The Finance Blogger

We received a question about home loans for people with bad credit. This reader has a bad credit situation and we will answer his questions in our next post about home loans for people with bad credit. He is applying for a home mortgage and found out that a dispute he had some time ago is affecting his credit score and making it difficult to find a mortgage with a decent interest rate.

Home Loans for People With Bad Credit Question to Debt Counselor::

My credit rating is below 500 although my debt to income level is only .3.  I had some trouble a while back with a company so I refused to pay them and they sent a notice to the credit agencies which caused my credit rating to nosedive. I have never missed a payment in my life and now I have this bad credit rating and want to get a home loan so that I can buy a new car. Do you think that this is the right way to go about getting a loan.

Do you currently have a mortgage? :: yes, and all payments are up to date

Home/Mortgage Loan Amount :: $75,000

Other Loans, Including Credit Cards:: None at this time, 2 credit cards with zero balance. We pay the charges to the cards in full each month on the statement due date.

Are you employed and for how long:: yes for 3 years

Your credit rating to be – excellent, fair, or bad? :: Bad as explained above
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We recently opened a bank account at a Wells Fargo branch on Palm Springs. This account was to be used as a winter vacation account for us to place money in for our vacation. It was to be used to pay for condo deposits on places that we rent from time to time in the area. We were told that there would be no fee’s. As long as we made a transfer of at least $75 from the checking account to the savings account. We did not expect to be the victims of identity theft. The checking account was the only thing needed. But also had to open the savings account in order to do this transfer and get the no fee account.

We ended up closing these accounts for two major reasons, both were quite frustrating on their  own.

• First there was a fraudulent withdrawal from our savings account in my wife’s name
• Secondly the bank changed it’s mind and decided to charge a $15 per month bank fee.

Identity Theft – Bank Fraud

Someone opened an account in New Jersey in my wife’s name. They used our address and then took $300 out of our account and deposited into this new account. She or he then withdrew $100 from this new account. Imagine our surprise when we started getting statements for this New Jersey account ! Same last name, first name and initials with our address!

The bank was good in that it immediately reviewed the case and deposited the funds back into our account in Palm Springs, however it took them about 3 months to investigate and determine what was going on with the other account. We continued to receive statements for this account and saw the activity on the New Jersey account.

They claim that a bank employee opening an account in New Jersey for a customer in New Jersey with the same name as my wife, accidentally clicked on the wrong person when they opened an account. Now this could have happened, however it still does not explain the removal of $300 from our account in Palm Springs.  Something pretty fishy is going on, but we will never know the real answer.

Bank Account Fee’s

There has been a lot of news recently about bank account fees, the high costs and the increases. Bank of America has really received a lot of press. Well Wells Fargo should have also got some of this bad press too.

We went from having a checking account with no fee’s to an account that they were going to charge $10 or $15 a month for just having the account. We keep a small amount in the account until we need to make a deposit so that we can pay for a rental fee on one of our vacation trips. This was not going to work and the bank person we spoke with was apologetic and tried to convince us to keep the account. We decided to close the account just because of these fee’s.

Actually we are happy that we no longer have these accounts. It is just one less thing to be concerned about. How can they suddenly start charging such a large fee ? If it were $5 or less, then maybe we would go for it. But at a price of $15 per month, there is no chance. Now they did say that if we kept a minimum balance of $7500 in the account they would waive the fee’s but who is going to do that today. You get so little interest for your money no one can afford to have that kind of money sitting there earning no interest.

We talked to a store clerk one day about this and he said that he does not even have a bank account. He uses a check cashing service and carries cash around with him all of the time. Check cashing is expensive as well. This is not something that we are prepared to do.

This is our story about banks and the fee’s. If you have something similar let us know by leaving a comment or two.

Our reader who posed the question to us indicated that he currently had a mortgage that was being renewed and that he wanted to increase the mortgage from $75k to $100k. He also indicated that he did not have any other loans or credit card debt. Our reader is employed full time and has been at the same job for the past 6 years. He would like to increase his mortgage so that he can complete a number of renovations to his home next year. He is also considering interest-only mortgages for his renewal.

They would like to know whether this is a good way to proceed or not. Also what the drawbacks would be with this type of mortgage. This is really a two-part question: Interest-only mortgages and increasing the mortgage to help pay for future renovations to his home. Many consumers plan renovations every year to their home to modernize them and to make them more attractive for sales purposes. This is a pretty common question for consumers all over the country.

Interest Only Mortgages

Many people like the idea of only paying interest on a mortgage since it means our monthly payments are lower as a result. While they do have this advantage there are a number of issues to consider before you leap to this solution.

First of all the interest rate is fixed usually for a short period of time, usually for a one month period. The interest rate is set based on the prevailing bank rate and can fluctuate a great deal over time. If you are concerned about increasing rates, then this may not be the best approach for you.

Secondly, paying interest only really means that you never repay the principal on your mortgage. As long as you are ok with this approach, then there is no problem. However, most people want to be mortgage-free at some time in their lives.

