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Today's Headlines: Should the US Ban Credit Card Surcharges?

MoneyTips Who's For Paying More? Let's take a quick vote. How many consumers are in favor of surcharges just for the convenience of using a credit card? Anybody? That's what we thought. The European Union and the United Kingdom agree with that assessment. New rules from the British government will soon prohibit retailers from charging customers extra for paying for their purchase with a credit card. The UK rule stems from an EU directive set to take effect on January 13, 2018, and, according to the UK Treasury Ministry, British consumers could save a sizable portion of the millions of pounds spent annually on card surcharges. Calling credit card surcharges "rip-off charges", Economic Secretary to the Treasury Stephen Barclay said that such charges "have no place in a modern Britain." Do they have a place in a modern America? Some states already say no, but the situation is not straightforward – and, despite Barclay's comment, lack of surcharges does not guarantee lower prices to consumers. Variations on the Theme Currently, Puerto Rico and ten states do not allow credit card surcharges (California, New York, Kansas, Florida, Maine, Connecticut, Texas, Oklahoma, Massachusetts, and Colorado). Merchants in the other states are generally allowed to pass on a surcharge that is equal to their costs associated with accepting the card (up to 4%). Surcharges on debit cards are already banned throughout the US via an amendment to the Dodd-Frank legislation. However, each card network has a specific set of surcharging requirements that retailers must follow in order to apply surcharges using that card brand. Combine different card requirements with differing state rules and you can see why relations between retailers, banks, credit card companies, and the credit card processors are complex and tense. For example, the American Express guideline does not allow retailers to charge a higher fee for one card network (swipe fee) compared to another. This is troublesome because fees are not the same among all card networks, and merchants are then limited to passing on only the lowest rate — or refusing to take cards with higher rates altogether. Retailers can get around this by applying product level surcharges (types of cards) instead of brand-level surcharges, but the situation remains complex. They must still abide by any state laws and limits/restrictions imposed by each card network, post an appropriate notice of the surcharge within their store, and include the surcharge amount as a separate line item on the receipt. There's Always a Way What about states where surcharges are not allowed? In many of these states, merchants are permitted to offer discounts for using cash or debit cards – thus the standard price is raised to cover the cost of credit card processing. The Supreme Court recently addressed a New York case challenging the execution of this approach, ruling that state law may be challenged with respect to the way prices are advertised on free speech grounds. New York state law allows that a merchant can advertise an item for a specific cash price (for example, $5) and a specific credit card price (for example, $5.10), or advertise the item for $5.10 with a 10 cent cash discount – but the merchant can't advertise a $5 item and a 2% surcharge for credit. Of course, retailers are welcome to raise prices straightaway without explanation and charge the same price to every one regardless of payment type. They risk losing business in doing so, but each merchant must do the risk/reward calculation. In short, if the US bans credit card surcharges nationwide, retailers can — and almost certainly will — continue to find ways to recoup their costs. What can change, however, is making these costs fully transparent, so consumers can decide which cards best meet their needs. The free market should take care of the rest. The Takeaway Nobody wants to pay extra fees on their credit card transactions, and it's laudable that the EU and UK are trying to protect their consumers from such fees. But it is naïve for them to assume that by removing card fees, merchants will mostly absorb the costs of processing credit cards, and not pass those costs on to consumers in other ways. We remain skeptical. Your job as a savvy consumer is to consider all fees and taxes before making a purchase, regardless of what you are buying and where you are buying it. This is not always easy – especially if you are buying an airline ticket or booking a hotel online – but you can't truly comparison-shop until you understand the total costs associated with your purchase. New regulations may make your job of assessing costs a bit easier, but they have an equal chance of making it harder. In either case, it's still your responsibility to shop wisely for credit products, comparing features, benefits — and costs — on an apple-to-apple basis. If you want more credit, check out MoneyTips' list of credit card offers. Photo ©iStockphoto.com/LDProd Originally Posted at: https://www.moneytips.com/todays-headlines-should-the-us-ban-credit-card-surcharges/560Credit Card Fees Consumers May Not Know AboutMany Credit Cards Drop International FeesThe True Cost of Your Credit Cards

