Thomas Skiffington, CRS, GRI, CRB, ABR, ePro, CLHMS, SRES, RECS, CDPE, ECOBROKER
701 W. Market Street
Perkasie, PA 18944
Office Phone: 215-453-7653
Toll Free: 800-440-remax
January 20, 2014 9:21 pm
I received some very important information issued through the Connecticut Public Interest Research Group - ConnPIRG - which is one of a network of these nonprofit consumer agencies operating across the country.
ConnPIRG issued a notice that new Consumer Financial Protection Bureau (CFPB) rules are now in effect that will help protect homeowners and homebuyers from the mortgage abuses they say led to the housing crisis.
In particular, ConnPIRG says consumers will get protections from lenders that make risky loans without checking a borrower’s income, assets, or ability to repay a loan. In the next two segments, we will review the highlights of these new policies, and how they can help mortgage seekers.
The new mortgage guidelines are part of the 2010 Dodd-Frank Wall Street Reform and Consumer Protection Act, which was enacted after the mortgage market collapsed and millions of consumers lost their homes, according to the ConnPIRG release.
Abe Scarr, ConnPIRG Director said the CFPB is getting results for consumers - the new rules are designed to help people safely buy affordable homes, and then to keep them.
Among the highlights of the CFPB’s new rules are the following:
- Consumers will get more information and more protection when shopping for a loan and during home ownership.
- Lenders will be required to make a “good faith, reasonable effort” to make sure you can repay your loan.
- Loan officers and brokers will now have to follow rules that protect consumers from conflicts of interest.
- Consumers will receive periodic mortgage statement that put important information about monthly payments in one place.
- Servicers must, under certain circumstances, reach out to borrowers having trouble making mortgage payments and help them apply for the options available to them to avoid foreclosure.
Check out our next segment, where we'll examine the CFPB's new toolkit for consumers, to help them take advantage of new mortgage protections. Also, get more information about the new law here.
January 20, 2014 9:21 pm
Low credit scores result in higher interest charges. Borrowers with a FICO credit score of 700 save an average of $648 in interest on their credit card, $1,392 on their car loan, and $2,340 on their mortgage each year, compared with borrowers who have scores below 620, according to a study by CardHub.com, a credit-card comparison website.
For consumers willing to scale back on credit card usage, says the Wall St. Journal, there are five sure strategies for boosting your credit score:
Pay down credit card debt – Borrowers with the best credit scores use an average of seven percent of their total credit-card limit. Borrowers who surpass 10 percent of their credit limit will see their FICO score drop, even if they make monthly payments on time. Ideally, you should pay off your balance each month. If you carry a balance, put the card away and pay off the balance as soon as possible. A stop-gap option is to ask your creditor to increase your spending limit, which could increase your overall credit score.
Convert credit card debt to a personal loan – Credit-card debt is more damaging to credit scores than a personal loan, which is considered installment debt. That’s because the credit-utilization ratio does not take installment debt into account. Also, a personal loan will likely have a lower interest rate. So converting the debt to a personal loan, and paying it off efficiently, makes sense – but only if you stop using the credit card until the loan is paid.
Be selective about accelerating payments – For the same reason, consumers looking to improve their credit score should pay off credit card debt first, rather than student loans or other kinds of debt.
Check credit scores regularly – One in three consumers has errors in at least one of their credit reports (Equifax, Experian, and TransUnion.) Errors can send your score plunging. Get a copy of your credit report for free every year from annualcreditreport.com. If you spot errors, contact the credit bureaus, which are legally required to respond within 30 to 45 days.
Pay on time – the quickest way to harm your credit score is to miss a payment. Late payments can stay on your credit report for seven years, so the first rule in improving scores is to pay on time each month.
January 20, 2014 9:21 pm
BPT)—Consumer knowledge about credit scoring remains a challenge. In fact, nearly half of Americans still don't know that mortgage companies use credit scores when making decisions about credit availability and pricing, according to a 2013 survey by the Consumer Federation of America and VantageScore Solutions, a credit score model developer. Even if you do understand the importance of a credit score, you may still wonder why yours isn't higher.
That's where "reason codes" come in handy.
Reason codes—also called score factors or adverse action codes—address factors that may be impacting your credit score, such as high balances on revolving credit accounts, late payments or a short credit history.