Read the rest of this entry »

We received a question about interest only mortgages from a reader and will answer his questions in our next post about interest only mortgages.

Question to Debt Counselor::Interest Only Mortgage Loan

I am considering an interest only mortgage for my home. We are renewing our mortgage and have this option to consider. It is appealing since the payments will be less than they currently are. We can use all of the cash flow that we can at the moment, since our bills for every day living expenses have gone up so much. The other thing we like is that we can pay down or draw on the interest free mortgage at any time up to an established limit that is based on the equity in our home and the approved limits by the bank.

Do you currently have a mortgage? :: yes

Home/Mortgage Loan Amount :: $75,000, but we would like to increase it to $100.000

Other Loans, Including Credit Cards:: No credit card balances and our car is fully paid for
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We decided to do a few posts on the general subject of home upgrades or remodeling. Consumers plan remodeling on their homes for many reasons whether it is just to complete repairs on various items around the house or to improve the sales value as you prepare your home to sell.  Many people also feel that before they retire they want to complete a lot of upgrades to their homes too.  When you upgrade your home, you can spend a great deal of money. Quite often they spend large sums of money on upgrades that may be premature and really not the best use of their money from a cash flow perspective.  We will examine this issue and several others in this post.

They feel that they will not have the money to do these things after they retire so now before they finish working  they have to :

• Replace the windows
• Replace the driveway
• Buy a new car
• etc

In other words get ready for retirement because they will never be able to afford it again. After all they will be on a fixed income and do not want any debts to be concerned about.. For some this is good advice, especially if you cannot deal with the mess of remodeling and you have lots of free money laying around.

However we would like to propose a different approach that maximizes your capital and helps you funds last longer. In this post we will talk about replacing windows , when you should do it and how many should be done.

Upgrade Your Home – Assumptions

The average 3 bedroom home will have roughly 10 windows in it and each window will cost on average $700 a piece or $7000 dollars to do the entire job.  Of course you can find cheaper windows and homes with more or less windows, however let’s use this as an average. Adjust these numbers to your own situation. This also assumes that you hire someone to do the work since most of us do not like to be on high ladders.

Alternatives to Replacing your Windows

• Maintain existing windows as long as possible
• Replace all windows at once
• Replace windows only as needed

We will discuss each of these alternatives and the relative cost of each.

Maintain existing windows as long as possible

This alternative is usually by far the least expensive. If you have wooden windows, they will last a lifetime if properly maintained.  When the paint cracks or peals off, water gets in and the wood begins to rot. When this happens it is time to replace the windows.

Do it yourself or hire someone for $500 every two years to scrape and paint the windows will ensure that your wood frame windows will last for many years. Over 10 years your windows will cost $2500 if painted every two years. Most people will wait three years and if you do it yourself, your looking at almost zero cost to maintain your windows.

Replace all windows at once

Replacing your windows all at once gets it done and you never need to worry about windows again if you replace them with vinyl windows that have zero maintenance.  Of course in our scenario you have to spend $7000 immediately, but most people will rationalize that painting is a non issue and it increases the sale value  of their home. Still not everyone has $7000 to spend !

Replace windows only as needed

Another scenario that I personally like is to replace windows only as needed. Our windows on the west and south side of the house are more prone to the freezing and thawing cycles during the winter and as a result the paint peels off and the water gets into the wood. The sills rotted and we needed to replace these windows.

We replaced half of our homes windows at a cost of $3500, four years a go and the rest seem fine as long as the sills are kept covered in paint. I have $3500 to put to use on other expenses, however using the time value of money I have had the use of this money for 4 years and assuming an interest rate of 5%, that’s $175 in income every year for the past 4 years or $700.

That pays for a window, so I essentially get one window for free!

Some people will argue that you cannot get 5% interest income. Well four years ago you could easily and now you can get 4%, with rates forecast to go up next year.

Upgrade Your Home – Summary

• Maintain existing windows as long as possible
  • Paint them yourself – $0, save $7000 for many years
  • Hire painters – $1500 @$500 each time every 3 years
• Replace all windows at once
  • $7000 for our scenario
• Replace windows only as needed
  • $3500 for half of the windows, maintain the rest, invest the savings, get one window for free from interest income

This is a simple straight forward scenario, however it works for me and I follow the last scenario as needed. Evaluate your own situation and make the decision that makes sense for your windows, your home and your financial situation.

Comments are welcome. For more ideas and thoughts about buying and selling real estate, click here.

In our last post we wrote about the times to  negotiate your health bill. We felt that some more detail behind each suggestion was warranted. The first one was Negotiate while you’re still healthy!  The others included – At the time you get a big bill. If you are suffering the results of a medical error. When you are caught between doctor and health plan.  Planning an elective procedure. We will discuss Negotiate your Health Bill in more detail in future posts as well.

Negotiate your Health Bill – Big bills

In our next post we will discuss the next area of when it is time to negotiate your health bills – If you are suffering the results of a medical error; When you are caught between doctor and health plan; and Planning an elective procedure.

