The Blog Of TL Wall Accounting

Archive for June, 2016

Should You Refinance Your Home Loan?

Some of our clients get a letter weekly from the banks that hold their mortgage with pretty great offers to refinance those mortgages to a lower rate. The question isn’t whether you’re getting a good deal but should you do it. Let’s take a better look at all of this.

If you’re relatively early into owning your home, within the first five years,and you started out with a percentage rate higher than 8%, it could work well for you to take a look at it. In some cases you could lower your monthly payments by as much as $900 a month depending on how high your starting rate was while getting a little bit of extra money to spend on a few other things. Of course, the smart thing would be to take that money and put it back towards the principle of your home to help you pay it off sooner but you’d have a lot of options to think about.

If you’re in the last 5 years or so towards paying off your mortgage, the deal might not be as smart a move depending on your long term goals for the house. If you’re looking to stay in the house for the rest of your life, don’t want to have any payments and want to will it to family members, then it’s best not to refinance and have to start all over.

If you’re looking to stay in the house and can continue making payments well into your old age and don’t have anyone you want to will your home to, refinancing this late not only reduces your monthly payments but could give you a nice windfall to use towards renovations. Also, if something happened to you and you had to go into a nursing home, your house might sell quicker, helping you spend down your out of pocket expenses so you can get on Medicaid quicker. That sounds a bit morbid but it’s a consideration to think of.

The decision is tougher when you’re in the intermediate range of 10 to 20 years into your payments. If you’re relatively young it’s not a bad way to go if you can save a lot on monthly payments, possibly making some double payments along the way if you have some extra money here and there. If you have some high outstanding bills and are ready to budget your payments but need a cash boost, then refinancing could help you get out of a jam and give you a shot to start over without having to think about bankruptcy.

Your accountant is a good place to start to ask questions regarding the possibility of refinancing. They could help you with the budgeting process to see if refinancing is a viable way for you to lower payments, pay off bills or make home improvements. It’s better to start with them because they don’t have a vested interest in what you do like the bank’s mortgage professionals will.

5 Reasons To Check Your Credit Report

Even though credit scores can seem somewhat arbitrary, based on which credit agency is putting the information together, it becomes obvious pretty quick that they’re pretty important to all consumers. Yet it’s amazing at how few people actually get credit reports before they try to obtain loans or get credit cards, even though every American consumer is allowed to get a free credit score once a year, courtesy of the federal government. Let’s look at 5 reasons you should be availing yourself of this important piece of paper.

1. The higher the credit score, the better credit risk you are.

Most people think their credit is better than it probably is. A study done in 2015 stated that 56% of consumers have subprime credit scores, which is usually a score of 640 or below. having a low credit score doesn’t always mean you won’t get a loan, but your lender might consider you a credit risk and charge you a higher interest rate. It’s better that you know your status before you let someone else run your report because if it’s not up to par, just the act of allowing someone to run your credit report can actually lower your score even more.

Just so you know, not all credit reporting agencies will tell you what your credit score is unless you pay for it. The reports change all the time, so you might not get the score even from the free reports that come. However, usually at least one agency will give you your current score.

2. Sometimes they have errors.

In 2013, a FTC report found that 5% of consumers had at least one error on one of the 3 major credit reporting agencies (Experian, Transunion or Equifax). That’s only considering financial errors, because it seems there are a lot more people who say that addresses are some of the biggest errors seen, although that doesn’t count against you unless it’s within the last 5 years.

3. They may show an outstanding bill that’s been paid

The biggest errors that show up on credit reports are old bills you’ve paid off that don’t show as being paid. These can wreck your credit report because you haven’t received anymore bills and you probably thought it was all taken care of because of that, but it could either mean that the billing system messed up your address or your original creditor didn’t log your payment correctly.

4. Sometimes you can get a negative report reversed.

If you check your credit report and see a bill outstanding and it’s one you agree with, if you have the ability to pay it off you can contact the creditor holding your outstanding debt, make a deal to pay your claim off (at least the amount you actually owe) if they agree to send something to each agency once you’ve made that payment telling them that everything’s been satisfied. Even though it can stay on your report for up to 7 years from the time it made the list, it’s a positive notification that some creditors will take into account in your favor.

5. It’s always better to know.

Like a lot of things, people who fear their credit status are scared to check on it to see where they stand. It’s always better to know because if you know what’s going on and you don’t like it you can always fix it. You never know when you might need to count on it being in the best shape possible.