MONEY MATTERS & INVE$TING
If it sounds too good to be true, it usually is!
P.T. Barnum (Barnum & Bailey Circus) once said that "a sucker is born every minute",
don't be one!
Payment History (has a 35% impact)
Outstanding Credit Balances (has a 30% impact)
Credit History (has a 15% impact)
Inquiries (has a 10% impact.
Each hard inquiry can cost you 2-50 points on a credit score)
Adjustable Rate Mortgage (ARM): Is also called a variable rate mortgage. A mortgage in which the interest rate is adjusted periodically, usually at intervals of one, three, or five years, based on a measure or an index, such as the rate on US Treasury bills or the average national mortgage rate. In exchange for assuming some of the risk of a rise in interest rates, a borrower receives a lower rate at the beginning of an ARM than if he or she had taken out a fixed-rate mortgage.
When you purchase a municipal bond, you lend money to the "issuer," the government entity (states, cities, counties and other governmental entities) that issued the bond. In exchange, the government entity promises to pay you a specified amount of interest, usually semiannually, and return your money, also known as "principal," on a specified maturity date. The money they raise from these bonds is used for build highways, hospitals and sewer systems, as well as many other projects for the public good.
municipal bonds offer income exempt from both federal and state taxes. There
is an entirely separate market of municipal issues that are taxable at the
federal level, but still offer a state—and often local—tax exemption on
interest paid to residents of the state of issuance. Most of this booklet
refers to ‘munies’, which are free of federal
Because of the special tax-exempt status of most municipal bonds, investors usually accept lower interest payments than on other types of borrowing (assuming comparable risk). This makes the issuance of bonds an attractive source of financing to many municipal entities, as the borrowing rate available in the open market is frequently lower than what is available through other borrowing channels.
Municipal bonds are one of several ways’ states, cities and counties can issue debt. Other mechanisms include certificates of participation and lease-buyback agreements. While these methods of borrowing differ in legal structure, they are similar to the municipal bonds described in this article.
One of the primary reasons municipal bonds are considered separately from other types of bonds is their special ability to provide tax-exempt income. Interest paid by the issuer to bond holders is often exempt from all federal taxes, as well as state or local taxes depending on the state in which the issuer is located, subject to certain restrictions. Bonds issued for certain purposes are subject to the alternative minimum tax.
The type of project or projects that are funded by a bond affects the taxability of income received on the bonds held by bond holders. Interest earnings on bonds that fund projects that are constructed for the public good are generally exempt from federal income tax, while interest earnings on bonds issued to fund projects partly or wholly benefiting only private parties, sometimes referred to as private activity bonds, may be subject to federal income tax.
The laws governing the taxability of municipal bond income are complex; however, bonds are typically certified by a law firm as either tax-exempt (federal and/or state income tax) or taxable before they are offered to the market. Purchasers of municipal bonds should be aware that not all municipal bonds are tax-exempt.
The risk ("security") of a municipal bond is a measure of how likely the issuer is to make all payments, on time and in full, as promised in the agreement between the issuer and bond holder (the "bond documents"). Different types of bonds carry different securities, based on the promises made in the bond documents:
In addition, there are several other types of municipal bonds with different promises of security.
The tool of choice is the Fed’s ability to influence the direction of interest rates. When interest rates are low, working capital is easier to obtain. This can spur economic development because, the more cash you have available, the more you are likely to pay for something you want. Left unchecked, however, and the result is “too much money chasing too few goods,” as the saying goes. Unfortunately, this leads to inflation as businesses realize they can charge higher prices for their goods and services. Suddenly, it costs you more for just about everything, as they are most often tied together in one way or another, the cost increases passed on from one supplier to the next, and of course, ends up at the checkout stand.
If interest rates are too high, however, the result can be a recession and, in extreme cases, deflation; the result of which can be devastating for most of the economy.
The discount rate is the interest rate banks are charged when they borrow funds overnight directly from one of the Federal Reserve Banks. When the cost of money increases for your bank, they are going to charge you more as a result. This makes capital more expensive and results in less borrowing. Spending goes down, this, it becomes more difficult for prices to rise; the opposite being true when capital becomes less expensive due to a decrease in the discount rate.
The Federal funds rate is the rate that banks charge each other for overnight loans. The first question comes to mind, why do banks borrow from each other, the answer, the Fed can (and does) require banks to keep a certain percentage of assets in the form of cash on hand or deposited in one of the Federal Reserve banks. From time to time, it will establish a required ratio of reserves to deposits; when this ratio is increased, more cash must be kept in the vault at night, making it more difficult (and expensive) for funds to be acquired. When the reserve requirement is lowered, the money supply is loosened; because less cash has to be kept on hand it becomes easier to acquire capital.
The much-heralded monthly Federal Reserve meeting is piloted by its Federal Open Market Committee, it targets a specific level for the federal funds rate. This rate directly influences other short-term interest rates, such as deposits, bank loans, credit card interest rates, and adjustable rate mortgages.
The stock market watches the monthly FOMC meetings very closely, as it has a profound and sometimes dramatic effect on the market. It might seem a small amount, but, a 1/4 point decline in the rate not only stimulates economic growth, but sends the markets higher, unfortunately if it stimulates too much growth, inflation will raise its ugly head.
Surprisingly, a 1/4 increase in the rate will curb inflation, but has the ability to slow growth and prompt a decline in the markets. Stock market analysts are ever watchful and with a cocked ear for any casual uttered statement by anyone on or associated with the Federal Open (FOMC) Market Committee, trying to get a clue as to what the Feds next move might be.
If you are turned down for
credit or find an error in your credit (which is free, from the three major
reporting agencies) report, you are entitled to have it investigated by
the credit bureau and corrected at no charge. However, if negative
information on your credit file is accurate, then only time and responsible
credit habits can help restore a bad credit history.
Term life policies offer death benefits only, so if you die your estate gets the whole pie. If you live past the length of the policy, you or your estate, get nothing back.
Permanent life policies offer death benefits and a "savings account" (also called "cash value") so that if you live, you get back at least some of, and often much more than, the amount you spent on your premium. You get this money back either by cashing in the policy or by borrowing against it.
As you do
your insurance homework, you quickly find out that permanent life insurance
premiums are more expensive than term premiums because some of the money is
put into a savings program. The longer the policy has been in force, the
higher the cash value, because more money has been paid in and the cash value
has earned interest, dividends or both. You should always concerned with cash
value. If you buy a policy today, your first annual premium is likely to be
much higher for a permanent life policy than for term.
However, the premiums for permanent life stay the same over the years, while the premiums for term life increase. That extra premium paid in the early years of the permanent policy gets invested and grows, minus the amount your agent takes as a sales commission. The gain is tax deferred if the policy is cashed in during your life. (If you die, the proceeds are normally tax-free to your beneficiary.)
Touted is the saying, "Buy term and invest the difference." The fact is, it depends on how long you keep your policy. If you keep the permanent life policy long enough, that's the best deal. But "long enough" varies, depending on your age, health, insurance company, the types of policies chosen, interest and dividend rates, and more. The reality is that there is not a simple answer, because life insurance is not a simple product. The key is how long you plan to keep the policy. If the answer is less than 10 years, term is clearly the solution.
If it is more than 20 years, permanent life is probably the way to go. Assuming that you keep the policy in force, as most people drop their policies within the first 10 years, but if you do your homework now, that shouldn't be the case for you. Make certain that your budget will be able to honor the commitment for the entire coverage period, you walk away and you are out everything you put in.
Derivatives are financial contracts, or financial instruments, whose values are derived from the value of something else (known as the underlying). The underlying on which a derivative is based can be a credit derivative based on loans, bonds or other forms of credit.
The main types of derivatives are forwards, futures, options, and swaps.