We learned a really good lesson when my wife needed some emergency treatment at an emergency clinic. We were pretty green in terms of experience at the time and were more concerned about the health issue and not about the costs. Most people would be in our situation and all we really cared about was whether we were covered or not for medical treatment.

Well my wife was in the emergency department for 5 hours and received a number of tests over this period. She was treated very well and we felt that she really did receive expert medical care. When we left the hospital was happy since they had our insurance plan and felt that they were going to get paid with no real problems.

Negotiate your Health Bill – Cost for Five Hours of Treatment

We eventually saw the bill for the treatment that my wife received. It came to around $9500 much to our surprise. Of course we were not concerned because the insurance was covering this, although they took a really long time and I had to intervene to get them moving to resolve the bill, otherwise I was going to receive collection phone calls for bill collectors.

Eventually the negotiations were completed and the final bill was negotiated down to $6300, still a large amount but much less than the original amount! The insurance company advised us to not pay the difference since this is what they had negotiated as a savings to the overall bill.

What if You do not Have Medical Insurance

In our case we really needed to see a doctor. We really had no choice. What would we have done in the situation that we had no medical insurance coverage. Well there are a couple of things to consider.

Doctors like to order lots of tests to confirm their diagnoses. This is a tricky situation to consider, however if the doctor is confident maybe you can forgo the additional testing and avoid the additional costs.  As you are being treated, you also need to evaluate the cost of everything that is done and whether it is optional or not. this is very tough to do when you are in pain, however if you have an advocate with you, perhaps they can evaluate things for you.

Secondly, before you leave with the bill in hand, start your negotiations immediately. Find out who the right person is that you should be dealing with and talk to them. There is no sense wasting time with the billing clerk. They will not have any authority to negotiate anything so do not waste your time.

Negotiating Leverage

If you pay the bill before you leave, then you have lost your negotiating leverage. A friend of mine received a second notice from a doctor for some treatment they received and decided to call the doctor. He explained that he had not coverage and would pay what he could as soon as he could. he wanted to know how much the doctor could reduce the bill since he would be paying cash. the bill was reduced by 50% on the spot and my friend paid the bill immediately.

Bottom line , talk to the right person and negotiate. The worst that will happen is that they say no and demand the full amount. But at least you asked. Note: you must do this before it falls into the hands of the bill collectors. They have no mercy!

Another excellent question from one of our readers concerning online mortgage loans! The question was whether a person should wait until they have picked out a home they are interested in purchasing to apply for a mortgage. Or whether they should pre-apply for a mortgage before they have even found a home that they are interested in. This is a common question that many consumers have when they are looking for their first home. They want to know how much they can afford and how big a house that they can afford.

Apply for Online Mortgage Loans

We believe that the answer is and always should be to apply for a mortgage ahead of time. Applying online is an excellent way to find a mortgage and become pre-approved for a mortgage. The reasons are as follows:

• Know how much you can get financing for in advance
• Understand the value of home you can afford
• Make an offer without conditions

These are the three main reasons for requesting mortgage approval ahead of time, whether it is through an online mortgage service or a traditional mortgage service such as a bank. We will explain in a bit more detail.
Read the rest of this entry »

We received a question about online mortgage loans from a reader about whether they should apply for pre-approval of a mortgage or if they should place an offer first on a home that they wish to buy. We  will answer his questions in our next post about an Online Mortgage Loan. In addition we will discuss why sometimes it is a good idea to apply in advance for a pre-approved mortgage. We can tell you right now that being pre-approved for a mortgage gives you a lot more confidence when you place an offer on a home. You already now that you can afford it and you can place a no condition offer on the table which is very attractive to many sellers.

Online Mortgage Loan

Question to Debt Counselor:: We are planning to purchase a home in the next year or so and have started looking at homes to get an idea of the prices, the areas we would like to live in and to see what is available on the market. We have not made any decisions at this time, but we do have a question. Should we apply for a mortgage before placing an offer on a home or should we wait until we have found something we like and then apply for a mortgage based on the price of the home we would like to make an offer on? We thought that maybe an online mortgage loan service might be able to help us.

Do you currently have a mortgage? :: No, we are currently renting

Home/Mortgage Loan Amount :: Not sure

Other Loans, Including Credit Cards:: a small car loan, the balance is about $6,500 and nothing on our credit cards
Read the rest of this entry »

This is the position, I find myself in at the moment. We have been in our home for 24 years and are just about to retire. We are trying to decide to remodel or buy a new house. The home has been maintained in perfect condition. Added a new roof when needed, upgraded the windows when needed and replaced the furnace when it broke. But the real question is! Should we renovate and bring it up the standard that new home buyers are looking for. Should we do this pre-retirement or post retirement?

Remodel or Buy a New House

New home buyers are looking for hardwood floors ( we have hardwood in most rooms but not all), they are looking for granite counter tops ( we still have the old traditional counter tops), they are looking for totally landscaped, which we have and they are looking for the bathrooms to be modernized. Our bathrooms are still in the 1980’s but they do have tile, just the wrong colors for today’s buyers.

