Shopping for a Lender (Part 2)

October 24, 2009

It is just as important to look for a lender with a reputation for integrity and service. You will be sharing all of your most private financial information with your loan company. Signing for a loan is a big commitment, so make sure that you feel comfortable with your lender. Here are some important items to consider when shopping for a mortgage lender:

Rate Commitment
Many lenders quote an interest rate at the time of application. However, if market interest rates should go up or down during the period before you close on your loan, you need to find out what interest rate you will ultimately be charged. It is also important to know how long the lender will commit to this rate.

Loan Servicing
After your loan is closed, you will be dealing with a loan servicing company. The loan servicing company will accept your payment every month and handle any questions you may have concerning your mortgage balance. Many lenders service their own loans while many others sell their servicing to outside firms. You should know upfront that the lender you choose works with reputable loan servicing companies.

Considering the cost involved, your final choice of a lender should be one who offers you a good deal financially. However, keep in mind that you will be dealing with your lender for many years and it is always easier to deal with people you like and trust.

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What is “The Fed”? (Part 3)

October 8, 2009

The most effective tool the Fed has, and the one it uses most often, is the buying and selling of government securities in its open market operations. Government securities include treasury bonds, notes, and bills. The Fed buys securities when it wants to increase the flow of money and credit, and sells securities when it wants to reduce the flow.

Sometimes, in order to understand why you need something, it helps to find out what it was like before that “something” was created. Before the Federal Reserve was created in 1913, there were over 30,000 different currencies floating around in the United States. Currency could be issued by almost anyone — even drug stores issued their own notes. There were many problems that stemmed from this, including the fact that some currencies were worth more than others.

There were even times when banks didn’t have enough money to honor withdrawals by customers. Imagine going to the bank to withdraw money from your savings account and being told you couldn’t because they didn’t have your money!

Before the Fed was created, banks were collapsing and the economy swung wildly from one extreme to the next. The faith Americans had in the banking system was not very strong. This is why the Fed was created.

The Fed’s original job was to organize, standardize and stabilize the monetary system in the United States. It had to set up a method that could create “liquidity” in the money supply – in other words, make sure banks could honor withdrawals for customers.

Source: HowStuffWorks, Lee Ann Obringer


Vacation Properties and Income – Part 2

September 14, 2009

Another way for retirees to generate income from a vacation home is to sell it. By using the federal capital gains exclusion in conjunction with the sale of your primary residence, you can potentially realize tax-free income. Here’s how it works. The basic capital gains exclusion rules state that you must have owned and used the home as your primary residence for at least two years out of the five-year period ending on the date of the sale. If you are married, the full $500,000 exclusion ($250,000 for single homeowners) is available as long as one or both of you satisfies the ownership test (two years) and you both satisfy the use test (primary residence).


Vacation Properties and Income – Part 1

September 10, 2009

If you have a vacation home, you’re already aware of the enjoyment it provides and the benefits it can offer at tax time. But you may not be aware of how vacation property can be used to generate income in retirement or how it can play into an estate plan. In fact, vacation properties offer retirees a number of different options in managing their finances and estate.
Vacation property may be used to generate income in several different ways. The first, and most obvious, is renting it. The IRS allows you to deduct mortgage interest on your primary residence and one additional property up to a limit of $1 million in combined mortgage debt for mortgages taken out after 1987. Current tax rules also allow you to rent out a second home for up to 14 days per year without having to report the rent as income. If you rent for more than 14 days, the home is considered investment property, and rent must be reported as income. Converting the property to an investment property, however, allows you to deduct rental expenses, such as insurance and utilities, if you have a net profit on the property (deductions are limited if you report a loss). You can still use an income-producing property for personal use while maintaining your tax advantages — but only for the greater of 14 days or 10 percent of the total days it is rented. Maintenance days do not count as personal-use days, but use by in-laws or other part-owners does, even if rent is charged.


Simple Truths

September 8, 2009

As a financial advising firm, one of the simple truths we have learned is that relationships are the single greatest influence on how people use their money and plan for the future. When people talk about their hopes and dreams, they talk about the people they love. Their future, the life they wish to live, is always full of the people most important to them. They don’t talk first about dollars and cents, Dow averages, or bond yields. They talk about a spouse, a parent, a child. When imagining their financial futures, even those without family often focus on others, such as employees, friends, faith communities, and charities.


Keeping Your Emotions in Check…

September 3, 2009

In times like these, with the economy in a tailspin, and the stock market in the tank, investing requires an extra dose of patience, perseverance and perspective.
It takes patience to ride out the bear market, perseverance to continue to invest even through a difficult economy, and perspective to see the long-term picture and realize that recessions and bear markets are just part of the natural economic cycle. Slumping economies and bear markets of the past have always turned around — and there is no reason to believe that this time will be any different.


Saving for College

August 31, 2009

Saving for College
Another school year is around the corner and your children or grandchildren are that much closer to college. If you haven’t already started to save for their college costs, this may be a good time to talk to your adviser about setting up a tax-sheltered college savings plan.
By planning ahead, you can use a 529 college savings plan to give your children a head start on their college costs. There are two types of 529 plans: college savings plans and prepaid tuition plans.
College savings plans are state sponsored investment accounts that allow participants to contribute regularly. A 529 plan account grows tax-deferred and withdrawals from the plan for qualified educational expenses are exempt from federal income tax. There are no income limits.