19 May 2009 -  Jacksonville, Florida USA                                        

 

Part 1 - When Is Refinancing Make Sense To You?

 

With the interest rates for 30-year fixed mortgages floating around to a 4 to 5 % level, the lowest has ever been since I was born? It may make sense to consider refinancing your 6+% current mortgage interest rate let alone if you have an adjustable rate mortgage (ARM).

First and foremost, the so called “expert” people in the lending industry told me the old rule of thumb is, “refinancing only makes sense if you can lower your interest rate by 2% or more”. Well, I believe that but the word “only” didn’t impede me from digging into refinancing issue a little deeper especially after all we have been through with our current mortgage lender.

Ok, I am definitely not an expert in any field of study more so on how people do business here in America but you see I am no longer the type of person who just sit back and submit myself to other people’s proficiency or abide by their own way of dealing business…never again.     In this day and age, you’ve got to learn how to play the game otherwise you’re always going to end up a loser.

Imagine in just a span of 4 years, our house mortgage was sold not just to two but three different mortgage lenders and during last year’s transition period, the extra payments we made every month which were supposed to go to the principal were re-directed to our escrow account and then at the end of the year, the lender turned around and refunded us the money which was equivalent to one month worth of extra mortgage payment.

An escrow is the account where the mortgage lender held certain amount of fund they collected from the borrowers to pay for their property tax and house hazard insurance premium at the end of every year. 

Can you believe it? All these happened during the transition period and I wasn’t on top of it because I know the $108 dollars extra we pay every month always go to the Principal so I just assumed they’ll continue doing the same thing. I only found out what they did when we received the check in the mail last week of January and when I spoke to Customer Service Representative, I was told that money was in fact a surplus from our escrow account. I was so furious, yelled and cussed the guy so badly!! Boy, are these lenders/bankers smart or just in the business to rip people off?! First, they tank the economy but then the government bailed them out at 0% interest!! And the worst thing is, the US Treasury and the Fed continuously rig the game to guarantee that these companies are going to survive in this financial meltdown. I don’t know about you but I am beginning to doubt Mr. O’s slogan “yes we can; change we can believe in”. I guess I am just tired of senseless wrangling in the government and the politicians’ promises that are often broken!! Yet, I am still hopeful and I pray that the US and the rest of the world will find its’ way out of this global mess even just a bit at a time, but always onward. Well, I better go back to the topic of refinancing before I get so political and hurt some members of my family and friends feelings.

Anyway, while refinancing at a lower rate reduces your monthly mortgage payment but you also have to first consider the closing costs which can be a very substantial amount for you to recover later on. Here's a classic example:

	NEW Refinance	CURRENT Mortgage	DIFFERENCE IN MONTHLY PAYMENT
Loan Amount	$   198,927	$     200,000
Annual Interest Rate	4.250%	5.875%
Term Length (in Years)	30	30
Monthly Payment without Escrow	$978.60	$1,183.08	$204.48

To compute the monthly payment, type this formula on MS Excel
                    =PMT(4.25% /12, 30*12,-198927)
                    =PMT(5.875% /12, 30*12,-200000)

So let’s just say, based on the data given, you’ll be saving $204.48 a month with a new refinanced loan but the total closing costs was $18,527.

This means that you need to keep/stay in your house for at least 90.60 months or 7.6 years just to break even the re-financing expenses.
Formula: ($18,527 divided by 204.48 = 90.60 months) or (90.60 / 12 = 7.6 years)

But there’s more to that than just to recoup your closing cost expenses of course. I’ll give you in the next post, the whole picture of the refinancing numbers complete with series of worksheets from Vertex42 - The guide to Excel in everything that I revised to make it simpler and easier for common people to understand.

Also, it is very, very important to be aware of the “pre-payment penalties” stipulated in your copy of the 'Federal Truth-in-Lending Disclosures' document which was signed by all parties, completed at loan closing/settlement when you first bough your house. Take a look at it before you go further into considering a refinancing.

A prepayment penalty is a provision in your mortgage loan contract with the lender that states that in the event you entirely pay off your loan early, you will have to pay a penalty. This penalty is usually enforced if the loan is being refinanced and not when you sell your house.