So What Should a Guy to Who is About to Retire?

Should we move to something more modern. Should we stay and renovate slowly or should we just leave things the way they are? From a non emotional perspective, people tell us that we will not get the money out of the house that we put into it renovating. That is if we sell it right away. On the other hand if we stay in the house and enjoy the renovations that is an entirely different matter. At least we will get the benefit of the work and the money that we put into the upgrade of our home.

When Should This Work be Done

There is nothing worse than going into retirement and in debt because you spend thirty or forty thousand dollars upgrading your home. A bathroom upgrade can cost $25,000 these days. A kitchen can cost easily $35,000. So unless you have the ready cash and it will not affect your retirement plans, think carefully about whether you want to spend this money or not.

The estimates we provided above can vary a great deal. Do it your self enthusiasts can save a great deal of work, while other people who contract everything out and purchase top of the line materials can spend much more than the numbers quoted. We really believe that you should live within your means and not go into debt as you enter retirement, hence our advice is to think very carefully before you spend all this money on the upgrades that you may be planning.

What are the costs Associated with Moving?

The cost to move can be expensive. A neighbor downsized and moved to a new home that had all of the upgrades that everyone seems to be looking for. By the time he was done paying for legal fees, real estate fees, moving costs, decorating costs and new furniture, he was a $100k in the hole! Would have been better staying were they are. Of course he would never admit this. Since he is a very proud person. But the reality is that it cost him much more to move than it would have to upgrade his existing home.

He also had a lot of problems with the builder. He has to put up with new sod, new fences around his yard. Also neighbors that do not share the same values as he does when it comes to taking care of his home and yard. For my money I would much rather stay right were we are. We love the house and the neighbor hood so why would we move?

When you assess all of the costs of moving, even if you downsize, there are a lot of expenses associated with moving. Evaluate all of these costs. Decide if it is worth it to move or whether you should you just upgrade your home and stay where you are. For my money, I plan to stay right where we are and not move. I would rather spend the money to upgrade our home vs. moving.

In our last post we wrote about the times to  negotiate your health bills and we felt that some more detail behind each suggestion was warranted. The first one was Negotiate while you’re still healthy!  The others included – At the time you get a big bill; If you are suffering the results of a medical error; When you are caught between doctor and health plan; and Planning an elective procedure. We will discuss these in more detail in future posts as well.

Negotiate your Health Bills while you’re still healthy

Many people either do not have health insurance. Or they have coverage that is limited to specified procedures, tests and the kind of drugs that will be paid for as part of your health plan.  Either way you can end up with a huge bill if something requires you to receive treatment at a hospital or even in a doctor’s office.  While you do not want to risk your overall health there is a fine line between some of the actions that can be taken to diagnose and treat a patient.

If you are healthy and do not have any pre-existing conditions, now is the time to negotiate a health plan that will allow you to have relatively low premiums. Once you have some sort of health condition, one of two things are going to happen. Your premiums are going to go up or you will not be able to get coverage for health related issues. This latter situation can be very difficult since the bills you are going to pay will be astronomical.

We have heard that if you are broke, the hospitals cannot turn you away and will provide the care you need. We have also heard that if you have some money, whether it is a house or whatever, they will make you pay and will have nothing left after you are done. This may seem extreme, however if any readers can clarify this, we would love to hear about it.

Negotiate your Health Bills with the Health Provider

Advising the doctor that you do not have a health plan or a limited one can sometimes work in your favor. The doctor may discuss alternatives with you that might allow you to reduce the cost or eliminate then altogether.  Some examples include:

• Tests that are nice to have for example may be deferred or eliminated.
• Using brand name drugs for example can also decrease your overall costs.
• Giving you options to consider regarding your diagnoses and treatment
• Choosing treatment that your insurance company covers vs. those that it does not.

Do this while you are still healthy and before you head to the doctor’s office or off for more testing. As we mentioned there is a fine line to be considered. For example the difference in a brand name drug and a generic may not be that different chemically. But there can be  a huge difference in price. On the other hand a test to confirm a doctors diagnoses that mean the difference between life and death or perhaps a major operation is probably something you want to have done.

Collection Is Expensive

Discussing your situation up front with the doctor allows him to tailor his treatment around your financial needs. While at the same time allowing you to take part in the decision as well. Never place the decision entirely in the hands of the doctor or some insurance administrator. You will want to make sure that you understand the issues. Also understand the implications of proceeding or not with what ever is being considered.

In our next post we will discuss the next area of when it is time to negotiate your health bills. At the time you get a big bill; If you are suffering the results of a medical error; When you are caught between doctor and health plan; and Planning an elective procedure.

Our latest questions is from a reader in Toledo Ohio who is planning to purchase a new home in Toledo and are wondering if they can afford to make this purchase. They need a new home loan in Toledo Ohio. Or mortgage to allow them to proceed with their plans. They both have good jobs. Also they make approximately $3000 every two weeks together which is around $72,000 a year. They are hoping to purchase a home that is currently listed for $140,000 and have $15,000 to place as a down payment. The couple feel they will need a mortgage of $125,000. Although this may be reduced if they are able to purchase the home at a reduced price after negotiations.