Derivatives can be used to mitigate the risk of economic loss arising from changes in the value of the underlying. This activity is known as hedging. Alternatively, derivatives can be used by investors to increase the profit arising if the value of the underlying moves in the direction they expect. This activity is known as speculation.
Because the value of a derivative is contingent on the value of the underlying, the notional value of derivatives is recorded off the balance sheet of an institution, although the market value of derivatives is recorded on the balance sheet
In finance a hedge is a position established in one market in an attempt to offset exposure to the price risk of an equal but opposite obligation or position in another market — usually, but not always, in the context of one's commercial activity. Hedging is a strategy designed to minimize exposure to such business risks as a sharp contraction in demand for one's inventory, while still allowing the business to profit from producing and maintaining that inventory.
Some form of risk taking is inherent to any business activity. Some risks are considered to be "natural" to specific businesses, such as the risk of oil prices increasing or decreasing is natural to oil drilling and refining firms. Other forms of risk are not wanted, but cannot be avoided without hedging. Someone who has a shop, for example, expects to face natural risks such as the risk of competition, of poor or unpopular products, and so on. The risk of the shopkeeper's inventory being destroyed by fire is unwanted, however, and can be hedged via a fire insurance contract. Not all hedges are financial instruments: a producer that exports to another country, for example, may hedge its currency risk when selling by linking its expenses to the desired currency. Banks and other financial institutions use hedging to control their asset-liability mismatches, such as the maturity matches between long, fixed-rate loans and short-term (implicitly variable-rate) deposits.
A hedger (such as a manufacturing company) is thus distinguished from an arbitrageur or speculator.
(Such as a bank or brokerage firm) in derivative purchase behavior.
A derivative instrument (or simply derivative) is a financial instrument, which derives its value from the value of some other financial instrument or variable. For example, a stock option is a derivative because it derives its value from the value of a stock. An interest rate swap is a derivative because it derives its value from one or more interest rate indices. The value(s) from which a derivative derives its value is called its underlier(s).
By contrast, we might speak of primary instruments, although the term cash instruments is more common. A cash instrument is an instrument whose value is determined directly by markets. Stocks, commodities, currencies and bonds are all cash instruments. The distinction between cash and derivative instruments is not always precise, but it is a useful informal distinction.
Derivative instruments are categorized in various ways. One is the distinction between linear and non-linear derivatives. The former has payoff diagrams that are linear or almost linear. The latter has payoff diagrams that are highly non-linear. Such non-linearity is always due to the derivative either being an option or having an option embedded in its structure.
A somewhat arbitrary distinction is between vanilla and exotic derivatives. The former tends to be simple and more common; the latter more complicated and specialized. There is no definitive rule for distinguishing one from the other, so the distinction is mostly a matter of custom.
Replacement cost coverage, on the other hand, will pay what it actually costs to replace the items you lost, again minus the deductible.
In some regions, most insurers write Actual Cash Value (ACV) coverage. In others, they'll quote you replacement cost coverage by default. Replacement cost coverage will cost you more in premiums, but it will also pay out more if you ever need to file a claim.
Let your Insurance agent know about any particularly valuable (It is always beneficial to take pictures of your valuables, as well as that of the interior of your home, keeping them in a safe location) items you have. Jewelry, antiques, and electronics might be covered up to a certain amount. If you have some items that are unusually expensive, such as a diamond ring, you'll probably want to purchase a separate rider. If you don't talk to your agent about an expensive item when you buy the policy, you probably won't be able to recover the full loss.
1. Owning a Home – If you own a home, there are two policy forms that are available to you: homeowners and dwelling forms. The main difference between these two types of forms is that the homeowners form combines property coverage with liability coverage. Dwelling forms only cover property losses. Both types of policy forms have the various peril coverage available for both your dwelling and your contents.
2. Owning a Manufactured Home – There are policy forms specifically designed to cover property for manufactured homes. This type of policy covers both dwelling as well as contents.
3. Owning a Home on a Farm – If your primary dwelling is on a farm or ranch, you may not qualify for standard homeowners’ insurance. A farm owners policy may be the most appropriate form to cover losses to your home as a result of tornadoes or hail. Additionally, a farm owners form provides coverage for both the personal and commercial exposure of farms, and contains both property and liability coverage.
The basic types of auto insurance coverages are:
There are several types of residential insurance policies. The HO-4 policy is designed for renters, while the HO-6 policy is for condo owners. Both HO-4 and HO-6 cover losses to your personal property from 16 types of perils:
*Policies designed for condominium owners primarily cover contents. However, there is a small provision included to cover the portions of the dwelling that are your insurance responsibility as defined by the governing rules of the condominium. Generally, additional dwelling coverage may be purchased if the provision included in the package is not sufficient.
** Renting a Residence – If you are renting a residence, coverage for your contents is available through renter’s insurance
Brokerage firms generally are classified as full service, discount, or online organizations. Investors who do not have time to research investments on their own will likely rely on a full-service broker to help them construct an investment portfolio, manage their investments, or make recommendations regarding which investments to buy. Full-service brokers have access to a wide range of reports and analyses from the company’s large staff of financial analysts. These analysts research companies and recommend investments to people with different financial needs. Persons who prefer to select their own investments generally use a discount or online broker and pay lower commission charges. Discount firms usually do not offer advice about specific securities. Online brokerage firms make their trades over the Internet in order to keep costs down and fees low. Discount brokerage firms usually have branch offices, while online firms do not. Most brokerage firms now have call centers staffed with both licensed sales agents and customer service representatives who take orders and answer questions at all hours of the day.
Brokerage firms also provide investment banking services; that is, they act as intermediaries between those companies or governments which would like to raise money and those with money or capital to invest. Investment banking usually involves the firm buying initial stock or bond offerings from private companies or from Federal, State, and local governments and, in turn, selling them to investors for a potential profit. This service can be risky, especially when it involves a new company selling stock to the public for the first time. Investment bankers must try to determine the value of the company on the basis of a number of factors, including projected growth and sales, and decide what price investors are willing to pay for the new stock. Investment bankers also advise businesses on merger and acquisition strategies and may arrange for the transfer of ownership.
Companies that specialize in providing investment advice, portfolio management, and trust, fiduciary, and custody activities also are included in this industry. These companies range from very large mutual fund management companies to self-employed personal financial advisors or financial planners. Also included are managers of pension funds, commodity pools, trust funds, and other investment accounts. Portfolio or asset management companies direct the investment decisions for investors who have chosen to pool their assets in order to have them professionally managed. Many brokerage firms also provide these services. Personal financial advisors can manage investments for individuals as well, but their main objective is to be able to provide advice on a wide range of financial matters.
growing crime in the US and it is not even done in the presence of the
victim. Most often the crime is performed on-line, by mail, on the telephone,
or on a fax-based transactions, This crime is known as
Equifax, Experian are the major credit reporting agencies in the US.
-Do you look
over your monthly credit card statement each month to make sure there aren't
any charges showing up that are not yours? If there are charges not initiated
by you, immediately contact that company.
Annual Percentage Rate (APR): The cost of credit or a loan expressed as a simple annual percentage. The Federal Truth In Lending Act requires all consumer credit agreements and loans to disclose the APR in large, bold type. On a mortgage, the APR is usually higher than the stated interest rate, since it includes points and other charges.
· Realtor commissions - typically 5-7% (7% is actually very high) of the selling price. (It is a good idea to shop around at several different real estate agencies to determine which one offers the greatest value for the money).
· Closing costs, including attorney, and other professional fees. (Next to the commission on the sale of the home, closing costs are often the biggest expense of selling a home. One of the costliest parts of closing costs is often title insurance. In most cases title insurance ranges between $800 and $1,800, and varies according to region, and rise with the cost of the home.
· Excise taxes on the sale. (Some states are authorized to levy a real estate excise tax on all sales of real estate, measured by the full selling price, including the amount of any liens, mortgages and other debts given to secure the purchase.