According to American Finance, the most common prepayment penalty is six months worth of interest on 80% of the principal balance or it can be 3% of the principal balance. This means that the prepayment penalty on a loan with an outstanding principal balance of $180,000 and an interest rate of 5.875% would be approximately $4,200 and or 3% of 180,000 is $5,000 and this would bring your closing cost to a whopping $20,000!!

Bottom line is Shop around, compare and DO the MATH first. Do not just jump into refinancing just because you see a very attractive low-interest rate mortgage loan. You have to watch out for the catch---the so called hidden fees?!

And a good place to start your research is at www.bankrate.com  but don’t forget to also check out your local credit unions for comparison as well.  I will talk about this topic when I get a chance.

Until next time....

    8 May 2009 -  Jacksonville, Florida USA                                        

 

I Still Have A Life

Between my two jobs and among other things to do, I haven't had as much time to keep this blog updated let alone reconnect with my family and friends on a regular basis. But I still have a life outside work you know--- At least no matter how crazed I am with work and etc, I can still devote some time each week with DH especially he’s been sick these last few days. The *taho or salabat with honey seemed to soothe his sore throat, soften his cough and clear his clogged nostril. It’s just a seasonal flu that we all can catch from time to time and nothing like Swine Flu that everybody seems to be panicky about these days... it is as if, this world had never have this kind of outbreak before. Well, I suppose the reason for the big panic is that the media and other politician especially Joe Biden are in full cry and exaggerating the facts about it that make the public even more hysterical as it is. I mean if people only learn to stay calm, they’d be able to retain their ability to think clearly, make effective and better decisions, and create a more positive outcome in life.

*Taho or salabat is a Ginger stock and I drink this stuff whenever I am sick...it's a good cold remedy... try it.
  Ingredients:
     A handful of Fresh ginger roots sliced into pieces
     2 cups water
     2 tablespoons of honey
Directions:  Put water and the sliced ginger into a pot and bring it to a boil then simmer for about 5-10 minutes uncovered. Squeeze in lemon juice and add honey before serving.

Two weekends ago, I took a day off at work and host a catch-up party for few good friends in town that I haven’t seen and talked to in ages. And I especially thank my DH for helping me out in the kitchen. To say that his siopao is big hit is an understatement. Needless to say, it was a great catch-up party strictly for ladies only and the moms had a real break from their daily household routine. One of them even blurted out how liberating and therapeutic it is to enjoy the party for the first time in nearly 4.5 years without her son in tow. I swear I couldn't remember the last time I laughed so hard that I nearly peed in my pants until that day. Laughter is the best stress reliever indeed. Thanks Ate Susan for making us laughed-out-loud. You are, as always the clown of the party :-)
 

More photos here

To the rest of my gang especially to my family and friends in the Philippines whom I haven’t been in touch with for a while, my sincere apology for being muted these days---I know I have been remiss in responding to your calls, emails, text messages, Friendster, Face book and Twitter requests. It seems as if I allowed myself to become too busy these days and forget to even acknowledge your existence or at least know how you’ve been but rest assured that I am still here thinking of you... just really busy doing so many things all at once especially trying to figure out if re-financing our current home mortgage makes sense to us considering that the closing cost is roughly 14 grand and we already paid a total of over 50 grand in the last four years. Then completing the application, talking back and forth to the mortgage specialist and complying the gazillions of paperwork required is no picnic but fortunately, I seemed to handling it so well as I have everything under control. To make the long story short, today we received the notice saying our re-finance loan application has been approved. Yaay! Yes, we managed to re-finance our current home mortgage interest rate from 5.875% to 4.250%; and if we continue to pay the same amount every month like we used to in the last 4 years, we would be able to save at least $25,000 in interest and shorten the term of our new loan to 19 years rather than stay with our current home mortgage loan for the remaining 20 years.

Wow!!! Talk about the milestones I have achieved over the years. DH was so proud of me and how much I’ve grown and changed from being so naïve to being completely independent, confident and assertive. Ten years ago, when DH and I bought our first condo and my first car, I was completely clueless. I just sat there starring in what it seemed to be a blank wall and not knowing what to ask. All I really did at that time was scribbled my signature on the paperwork when DH prompted me to and didn't really know what the heck was I signing it for.  Nowadays, I walk all the talk while DH's job is just to sign the paperwork.