This is an excellent question and more people should do this kind of planning prior to making the leap into home ownership. There might be less foreclosures and bankruptcies as a result if people took the time to determine if they can afford to make the payments prior to purchasing a home.

New Home Loan in Toledo Ohio – Monthly Payments

Using these numbers and an interest rate of 6% with a 25 year term, the monthly payments would be

• Payments: $720.19 .
• Total Amount to be payed: $219,058.36
• Total amount of interest $94,058.36

The interest rate and the 25 year term are negotiable with the banks. They could be lower or higher and affect the monthly payment accordingly. However this calculation provides this couple with a budgetary number for them to use in their planning.

As part of their financial planning, they should also include taxes. Although they did not include an estimate of the taxes with their questions we will assume $200 a month for taxes.  Based on this assumption their monthly payments for principal, interest and taxes is $920. Which is only 15% of their monthly income. Most banks will approve mortgages that go up to 25% and some will approve high ratio mortgages that go higher. This couple is well inside the limits that the banks use.

There is also a cushion on the monthly payments should they decide to have a family and their income drops as a result or one of them gets laid off which is possible in this economy.

Plan for Upgrades and Emergencies

Most homes will require maintenance of some sort every year. There are upgrades that also will be completed as money is available. Our recommendation for this couple is to set aside some money for this purpose. Ensure it is available to them when they either need to replace such things as the roof, repave the driveway  or other major maintenance items.

They should also have a 6 month savings plan available to handle emergencies. Sickness that prevents one of them from working or if they should receive a lay off notice. With the purchase of this home, at least from a financial perspective, this couple will be in a good position to deal with the financial issues that they may be faced with.

If you have questions about debt , loans or mortgages, please send us your questions and we will try to answer them for you during the following week. You can write your question in the comment field at the bottom of this post. For more information about mortgages, click here.

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New Home Loan in Toledo Ohio. We received a question about new home loans from a reader and will answer his questions in our next post about new home loans. The simple question they have is how much can they afford to pay for a home given their down payment and their current income. This is a common question that almost every home owner has when they go to purchase a home. It is one of the main factors that helps them decide which home to make an offer on. If the price range of the home is out of their ability to afford, then there is no sense in making an offer on it.

Question to Debt Counselor about New Home Loans::

We are planning to buy a new home and are wondering if we can afford to purchase a home. My wife and I  have about $15,000 saved up and want to buy a home that is currently listed for $140,000. We are hoping to get it for less than that, but our real estate agent told us to go for the full amount in case this one slipped away on us and we had to look at another home. Do yo think we can afford this. We both work and are not planning to start a family for a few years. We are also concerned that we may not have saved enough for a down payment on a house of this cost.

Do you currently have a mortgage? :: No, we do have a car loan and several credit cards which are fully paid up. We rent an apartment at the present time and would like to buy our own place.

Home/Mortgage Loan Amount :: $125,000

Other Loans, Including Credit Cards:: Car loan, 2 credit cards with max balance of $3000 each

Are you employed and for how long:: Yes, both my wife and I are. I work in a factory and she works for a local store here in Toledo. We have both been in our jobs for the past 2 years.
Read the rest of this entry »

It used to be that the doctor was god and whatever he said was gospel. Now a days we have all learned that doctors are just like everybody else.  They are trying to make a living in a very stressful environment. They make mistakes just like everyone else, they make decisions that are based on judgement. Many  are dealing with huge costs which they pass on the patient or the insurer. This is why you need to Negotiate Health Bills! Doctors bills and hospital bills can be negotiated just like everything else and there are specific times when you may want to discuss the bill and negotiate a better deal. The following are a list of those times and we will discuss each in more detail.

• While you’re still healthy
• At the time you get a big bill
• If you are suffering the results of a medical error
• When you are caught between doctor and health plan
• Planning an elective procedure

Negotiate Health Bills While you’re still healthy

Advising the doctor that you do not have a health plan or a limited one can sometimes work in your favor. The doctor may discuss alternatives with you that he might have avoided otherwise. Tests that are nice to have for example may be deferred or eliminated. Using brand name drugs for example can also decrease your overall costs. Do this while you are still healthy and before you head to the doctor’s office or off for more testing.

Negotiate Health Bills At the time you get a big bill

If you get a large bill or even a small one, it is always a good idea to review the details and understand all of the charges. If there is anything you do not understand or recall receiving ask for clarification before you pay of it. Once you pay for something there is a lot less chance you will be able to negotiate.

A friend was billed $10 a day for a new toothbrush every morning while at the hospital. First of all that is an expensive toothbrush and secondly she never received a new toothbrush every day. She reused a tooth brush each day and for 5 of those days she was in a coma and could not brush her teeth. A small example that amounted to over $100 on her hospital bill. Challenge everything.