· Property taxes and any homeowner association fees. (These are always pro-rated, split by the buyer and seller, the amount set by the due dates on them).
Capital gain tax on home sale:
The federal Taxpayer Relief Act of 1997 says when you sell your home you can keep, tax free, capital gains of up to $500,000 if you are married filing jointly or $250,000 for single taxpayers, or married taxpayers who file separately. To qualify for the exclusion, you must have used the home as your principle residence for at least two of the prior five years. It is not a onetime tax exclusion. You can use the exclusion as often as you meet the qualifications.
The federal Internal Revenue Service Restructuring and Reform Act of 1998 further clarified the law and says you can prorate the $500,000/$250,000 exclusion (not your specific gain) if unforeseen events, such as a job change, illness, or some other hardship forced you to sell before you meet the two-year residency requirement.
The common denominator of those who have achieved financial success
If your employer offers a 401(k) plan, it makes a lot of sense to participate in it as soon as possible. If you start early you can very likely have a million or more dollars in your account by the time you retire.
The primary advantages to a 401(k) are that the money is contributed before it is taxed and your employer may be matching your contribution with company money.
There is a small downside to the employer contribution, this being a "vesting schedule". Vesting means that there is usually a tiered schedule for when money the employer contributes to your account is actually yours. For example, your employer may have a three-year vesting schedule that increases your ownership of the money by one-third each year. After three years, the money is all yours and all future contributions are 100-percent yours.
Congress declared in 1978 that Americans needed a bit of encouragement to save more money for retirement, and not entirely depending on Social Security. They thought that if they gave people a way to save for retirement while at the same time lowering their state and federal taxes, they might just take advantage of it. The Tax Reform Act was passed. Part of it authorized the creation of a tax-deferred savings plan for employees. The plan got its name from its section number and paragraph in the Internal Revenue Code -- section 401, paragraph (k).
401(k) plans are part of a family of retirement plans known as "defined contribution" plans. Other defined contribution plans include profit sharing plans, IRAs and Simple IRAs, SEPs, and money purchase plans. They are called "defined contribution plans" because the amount that is contributed is defined either by you the employee or the employer.
In a nut shell:
-When you participate in a 401(k) plan, you tell your employer how much money you want to go into the account. You can usually put up to 15 percent of your salary into the account each month, but the employer has the right to limit that amount. It might be worth your while to rally for a higher limit if it isn't as high as you would like it to be. The IRS limits your total annual contribution.
-The money you contribute comes out of your check "before taxes are calculated", and more importantly, before you have the opportunity to spend it. That makes the 401(k) one of the most effective ways to save for your retirement.
-Usually, by not always, your employer will match a
portion of your contribution.
Ratio: is used
for measuring solvency and researching the Capital Structure of a company.
Mutual funds can invest in many different kinds of securities. The most common are cash, stock, and bonds, but there are hundreds of sub-categories. Stock funds, for instance, can invest primarily in the shares of a particular industry, such as technology or utilities. These are known as sector funds. Bond funds can vary according to risk (high-yield junk bonds or investment-grade corporate bonds), type of issuers are government agencies, corporations, or municipalities, or maturity of the bonds (short- or long-term). Both stock and bond funds can invest in primarily U.S. securities (domestic funds), both U.S. and foreign securities (global funds), or primarily foreign securities (international funds).
Most mutual funds' investment portfolios are continually adjusted under the supervision of a professional manager, who forecasts the future performance of investments appropriate for the fund and chooses those which he or she believes will most closely match the fund's stated investment objective. A mutual fund is administered through a parent management company, which may hire or fire fund managers.
Mutual funds are liable to a special set of regulatory, accounting, and tax rules. Unlike most other types of business entities, they are not taxed on their income as long as they distribute substantially all of it to their shareholders. Also, the type of income they earn is often unchanged as it passes through to the shareholders. Mutual fund distributions of tax-free municipal bond income are also tax-free to the shareholder. Taxable distributions can be either ordinary income or capital gains, depending on how the fund earned those distributions.
Mutual funds offer several advantages over investing in
individual stocks. For example, the transaction costs are divided among all
the mutual fund shareholders, who also benefit by having a third party
(professional fund managers) apply their expertise, dedicate their time to
manage and research investment options. However, despite the professional
management, mutual funds are not immune to risks. They share the same risks
associated with the investments made. If the fund invests primarily in
stocks, it is usually subject to the same ups and downs and risks as the
is the price-to-earnings
ratio is the dollars that you pay for each one-dollar of earnings.
Its calculated by dividing the price per share, by the past 12 months
earnings per share. You will get the same answer by dividing the market cap
by the company's total earnings for the past four quarters.
Conversely, a low P/E may indicate a “vote of no confidence” by the market or it could mean this is a sleeper that the market has overlooked. Known as value stocks, this is what the very clever and informed investor is looking for, these are where fortunes are made by "some". Being able to spot a growth stock prior to the rest of the market discovers it true worth.
The average P/E ratio in the market has been around 15-25. This fluctuates significantly depending on economic conditions. The P/E can also vary widely between different companies and industries.
Blue Chip Stock: The common stock of a company with a reputation for quality products, services, and management, and a long history of earnings growth and dividend payments. Some examples of blue chip companies include Apple, General Electric, Exxon/Mobil, IBM, Berkshire-Hathaway, Microsoft, Coca-Cola, Gillett, and DuPont.
Casualty Loss: As defined by the IRS, the loss is sudden and unexpected losses due to flood, fire, tornado, earth quake, or hurricane and if you're not compensated by insurance, you are eligible for a tax deduction. The focus is that they are usually reimbursed either in full or in part by insurance contracts. Amounts of compensation are listed for losses are not usually tax-deductible if full restitution is made by the insurance carrier. However, claims denied or not covered are potentially tax-deductible. Casualty losses are a red flag for an IRS audit and nd you will need to produce documents supporting the values, basis, and depreciation. If your records meet all the general rules and exceptions, you may have a deductible loss on your federal income tax return.
The general rule for year deductible, is that the loss is a deduction in the year of the casualty, however, there is an exception for a casualty loss suffered in an area determine by the United States President to warrant assistance by the federal government under the Disaster Relief and Emergency Assistance Act. Instead of claiming the loss in the casualty year, the loss may be claimed in the year immediately preceding the year in which the casualty occurred. The benefit to you is that you receive any accompanying tax refunds a year earlier which will provide you additional funds to re-build after the casualty.
The amount of the deductible casualty loss depends upon whether you suffered a total or partial loss.
Total loss of business property. If your business property is completely destroyed (becomes totally worthless), your deductible loss is the adjusted basis of the property, minus any salvage value and any insurance or other reimbursement you receive or expect.
Partial loss of business property. In a partial destruction, the deductible loss is the decrease in fair market value of the property or the adjusted basis of the property, whichever is less. Reduce this amount by any insurance or other reimbursement you receive or expect.
A casualty loss is not deductible if the damages or destruction is caused by: a) Accidentally breaking articles such as glass or china under normal conditions; b) A family pet; c) A fire you willfully set or paid someone to set; d) A car accident, if caused by your negligence. Loss of property due to progressive deterioration is not deductible as a casualty loss, because damage results from a normal process, such as rot or erosion, rather than from a sudden event, such as a storm.
If you recover property after you've taken a theft-loss
deduction, you must recalculate your loss. If the new figure is less than you
deducted, you generally have to report the difference as income in the
Buy-Sell Agreement: provides for the purchase of all outstanding shares of an owner who wishes to sell, terminate involvement, is permanently disabled, or dies. Such an agreement allows for different future ownership structure. The agreement is usually funded with life and disability insurance, and contains specific purchase arrangements. buy-sell agreement may be thought of as a sort of "premarital agreement" between business partners/shareholders. It is sometimes called a 'business will'. An insured buy-sell agreement (agreement funded with life insurance on the participating owner's lives) is often recommended by business succession specialists and financial planners to ensure the buy-sell arrangement is well-funded and also to guarantee there will be money when the buy-sell event is triggered.