Rent-To-Own Homes 101

MoneyTipsYou have spotted the house of your dreams, and it is on the market – but you cannot afford to buy it at the moment. Perhaps you do not have enough down payment funds, or your credit score is not good enough to get a mortgage loan. Don't give up yet. You have one other possibility to consider – a rent-to-own contract. In a rent-to-own arrangement, the potential buyer agrees to rent the home for a given period (typically 1-3 years). At the end of the rental period, the renter will either have the option to buy the house or be obligated to do so, depending on the terms of the agreement. To retain the option to buy the house, a renter puts up a payment (option money) which can range anywhere from 2.5%-7% of the sale price of the home. This gives the renter the right to buy, but not the obligation to do so. Meanwhile, the current homeowner/landlord agrees not to sell to any other potential buyers during this time. Option money may be refundable (usually not) or partially applied toward the eventual purchase price (usually so). Why would you want to rent-to-own? Here are a few potential reasons. Finding the Perfect Home – If you find the perfect home but cannot afford to buy it, the rent-to-own relationship gives you time to gather the needed down money or repaired credit score to qualify for a mortgage. You can check your credit score and read your credit report for free within minutes using Credit Manager by MoneyTips. Quick Relocation – If you need to relocate for a job transfer or other involuntary reason with limited time, a rent-to-own can let you take advantage of the best fit you can find in a short timeframe without locking into a 30-year mortgage. Another example would be a move into a more desirable neighborhood or school district for your children. You have to weigh the advantages of rent-to-own over a straight rental. Inability to Get a Traditional Mortgage – Poor credit, previous foreclosures, or other historical problems that still count against you on mortgage applications may make rent-to-own a superior option. This does assume that the problems have been rectified, and that your current income allows you to make your rental payments. Unfortunately, there are also some downsides to consider. Expense – Renting-to-own is more expensive than a straight rental. Your rent will be higher as a premium to the current homeowner to accept the rent-to-own arrangement. You will generally receive a portion of your rental payments back as credit on the purchase price, but in the short term, the expense is greater. In essence, there is no point in renting-to-own a house if you do not reasonably expect to buy it. Risk – If you choose not to buy, you will lose any non-refundable option money as well as any credit you had built up toward the purchase of the home. Overextension – Beware of overestimating your ability to pay rent and still save up enough funds to buy the house at the end of the term. Make sure you have sufficient fiscal discipline to make this work for you. Before executing a rent-to-own agreement, have a real estate lawyer look over the terms before you buy. Clarify any ambiguities on expected maintenance and upkeep, payment terms and conditions, and expectations and obligations at the end of the term. Rent-to-own housing arrangements work well for some people, but they are not for everybody. Consider whether a straight rental is better while you save money for a future home purchase, and before you decide that a rent-to-own is best for you, make sure that you fully understand all of your obligations and options. MoneyTips is happy to help you get free refinance quotes from top lenders. Photo ©iStockphoto.com/joebelanger Originally Posted at: https://www.moneytips.com/rent-to-own-homes-101Making the Choice Between Buying and Renting5 Reasons Not to Buy a HomeHome Buying vs. Renting

Have You Done Your Homework On Your Bank?

MoneyTipsHow do you know that your bank is the best one for you? You can consult all the advertising flyers and conventional information available at bank branches — or you can do some homework on the fundamentals of your bank with help from the online Bank Data Guide from the Federal Deposit Insurance Corporation (FDIC). What better source of information could you find than the organization that insures your deposits up to $250,000? The FDIC Bank Guide has links to lots of information, far more than you are likely to care about as a depositor. However, it does have several functions that are geared to depositors, starting with the BankFind menu. BankFind does just what the name implies — it allows you to find information about a particular bank. A drop-down menu will attempt to guide you through options as you type in the bank name. The main menu will give you the FDIC certificate number, when the bank was established and insured, the Bank Charter Class, location of the headquarters, and the webpage contact for the bank. FDIC contacts for consumer assistance regarding the bank are also included. The location drop-down menu allows you to find a specific location or all locations where your bank does business. The history tab lists all major changes within the bank including acquisitions, mergers, name changes, organization type, and changes of regulatory agency. The identification tab lists all relevant identifiers from the FDIC and the Federal Reserve. The financial snapshot tab gives the basic financial information about your bank's relative strength. Available information includes total assets and deposits, bank equity capital, and year-to-date and quarterly reports on net income, post and pre-tax return on assets, and return on equity. Click on the link for comprehensive financial reports and you will find a menu that goes further in depth, even allowing you to create comparison reports and to check FDIC ratings via the Community Reinvestment Act. The Details and Financials - ID tab will take you to that same menu, and the Reports and Analysis tab allows you to go to a user-friendly comparison page where you can compare dollars/percent of assets or rankings for up to four banks. Once you have located the branches of interest, you can use the Branch Office Deposits tab to find out the deposits at any particular location. Totals are available for each branch, including the countywide total for all branches in that category, and the statewide total. Bank robbers, don't get any ideas. The Bank Guide contains far more information that is useful primarily for analysts and regulators, such as downloadable reports on various banking institutions and cumulative data about the banking industry. As an individual depositor, you are probably not going to care about such in-depth information, but it is available if you find it interesting. The FDIC Bank Guide's real benefit to most people is the ability to find basic bank information quickly, to help you make decisions about your banking options. Do the locations and services at those locations match your convenience needs, is the bank stable with sufficient deposits, assets and returns, is it prone to acquisitions or changes, and how does it rate among its peer institutions? You may find that you have a better banking choice available to you, or you may find peace of mind in confirming that you already use the best bank for your needs. If you are starting from scratch with no credit history, check out MoneyTips' list of credit cards for limited or no credit, which can help you to build a credit history. Photo ©iStockphoto.com/Rawpixel Originally Posted at: https://www.moneytips.com/have-you-done-your-homework-on-your-bankHow Much Do We Trust Big Banks? (Infographic)Do We Trust Big Banks?Federal Reserve 101