This is not limited to the hospital. Challenge what your insurance will pay as well to make sure you are getting full value from your insurance coverage.

Contact your health insurer if your calculations show the health plan should be covering more of the total cost, and don’t pay the bill until you’ve exhausted all your options, according to Consumer Reports. Still, it’s important to signal that you want to work toward a resolution.

If  you are suffering the results of a medical error

Unfortunately, medical errors and complications occur frequently. Should you pay for medical mistakes? Check your bill thoroughly and if some thing was given to you in error, it is time to negotiate with the hospital and your insurance company. Having your doctor go to bat for you in such cases can be a powerful negotiating tool.  Your insurance company also may provide you some recourse. Again never pay for something until negotiations are complete.

If you feel caught between doctor and health plan

Billing issues are usually very complex. You may need help to understand the issues and what is being billed and may have to turn to supporting agencies in your state to get help. Bills for specialist you never saw but reviewed your charts for 5 minutes and health care workers that provide limited service are good examples.

Negotiate Health Bills when Planning an elective procedure

You’re in a prime negotiating position to negotiate when you’re healthy and have the luxury of time to compare costs and services for an elective procedure. If you are in control of the timing and the decision to proceed, you are in the best position to negotiate services and costs. Always request a written quotation stating fully the cost and services to be provided. Compare competing quotes carefully if you have the luxury of getting several quotations.

Ideally the estimate would cover services needed up to 30 days after the procedure and specify that if any complications or errors occur, you won’t have to pay anything and corrective action will be provided.

Downsize to a Bungalow? Lot’s of baby boomers are thinking about whether they should stay where they are in their current homes or downsize to a bungalow.  There can be a number of legitimate reasons why you want to downsize, however saving money is probably not one of them. It just costs way too much to move and pay real estate fees etc unless you are downsizing to a much smaller home. Lot’s of people assess this situation every day and wonder what is the best position for their personal situation.

Downsize to a Bungalow – Issues

We will discuss this point in a moment, but first here is a list of reasons many people think about when they are thinking about downsizing and some actually do it.

• A house without stairs
• Less Yard work
• Change neighborhoods
• Life Style change
• Avoid major maintenance issues
• Health issues
• Trying to reduce monthly costs
• Just the urge to move to avoid memories

When you downsize to a bungalow you meet several of these objectives for moving.  No stairs, usually a smaller lot so less yard work, but not always and usually seniors like bungalows so there are like minded people around the area. Sometimes it is better to move than put a lot of money into an existing home. If you have serious health issues you may be forced to move out of your home also into a seniors home where there is more support available.

Downsize to a Bungalow – Economic

Moving for economic issues is a really tough one and unless you are downsizing to a much smaller home in another  neighborhood into a less desirable area, you may not save that much money.  Issues to consider in your assessment include:

• Real Estate Fees – 5 to 6%
• Legal fees
• Moving fees
• Taxes depending on your area
• Property taxes
• Heating and cooling costs
• Landscaping if a new home
• Updates to an older home, repairs and remodeling
• Even with a new home, there are many upgrades to consider

All of these costs can really mount up so you need to be very careful in making your decision to downsize. Personally I would rather put all of this extra money into upgrades and improvements to my own home instead of paying all of these expenses to move to another home. Every situation is different, so you will need to develop costs associated with each and then make your decision based on the economics and emotional issues that you are dealing with.

Complete Your Own Calculations

Everyone must do their own math and take into account their financial circumstances. If , for example , you are paying 5% real estate fees on a $100,000 home that you are selling, that is $5000 along with legal fees to sell your current place and purchase another, say $1000 you now are spending $6000 in total.  Add to that the cost of moving, which might be as low as $100 to rent a truck for a day or much more if you hire someone to pack and move your things, adding several thousand dollars extra.

Then there is the redecoration, remodeling and landscaping. This could amount to nothing or be many thousands of dollars. Although it is usually not nothing, some people can get away with not spending too much money.  This is very personal to each couple, so make sure you discuss this with your spouse before you decide on how much to budget for this area.

If you love the area you live in,  then spend the money on your own home. If you have trouble with the stairs, install a stair lift. Everyone will be much more comfortable in their own home that they know and love. While some people prefer to move to another city that they have often thought about visiting. Then there are those that move to be with their kids or they move to be closer to family, especially if older members need support. Everyone makes their decision for a variety of reasons and they do what is right for them.

The intent of this blog is to encourage readers to also assess the real cost of downsizing to a bungalow or any other home. Good luck with your decisions! For more information about down sizing your home, click here.

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The questions we got from our last reader involved a poor credit mortgage refinancing issue. Basically the writers mortgage was coming due and he was nervous about renewing the mortgage given his poor credit situation.  He has always paid his mortgage on time , never missing a payment nor being late for a payment. The problem comes from his problems with his credit cards. The two negative things you can do with credit cards is first of all only pay the minimum payment and secondly miss a payment. Always pay off the balance in full each month. If you are not going to be able to do this, then do not purchase items and charge it to your credit card!