In the sale of a business, a buy-sell clause in a shareholder agreement preserves continuity of ownership in the business and ensures that everyone is fairly treated, the buyer as well as the seller. It is a binding contract between business partners about the future ownership of the business. A buy-sell agreement is made up of several legally binding clauses in a business partnership or operating agreement (or it can be a separate agreement that stands on its own) that can control the following business decisions:
(the most comment events that trigger a buyout are: death, disability, retirement, or an owner leaving the company)
Buy-sell agreement can be in the form of a cross-purchase plan or a repurchase (entity or stock-redemption) plan. For greater neutrality and effectiveness of the buy-sell arrangement, the service of a corporate trustee is recommended.
This is when investor purchases a house at a considerable discount from market (estate, foreclosure) value. The price may also be due to the condition of the property, such as the need for major renovations and/or repairs needed or the owner(s) needing to sell a house quickly, for whatever reason.
The investor will then perform necessary renovations and repairs, and attempt to make a profit by selling the house quickly at a price nearer to full market value, hence, "Flip".
Many investors do this on full-time basis, and some do very well. They have done their homework and understand the various hurdles they will encounter.
there is an adverse financial aspect to those who participate in
"flipping", when interest rates go up, the cause and effect
resulting in lack of sales, and major price depreciations (often far below)
their previous increases, results in a excessive
properties on the market at one time, obviously not selling due to lack of
buyers, due to the increase in interest they would have to pay, consequently
causing a serious downturn in local market and potentially the economy as a
whole causing a domino effect. Here the investor is really in trouble, since
they are paying the mortgage, putting time and money in the property, as well
as taxes and insurance, having to ride it out, until the real estate market
returns, which on occasion can be a few years. The method of escape from the
property is precisely why you see so many TV commercials attesting to those
"flippers" telling you how many LLC or Corporations they own, as
that is some badge of success, well it is not. All this does is to provide
them the opportunity to walk away from the property, giving it back to the
lender. Their liability being the actual dollars they have invested.
Education IRA: A This is a savings plan that allows parents to receive
tax-free savings on money earmarked for a child’s college education. There
are limits on income eligibility and on how much may be set aside per year in
an education IRA. There
is also a provision in federal tax law makes it possible for parents to use
tax-favored savings accounts to pay their children's tuition for private
elementary and high schools--or even to pay for tutoring.
Day traders quickly buy and sell stocks (sometimes only seconds to minutes) continuously in hopes that their stocks will continue climbing or falling in value for the very short period, they own the stock, allowing them to quickly lock in quick profits. Day traders usually buy on borrowed money, hoping that they will reap higher profits through leverage, but also running the risk of higher losses.
Day trading is highly risky and it is not illegal. Most individual investors do not have the temperament to be a day trader, as well as be able to sustain the devastating losses that day trading can bring. But if you are successful, the gains are sometimes substantial.
A few pointers about day trading:
-Day traders live
their life in front of their computer screen, looking for a stock that is
either moving up or down in value. They want to ride the momentum of the
stock and get out of the stock before it changes direction. They do not know
for certain how the stock will move, they are hoping that it will move in one
direction, either up or down in value. True day traders do not own any stocks
overnight, because of the extreme risk that prices will change radically from
one day to the next, leading to some very big losses.
-Don't believe snake oil claims that promise sure profits
from day trading. Before you start trading with a firm, find out about them.
Do some research, find out the percentage of their clients that are actually
making money and how many are not. If the firm does not know, or will not
tell you, think twice about the risks you take in the face of ignorance.
Family Limited Partnership (FLP): A partnership of family members to arrange for generational transfers, maintain control in the general partners, and reduce potential liability to the transferor and transferee. Family limited partnerships utilize the benefits in wealth preservation, taxation, credit protection, and estate planning.
Limited Liability Company (LLC): In contrast to the unlimited
liability inherent in proprietorships as a form of business ownership, a limited
liability company provides limited liability to each shareholder "to
the extent of invested capital".
Managing members are the individuals who are responsible for the maintenance, administration and management of the affairs of an LLC. In most states, the managers serve a particular term and report to and serve at the discretion of the members. Specific duties of the managers may be detailed in the articles of organization or the operating agreement of the LLC. In some states, the members of an LLC may also serve as the managers.
Members are the owner(s) of an LLC. Unless the articles of organization or operating agreement provide otherwise, management of an LLC is vested in the members in proportion to their ownership interest in the company.
Operating as an LLC form of partnership does not mean that appropriate US federal partnership tax forms are not necessary, or not complex. As a partnership, the entity's income and deductions attributed to each member are reported on that owner's tax return.
LLCs can lose their tax advantage without the partnership structure. The possible label "disregarded entity" for income tax purposes singles out the one-member owner of an LLC as actually earning income and deductions directly. It is the owner, then, who reports as a business proprietor, rather than as an LLC operating an active trade or business. An LLC passively investing in real estate and owned by a single member would have its income and deductions reported directly on the owner's individual tax return on a Schedule E tax form. And an LLC owned by a corporation--in other words, an LLC with a single corporate member--would be treated as an incorporated branch and have its income and deductions reported on the corporate tax return, creating double taxation.
If you are in the market for credit, a home equity plan may be right for you. Or perhaps another form of credit would be better. Before making a decision, you should weigh carefully the costs of a home equity line against the benefits. Shop for the credit terms that best meet your borrowing needs without posing undue financial risk. And remember, failure to repay the amounts you've borrowed, plus interest, could mean the loss of your home.
A home equity line of credit is a form of revolving credit in which your home serves as collateral. Because the home is likely to be a consumer's largest asset, many homeowners use their credit lines only for major items such as education, home improvements, or medical bills and not for day-to-day expenses.
With a home
equity line, you will be approved for a specific amount of credit--your
credit limit, the maximum amount you may borrow at any one time under the
plan. Many lenders set the credit limit on a home equity line by taking a
percentage (say, 75 percent) of the home's appraised value and subtracting
from that the balance owed on the existing mortgage.
Many home equity plans set a fixed period during which you can borrow money, such as 10 years. At the end of this "draw period," you may be allowed to renew the credit line. If your plan does not allow renewals, you will not be able to borrow additional money once the period has ended. Some plans may call for payment in full of any outstanding balance at the end of the period. Others may allow repayment over a fixed period (the "repayment period"), for example, 10 years.
Once approved for a home equity line of credit, you will most likely be able to borrow up to your credit limit whenever you want. Typically, you will use special checks to draw on your line. Under some plans, borrowers can use a credit card or other means to draw on the line.
There may be limitations on how you use the line. Some plans may require you to borrow a minimum amount each time you draw on the line (for example, $300) and to keep a minimum amount outstanding. Some plans may also require that you take an initial advance when the line is set up.
If you decide to apply for a home equity line of credit, look for the plan that best meets your particular needs. Read the credit agreement carefully, and examine the terms and conditions of various plans, including the annual percentage rate (APR) and the costs of establishing the plan. The APR for a home equity line is based on the interest rate alone and will not reflect the closing costs and other fees and charges, so you'll need to compare these costs, as well as the APRs, among lenders.
Interest rate charges and related plan features
Lenders sometimes offer a temporarily discounted interest rate for home equity lines--a rate that is unusually low and may last for only an introductory period, such as 6 months.
Variable-rate plans secured by a dwelling must, by law, have a ceiling (or cap) on how much your interest rate may increase over the life of the plan. Some variable-rate plans limit how much your payment may increase and how low your interest rate may fall if interest rates drop.
Some lenders allow you to convert from a variable interest rate to a fixed rate during the life of the plan, or to convert all or a portion of your line to a fixed-term installment loan.
Plans generally permit the lender to freeze or reduce your credit line under certain circumstances. For example, some variable-rate plans may not allow you to draw additional funds during a period in which the interest rate reaches the cap.