More Americans Want To Forgive Trillion-Dollar Student Loan Debt Than Want It Repaid

MoneyTips More Americans believe that we should forgive all federal student debt than feel that the recipients should pay their loans back. In a shocking survey recently conducted by MoneyTips.com, nearly 42% agreed with the statement, I believe President Trump's Department of Education should forgive all federal student debt to help the economy. Less than 37% disagreed, while the remaining 21% neither agreed nor disagreed. "It is surprising that the majority of the US population supports this measure," says Brandon Yahn, Founder of studentloansguy.com. "Perhaps this student debt burden has spread more across all generations, and popular sentiment is turning the corner as it relates to student debt." The exclusive survey of 466 Americans, conducted in June, found that more than 25% strongly agreed with the statement, while 18% strongly disagreed. If this became the law of the land, it would mean American taxpayers forgiving around $1.3 trillion in debt, which Trump and his Education Secretary Betsy DeVos do not seem inclined to do. As a candidate, Trump proposed student loan forgiveness after 15 years of repayment, but Trump and DeVos' initial education budget reportedly seeks to eliminate current forgiveness programs. While income wasn't a factor, gender seemed to affect people's feelings on this subject, with more women favoring forgiveness over men. 47% of the women agreed or strongly agreed with the statement, while less than 36% of the men felt the same way. Conversely, more than 40% of the men disagreed at some level, compared to less than 34% of the women. Less than 15% of the women surveyed felt strongly that the borrowers should live up to their obligations to pay back their loans. Since a recent study showed that women hold nearly two-thirds of aggregate student debt, perhaps sisters are doin' it for themselves. Reasoned millennial money expert Stefanie O'Connell, "Women are now more likely than men to get a college degree, which may explain why they would favor student loan forgiveness at higher rates. They're also likely to experience career interruptions due to childbearing and caretaking, which can impede their lifetime earning potential and, consequently, their ability to pay back their loans. Finally, many of the lucrative jobs that don't require a college degree tend to be in male-dominated fields - carpentry, electrical, etc. - which might explain why more women favor loan forgiveness." Younger people also tended to forgive the student loans, with those aged 18-49 clearly for it, while those 50 and up wanted the loans repaid. 30% of the younger group strongly agreed with the statement, while less than 19% of the older group strongly agreed. Of course, older people are not immune from the sting of student loan repayment. Adds Stefanie O'Connell, author of The Broke and Beautiful Life, "The average student loan debt has increased around $19,000 in just the past 14 years, so I can see why younger borrowers would be more eager to see student loans forgiven." Brandon Yahn, who himself paid back more than $40,000 in student loans, says, "Most young people (especially millennials) have seen how much of a burden student debt has had on them and their peers, so it's not a surprise that they would be interested in having all student debt taken away. This was clearly seen last year in the support that Bernie Sanders was able to garner in pushing for tuition-free college." Presidential preference certainly influenced the results, but not always as expected. Donald Trump supporters surveyed were against the concept of student debt forgiveness. Among the 164 winning voters who participated, the group who strongly disagreed was only one larger than the group who strongly agreed with the statement. Nevertheless, 25% simply disagreed with the statement, while less than 15% just agreed. Overall, nearly 48% of the Trump voters were against the idea, while less than 37% supported it. People who reported that they voted for Clinton were more likely to support the idea of forgiving federal student debt. 31% of the 156 Clinton voters who took part agreed strongly, while 16% more merely agreed. Contrast that to 14% who disagreed strongly and the 17% who disagreed. Since there were more Trump supporters than Clinton supporters in the survey, why did the overall numbers skew Clinton's way? The people who didn't vote in the 2016 Presidential election also want to wipe the student debt slate clean. More than 43% of them agreed or agreed strongly with the statement, while only 25% of them disagreed to some degree. While non-voters' views were similar to those of Clinton supporters, Americans who voted for third-party or write-in candidates surprisingly answered similarly to the Trump voters. 31% of them disagreed strongly with the statement, while less than 23% agreed strongly. Senator Bernie Sanders suggested free college tuition and lower interest rates for student borrowers during his ill-fated presidential campaign. Bucking stereotypes, the few "Bernie Bros" surveyed were even more opposed to student loan debt forgiveness than Trump supporters. Our favorite write-in candidate gleaned from the survey: Ivana Do Over! Says Student Loan Hero expert Miranda Marquit, "Many millennials, who thought they were doing the right thing, took on student loan debt only to graduate to an economy where jobs have been scarce and wages have been mostly stagnant for decades. Gone are the days when you could work for the summer and pay for the following school year. As a society, we sold a dream and failed to deliver. You can make payments on your loans for decades and barely make headway." Adds Marquit, "As a result, these millennials are unable to help the economy in other ways. Research indicates they are putting off financial milestones that come with economy-building benefits. All the consumption that comes with things like buying homes and starting families is being lost because the largest generation yet doesn't have money to spare. Student loan forgiveness would go a long way toward helping millennials feel stable enough to take the next steps in their financial lives, as well as even starting businesses." Find out quickly at what rate you can refinance your student loan. Photo ©iStockphoto.com/designer491Originally Posted at: https://www.moneytips.com/more-americans-want-to-forgive-trillion-dollar-student-loan-debt-than-want-it-repaid/226Student Loan Debt Hurting Retail SalesNew Jersey's HESAA Student Loan Program Under FireObama Administration Announces New Loan Forgiveness Rules