"Many people only review their credit score when they're applying for or have been refused new credit," says Barrett Burns, president and CEO of VantageScore Solutions. "Credit score notices, often sent after consumers apply for credit, include 'reason codes'—numbers and phrases that appear along with the score to explain why the score isn't higher. If you're unfamiliar with what those reason codes mean, the information intended to help you better understand your score may actually have the opposite effect."
You'll see reason codes on your credit score notice, regardless of whether your score is really good, average or poor, because the reason codes are meant to explain why your score isn't even higher. While they don't directly account for a lender's credit decisions, understanding reason codes can help you better manage your credit accounts and improve your credit score.
To help with that, VantageScore Solutions created a new consumer education website, ReasonCode.org, which provides a wealth of information about reason codes. The website includes a search engine that allows you to enter the reason codes that appear on your credit score notice and obtain more detailed information about each code in plain English and tips for improving your credit score.
To help you understand reason codes, here are some important consumer questions and answers:
Q. What is a "reason code" and why does it appear on my credit score notice?
A. Reason codes are alpha numeric codes (e.g. 01, AA) combined with short descriptions intended to explain why your credit score is not higher. Reason codes clarify why you did not receive a "perfect" credit score on a particular scoring model. Since perfect scores are rare, your score could always be higher, even when it's very good, so you'll always have reason codes associated with your score.
Q. Why should I care about reason codes?
A. If your score could be better, you can use reason codes as a guide to understand what you need to do to improve it. For example, if you receive a reason code that points to a high balance on your credit cards as a reason your score is lower then paying down those balances may lead to an improved score.
Q. Which code has the most influence on my score?
A. Reason codes are always listed in the order of greatest impact. Keep in mind just about all consumers will receive reason codes—even if a score is nearly perfect. If your score is already very high you may not need to take any action.
Reason codes can be a map for you to follow on the road to a higher credit score. Read and research them carefully and become a better manager of credit. The result can quite literally be more money in your pocket.
January 20, 2014 9:21 pm
Close. Act of finalizing a transaction in which all the concerned parties meet to transfer title to a property. Also, when real estate formally changes ownership.
January 20, 2014 9:21 pm
A: No. A loss from the sale of personal-use property, such as a home or car, is not deductible. They are considered nondeductible personal losses, and you cannot reduce your tax bill by deducting them the way you would deduct stock and investment losses on your tax returns.
January 17, 2014 11:12 pm
Where did all my money go? It’s a universal question. And if you’re like most people, it’s one you ask with more than a touch of frustration. You don’t spend extravagantly. You pay the bills, buy groceries, and provide school supplies and clothes for your kids. Sure, maybe you go out to eat on Saturdays and take a once-a-year vacation—after all, you deserve some pleasure in life—but it’s hard to believe these small luxuries account for your stagnant savings or, worse, that credit card debt that’s slowly inching upward.
So where did all the money go? Author John Vento has an answer that might surprise you. Taxes.
“Most people think their biggest expense is their mortgage or rent or their kids,” says Vento, president of his New York City-based Certified Public Accounting firm, John J. Vento, CPA, P.C., and Comprehensive Wealth Management, Ltd., as well as the author of the new book Financial Independence (Getting to Point X): An Advisor’s Guide to Comprehensive Wealth Management. “But believe me when I say that most of your money has gone—and continues to go—to taxes, taxes, and more taxes.
“Just think about it,” he adds. “There’s your federal and state income taxes. Social Security taxes. Payroll taxes. Sales taxes. Property taxes. And on and on. In fact, if you take a close look at how much you pay for various taxes, chances are this number would be more than 50 percent of your overall expenditures. And while no one can avoid taxes completely—not legally anyway—there are almost certainly ways to reduce your bill that you aren’t taking advantage of.”
A Certified Public Accountant and Certified Financial PlannerTM with decades of experience, Vento knows exactly what it takes to sustain and build wealth. His new book is a complete resource for anyone concerned with building wealth and financial security in today’s no-guarantee financial environment. Most importantly, in it, Vento explains how to employ current tax facts and strategies in order to save hundreds—and perhaps thousands—of dollars every year.
“So if you want to increase your savings, what would be the single most important expenditure for you to focus on in order to keep more of what you make and get closer to achieving financial independence?” asks Vento. “The answer, of course, is taxes, taxes, taxes. But the fact is, most people completely overlook the importance of minimizing their taxes in order to help maximize their wealth accumulation.”