Costs of establishing and maintaining a home equity line
In addition, you may be subject to certain fees during the plan period, such as annual membership or maintenance fees and a transaction fee every time you draw on the credit line.
You could find yourself paying hundreds of dollars to establish the plan. If you were to draw only a small amount against your credit line, those initial charges would substantially increase the cost of the funds borrowed. On the other hand, because the lender's risk is lower than for other forms of credit, as your home serves as collateral, annual percentage rates for home equity lines are generally lower than rates for other types of credit. The interest you save could offset the costs of establishing and maintaining the line. Moreover, some lenders waive some or all of the closing costs.
Before entering into a plan, consider how you will pay back the money you borrow. Some plans set minimum payments that cover a portion of the principal (the amount you borrow) plus accrued interest. But (unlike with the typical installment loan) the portion that goes toward principal may not be enough to repay the principal by the end of the term. Other plans may allow payment of interest alone during the life of the plan, which means that you pay nothing toward the principal. If you borrow $10,000, you will owe that amount when the plan ends.
Regardless of the minimum required payment, you may choose to pay more, and many lenders offer a choice of payment options. Many consumers choose to pay down the principal regularly as they do with other loans. For example, if you use your line to buy a boat, you may want to pay it off as you would a typical boat loan.
Whatever your payment arrangements during the life of the plan--whether you pay some, a little, or none of the principal amount of the loan--when the plan ends you may have to pay the entire balance owed, all at once. You must be prepared to make this "balloon payment" by refinancing it with the lender, by obtaining a loan from another lender, or by some other means. If you are unable to make the balloon payment, you could lose your home.
If your plan has a variable interest rate, your monthly payments may change. Assume, for example, that you borrow $10,000 under a plan that calls for interest-only payments. At a 10 percent interest rate, your monthly payments would be $83. If the rate rises over time to 15 percent, your monthly payments will increase to $125. Similarly, if you are making payments that cover interest plus some portion of the principal, your monthly payments may increase, unless your agreement calls for keeping payments the same throughout the plan period.
If you sell your home, you will probably be required to pay off your home equity line in full immediately. If you are likely to sell your home in the near future, consider whether it makes sense to pay the up-front costs of setting up a line of credit. Also keep in mind that renting your home may be prohibited under the terms of your agreement.
If you are thinking about a home equity line of credit, you might also want to consider a traditional second mortgage loan. A second mortgage provides you with a fixed amount of money repayable over a fixed period. In most cases the payment schedule calls for equal payments that will pay off the entire loan within the loan period. You might consider a second mortgage instead of a home equity line if, for example, you need a set amount for a specific purpose, such as an addition to your home.
In deciding which type of loan best suits your needs, consider the costs under the two alternatives. Look at both the APR and other charges. Do not, however, simply compare the APRs, because the APRs on the two types of loans are figured differently:
The federal Truth in Lending Act requires lenders to disclose the important terms and costs of their home equity plans, including the APR, miscellaneous charges, the payment terms, and information about any variable-rate feature. And in general, neither the lender nor anyone else may charge a fee until after you have received this information. You usually get these disclosures when you receive an application form, and you will get additional disclosures before the plan is opened. If any term (other than a variable-rate feature) changes before the plan is opened, the lender must return all fees if you decide not to enter into the plan because of the change.
When you open a home equity line, the transaction puts your home at risk. If the home involved is your principal dwelling, the Truth in Lending Act gives you 3 days from the day the account was opened to cancel the credit line. This right allows you to change your mind for any reason. You simply inform the lender in writing within the 3-day period. The lender must then cancel its security interest in your home and return all fees--including any application and appraisal fees--paid to open the account.
Quick Tip: There's no such as thing as "Get rich quick." That which can be achieved in one day, could be gone the next!
Investment strategies vary by hedge funds, each offering different degrees of risk and return. A macro hedge fund, for example, invests in stock and bond markets and other investment opportunities, such as currencies, in hopes of profiting on significant shifts in such things as global interest rates and countries’ economic policies. A macro hedge fund is more volatile but potentially faster growing than a distressed-securities hedge fund that buys the equity or debt of companies about to enter or exit financial distress. An equity hedge fund may be global or country specific, hedging against downturns in equity markets by shorting overvalued stocks or stock indexes. A relative value hedge fund takes advantage of price or spread inefficiencies. Knowing and understanding the characteristics of the many different hedge fund strategies is essential to capitalizing on their variety of investment opportunities.
A wide range of hedging strategies are available to hedge funds. For example:
--Selling short - selling shares without owning them,
hoping to buy them back at a future date at a lower price in the expectation
that their price will drop.
Less than 5% of hedge funds are global macro funds. Most hedge funds use derivatives only for hedging or don't use derivatives at all, and many use no leverage.
Limited Partnership: An organization managed by a general partner and financially backed by limited partners, offering limited liability to the extent of the amount invested by each individual limited partner. A limited partner does not supervise the daily operations or directly manage the partnership.
You can "bid" for a bill in two ways:
Your Bid may
To place a noncompetitive bid, you may use TreasuryDirect, Legacy Treasury Direct, or a bank, broker, or dealer.
To place a competitive bid, you must use a bank, broker, or dealer.
In a nut shell: Treasury Bills are,
Closing Costs: Also called settlement costs. The expenses involved in transferring real estate from a seller to a buyer. Typically includes fees or charges for loan origination, discount points, appraisal, property survey, title search, title insurance, deed filing, credit reports, taxes, and legal services. Does not include points and the cost of private mortgage insurance (PMI).
Congress created REITs (pools of real estate that are sold as a public security) in 1960 to make investments in large-scale, income producing real estate accessible to smaller investors. This was a vehicle for average investors to invest in large scale commercial properties the same way they invest in other industries, through the purchase of equity. In the same way as shareholders benefit by owning stocks of other corporations, the stockholders of a REIT earn a pro-rata share of the economic benefits that are derived from the production of income through commercial real estate ownership. REITs offer distinct advantages for investors: greater diversification through investing in a portfolio of properties rather than a single building and management by experienced real estate professionals.
Both foreign and domestic sources provide investment in the REIT market. REITs are owned by thousands of individuals, as well as large institutional investors including pension funds, endowment funds, insurance companies, bank trust departments and mutual funds. Investment goals for REIT share ownership are much the same as investment in other stocks current income distributions and long-term appreciation potential.
The majority of REIT shares can be purchased on the major stock exchanges, and orders can be placed through stockbrokers. Financial planners and investment advisors can help to match an investor's objectives with individual REIT investment.
Because REITs are, by definition, obligated to distribute 90% of their taxable income to investors, they must rely upon external funding as their key source of capital. Investors must consider a REITs potential for future success, assessing whether individual REITs have the access to debt or equity capital sufficient to fund their future growth plans. REITs that have the ability to properly leverage themselves usually will deliver superior returns.
The most common and widely purchased are shares of equity REITs, which invest in commercially managed property that produce income. This is generally the type of REIT that is referred to when discussing them as an investment tool. Typically, the trust invest in and actively manages large commercial real estate projects. These ranging from apartments to shopping centers to office complexes, as well as many other large-scale projects, although most of the do trust specialize in a certain type of investment.
- REITs trade
like stocks, you can get into and out of them with ease, unlike limited real
estate partnerships or other forms of real estate ownership.
REITs must meet specific criteria as established by the act:
outperformed common stocks with less risk. On average, annual returns
have exceed 13% per year. Just like other stocks, strong earnings growth
moves REIT share prices higher. But earnings growth is even more significant
for REITs. Because REITs must pay out 90% of their net income to
shareholders, earnings growth also fuels dividend increases. So, you'll
usually get the best overall returns with REITs producing above-average
Due to a REIT’s diversification it may
provide some protection from the ups and downs of individual properties such
as occupancy rates, defaults on rents, and downturns in industry sectors or
Investors searching for relatively low-risk investments that can easily be converted into cash often turn to certificates of deposit (CDs). A CD is a special type of deposit account with a bank or thrift institution that typically offers a higher rate of interest than a regular savings account. Unlike other investments, CDs feature federal deposit insurance up to $100,000.