While I am really grateful and proud of DH's complete trust in my ability to take full-charge of our finances but sometimes I can’t help but get frustrated with him for being so passive when it comes to the financial aspect of our marriage. I just wish he is at least proactive to our money like he used to than just entrust everything to me now but then again, I can’t blame him for not liking to deal with numbers and not having the time and patience to negotiate with the merchants. His reason is, he trusts me without a shadow of a doubt, and that he knows I definitely know what I am doing and he believes I do the right thing for us because I am the accountant.

Three weeks ago, I also sat down with our Financial Advisor alone---all by myself. It was funny how the financial advisor and I talked about our own respective experience in handling the financial aspect of the marriage. How he and DH are the exact opposite of each other. He said while he is on top of their finances and so anal about it whereas his wife does not seem to care as long as she and their four kids are provided on a regular basis. He even asked me how Tony feels about me sending money regularly to my family in the Philippines. I told him, Tony doesn’t mind it all... and I withhold or hide nothing from him. You know it seems to me that all Tony cares about is, as long as I allocate a budget for his cooking frenzy, nursery plants and Lowe’s or Home Depot on top of his weekly allowance, he couldn’t be any happier. He’s a spender I can tell you that but to justify his spending habit, our back and front yard look really nice and I have to give him 100% credit for all of these. My man has a green thumb! See the proof?

     
     
More photos here

On Getting Fit

As I recounted in my previous post two years ago: “If there is one thing in my marriage that I find it so distressing to deal with and you better believe it, it is no where close to my being infertile but battling with DH weight problem and health in general.” Well, I thought after all the effort DH put on to becoming fit and healthy and lost 75 lbs, I wouldn’t have any problem with him anymore but last month, he caught me by surprise when he quit the Weight Watcher Program. To be perfectly honest, I was so distressed but come to realize later that unless he really makes a conscious decision to live a healthy lifestyle for his own sake; there’s nothing else I can do to help him get back on track so I gave up!!! I just subscribe to the idea that "Life is all about the choices we made and our attitudes towards it." It’s simply just a matter of how we choose to handle the situation. Like, we choose how we react to certain issues and situations. We choose how people will affect our mood. We choose to be in a good mood or bad mood. It's our own choice how we live our own lives really. So there, I have the choice to whine and stress myself out about his weigh problem or just ignore what he eats. You see, if I choose to whimper about his bad eating habit everyday, that certainly wouldn’t do us any good, rather it would only make the matter worst. Nonetheless, no matter what and no matter how fat he is, I still love him with all my heart, mind and soul. After all, he makes a good husband despite his bad eating habit you know so I think I’ll keep him for life ;-) Really, all I can do now is to pray and hope that one day he realizes that life is worth living than just the temporary indulgence of junk foods and how much fun would it be if we grow old together. *fingers crossed*

Speaking of weight loss, I’ve finally shred 4 lbs of fats two months ago although I gained back a pound last month because of the Panera bagels (12pcs of Cinnamon Crunch and 12pcs of Dutch Apple & Raisin with reduced Fat Hazelnut and Honey Walnut that I can't resist to get) Sheesh!!! I just can't stop eating them--its way too good plus with the catch-up party two weeks ago and DH fired up his grill again last Sunday and made a very tasty chicken BBQ, I forgot all about diet for a while and devoured 4 cups of white steamed rice and ate almost the whole chicken in less than 30 minutes. LOL

Then last Monday, I attended the celebration party for all tax volunteers of Real Sen$e-A United Way Initiative at Dave and Buster. Ohh the food was mouth-watering that I even went back for second serving. It was a good break to say the least. Now I am back to being good again!

Overall, we completed 9,382 tax returns in Jacksonville, Florida and saved the American taxpayers over 1.6 million dollars!!! I am humbled and proud to be part of this great cause.

Tax Season Update AS OF MARCH 24, 2009
Tax Season Measure	2009	Compared to 2008	Dif
Total Returns Completed	9,382	8,804	7%
Total Refund Dollars	$13,321,408	$10,693,761	25%
EITC Returns Completed	2,464	2,200	12%
EITC Returns Dollars	$3,886,547	$3,658,129	6%
Total $ Saved by Taxpayers w/Real$ense	$1,615,303	$1,360,604	19%

Well, now that the tax season is over, guess what? I just signed up for another volunteer job as a *Financial Education Trainer in one of Real Sen$e-United Way Programs. *Financial Education Trainer is a person who facilitates Money Smart, a financial education class for community members interested in learning how to better manage their finances.