Late Payments Impact Credit ratings

Apparently there was a time when had to choose between paying his mortgage payments or being late on the credit cards. He chose to he late on paying his credit cards which put him into the poor credit rating category. Had he taken the reverse, i.e. paid his credit cards and not his mortgage there is a chance that he might have lost his home. He did not do that and has a good relationship with his bank today, even though his credit rating is not so great.

We think the chances are pretty good that the bank will just renew the mortgage at the prevailing rate since his record with them is good. They may look at his credit record and they may only look at his record with the bank.  Obviously we think that customers should never get themselves into a situation were they cannot make their payments. But this is water under the bridge and now he has to deal with the situation. Read the rest of this entry »

We received a question about poor credit mortgage refinancing from a reader and will answer his questions in our next post about poor credit mortgage refinancing. We get a lot of questions about this issue. Consumers with poor or bad credit who are trying to refinance their home or are trying to obtain a mortgage so that they can purchase a home they can call their own. Managing your credit rating and your debt is incredibly important and we wish consumers would pay more attention to this issue.

They really have to plan well in advance of things like mortgage renewals to make sure that their credit rating is under control when it comes time to renew a mortgage. If it is not in good shape, your interest charges could go way up as a result.

Poor Credit Mortgage Refinancing – Question to Debt Counselor::

Our mortgage is coming due in two months time and we are very nervous about refinancing the mortgage with our poor credit rating. I have paid the mortgage on time every month for the past 5 years and never missed a payment. The problem is that I cannot say the same for our credit cards.

We missed several payments 2 years ago. I got laid off for a spell of 3 months and as a result my credit rating slipped into the poor category. We chose at the time to pay our mortgage so that there would be no danger of us losing the house. We have since repaid everything we owe on the credit cards and the only other debt we have is a small car loan.

Our concern is that the bank will not want to refinance our mortgage given our poor credit rating.

Do you currently have a mortgage? :: yes, and it needs to be refinanced

Home/Mortgage Loan Amount :: $45,000

Other Loans, Including Credit Cards:: just a small car loan of $5,000

Are you employed and for how long:: yes, I work for Ford for the past 10 years
Read the rest of this entry »

One of our readers posed a question about using credit cards vs. lines of credit. He wanted to know if he would be better off arranging for a line of credit for renovations that he plans to do around his home. The total amount of expense being considered is $30,000 and he apparently has sufficient room on his credit cards to carry this amount, but would have to arrange for a line of credit from the bank. He is concerned about the amount of interest he might pay on any unpaid balance on his credit cards. So which is better, credit cards vs. lines of credit?

He makes sufficient income, has a great credit rating so should not have a problem being approved for a line of credit should he decide to go that direction.  This is a great question since many people just use their credit cards and end up paying more interest overall which makes whatever they purchased that much more expensive. Credit cards can have interest rates as high as 18% for regular cards and 29% for store credit cards. Compared to a secure line of credit with the interest rate at prevailing mortgage rates, credit cards are not a good deal at all.

Credit Cards vs. Lines of Credit

Credit cards are a great financial tool to use to pay for many items as long as you pay the balance on your credit card every month. If you do not the credit card company will charge you interest on the unpaid balance of something in the order of 18% and all the way up to 28% approximately if it is a store based credit card.
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In our last post we were talking about some of our buddies who have to work long into their retirement years because of their poor finances associated with being married more than once. We decided in this post to look at your finances and 2nd marriages and what the extra expenses are associated with the 2nd or even 3rd marriage and why this could have such a large impact on your retirement plans.

You may have to work a few more years to make up for the extra expenses that you have while dealing with divorce and getting remarried. Add kids to the mix from one or more marriages and you may as well just keep working unless you have an excellent job that pays very well in retirement.

Additional Expenses Associated with Divorce and Remarriage

Here is our list. Do you have any to add?

• Legal fees associated with your divorce settlement
• Legal fees associated with a pre-nup on your 2nd marriage
• 2nd marriage getting married expenses
• Support costs especially if your spouse was not working or made less
• Support costs for the kids
• Paying for two lodgings instead of one
• Paying for travel costs for the kids to visit
• Retirement pension cut by 50%

There are probably others , but these are the big ones that come to mine. Note that the legal fees are within your control and can be reasonable. Or they can be huge if  you decide to contest the settlement.

From friends I have spoken to, legal fees can be really huge. One friend was so frustrated. They had just spent a hundred thousand dollars on legal fees. There was a lot of anger and both parties contested the divorce settlement. Another who was well aware of these costs, decided to use a person who is a marriage settlement counselor to help them resolve issues. There was still some cost that had to be dealt with. However the costs were much less than what the other person in the example experienced.

What happens if you Get Remarried

It gets very complicated to say the least. Now you have sharing arrangements with a variety of kids and families, more gifts to buy at Christmas and birthdays and more expense associated with the family in general.