When you purchase a CD, you invest a fixed sum of money for fixed period of time – six months, one year, five years, or more – and, in exchange, the issuing bank pays you interest, typically at regular intervals. When you cash in or redeem your CD, you receive the money you originally invested plus any accrued interest. But if you redeem your CD before it matures, you may have to pay an "early withdrawal" penalty or forfeit a portion of the interest you earned.
Although most investors have traditionally purchased CDs through local banks, many brokerage firms and independent salespeople now offer CDs. These individuals and entities – known as "deposit brokers" – can sometimes negotiate a higher rate of interest for a CD by promising to bring a certain amount of deposits to the institution. The deposit broker can then offer these "brokered CDs" to their customers.
At one time, most CDs paid a fixed interest rate until they reached maturity. But, like many other products in today’s markets, CDs have become more complicated. Investors may now choose among variable rate CDs, long-term CDs, and CDs with other special features.
Some long-term, high-yield CDs have "call" features, meaning that the issuing bank may choose to terminate – or call – the CD after only one year or some other fixed period of time. Only the issuing bank may call a CD, not the investor. For example, a bank might decide to call its high-yield CDs if interest rates fall. But if you’ve invested in a long-term CD and interest rates subsequently rise, you’ll be locked in at the lower rate.
Before you consider purchasing a CD from your bank or
brokerage firm, make sure you fully understand all of its terms. Carefully
read the disclosure statements, including any fine print.
1/4 of 1 percent of Americans are worth 10 Million dollars and make $750,000 or more per year.
Quick Tip: Make sure your new insurance policy is in effect before dropping your old one, or you could be very sorry.
Quick Tip: Be cautious in taking out Home Equity Loans. These loans reduce the equity that you have built up in your home. If you are unable to make payments, "you could lose your home".
According to the EPA's Energy Star Program, Home electronics accounts for in excess of 15 prcent of all residential electric
Percentage Rate (APR)
Credit Counseling Service (CCCS)
Credit Opportunity Act (Implemented by Federal Reserve Regulation B)
Credit Billing Act
(London interbank offered rates)
in Lending Act (Implemented by Federal Reserve Regulation Z)
If you are trying to pay off a balance, most likely you are looking for a card that offers a teaser rate (or "special" rate, "promotional" rate, "limited-time-only" rate). It is simply the Very Special Interest Rate the lender is offering at that time. As with most teasers, there are time limits attached. Teaser and introductory rates are usually offered for both fixed rate and variable rate cards. In all promotional materials for cards carrying a teaser rate, you'll see reference to an "ongoing APR," as well. That is the interest rate you will be charged on balances once the introductory "teaser rate" period has ended.
You have the right to ask that nationwide consumer credit reporting companies place "fraud alerts" in your file to let potential creditors and others know that you may be a victim of identity theft
· Equifax: 1-877-576-5734; www.equifax.com
· Experian: 1-888-397-3742; www.experian.com/fraud
· TransUnion: 1-800-680-7289; www.transunion.com
LifeLock = Helps protect your personal information.
Quick Tip: Seniors control 79% of America's Financial Assets. Seniors also spend $14 Billion Annually on gifts just for their grandchildren. On average Seniors have over 26% more disposable income than other consumers.
The expiration of options contributes to the once-per-quarter "triple-witching day," the day on which three derivative instruments all expire on the same day. Stock index futures, stock index options and options on individual stocks all expire on this day, and because of this, trading volume is usually especially high on the stock exchanges that day. In 1987, the expiration of key index contracts was changed from the close of trading on that day to the open of trading on that day, which helped reduce the volatility of the markets somewhat by giving specialists more time to match orders.
You will frequently hear about both volume and open interest in reference to options (really any derivative contract). Volume is quite simply the number of contracts traded on a given day. The open interest is slightly more complicated. The open interest figure for a given option is the number of contracts outstanding at a given time. The open interest increases (you might say that an open interest is created) when trader A opens a new position by buying an option from trader B who did not previously hold a position in that option (B wrote the option, or in the lingo, was "short" the option). When trader A closes out the position by selling the option, the open interest either remain the same or go down. If A sells to someone who did not have a position before, or was already long, the open interest does not change. If A sells to someone who had a short position, the open interest decreases by one.
Reverse Mortgages: Get the Facts Before Cashing in on Your Home's Equity
Whether seeking money to finance a home improvement, pay off a current mortgage, supplement their retirement income, or pay for healthcare expenses, many older Americans are turning to “reverse” mortgages. They allow older homeowners to convert part of the equity in their homes into cash without having to sell their homes or take on additional monthly bills.
In a “regular” mortgage, you make monthly payments to the lender. But in a “reverse” mortgage, you receive money from the lender and generally don’t have to pay it back for as long as you live in your home. Instead, the loan must be repaid when you die, sell your home, or no longer live there as your principal residence. Reverse mortgages can help homeowners who are house-rich but cash-poor stay in their homes and still meet their financial obligations.
To qualify for most reverse mortgages, you must be at least 62 and live in your home. The proceeds of a reverse mortgage (without other features, like an annuity) are generally tax-free, and many reverse mortgages have no income restrictions.
Reverse mortgage loan
advances are not taxable, and generally do not affect Social Security or
Medicare benefits. You retain the title to your home and do not have to make
monthly repayments. The loan must be repaid when the last surviving borrower
dies, sells the home, or no longer lives in the home as a principal
residence. In the HECM program, a borrower can live in a nursing home or
other medical facility for up to 12 months before the loan becomes due and
Buying on margin means that you are buying your stocks with borrowed money.
If you are buying stocks in cash, you pay $10,000 for 100 shares of a stock that costs $100 a share. consequently, they are free and clear.
But when you buy on margin, you are borrowing the money to purchase the stock. For example, you don't have $10,000 for those 100 shares. A brokerage firm could lend you up to 50% of that in order to purchase the stock. All you need is $5,000 to buy the 100 shares of stock.
Most brokerage firms set a minimum amount of equity at $2,000. In other words, you you have to put in at least $2,000 for the purchase of stocks.
In return for the loan, you pay interest, either upfront, or against your stock. The brokerage is making money on your loan. They will also hold your stock as collateral against the loan. If you default, they will take the stock. They are exposed to little risk in the deal.
The price of your stock could always go down. By law, the brokerage will not be allowed to let the value of the collateral (the price of your stock) go down below a certain percentage of the loan value. If the stock drops below that set amount, the brokerage will issue a margin call, which means that you will have to pay the brokerage the amount of money necessary to bring the brokerage firms risk down to the allowed level. If you don't have the money, your stock will be sold to pay off the loan. In most cases, there is little of your original investment remaining after the stock is sold, or if may have fallen so far, you have to make up the difference.
Buying on margin could mean a huge return. But there is the risk that you could lose your original investment. As with any stock purchase there are risks, but when you are using borrowed money, the risk is increased.
Buying on margin is usually not a good idea for the beginner or normal, everyday investor. It is something that sophisticated investors even have issues with. The risk can be high. Make sure that you understand all of the possible scenarios that could happen, good and bad.
Suggestions from the professionals:
If executed correctly, margin strategy can provide for huge profits. The flip side, you can lose your entire investment and any other assets you have. Do Not venture into this aspect without understanding what you're doing.
Quick Tip: Read the Fine Print! and "Beware" of Subprime or Alt-A loans. They are somewhat riskier in nature than A credit, prime, or traditional loans. If you can't afford to buy it, DON'T.
a pre-approval, it's important not to misrepresent the facts on your
application. If a lender learns later that you've misrepresented or omitted
information on your application, your pre-approval may be rescinded.
