Low-interest rates make refinancing attractive to many homeowners. It can help you lower monthly payments, and you can use the extra money for many things. However, if you are approaching your retirement, you may have a few additional considerations to keep in mind. Why Refinance? Refinancing helps homeowners at all life stages and income levels the opportunity to pay less for their homes each month. This is especially true for homeowners who purchased their homes at times when the going interest rates were considerably higher. In fact, shaving as little as one percent off of the current interest rate can net substantial savings over the remainder of the loan. There are also a few other reasons you might want to consider refinancing your home. The rate on your Adjustable Rate Mortgage (ARM) is about to increase – or you suspect that it might. If you can convert your ARM to a fixed-rate loan with a lower interest rate, you have a potentially winning situation on your hand – provided that you are at least ten years away from retirement. Another reason to consider refinancing your home is if your lower interest rate is low enough that you can make roughly the same monthly payment and shave years off the life of your mortgage. Combine that with additional efforts to make one or two extra payments each year and you can potentially shave even more years from your loan, reducing the amount of interest you pay over the loan term even further. Disadvantages of Refinancing With the potential benefits that refinancing has to offer, many people wonder why it would not be an automatic yes. There are a few situations, though, when refinancing may not be the best choice for your situation. If you are planning to move after retirement or in the next five or so years, refinancing might prove unprofitable in the long run. For individuals who are having trouble making ends meet, or reaching financial goals prior to retirement, refinancing a home as retirement approaches could prove to be a financial burden rather than a boon. The absence of a mortgage during retirement is one of the best gifts you can give yourself. Consider carefully before extending the burden of making monthly payments into your retirement years. The final disadvantage to consider is the loss of equity in the home. Having equity in your home gives you options when emergencies in life arise. These emergencies can come in the form of health issues, family financial issues, or the expense that comes from needing a new roof or furnace. An extended mortgage could have you cash strapped and unable to come up with the funds for these types of emergencies. Good Rules of Thumb The best rule of thumb when deciding whether or not to refinance is to do the math. If you can recover your closing expenses and turn payments savings into investments during the time you have remaining before retirement, then refinancing may very well be worth your while. On the other, if you could invest the amount of money you will spend on closing costs and other expenses related to refinancing your home and make a bigger impact on your future by doing so, then your money is best spent elsewhere. Finally, there is one question to ask yourself. Do you want to have a mortgage going into retirement? For some, that is the only thing you need to know about refinancing as your retirement approaches.

Should You Refinance Close to Retirement?

View Resource Should You Refinance Close to Retirement?
Housing is typically the largest line item in most people’s budget. This is especially true for individuals who are living on their own for the first time. Therefore, before signing a rental lease, it is important that you perform some basic calculations and apply a little forward thinking so that you know you know what you can afford, how that aligns with your priorities and goals, and the lifestyle you want to live. Basic Guidelines Personal finance experts, for years, have promoted the ’30 percent rule’ when giving advice about deciding on a budget for living accommodations. This often-advised “rule” means that you take about 30 percent of your monthly income and budget it for rent. This figure typically includes things like utilities, Internet access, and similar expenses. Anything above 30 percent, according to these financial experts, means that you have an increased risk of having a future budgetary problem and of not being able to afford the lifestyle you want to live. According to CBS MoneyWatch, you should not exceed three to four percent of your gross income for utilities, leaving around 26 to 27 percent to pay for rent. It is important to factor in renters insurance as well if you have personal property that would represent a significant financial impact in the event of a loss. Making Tradeoffs When devising your budget for rent and other living expenses, you will find that you might have to make tradeoffs. For example, you might allow yourself some breathing room in your budget by underspending on your housing. Prioritize your spending on what is most important to you, whether that is your transportation and healthcare needs or allowing for more indulgent expenses, such as entertainment and vacation. As another budgetary tradeoff, you might consider getting a roommate or living in an area that offers greater budget-friendly rent opportunities. Keep in mind that living in an area inundated with upscale restaurants, pricey bars, and classy coffee shops are a conscious financial decision that will impact your budget substantially. You have to determine if they are really important to you. Where you live and what you spend on rent will ultimately determine how much money you have leftover to spend on supporting your desired lifestyle. Finding Ways to Economize Once you determine your priorities and know your budget, it is time to find ways to get the most value for your income. This involves ways to bring in more money or reduce the outflow of money. Reduce your Spending The first thing you can do is figure out a way to reduce your spending. This includes considering the choices mentioned above, like getting that roommate or finding a neighborhood that is more affordable. You might be able to have your rent reduced by offering your landlord managerial or maintenance services. Many landlords like this idea as it can save them money. Increase your Income Any extra income you can bring in will help your budget. You could consider picking up odd jobs like tutoring, or you can pick up freelance work in your chosen field to add to your overall income. The Takeaway When asking the question what you should spend on rent, the answer is that ‘it depends.’ There are common rules of thumb that suggest a certain percentage of income as a guide for your housing budget, and they are good to consider as a benchmark and guideline. However, just remember, you are in charge of your budget. If you want to spend more than that 30 percent of income on your rent, you might need to make cuts in other places like your entertainment or travel expenses. If you are a homebody, this might make sense for you. However, if you are a traveling nomad, it might not. The key is to understand your personal goals and priorities and craft a budget that is unique to your lifestyle.