If you happen to marry a working spouse, some of the extra expense mention above in our last section can be reduced somewhat. You can at least share the cost of some of the bills such as lodging expense and travel costs. Even retirement can be better if two people are supporting retirement costs. You still have all of the legal fee costs which is just money that is gone and can never be recovered or replaced.

Your Finances and 2nd Marriages – Consider Carefully When you Remarry

Although everyone wants to be in love and not worry about finances. The reality is that we must if we are to continue to live comfortably. Be very careful when you remarry. Protect yourself as well by having a pre-nup for both parties which spells out how your expenses will be handled. How your assets will be handled especially if there is a breakup in the future.

Our friends who are married for the 2nd or 3rd time just have to face the music. They know that they are going to have to work for a while longer to make up all of these extra costs that they have. Retirement may not come as soon as they planned. They may not be able to do all of the things they planned during retirement.

The year is almost over and you still have time to make some financial moves before year end to minimize your taxes and position your investments for next year. We have compiled a short list of smart financial moves to consider before year end for this purpose. Here we go with our list:

• Make a retirement investment – RRSP for Canada , 401k for the US
• Contribute to an Education Fund
• Complete tax Savings Transactions
• Take advantage of Tax Free Savings Accounts ( Canada )
• Consider Income splitting
• Plan your Charitable giving
• Review your Plans with your financial Adviser or Tax Adviser

Smart Financial Moves to Consider before Year End

A few more words about each of these ideas. Note, some apply to Canada, although most countries have something similar, so check with your adviser for suggestions in your country.

Make a retirement investment – RRSP for Canada , 401k for the US

There are lots of reasons to save for retirement, however one of them is that you need to do this every year and if you have not set aside some money this year, now is the time to do it. Don’t wait until after year end, do it now so that you can take advantage of any tax savings in the current year.

Contribute to an Education Fund

If you have kids and you want them to go beyond high school, it is a good idea to set aside money now to pay for their education. Education has become particularly expensive and families who start early can provide the best opportunities for their children. It is easy to do do when it is spread over many years rather than in one lump sum.

Complete tax Savings Transactions

If there are transactions such as selling stocks at a loss, now is the time to do it at year end. There are several things to remember – there is a 3 day settlement rule so you cannot wait until the last day; also there is a wait time before you can repurchase the stock if that is your intent. Governments realize that this is what many people and fund managers do every year. Understand what the rules are and then proceed. Your investment adviser can assist with this decision.

Take advantage of Tax Free Savings Accounts ( Canada )

This is something available in Canada and may be available in other countries. basically the government is encouraging people to save money and allows Canadians to save money and not pay tax on the income until it is withdrawn from the plan. It is a great way of hiding income until such time that you want to utilize it, usually in a year where you have smaller income than normal.

Consider Income splitting

If you can transfer income to a spouse who has a lower tax rate, some times you can decrease the total tax paid by a married couple. Consult with your tax adviser on this one.

Plan your Charitable Giving

It is always good to give and in most countries this is a tax deduction. Give money before year end to ensure that you minimize the total tax you pay.

Review your Plans with your financial Adviser or Tax Adviser

Regardless of what you do, it is a good idea to meet with your adviser prior to year end to review all of these financial strategies and others to ensure that your taxes are minimized and your investments are maximized for growth. You may also want to re balance your investment portfolio particularly if some stocks have gained while others may have not. As you near retirement, some investors will shift more towards income oriented investments and less on growth oriented investments.

Smart Financial Moves to Consider before Year End

Your adviser can help with all of these assessments and decisions.This is a good time to schedule an appointment with your adviser and take action on these smart financial moves to consider before year end. In fact you should meet with your advisor once every six months to discuss your investment portfolio and your retirement plan. Let your advisor know when you plan to retire so that he can make the appropriate recommendations

We received a question about credit cards vs. lines of credit from a reader and will answer his questions in our next post. They wish to know if it is better to charge everything to their credit cards or if they should just arrange for a line of credit and use the line of credit to pay for all of their renovations that they are planning to complete in their home. This is a fairly common question that many people have as they plan upgrades and renovations to their homes.

Credit Cards vs. Lines of Credit

Question to Debt Counselor:: We are planning on doing some renovations around our home. The kitchen will cost about $8000 , the bathrooms about $5000 each and then we are planning to upgrade the floors to hardwood. They have carpeting which has seen better days. The roof also needs to be repaired. In total we are spending about $30,000 and we are wondering if we would be better off using our credit cards to pay for these renovations or arrange for a line of credit to pay for them? We do not have a line of credit now, but could arrange for one at the bank.

Our credit cards have enough room on them that we could charge all of this to the cards, but it would take some time to repay these amounts. It would mean that we would carry an unpaid balance on the credit cards for several months. We probably would pay some interest on the unpaid balance at whatever interest rates that they charge.  This is our question.

Profile Review

Do you currently have a mortgage? :: yes, almost paid off

Home/Mortgage Loan Amount :: $25,000

Other Loans, Including Credit Cards:: a Car loan, a couple of credit cards with zero balance

Are you employed and for how long:: Work at GM for the past 10 years
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