Once you find the home you want to buy, the next step is to write an offer – which is not as easy as it sounds. Your offer is the first step toward negotiating a sales contract with the seller. Since this is just the beginning of negotiations, you should put yourself in the seller’s shoes and imagine his or her reaction to everything you include. Your goal is to get what you want, and imagining the seller’s reactions will help you attain that goal.
The offer is much more complicated than simply coming up with a price and saying, "This is what I will pay." Because of the huge dollar amounts involved, especially in today's litigious society, both you and the seller want to build in protections and contingencies to protect your investment and limit your risk.
In an offer to purchase real estate, you include not only the price you are willing to pay, but other details of the purchase as well. This includes how you intend to finance the home, your down payment, who pays what closing costs, what inspections are performed, timetables, whether personal property is included in the purchase, terms of cancellation, any repairs you want performed, which professional services will be used, when you get physical possession of the property, and how to settle disputes should they occur.
In most purchase transactions there usually some dips in the road, but they usually smooth out. There is one issue that you want to deal with, your anticipating potential problems so that if something does go wrong, you can cancel the contract without penalty. These are called "contingencies" and you must be sure to include them when you offer to buy a home.
For example, some "move-up" buyers often agree to purchase a home before selling their previous home. Even if the home is already sold, it is probably a "pending sale" and has not closed. Therefore, you should make closing your own sale a condition of your offer. If you do not include this as a contingency, you may find yourself making two mortgage payments instead of one.
There are other common contingencies you should include in your offer. Since you probably need a mortgage to buy the home, a condition of your offer should be that you successfully obtain suitable financing. Another condition should be that the property appraises for at least what you agreed to pay for it. During the escrow period you are likely to require certain inspections, and another contingency should be that it pass those inspections.
Basically, contingencies protect you in case you cannot perform or choose not to perform on a promise to buy a home. If you cancel a contract without having built-in conditions and contingencies, you could find yourself forfeiting your earnest money deposit.
Now that you
and the seller have agreed on the price and the length of time (Escrow
Period, which can run from a few weeks to six months) before you move-in, you
begin Escrow, which defined, is a deposit of funds, a deed or other
instrument by one party for the delivery to another party upon completion of
a particular condition or event.
Whether you are the buyer, seller, lender or borrower, you want the assurance that no funds or property will change hands until ALL of the instructions in the transaction have been followed. The escrow holder has the obligation to safeguard the funds and/or documents while they are in the possession of the escrow holder, and to disburse funds and/or convey title only when all provisions of the escrow have been complied with.
The principals to the escrow: buyer, seller, lender, borrower: cause escrow instructions, most usually in writing, to be created, signed and delivered to the escrow officer. If a broker is involved, he will normally provide the escrow officer with the information necessary for the preparation of your escrow instructions and documents.
The escrow officer will process the escrow, in accordance with the escrow instructions, and when all conditions required in the escrow can be met or achieved, the escrow will be "closed." Each escrow, although following a similar pattern, will be different in some respects, as it deals with your property and the transaction at hand.
The duties of an escrow holder include; following the instructions given by the principals and parties to the transaction in a timely manner; handling the funds and/or documents in accordance with the instruction; paying all bills as authorized; responding to authorized requests from the principals; closing the escrow only when all terms funds in accordance with instructions and provide an accounting for same : the Closing or Settlement Statement.
The selection of the escrow holder is normally done by agreement between the principals. If a real estate broker is involved in the transaction, the broker may recommend an escrow holder. However, it is the right of the principals to use an escrow holder who is competent and who is experienced in handling the type of escrow at hand. There are laws that prohibit the payment of referral fees; this affords the consumer the best possible escrow services without any compromise caused by a person receiving a referral fee.
If you are obtaining a loan, your escrow officer will be in touch with the lender who will need copies of the escrow instructions, the preliminary title report and any other documents escrow could supply. In the processing and the closing of the escrow, the escrow holder is obligated to comply with the lender's instructions. During the escrow process, your escrow officer, upon request, can provide you with an estimate of the escrow fees and costs as well as fees charged by others, provided such information is available.
It has become a practice of some lenders to forward their loan documents to escrow for signing. You should be aware that these papers are lender's documents and cannot be explained or interpreted by the escrow (they are not lawyers, nor can they provide you with legal advice. If you require legal answers, you should first consult with a lawyer) officer. You have the option of requesting a representative from the lender's office to be present for explanation, or arrange to meet with your lender to sign the documents in their office.
the end of the Escrow period, the amount of closing costs will depend on what
items are customary for buyers and sellers to pay for in your area.
Traditions vary greatly from one area of the country to another. The escrow holder has no control over the
costs of other services that are obtained, such as the title insurance
policy, the lender's charges, insurance, *property taxes, recording charges,
etc.. In some
areas, for example, the buyer pays for title insurance. In other areas, it is
the responsibility of the seller. In still other areas, the cost is split
between buyer and seller. Your Agent can give you specific information on the
items that are customarily paid for by buyers in your area. In addition, the
amount of closing costs will depend on the amount of points you will be
paying with your mortgage loan, since these are generally paid for up-front.
(A point is 1% of your mortgage loan amount).
Supplemental Property Taxes is another concern of the buyer. Upon transfer of real property, a supplemental tax bill is generated. This is accomplished in cooperation with the County Assessor and the County Tax Collector.
Shortly after the close of an escrow involving the conveyance of real property, the County Assessor will request information about the property from the buyer. This information assists the Assessor in determining the value of the property for taxation purposes. The escrow holder may have previously supplied some of the information at the time of the closing of the escrow, via Preliminary Change of Ownership form that should accompany each deed when it is recorded).
Sign on the dotted lines (lots and lots), wait the legal
waiting period in your state (usually 24 hours), congratulations, pick up the
keys, the home is yours.
Be Patient & Prudent & seek wisdom
The Dow Jones Industrial Average is simply the average value of 30 large, industrial stocks. Big companies like General Motors, Goodyear, IBM and Exxon are the kinds of companies that make up this index. The Dow Jones Industrial Average has simply chosen 30 companies and averaged their values together by following a specific formula. Nothing more, nothing less.
There are all many others out there with, the largest being the Dow and the S&P 500, which is the average value of 500 different large companies. If you follow the Russel 2000, you find that it tracks the averages of 2,000 smaller companies.
The averages tell you is the general health of stock prices as a whole. If the economy is "doing well," then the prices of stocks as a group tend to rise. If it is "doing poorly," prices as a group tend to fall. The averages show you the direction in the market as a whole. If a specific stock is going down while the market as a whole is going up, that tells you something. Or if a stock is rising, but is rising faster or slower than the market as a whole, that tells you something as well.
The benefits of tax lien certificates are potentially rewarding in a way that is rarely seen in real estate: fixed interest rate returns and a potential chance to purchase property at a fraction of the normal cost.
The Downside in purchasing tax lien certificates is to later discover the property they thought they had purchased at a value was really worth nothing. For one, if a homeowner declares bankruptcy while the tax lien is outstanding, the bankruptcy court could outweigh the rights of investors, leaving the tax lien certificate worthless in the wake of the IRS. Other problems could include a property that has significant damage, making the structure uninhabitable or the property so damaged (slide, flood, earthquake, etc.) thereby making the sale worthless. Prior to ever proceeding with the investment, the investor should perform physical inspections and surveys on property before making a decision. the loss to your investment portfolio could be much more significant than any potential gain.
Due diligence would be to confirm that the property has no other liens against the title, as well as tell you whether or not the person whose name is on the lien actually has legal rights to the property. When you do purchase TLC's, keep in mind that you must make payment within 48 hours and in cash.
Did you ever notice those senior's enjoying their Golden years? That is because they lived within their means and not on a mass of burdening credit. Can you imagine jointly making 100K or more each year and being broke? a huge portion of America is doing just that. Today's modern family financial woes are because of many living a life of must have it right now, forgetting the pending disaster of debt. BIG MISTAKE.