How Much Should You Spend on Rent?

View Resource How Much Should You Spend on Rent?
College is full of lessons to be learned and one important lesson you should learn but most likely won’t in the classroom is how to manage your money wisely. You will not receive a grade on how well you manage your first credit card. Unfortunately, many people learn credit card responsibility only after they have gotten themselves into a pile of debt. Pros of Having Credit Cards As with many things in life, there are positive and negative aspects to having credit cards. Being responsible with credit cards involves understanding both sides. Builds Credit Credit cards are the best way to start establishing a credit history. To build your credit score, you need credit; therefore, getting a credit card while still in college is a simple way of doing this. The fact is that a major contributor to your FICO score is your credit history length. Obtaining a credit card while still in college helps you begin building your credit history so that when it comes time for you to require credit to obtain your first mortgage, you will not have a problem obtaining a loan. Alternative to Carrying Cash These days, not many people carry cash and college students, in particular, are not likely to deal with paper currency. If you do need cash, however, and don’t have an ATM near you on campus, reaching for your credit card can help you if you are in a bind. Avoids Identity Theft Identity theft and fraud have increased dramatically with the rise in technology. You leave yourself more vulnerable to identity theft by making online purchases with a debit card instead of a credit card. If a thief does gain access to your debit card, it is too easy for them to drain your bank account. With a credit card, they are only racking up fraudulent charges that you can dispute and have removed. Cons of Having Credit Cards While there are many advantages to having one or more credit cards, you should also be aware of their significant drawbacks. Forget to Track Spending You can get yourself into serious financial trouble if you fail to track your credit card purchases. Typically, this results in a huge bill at the end of the month that you are unable to pay in full within your billing cycle. If you continue this pattern, it can lead to a hefty debt that you will have a hard time paying off. Forget the Bill No doubt you are very busy in college going to class, juggling homework, and keeping a part-time job. With so much going on, it does not take much to forget little details like paying your credit card bill. However, when you fail to pay your bill on time, it can damage your credit score tremendously. That might not hurt you too much while you are still a student, but it can put you in a negative position as you begin your new post-graduation adult life. This will make it more difficult to get a car or home loan and to get a great rate on that loan. Open Too Many Cards Too often, college students sign up for every credit card offer that falls in their lap. When you have too many cards, it can make it overwhelming to track your spending, pay your bills on time and stay out of debt. Using Credit Cards Wisely To keep yourself out of credit card debt and keep your credit score in check, you need to stay on top of your bills and pay them in full and on time every month. You don’t use a credit card any differently than you would your debit card, except for how you pay it at the end of each month. With a debit card, your money automatically gets pulled from your bank account at the time of your purchase, but with credit cards, it’s up to you to pay the balance, which can add up quickly. The bottom line is this. You can establish credit responsibility and you should. This will set you up with a strong credit history so you can continue down your path as an adult with sound financial habits.