Pre-Qualify Before Car Shopping

MoneyTipsYou may like shopping for a new or used car, but you will not like paying for it — especially when it comes to arranging the auto loan. The finance and insurance (F&I) office at the dealership is nobody's idea of a good time. How can you keep your time in the F&I office to a minimum? The easiest way is through pre-qualification for a car loan. Pre-qualification provides a solid estimate of the loan amount that you qualify for and the interest rates you will be charged through that institution. By pre-qualifying with a bank or credit union, you have an independent reference to compare to the financing offer from the dealership. The dealer will always prefer that you use their financing, because that's the more lucrative part of the auto business. Some car buyers simply agree to dealer financing out of convenience, others because they do not realize that they have alternatives, and still others because they incorrectly assume they can get the best interest rates from the dealership. In fact, rates are frequently higher with dealerships, and the alternatives are fairly simple with a bit of research. Keep in mind that advertised rates at dealers are only available to those with superior credit. If you have poor credit, it is even more important for you to pre-qualify to check your options. You can pre-qualify through your regular bank or credit union, which may offer you a discount for financing if you are already an account holder. Another option is through online sites such as Up2Drive, BlueHarbor, and Auto Credit Express. With poorer credit, pre-qualification through online sites may be your best option; some cater specifically to borrowers with lower credit scores. You can check your credit score and read your credit report for free within minutes using Credit Manager by MoneyTips. Armed with pre-qualification, you can ignore the financing element at the dealership and focus on the price, knowing what you can afford to pay. Look for vehicles slightly lower than the loan amount to allow for all taxes and fees. Dealers may attempt to beat your pre-qualification deal, or add other incentives to sweeten the deal. Be very skeptical of any other offers from the dealership that retain a higher interest rate than your pre-qualification terms. There are other advantages of pre-qualification aside from negotiation with the dealership. You also have a solid budget to keep you from being tempted to buy a more expensive car than you can realistically afford. You can go one step beyond pre-qualification with pre-approval. Pre-approval means that you are approved for a loan amount instead of an estimate. This process includes a more extensive credit check and proof of income. If you can pass the criteria, you have an even greater influence with the dealership. You can stand completely firm with the original pre-approval offer, the equivalent of a check in your back pocket. Pre-approval through a bank or credit union gives you the ultimate in flexibility, since that is good with any dealership. Pre-approval with any dealership limits you to buying at that dealership. If you are going through the pre-approval stage, you should be ready to buy; when you are just exploring options and unsure about a purchase, stick with pre-qualification. If you have a preferred lender and dealer in mind, check with the lender to see if they have a list of approved dealers, and that your dealer is on that list. For new cars, you simply negotiate the price with the dealer and let them make arrangements with your lender. Lenders may have other stipulations on used car loans, such as a secondary loan limit that applies only to used cars or limits on the age and/or odometer reading. Check on these restrictions if you are thinking about buying a used car. Pre-qualification/pre-approval is a powerful tool for you to use at an auto dealership. You do not have to settle for the dealer's financing, which is often a worse deal for you. It is a great feeling to go into a car dealership with the upper hand. Consider getting pre-qualified or pre-approved for your auto loan at a bank or credit union, and experience that wonderful feeling for yourself. If you are interested in a personal loan, visit our curated list of top lenders. Photo ©iStock.com/BariscanCelik Originally Posted at: https://www.moneytips.com/pre-qualify-before-car-shopping7 Keys to Buying a Used CarIs Your Car Dealer Financing Final?Online Car Loans 101