If you want to change your taxes from your biggest expense to your biggest saving opportunity, take a look at a few tips from Vento:
Find a trusted financial advisor. Everyone needs a trusted advisor to guide them during good times and bad—someone whose primary goal will be to help you achieve your long-term financial objectives. And while you may assume financial advisors are for “the super wealthy” (i.e., not you), or that your stockbroker or tax preparer adequately fills this role, Vento says you’re wrong in both cases.
Get organized. Don’t walk into your tax preparer’s office with your W-2 and a few receipts and expect to have a wealth-building experience. “Tax records, such as records of income received, work-related expense reports, medical expense information, information about home improvements, sales, and refinances, and so on, should be carefully kept on a year-round basis—not thrown in a drawer or shoebox and then hastily assembled just for your annual tax appointment,” notes Vento.
Retro-file to take advantage of missed deductions. Using your taxes as a way to actually save money is probably a new concept for you. That said, chances are high that you’ve missed out on ways to save in years past. Well, here’s some good news for you: Those savings aren’t lost forever.
Get credit for your kids. Put together a list of all expenses related to your kids. You’ll want to include child care, tuition payments, 529 plan contributions, donations, medical expenses, etc. “Ask your tax preparer to explore every tax credit that might be available to you, such as the child care credit, child tax credit, and the earned income credit,” explains Vento. “For older children who are in college, you must consider the education tax credits, such as the Lifetime Learning Credit and the American Opportunity Tax Credit.
“If your children are young and you’re looking for the best overall savings option, you’ll have the most control and the greatest tax benefits if you save money via a 529 plan,” he adds. “Although you do not receive any federal tax deduction for the contributions you make to these plans, the distributions are generally tax free to the extent that you use them to pay for qualified higher education expenses. For example, assuming you contribute $10,000 to a 529 plan in the year your child is born and this amount accumulates to $30,000 by the time the child is ready to attend college, this entire amount can be used free of tax if used for qualified higher education expenses. Neither you nor your child will be taxed on the profit made with this money.
Know what gets taxed and what doesn’t in regard to insurance payouts. Generally, the cost of personal homeowner’s, automobile, boat, and umbrella liability insurance are not tax deductible. However, insurance reimbursements to the extent of your loss are generally not taxable. So if you receive an insurance reimbursement as a result of damage to your home or car (as long as it is not in excess of your adjusted basis), it isn’t taxable, notes Vento.
Retire from a big tax burden. Many Americans aren’t saving enough for retirement. That’s unfortunate for two reasons. Number one, the earlier you start to save for retirement the better. And number two, retirement saving is a great way to reduce the amount you pay in taxes.
If your employer offers a 401(k) plan, invest as much as it will allow, Vento recommends. Making elective salary deferrals to your company’s retirement plan allows you to defer tax on your salary and get a tax-deferred buildup of earnings within your plan until you start making withdrawals when you retire. Other options include IRAs, which are available to all wage earners at any salary level, as well as to nonworking spouses.
“Contributions to traditional IRAs may be tax deductible if you meet the requirements; your withdrawals will be taxable in the year that you make those withdrawals,” Vento explains. “Therefore, a traditional IRA gives you a tax deduction in the current year and a tax deferral for any earnings, but ultimately you will pay tax when you withdraw from your account.
“In contrast, contributions to a Roth IRA are not tax deductible, but qualified withdrawals are tax free,” he adds. “Therefore, Roth IRAs do not give you a tax deduction in the current year, but ultimately your qualified withdrawals including earnings will be paid out to you tax free. Compare the benefits of a traditional IRA to a Roth IRA and choose the one that is best for your particular situation.”
Get the most out of Social Security. If you are collecting Social Security benefits, up to 85 percent of these benefits could be subject to federal income tax. However, it’s important to note that you can avoid paying income tax on your Social Security benefits if your provisional income is $25,000 or less if you are single, or $32,000 or less if you are married and filing jointly.
“Planning your retirement income to include tax-free withdrawals, such as from a Roth IRA account, may allow you to keep your income under these thresholds and ultimately avoid paying tax on your Social Security benefits,” explains Vento.
Don’t get taxed by your health. Take full advantage of medical insurance premiums paid by your employer on your behalf. This is considered a tax-free fringe benefit. These medical insurance premiums are 100 percent deductible by your employer and tax free to you. All payments made by the medical insurance company to cover your medical expenses are also tax-free payments made for your benefit.
“If your health insurance qualifies as a high-deductible plan, you should establish an HSA and fully fund tax-deductible contributions to cover future medical expenses,” says Vento. “Individuals can contribute and deduct $3,300 for a single policy and $6,550 for a family in 2014. If you and your spouse are 55 or older, you can make an additional tax-deductible, catch-up contribution of $1,000 each.”