Should College Students Have Credit Cards?

View Resource Should College Students Have Credit Cards?
It can be a proud accomplishment when you pay off your credit card debt. However, if you are not careful, it can also be very simple for you to get right back into debt. Congratulations! If you have paid off your credit card debt, congratulations are in order. However, just because you are debt free now doesn’t mean you can stay that way. You have to set goals and guard yourself against sliding backward. Go ahead and celebrate your new debt-free life and then follow the tips below to maintain a zero balance. Maintaining a Zero Balance There are several actions you can take to maintain a zero credit card balance. Using your Card Responsibly You can continue using your card as long as you can stay responsible with it. Pay your balance in full every month so you can keep a healthy credit score. Maintaining a good credit score will help you down the road in securing credit with low rates, obtaining insurance, landing jobs that require credit checks, and getting approved for utilities without having to put down deposits. Finding Your Triggers Once your credit cards are paid off, figure out the reason you were in debt in the first place. How did you handle your finances and how did others influence your spending habits? For instance, did friends persuade you to spend on shopping sprees or expensive dinners? When you get bored or are under stress, do you run to the mall? These are triggers that influence your spending behavior. Knowing and avoiding these triggers can help you stay out of debt. Keeping a Budget When you no longer have to account for every penny, it can be too tempting to do away with your budget. However, this is a quick way to get back into the same reckless spending cycle. Having a budget will keep you in line with what you can and cannot spend. Preparing for Emergencies You can pay careful attention to your spending, yet still fall off the credit wagon if you’re not prepared to deal with financial emergencies. Unplanned items such as car repairs, medical emergencies or an unexpected loss of income can bust the best of budgets and derail the progress you’ve made in maintaining a debt free life. Having an emergency savings account in place can help you absorb some of the sting that unplanned expenses have on your finances. Experts recommend that you save three to six months of your monthly income to deal with such situations. That way, when your car sputters and spurts, or you lose hours at work, you’ll have the savings in place to deal with the emergency, instead of pulling out your credit cards to handle the situation, raising your account balance back to perilous heights. Things to Tackle Next Once you’ve got an emergency savings account in place, you should begin to pay off any other debts you have. You can start with the high-interest rate accounts. Pay off your student or car loan. Invest in your future, whether that involves starting a new business or looking for investment opportunities such as real estate. It is also crucial to begin saving for your retirement. This includes investing at least up to your employer’s match for their 401 K plan and maxing out your IRA contributions. Keep an eye on your credit. You should be looking at your credit card statement every month even if you are on autopay. There is always the risk of mistakes that can affect your credit score. Go through the three national credit reporting agencies (Equifax, Experian, and TransUnion) to review your credit and credit score once a year. If you find any mistakes on your credit report, you can dispute them and have them removed from your credit report once they cannot be verified as legitimate charges. You have a clean slate now. It is up to you to stay responsible when using your credit card. Don’t make any unnecessary purchases and always pay your bills in full each month and on time. Just keep in mind how great it feels to be debt-free and go ahead and enjoy your money responsibly.