Why Are Millennials Avoiding Credit Cards?

MoneyTipsCredit card usage is dropping among the millennial generation. A surprising 67% of Americans between 18 and 29 years of age have no credit cards at all, according to a recent survey. That compares to only 45% of Americans between the ages of 30 and 49, and 38% of those aged 50-64 without credit cards. At 32%, even less Americans aged 65 and over are without a credit card. The 2009 Credit Card Accountability Responsibility and Disclosure (CARD) Act probably played some part in the decrease by making credit cards difficult to obtain for those under age 21. Whopping levels of student debt also play a role, as millennials are wisely afraid to add more debt to their loan obligations. Unemployment may be keeping some millennials from qualifying for credit, but others appear to be avoiding credit cards as a matter of principle. Given America's soaring credit card debt, that is a positive development… or is it? Consider some of the potential advantages of credit card use. Building Credit History – Without a credit history, lenders have no way to evaluate your risk when the time comes to buy a car, a home, or any other large purchase requiring a loan. You will be charged higher interest rates, as a result, until you prove your risk level is low. Purchase Protection – As opposed to cash purchases, credit cards offer protection against vendor fraud and stolen items. You also have means for disputing fraudulent purchases made in your name. Convenience – Credit cards are convenient and accepted at most vendors, whether brick and mortar or online. (Arguably, this is a negative if you have poor self-control.) Record of Expenses – Monthly credit card summaries provide you with a full record of your credit purchases. If you do not keep receipts or budget properly, these records are quite helpful to outline where your money is going. Emergency Reserve – Your credit limit serves as an emergency pool of funds for unexpected expenses such as an auto breakdown or an accident requiring medical care. Credit.com suggests that the average person without credit cards could pay almost $160,000 in extra interest over a lifetime when compared to the interest rates acquired through responsible credit card use. While there are many assumptions involved in that figure, the principle is sound. However, many millennials are putting more emphasis on the negative side of credit cards, such as these examples. Fraud/Identity Theft – Credit card breaches cause many headaches in disputing fraudulent charges and repairing the damage from lost personal information. Debit cards are less tempting as they are limited to the cash in your account, and your credit limit is probably higher than your bank account balance. Debt/Interest Rate – Credit card debt is usually the highest interest rate debt you will incur and if you charge more than you can pay off each month, debt can spiral to unmanageable levels. If you want more credit, check out CreditCards.org's list of low-interest credit card offers. Ease of Overspending – The flipside of the convenience advantages listed above. Poor Credit Scores – Just as you can build your credit history with responsible credit card use, you can damage it with irresponsible use. Having no credit history makes it difficult to qualify for loans and mortgages, but having a poor credit history increases those difficulties. You can check your credit score and read your credit report for free within minutes using Credit Manager by MoneyTips. The most responsible path is to use cards sparingly, pay them off in full each month, and stay at a small fraction of your credit limit (10% or less if possible). This strategy will give you the best credit rating without increasing your debt. Avoiding credit cards is advisable if you cannot use them responsibly. However, it is better to learn how to use cards sparingly and intelligently. The same properties that can cause you to run up credit card debt (such as lack of self-control, poor budgeting and overspending) are going to cause problems in other areas of life eventually. Once you get those habits under control, you may not feel the need to avoid credit cards. Photo ©iStockphoto.com/SIphotography Originally Posted at: https://www.moneytips.com/why-are-millennials-avoiding-credit-cardsDoes Your Credit Card Limit Measure UpWhat Happens When You Go Over Your Credit Limit?Higher Credit Limits Help Improve Credit Scores