Easy Credit is a path to bad credit and misery, and the house of cards is most likely going to fall on you.
asset value, or (NAV),
is the current market value of a fund's holdings, less the fund's
liabilities, usually expressed as a per-share amount. For most funds, the NAV
is determined daily, after the close of trading on some specified financial
exchange, but some funds update their NAV multiple times during the trading
day. The public offering price, or POP, is the NAV plus a sales charge.
Open-end funds sell shares at the POP and redeem shares at the NAV, and so
process orders only after the NAV is determined. Closed-end funds (the shares
of which are traded by investors) may trade at a higher or lower price than
their NAV; this is known as a premium or discount,
respectively. If a fund is divided into multiple classes of shares, each
class will typically have its own NAV, reflecting differences in fees and
expenses paid by the different classes.
exactly the opposite of buying a stock.
If an investor/speculator thinks the price of a stock will go down, they essentially believe the current price of the stock is a good price at which to sell. They would ask to borrow a certain number of shares from a bank to sell immediately. Once the stock is sold, the borrower still has the obligation to return the shares to the bank. That means the borrower will have to eventually buy the stock back on the stock market at a later date – also known as “buying to cover” or “covering a short position”. However, in order to make a profit, the borrower wants to buy the stock at a lower price than the price at which they originally sold the stock. The concept of shorting stock remains to buy low and sell high, however, shorting a stock requires you to perform these two steps in reverse order than when making “long” investments.
The obvious incentive for a bank is to charge an interest fee on the value of the sale proceeds generated on the stock they lend. Plus, they know that they'll get the stock back in the future, a fact which limits their own portfolio risk: Banks know that they will be better off lending than not, because regardless of the direction of the stock’s price movement, they will have the same amount of stock, but will also have the added interest income associated with lending the stock.
Though shorting is often used to mitigate risk associated with investing in the stock market, it is important to realize the concept of “unlimited losses” that are associated with short investments. When the investor makes a long investment, the most they can lose is the total value of that investment (the amount they paid for the stock) in total. In the case of shorting, if the stock goes up instead of down, they face the possibility of having to make up the loss. As an example, let’s assume that shares in LCI are currently sell for $10 per share. A short seller would borrow 100 shares of LCI, and then immediately sell those shares for a total of $1000. If the price of LCI shares later falls to $8 per share, the short seller would then buy 100 shares back for $800, return the shares to their original owner, and make a $200 profit. This practice has the potential for an unlimited loss. For example, if the shares of LCI that one borrowed and sold in fact went up to $25, the short seller would have to buy back all the shares at $2500, losing $1500. It’s this potential risk of unlimited losses that requires an investor to be very savvy (thorough knowledge of the proposed shorted stock) when shorting in the stock market.
Over the long-term, the stock market enjoys a average gain of about 12% per year. This does make shorting appear to be a poor direction to be going, as it seems as though the general market is bound to move higher, or against the wishes of a short-seller. However, in the short-term, the market does fall in value (sometimes simply adjusting from un-ups), and on an individual basis there will always be stocks that perform poorly. It is when observing these select opportunities where short-selling can make sense as an investment strategy.
Shorting can be used as an effective portfolio hedge, helping to eliminate some risk associated with long term investments in the market. But due to the possibility for unlimited losses, it should be thoroughly investigated, as it has the potential of financial ruin for the investor.
In a nut Shell:
A reverse mortgage is a special type of home loan that lets a homeowner convert a portion of the equity in his or her home into cash. The equity built up over years of home mortgage payments can be paid to you. But unlike a traditional home equity loan or second mortgage, no repayment is required until the borrower(s) no longer use the home as their principal residence. HUD's reverse mortgage provides these benefits, and it is federally-insured as well.
To be eligible for a HUD reverse mortgage, HUD's Federal Housing Administration (FHA) requires that the borrower is a homeowner, 62 years of age or older; own your home outright, or have a low mortgage balance that can be paid off at the closing with proceeds from the reverse loan; and must live in the home. You are further required to receive consumer information from HUD-approved counseling sources prior to obtaining the loan. You can contact the Housing Counseling Clearinghouse on 1-800-569-4287 to obtain the name and telephone number of a HUD-approved counseling agency and a list of FHA approved lenders within your area.
Yes. It doesn't matter if you didn't buy it with an FHA-insured mortgage. Your new HUD reverse mortgage will be a new FHA-insured mortgage loan.
Your home must be a single-family dwelling or a two-to-four-unit property that you own and occupy. Townhouses, detached homes, units in condominiums and some manufactured homes are eligible. Condominiums must be FHA-approved. It is possible for individual condominiums units to qualify under the Spot Loan program.
With a traditional second mortgage, or a home equity line of credit, you must have sufficient income versus debt ratio to qualify for the loan, and you are required to make monthly mortgage payments. The reverse mortgage is different in that it pays you, and is available regardless of your current income. The amount you can borrow depends on your age, the current interest rate, and the appraised value of your home or FHA's mortgage limits for your area, whichever is less. Generally, the more valuable your home is, the older you are, the lower the interest, the more you can borrow. You don't make payments, because the loan is not due as long as the house is your principal residence. Like all homeowners, you still are required to pay your real estate taxes and other conventional payments like utilities, but with an FHA-insured HUD Reverse Mortgage, you cannot be foreclosed or forced to vacate your house because you "missed your mortgage payment."
No! You do not need to repay the loan as long as you or one of the borrowers continues to live in the house and keeps the taxes and insurance current. You can never owe more than your home's value.
When you sell your home or no longer use it for your primary residence, you or your estate will repay the cash you received from the reverse mortgage, plus interest and other fees, to the lender. The remaining equity in your home, if any, belongs to you or to your heirs. None of your other assets will be affected by HUD's reverse mortgage loan. This debt will never be passed along to the estate or heirs.
The amount you can borrow depends on your age, the current interest rate, and the appraised value of your home or FHA's mortgage limits for your area, whichever is less. Generally, the more valuable your home is, the older you are, the lower the interest, the more you can borrow.
There are five different way to receive your payments:
THE DILIGENT PROSPER
Annuities only make sense for a minor group of investors. Mutual funds are acceptable for the rest of investors. The reason they are so much heralded, is that the commissions are 5% or more, that is why the sale of variable annuities have gone through the roof since 2000. Should you wish to participate in Annuities, it is wise to select one with low costs and good investment options, from mutual fund companies.
A variable annuity is basically a tax deferred investment vehicle that comes with an insurance contract, usually designed to protect you from a loss in capital. Thanks to the insurance wrapper, earnings inside the annuity grow tax deferred, and the account isn't subject to annual contribution limits like those on other tax favored vehicles like IRAs and 401(k)s. Typically you can choose from a host of mutual funds, which in the variable annuity world are known as "sub accounts." Withdrawals made after age 59 1/2 are taxed as income. Earlier withdrawals are subject to tax and a 10% penalty.
annuities can be immediate or deferred. With a deferred annuity the account
grows until you decide it's time to make withdrawals. And when that time
comes (which should be after age 59 1/2, or you owe an early withdrawal
penalty) you can either annuitize your payments (which will provide regular
payments over a set amount of time) or you can withdraw money as you see fit.
Residents of some states may pay even more taxes on non-qualified variable annuity accounts. (That is, accounts that are not purchased within an IRS approved retirement plan like a 401(k), 403(b) or IRA.) Some states also add a tax for variable annuities purchased within a qualified account.
to face the issue of income tax due on annuities, there is no way of avoiding
the fact that, if
you die with money remaining in your annuity, your beneficiary will inherit
all the taxes that you have deferred. Compare this to a mutual fund, whose
basis is stepped-up at death. In that case, your beneficiary would owe no
taxes on the gains.
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