Don’t let taxes deflate your ROI. Inflation and taxes are perhaps the two biggest drains on your investment returns. When investing, you must always consider the tax consequences of your investment when determining your true rate of return.
Give a gift. Take advantage of gifting strategies that can help you prevent losing some of the value of your estate to taxes. For 2014, the gift tax exclusion is $14,000 per year. What this means is that you can make a gift in this amount to anyone—and to as many people as you like—every calendar year, and that money will not be subject to gift tax or included in your taxable estate. Furthermore, it will not be added back to your lifetime exemption (which in 2014 is $5,340,000 million). This amount can be increased to $28,000 per year if a nondonor spouse agrees to split the gift.
“This can be a great way to transfer assets to children, grandchildren, and other intended heirs while you are still alive,” says Vento. “Ultimately, this will reduce the taxable value of your estate and, at the same time, your ultimate estate tax liability.”
“Paying taxes doesn’t simply have to mean kissing a large portion of your hard-earned money good-bye,” says Vento. “When you understand how they work and know where to look for opportunities, you can actually minimize your tax payout, and as a result, save a lot more of your money. Those savings can then pave your way to financial independence.”
January 17, 2014 11:12 pm
With millions of people newly covered by health insurance, and 11,000 more becoming eligible for Medicare every day, more people will be visiting doctors and hospitals.
And while that’s a positive, patient advocate Ruth Fenner Barash warns that the U.S. health care system is not always the benevolent safety net many people believe it to be. It can be abusive, incompetent, callous toward patients – and worse.
“Patients and their loved ones cannot blindly turn themselves over to this massive, technology-based system and trust that it will care – or take care of them,” says Barash, who shares lessons learned from extensive health-care experiences in a new book, “For Better or Worse: Lurching from Crisis to Crisis in America’s Medical Morass.
Her cautionary tale traces the long medical journey her husband, Philip, endured with her as his advocate. She discovered mismanagement and excess, useless interventions and a sometimes complete disregard for pain – even when there was no hope of healing.
“I learned a great deal from our experience, and with so many people now gaining access to health care, I want others to benefit from what I’ve learned,” she says. “You can navigate the system; you just have to know how.” Barash offers these suggestions for patients and their loved ones, whether it’s a trip to the doctor for a checkup or a diagnosis of a catastrophic illness.
• Avoid the emergency room – for your own sake. Emergency rooms were developed with the idea that few people would use them – most people would see their physician. But as health care costs rose, they became a primary care facility for those without insurance or the money to pay for services out of pocket. “Patients and their families were not expected to spend a long time in the E.R. – presumably, they would be seen quickly and either admitted to the hospital or treated and released – so they’re not designed for comfort,” Barash says. “They’ve become very crowded, especially in cities, and patients might wait for hours sitting in hard plastic chairs in the waiting room. For someone who’s sick or injured, this can be torture.” Sick people usually are not isolated, so waiting rooms also teem with germs, she notes.
• Be skeptical – question everything. Too often, we take the first thing we’re told as gospel, Barash says. “If you have the luxury of time, take some of that time to think things through, to research and get second opinions,” she says. Research your physician’s connections. When you’re referred to a specialist, ask why that particular person. If you live in an area with a large academic community, ask around about the physicians and health-care providers with the best reputations. Who has the most experience in a particular niche? Who’s doing the most promising research? How many times have you performed this procedure and what is your success rate?
• Ask what it costs – no matter who’s paying. Our health-care system is absurd in the number of useless consultations, diagnostic procedures and interventions it foists on patients, Barash says. Whether our hospital bills are fully covered by Medicare, Medicaid or private insurance, or we’re paying a portion ourselves, we must all include cost in our discussions with health-care providers. “Part of the blame for having the most expensive health-care system in the world goes to us, the individuals, who don’t question purchases or shop for prices as we would for groceries, clothing, or furniture,” Barash says. “If a test or consultation is ordered, understand why. Is it really necessary? You can say no!”
Finally, Barash says, we all must come to terms with the fact that death is a given.
“My husband’s problem, and the problem many of us may be doomed to face, is the seemingly endless getting there – a dying we don’t want.”
January 17, 2014 11:12 pm
License. A privilege or right granted to a person by a state to operate as a real estate broker or salesperson.