Credit Gardening 101

MoneyTipsYou may be a whiz at vegetable gardening or flower gardening, but how are you at credit gardening? That may sound like you are buying plants on credit, but in this case, good credit is the product of your gardening. Instead of harvesting fresh vegetables or springtime flowers, your harvest will be an improved credit score. Your objective is to remove items that drag down your credit score — the "weeds" in your credit report — while taking care not to introduce any new items that can drop your score. For example, opening new lines of credit will typically pull down your score through hard inquiries for credit that require significant review of your income and debts. Just as with other types of gardening, credit gardening requires planning. Your credit score is most important right before making a large purchase such as an auto or a home, and by keeping your credit score at its peak, you can save hundreds or even thousands of dollars via a lower interest rate offer. Before beginning your credit gardening, make sure that your garden has no hidden errors that are unnecessarily damaging your credit score. You can check your credit score and read your credit report for free within minutes using Credit Manager by MoneyTips. The service will allow you to check reports from all three major credit bureaus (Equifax, Experian, and TransUnion); that's important because any error could be unique to one agency. Be sure to dispute any errors in the report to clear your credit garden for planting. If you believe there is a mistake on your credit report, you can resolve it with a single click using our credit correction service. If you already have a variety of credit accounts such as credit cards and installment loans like a mortgage, your credit "seeds" have already been planted and your goal is to manage those accounts wisely until the next large purchase. However, if you are starting out with little credit or attempting to rebuild poor credit, you will need to plant some credit seeds by opening a few, controllable accounts. Secured cards backed by a cash deposit are an excellent form of seed credit, assuming that the card issuer reports activity to the credit bureaus. Gas station cards are also useful because they are frequently used but do not generally build up large balances. During the tending phase of your credit garden, you must be careful to manage your accounts wisely. Use all of your cards for small purchases each month to keep the accounts active and your overall credit utilization low. Make sure that you pay off all purchases on time and in full each month. This provides food for your credit garden by showing responsible use of credit. Meanwhile, the passage of time will eventually remove the negative events pulling your credit score down — weeding the credit garden automatically. Even though you may be tempted by promotional credit card offers or major deals on purchases during the tending phase, keep your goal of a higher credit score in mind. If you are not credit gardening toward a specific large purchase, it may help to set a time-related goal such as opening no new accounts for one year. This clears the path for future large purchases. After careful tending, it is time to harvest your new higher credit score in whatever way you see fit. Whether your goal is a great deal on a mortgage or auto loan, or simply to bask in the glow of a great credit score, it is time to enjoy the fruit of your efforts. If you want to see your credit report and credit score within minutes for free, try Credit Manager by MoneyTips. Photo ©iStockphoto.com/Saracin Originally Posted at: https://www.moneytips.com/credit-gardening-101How To Boost Your Credit Score Fast5 Credit Tips For New College GradsHow can I increase my credit score?

