from being sad that your baby is finally growing up, you worry whether giving a student a credit card is really a good idea.
The truth is, credit card companies flock to students like fish to water because they think these youngsters are easily influenced. Some students are not financially responsible and these companies know it. When a student makes a bad choice with a credit card, the credit card company benefits.
Responsible use of credit cards, no matter what age the card holder, helps to build credit. Credit is necessary to qualify for auto loans, home mortgages, and, in some states, the best auto insurance rates. If they are able to handle the responsibility, students should get a credit card for this reason.
The truth is, credit card companies flock to students like fish to water because they think these youngsters are easily influenced. Some students are not financially responsible and these companies know it. When a student makes a bad choice with a credit card, the credit card company benefits.
Responsible use of credit cards, no matter what age the card holder, helps to build credit. Credit is necessary to qualify for auto loans, home mortgages, and, in some states, the best auto insurance rates. If they are able to handle the responsibility, students should get a credit card for this reason.
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