January 17, 2014 11:12 pm
A: With a refinancing, you pay off an old loan on your home and take out a new one, usually at a lower mortgage interest rate. To refinance, you will generally need to have equity in your home, a good credit rating, and steady income. You can borrow a percentage of the equity to cover remodeling costs, debt consolidate, and college tuition.
When you refinance, you will incur all the closing costs that go along with getting a new mortgage. So unless you're doing extensive renovations and can get a mortgage interest rate at least two points below your current loan rate, you may want to select another financing option.
January 17, 2014 11:12 pm
Each generation handles their finances a bit differently, due to economic influences, technology and more. When it comes to baby boomers, a lack of planning and very poor insurance coverage suggests a significant risk for delayed retirement or outliving retirement assets. Below are 7 steps baby boomers can take to secure their financial future, courtesy of Financial Finesse.
Run a retirement calculator. As Boomers approach retirement age, many have no idea whether they’ll actually be able to afford to retire since less than half of them have run a retirement estimate. Fortunately, many employers offer tools like Financial Engines, Schwab’s GuidedChoice, or our own retirement estimator that provide a projection of your retirement income and how much more you may need to save to achieve your goals.
Don’t forget to factor in health care costs. With Fidelity estimating that a 65-yr old couple will need $220k on average to cover health care costs in retirement, medical expenses will be a big part of that calculation. This is even more true if you plan to retire before you qualify for Medicare at age 65 since you may have to foot the entire bill. If you don’t have access to retiree health care coverage, you can purchase insurance on the new exchanges without having to worry about pre-existing conditions and depending on your taxable income, you may also qualify for tax subsidies that can significantly reduce your cost of insurance.
Catch up on tax-advantaged savings plans. The bad news is that less than 30% of Boomers are on track for retirement. The good news is that they are generally in their peak earning years, many are empty nesters and some have even paid off their mortgages so this can be a great time to make up for lost savings. If you turn 50 or older this year, you can take advantage of catch-up provisions in tax-advantaged retirement accounts. For your employer-sponsored plan, this means you can save an additional $5,500 on top of the standard $17,500 IRS limit for 401(k) or 403(b) deferrals. For an IRA, you can deposit an additional $1,000 on top of the standard $5,500 IRA contribution limit for 2014. (If you neglected to contribute to an IRA last year, there’s still time since you have until 4/15/14 to make your 2013 IRA deposit.) If you’re eligible to contribute to an HSA and are age 55 or older, you can contribute an extra $1k in addition to the $3,300 limit for individuals and $6,550 limit for families in 2014. (HSAs can be used tax-free for qualified medical expenses and penalty-free for any purpose after age 65.)
Consider alternative retirement strategies. If you don’t have enough time to save for your retirement goals, you may want to think about other ways to supplement your retirement income or reduce your expenses in retirement. Some options include working in retirement, paying off your mortgage, downsizing, purchasing an immediate annuity, moving to an area with a lower cost of living (maybe even overseas), and getting a reverse mortgage.
Downshift your investment strategy. If you have accumulated a hefty retirement account balance, you may find that your investment earnings outweigh your contributions so a good investment strategy is crucial. While the recent performance of the stock market may make it tempting to be more aggressive or take gains and get out of the market altogether, neither market timing approach has been shown to be consistently successful in the past. Instead, you’ll want to maintain a balanced portfolio that gradually becomes more conservative as you get closer to retirement. This is easiest with a target retirement date fund, which is a one-stop shop that does that automatically and is increasingly available in employer-sponsored plans. For a more customized portfolio, you might be able to get face-to-face financial advice or guidance through your employer or by hiring your own financial advisor.
Don’t let education expenses jeopardize your retirement. Before raiding your retirement accounts to help children or grandchildren, you might want to consider ways of minimizing college costs and explore all the options for low cost student loans. If you can afford to help with college bills without hurting your retirement, IRAs can be used penalty-free for qualified education expenses and appreciated stocks can be gifted to a child and taxed at the child’s capital gains rate when they sell it (unless they’re subject to the kiddie tax).
Protect your wealth. College costs aren’t the only threat to your retirement assets. After not saving enough for retirement, lack of wealth protection was the Boomers’ biggest vulnerability. Whether you’re already on track for retirement or feel you don’t have much wealth to protect, you should make sure you have adequate liability and long term care insurance. Otherwise, a single lawsuit or nursing home stay can wipe out a lifetime of saving and investing. Long term care insurance is particularly important to purchase before age and deteriorating health could make it unaffordable.
Source: Financial Finesse