Avoid Paying Mortgage Insurance Despite Low Down Payment

MoneyTipsIf you are stretching your funds to purchase a home with a minimal down payment, you are probably familiar with private mortgage insurance (PMI). It is generally required in any home purchase in which the down payment is less than 20%. PMI is insurance for the lender, not for you — it covers the lender for the increased default risk that you present. Typically, lenders arrange PMI through a third-party insurer. The premium is calculated based on a percentage of your loan amount and incorporated into your monthly payment. The PMI lasts until you no longer pose a heightened risk of default, usually near the 20-22% equity range. If you have a hard time accepting this approach, consider a variation of PMI offered through lenders. In this lender-based alternative, known as LPMI, the lender pays the PMI and passes that cost on to you through a higher interest rate on your loan and/or an upfront fee. LPMI often results in a lower initial monthly payment, which could make the difference in being able to afford your dream home. The main disadvantage of LPMI is that it cannot be cancelled. In essence, LPMI spreads out your mortgage insurance over the life of the loan. Typically, you are trading a lower initial monthly payment front-loaded with PMI for a higher monthly payment in later years. Depending on the interest rate, you may be paying a lot more over the long run — which is why most borrowers who expect to stay in their home for a considerable time opt for traditional borrower-paid PMI. LPMI does provide a tax advantage. Since LPMI is tied into the interest rate of your loan, it is also tax deductible because it is considered to be part of your tax-deductible mortgage payment. Traditional PMI is considered separate and not deductible as of this writing. The keys are the combination of interest rate, the size of the loan, and the time you expect to stay in the home. If the interest rate is low enough or you can lower the rate with some upfront fees, it may not matter that the LPMI lasts for the life of the loan. LPMI also makes more sense if you do not intend to stay in the home for a long enough time to reach the 20% equity point that would allow you to cancel traditional borrower-paid PMI. To find out if LPMI is a better option for you, work with your loan officer to do a direct comparison of your costs, both monthly and over the life of the loan. Regardless of the style of mortgage insurance that you choose, there are two ways to keep your premium as low as possible. Casey Fleming, Author of The Loan Guide and Mortgage Advisor at C2 Financial Corporation, explains: "Mortgage premiums today are very highly credit score driven, so the higher your credit score, the lower your premium will be with all other things being equal...[they are] also very dependent on your loan-to-value ratio and it's done in steps." Essentially, the higher your credit score and the lower your loan-to-value ratio is (i.e. more down payment), the lower your premiums will be. You can check your credit score and read your credit report for free within minutes using Credit Manager by MoneyTips. Of course, if you can afford to make a 20% down payment or more, PMI is not an issue. You may want to consider waiting until you can place 20% down to make your purchase, but in that case you risk missing today's relatively low interest rates — unless you can compensate with future improvements in your credit score. If you decide not to wait, work with your chosen lenders, and remember to consider PMI options as you shop around. Armed with a cost-benefit analysis, you will be able to make the best mortgage insurance choice to fit your needs. MoneyTips is happy to help you get free refinance quotes from top lenders. Photo ©iStockphoto.com/Bliznetsov Originally Posted at: https://www.moneytips.com/avoid-paying-mortgage-insurance-despite-low-down-paymentPrivate Mortgage Insurance 101MIP vs. PMIMortgage Insurance – What Is It?

Saving on the Costs of Children

MoneyTipsChildren are treasures – but they are expensive ones. The latest USDA report on the costs of raising children to the age of 17 puts the price at almost $234,000 apiece accounting for inflation. As Sunday, July 23, is Parents' Day in the US, this is a good time to consider your total family income over that same period of time and how you can use that income most efficiently. Housing – Housing is the largest contributor to the costs of raising a child, and therefore is the place where you can make the most impact. You may think that you immediately have to upgrade your home when your family grows, but that is not necessarily the case. Upgrading just so your children can all have their own bedrooms, or just because you think that you should upgrade, is not a suitable reason. With an existing mortgage, focus on saving for future expenses and building your equity. If you are renting and planning to buy, wait until you have saved up a sufficient down payment and find an excellent deal on a home that fits your needs. Look for a rent-to-own arrangement if you want to buy a home ultimately but simply cannot afford it at the moment. In short, do not buy a house bigger than you need just because you want one. Your children’s needs take precedence, and the money you save on housing can be applied to future expenses such as higher education. MoneyTips is happy to help you get free mortgage and refinance quotes from top lenders. Child Care – Child care and education costs are tied for the second–largest cost component of child-raising. If you cannot afford traditional daycare and do not have a willing and able relative nearby, consider creative yet safe options. Examples include babysitting co-ops where the load is shared (or similar nanny-sharing concepts), and flexible work schedules that allow one parent to be home at all times. Do not assume that you do not qualify for assistance programs. Check with Benefits.gov, as well as your state and local Department of Children’s/Social Services, to see what programs are available. Education – Start saving for higher education early by putting away any small amount you can in a 529 savings program. The earlier you start, the more time your funds have to accumulate and relieve the pressure for scholarships or student loans to cover education costs. Food – Any parents of teenage boys are painfully aware of food costs. During their growth spurts, they are bottomless pits. However, you can encourage healthy eating habits and still keep food costs down even during that stage. Buying in bulk is an excellent method of keeping costs in check. Stores like Sam’s and Costco supply large quantities of necessities at a discount, and you are likely to have little waste at this point. Coupons can also save significant money on grocery bills. If you do not have time to clip and save, consider the newer coupon apps that allow you to search and download specific coupons to your smartphone (or computer printer, if you prefer). Check out our Coupons 101 article for more tips and details on the coupon apps available. If you have the space, growing your own food can be a great cost-saver, as well as providing chores for your children and helping to establish a work ethic. Besides, food just tastes better when you grow it yourself. Clothing – Your kids do not have to have the most stylish and trendy clothing, despite what they may tell you. Make sure your kids have adequate clothing, but there is no need to go overboard with designer clothes and overpriced athlete-endorsed sneakers. A funky used clothing store may satisfy your teenager’s tastes and your budget. Do not let child-raising costs frighten you. Children are worth every penny in the end, and then some… although there will be many days when you question that concept. Photo ©iStockphoto.com/fotostorm Originally Posted at: https://www.moneytips.com/saving-on-costs-of-childrenThe Costs Of Raising Boys Vs. Girls (Infographic)Costs of Being a DadCost of Raising a Child