After You’ve Paid Off Your Credit Cards

View Resource After You’ve Paid Off Your Credit Cards
Life insurance is one of those things you never want to think about when you are young, vibrant, and full of life. There are certain times in life, though, when it becomes necessary to consider carefully what having (or not having) life insurance will mean to the people you love if you were taken away from them suddenly. Now that you have made the decision to buy life insurance, you have a few important decisions to make, including the type of life insurance to purchase. Term Life Insurance Much like the name implies, term life insurance provides coverage for a specified period. Some policies are for a term of five or ten years. Others go on for as long as 30 years. The average policy is for a term of 20 years. If you pass away within the 20-year term of that active policy (meaning that you have not allowed the policy to lapse), then your family, or designated recipients, will receive the full value of the policy. There are many benefits to a term life policy worth considering. First, your premiums will never increase during your term. This means you can engage in long-term planning for the years when you are raising your children, paying a mortgage, or have greater financial responsibilities and obligations to consider. The other benefit is that term life policies are cheaper than whole life policies – at least when you are young and in relatively good health. That is also often the time when you are just starting a family, building a career, or when you buy your first home and assume a mortgage. The drawback to a term life policy is that it only has value to you during the time in which you are paying for it. Once your term ends, the policy has no value at all. Additionally, if you decide you need to extend the coverage term, say you have a baby later in life or buy a newer home and have a longer than expected mortgage, it will cost much more for the additional term than you paid for your original term. Those rates are not locked in for life. Whole Life Insurance This type of coverage is sometimes called permanent life insurance. It is much different from a term life policy in the fact that it has both investment and insurance components. However, that is not the only difference. These are a few of the ways whole life policies differ from term life insurance. You lock in the rates when you purchase a policy. The younger you are, the better your health, the lower your insurance rates. From the moment you take out your policy, your rates are locked in for the life of your policy. This means that you will receive the same low rates for as long as you continue paying for your policy and do not allow it to lapse. In addition to locking in lower rates for life, a whole life policy builds cash value over the years. This makes your whole life policy both an investment and insurance policy. While the initial premiums are often greater than a term life policy, locking in the rates for life is a game changer when it comes to long-term costs and financial planning. Choosing Between the Two Each type of policy offers its set of strengths and weaknesses. A whole life policy, locked in early, ensures that you will always have affordable life insurance coverage. However, term life policies allow you extra life insurance protection that is affordable at times when you need it most. Some people choose to have both. One for permanent whole life coverage and the term policy for a little additional security for their families during certain critical years. If you are unsure about which policy is best for you, consider consulting with an independent insurance agent or financial planner to discuss your options.

Term vs. Whole Life Insurance

View Resource Term vs. Whole Life Insurance
We all love getting away from it all and going on vacation. With all the excitement of going away, and with the number of excellent deals on flights and hotels, it is easy to forget about buying travel insurance. There are two main types of policies you can buy – single trip and annual insurance. As the names suggest, single trip insurance covers you for one trip, whereas annual insurance covers you for multiple journeys within a set period. Travel Insurance Basics There are various types of travel insurance coverage, many of which offer different features. The one you purchase will depend on factors such as where you are going, what you will be doing on vacation, and the length of your trip. The most common options are: Benefits In addition to the benefits listed above, travel insurance can offer you real peace of mind to have coverage should the worst happen during your vacation. Certain groups of travelers can benefit from buying travel insurance, there include: Is it Worth It? Travel insurance provides you with real peace of mind, so it is ideal for you if you are a worrier, if your trip cost a lot of money, or if you have a legitimate concern about the vacation destination. In considering different policies, there are some “benefits” that you probably won’t need, such as death coverage. In fact, a decent life insurance policy is a better option if you have concerns regarding your mortality. Also, if you have booked a short, inexpensive, and domestic trip, it is unlikely you will need insurance. Many travel insurance policies do not cover some pre-existing medical conditions either, so if you are considering purchasing medical insurance, be sure to investigate the coverage thoroughly. Sometimes, other insurance you have or your credit card may already provide the coverage you need. That is another important aspect to check before you spend money on a new travel insurance policy. Travel insurance is a good idea if you need peace of mind when you are on vacation, especially if you do not have any other back up. If you are planning on trying out some extreme sports, on visiting a developing country, or anything else in between, it might be worth taking out travel insurance. However, the concept of risk is a very personal one that varies from person to person, so whether or not you take out travel insurance can be a very personal choice.

Is Travel Insurance a Good Idea?

View Resource Is Travel Insurance a Good Idea?
FHA mortgages are a popular option for first-time home buyers to consider. These loans offer attractive terms, including the ability to make smaller down payments and a some flexibility when it comes to credit and income requirements. If you are a first time home buyer it may be a good idea to look into a loan like this for your home purchase, as long as you can meet the qualification requirements. What is an FHA Loan? FHA stands for Federal Housing Administration. The FHA insures certain loans with the intention of making it easier for people who would not otherwise qualify for a home loan to do so. Essentially the government guarantees lenders that they will be repaid for the loan even if you fail to do so. This makes lending the large amount of money it takes to purchase a home, more attractive to lenders who would otherwise be unwilling to take the risk on the bulk of the population. Not all homes are eligible for FHA mortgages. In fact, in order for the home to quality the buyer must live in the home. You cannot use FHA loans to buy a home as an investment property and rent it out to others – or to buy a vacation home. FHA loans are available for homes that are detached, semi-detached, row houses, condos, and townhouses. Borrowers who receive FHA loans must also purchase mortgage insurance. You have a few options available for doing this. You can choose any of the following: Finally, you must have the home appraised by an FHA-approved appraiser and the home must be deemed to meet certain conditions in order to qualify for an FHA loan. These conditions are generally related to the home’s structural soundness and value. What are the Key Features of FHA Loans? There are several ways the FHA makes the home buying process easier for the average person, including those listed below. These features are attractive to potential home buyers, but are not the only reason people turn to FHA loans. How do You Qualify for an FHA Mortgage? While the credit score requirements aren’t as insurmountable with FHA loans as they are with other types of loans, that doesn’t mean that there are no real requirements. In fact, the FHA has some pretty stringent requirements for approval including those listed below. Once all of the pieces fall into place, an FHA loan can be a great option if you’re considering purchasing a first home – for all these reasons and more.

FHA Mortgage Basics

View Resource FHA Mortgage Basics

Repayment of a mortgage loan requires that the borrower make a monthly payment back to the lender. That monthly payment includes both repayment of the loan principal, plus monthly interest on the outstanding balance. Loan payment are amortized so that your monthly payment remains the same during the repayment period, but during that period, the percentage of the payment that goes towards principal will increase as the outstanding mortgage balance decreases. Mortgage payments can also include pre-payments of property taxes, homeowner’s insurance and monthly homeowner’s association dues into an escrow account, managed by your lender. When those items are due, your lender will make the payment to the tax authority, insurance company or homeowner’s association.

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Calculate a Mortgage Payment

View Resource Calculate a Mortgage Payment

Adjustable rate mortgages typically offer home buyers the advantage of having a lower mortgage payment during the initial period of the mortgage. Adjustable rate mortgages are typically offered on a 1, 3, 5 or 7 year basis. Once the initial period expires, the mortgage rate will reset at then current interest rate levels. Depending on the direction interest rates are taking, these resets can result in higher or lower monthly payments to the borrower. This adjustable rate mortgage analyzer will help you understand the implication of your adjustable rate terms by showing what your monthly payment will be under different scenarios.

Experience the Difference of Banking Local

At First Mutual Bank, we understand your unique needs. Whether you’re looking for personalized banking solutions, competitive loan rates, or expert financial advice, we have what you need!

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Adjustable Rate Mortgage Analyzer

View Resource Adjustable Rate Mortgage Analyzer

Repayment of a home equity loan requires that the borrower make a monthly payment to the lender. That monthly payment includes both repayment of the loan principal, plus monthly interest on the outstanding balance. Loan payments are amortized so that the monthly payment remains the same throughout the repayment period, but during that period, the percentage of the payment that goes towards principal will increase as the outstanding mortgage balance decreases.

Calculate a Home Equity Loan Payment

View Resource Calculate a Home Equity Loan Payment