Men More Likely Than Women To Ask For Financial Advice

MoneyTipsWe all have heard the cliché that men never ask for directions. That may or may not be true on the road, but a new survey refutes the stereotype with respect to finances. A recent survey by Country Financial finds that in a wide range of basic financial topics, men are more likely to ask for help than women are. Overall, 19.5% of survey respondents had never sought financial advice at all – but 23.6% of all female respondents reported never seeking financial advice as compared to 15.2% of men. Out of the financial categories listed in the survey, the one topic women sought advice on the most was retirement planning (37%). Given that women on average live about five years longer than men and earn less money (approximately 83 cents for every dollar that men earn), retirement planning should be even more important to women – but men still had a higher overall rate of asking for retirement advice (45.2%). The discrepancy in asking for advice holds across other categories such as taxes (42.1% for men, 33.9% for women), insurance (39.0% to 26.9%), estate planning (25.4% to 12.9%), debt management (20.4% to 15.8%) and non-retirement investments (30.1% to 24.1%). Why would men seek advice more often than women would? Perhaps women simply don't need as much advice. Women tend to be better at relationships, and according to Leisa Peterson, Certified Financial Planner and Life Coach at WealthClinic, people should consider that "their relationship with money is actually really similar to their relationship with other people." A Vanguard study from 2016 partially backs up this premise, finding that working women were saving between 7% and 16% more than men depending on their income levels. It's possible that women prefer to do their own research with available sources and take time to reach their own conclusions, while men just want to get to the answer as quickly as possible. Regardless of your gender, there's no harm in asking for financial advice from a qualified source. Financial Educator and Author Tiffany "The Budgetnista" Aliche explains: "The number one piece of advice I can give someone with financial problems is 'Ask for help'...Just like you wouldn't set your own leg if you broke it, don't fix your own money by yourself if you have not been educated in how to do so." Where should you go for education and advice? Internet resources are abundant, as are financial planners. However, there are alternatives. For those struggling to make ends meet, "I would always recommend a non-profit credit counseling agency," advises April Lewis-Parks, Director of Education and Public Relations at Consolidated Credit. "They will give you a range of options. Everybody's situation is different." It makes sense to do initial research on your desired topic using Internet resources. Not only can you find advice on any financial topic for free, you can also do research on any financial planner or non-profit counseling agency that you plan to use. With a greater baseline understanding of the topic, you can more easily understand the counselor's advice – and also get a feel for advice that seems questionable enough to seek a confirming opinion. Maybe you fit into this data profile and maybe you are an exception – but in either case, it's simply common sense to fill in gaps in your financial education by asking for advice from a trusted source. Don't be afraid to ask for help on retirement planning, investments, or any other important financial topic. As for directions to the nearest gas station, ask someone or use your phone! Let the free Retirement Planner by MoneyTips help you calculate when you can retire without jeopardizing your lifestyle. Photo ©iStockphoto.com/Juanmonino Originally Posted at: https://www.moneytips.com/men-more-likely-than-women-to-ask-for-financial-advice/731Women and RetirementFinancial Decisions: Men Vs. WomenAverage Social Security Payments Are Lower For Women Than For Men
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