how to owner finance a home

How to Owner Finance a Home.

There are many benefits to an owner financing deal when purchasing a home. Both the buyer and seller can take advantage of the deal. But there is a specific process to owner financing, along with important factors to consider. You should begin by hiring people who can help you, such as an appraiser, Residential Mortgage Loan Originator, and lawyer.

Part 1 Hiring People to Help You.

1. Hire an appraiser. Both the buyer and the seller should hire their own appraiser to determine the value of the house. The seller receives an appraisal in order to select a price for the home, and the buyer gets an appraisal to confirm that the selling price is fair. You can find an appraiser in the following ways:

look in the Yellow Pages, ask for a referral from a mortgage company, bank, or realtor, contact your state’s licensing agency.

2. Hire a real estate attorney. Both parties should work closely with a real estate attorney. A real estate attorney can draft all of the necessary paperwork. The attorney can also protect your interests. For example, the buyer can include a protection clause just in case the property has to be sold in response to a life changing event, job relocation or loss, divorce or death.

You can get a referral to a real estate attorney by contacting your local or state bar association. Bar associations are organizations made up of attorneys, and they often provide referrals to their members or can help you find an attorney.

3. Get advice from a Residential Mortgage Loan Originator (RMLO). A Residential Mortgage Loan Originator can give you advice on how to manage owner financing in a way that is transparent and compliant with regulations. When you owner finance a home, you are essentially providing the buyer a loan until they complete their payments on the home. Since you want your agreement to be clear and binding, it's good to work with a mortgage professional.

Your RMLO can help ensure that your owner financing documents are compliant with the Safe Act and Dodd Frank Act.

Make sure your RMLO is properly licensed by your state. Check with your state’s Department of Business Oversight or equivalent state office to check.

Part 2 Preparing for the Sale.

1. Get approval if you still have a mortgage. Owner financed sales work best when the owner has title free and clear or the owner can pay off the mortgage with the buyer’s down payment. However, if the seller still has a large mortgage, they need to get their lender’s approval.

Check whether you can pay off the mortgage with the buyer’s down payment. If not, then contact your mortgage company and discuss that you want to sell the house.

2. Consider performing background checks to control risk. Both the seller and buyer should perform background checks on each other. Many owner financed sales are short-term, for five years or so. At the end of the term, the buyer is expected to refinance and then make a “balloon payment,” paying off the balance of the loan. As a seller, you will want assurance that a buyer can get a traditional loan at the end of the contract term, which means you definitely want to check their credit history and employment.

In fact, sellers should consider having buyers complete a loan application. You can verify references, employment history, and other financial information.

Buyers also benefit from background checks. For example, they might discover that the seller has been financially irresponsible. If the seller still holds a mortgage on the home, there is a risk of default.

3. Determine loan details. One advantage of an owner financed sale is that the seller controls details about the financing. Because the seller is assuming a lot of risk, they should come up with terms that protect them. Talk with your attorney about what the terms of the loan should be. Consider the following.

a substantial down payment (usually 10% or more), an interest rate that is higher than usual (though less than your state’s maximum allowable interest rate), a loan term you are comfortable with.

4. Ask your lawyer draft a purchase and sale agreement. You want to protect yourself legally by making sure that you have all of the necessary legal documents prepared. Your real estate attorney can draft a purchase and sale agreement, which both seller and buyer will sign. This document provides information about the following:

closing date, name of the title insurance company, final sale price, details about a down payment, if any.

contingencies which must be met for the sale to proceed, such as an acceptable inspection and a clear title report.

5. Draft a promissory note. The seller also needs the buyer to sign a promissory note or other financial instrument. Your lawyer can draft this document for you. It should contain the following information.

borrower’s name, property address, amount of the loan, interest rate, repayment schedule, terms for late or missed payments, consequences of default.

6. Have your lawyer draft a mortgage. The mortgage provides security for the loan. Your lawyer should also draft this document for you. The mortgage is what allows you to repossess the house should the buyer default on the loan.

Part 3 Completing the Sale.

1. Agree on an interest rate and term with the buyer. Your RMLO partner will calculate the agreed upon amount based on a specific period of time and if you have agreed on a balloon payment. Remember that not every state allows balloon payments.

For example, you can base monthly payment amount on a hypothetical 30-year mortgage, but schedule payment of the remaining amount in 5 years (balloon). The RMLO will also create required disclosures for the seller/lender.

2. Close the sale. Both the buyer and seller should have independent attorneys who can review all paperwork to make sure that it is complete. You should schedule a closing to sign everything and make copies.

3. Hire a loan servicer to manage payments. The seller should talk to their lawyer about whether they want to hire a loan servicer. If they do, then their lawyer can recommend someone. A loan servicer provides many important services.

collects the mortgage payments, sets up an escrow, handles tax statements and payments, makes insurance payments, processes payment changes, performs collection services, if necessary.

4. Record your mortgage or deed of trust. You can record it in the county land records office. Doing so will allow the buyer and the seller to take advantage of tax deductions. Making the deal official in this manner also proves that the sale took place.

Part 4 Deciding Whether an Owner Financed Sale is Right.

1. Analyze your situation as a seller. Owner financed sales are rare, and you shouldn’t jump into one until you have thoroughly considered your situation. Think about the following.

You usually must own the house free and clear of any mortgage. Otherwise, you will need your lender to give you permission to sell.

Taxes can be complicated and you’ll want to hire a tax professional to help you.

You might have to go through the foreclosure process if the buyer stops making payments. This can be costly and time-consuming.

However, you may make much more money on an owner financed sale than if you sell the traditional way.

2. Determine if an owner financed sale is ideal as a buyer. Buyers usually like owner financed sales because a seller might be less choosy than a bank or mortgage lender. However, you should consider the following.

You might have to come up with a larger down payment than you normally would. The owner-seller is taking a risk by financing your sale, and in return they might want a larger down payment or higher interest.

Owner financed sales often close faster than other sales.

You need to be sure you can make the balloon payment if one is written into the contract. If you break the contract, then you could lose the house and all of the payments you have made up to that point.

3. Talk with professionals if you have questions. In addition to working with a real estate lawyer, you might want to meet with a tax professional, such as a certified public accountant. Ask about the tax benefits of an owner financed sale compared to selling outright.

If you are a buyer, then you should talk about how to raise your credit score so that you qualify for a traditional mortgage when the balloon payment comes due.

4. Make sure your buyer can cover the balloon payment. Owner financing is most often used when the buyer or property does not qualify for a conventional loan. This means the buyer may not have the resources to cover the balloon payment at the end of your term. Discuss your buyer's options before entering into a contract with them.

If you are a buyer, make sure that you have your options for paying the balloon payment lined up before you agree to the seller's terms.

5. Consider a lease-to-own option. This option is often more advantageous for the buyer and less complicated for the seller. You and the person interested in your home will lock in a potential sale price for the home, as well as a lease agreement ranging from 2 to 5 years. During that time, the person will pay you rent on the home, with a portion of that rent going toward a down payment on the house. After the lease ends, the person can choose to proceed with the sale as arranged, or they can opt to walk away.

If they walk away, they don't get a refund on the extra money they paid toward the down payment.

If they do walk away, you'll need to relist your home.

Tips.

The seller should ask that the buyer purchase homeowner's insurance and confirm the seller as mortgagee.

The seller should establish a land contract. With a land contract, title doesn’t pass to the buyer until the final payment has been made. Discuss this option with your attorney and see if such a contract is feasible.

December 03, 2019

How to Owner Finance a Home

How to Owner Finance a Home.

There are many benefits to an owner financing deal when purchasing a home. Both the buyer and seller can take advantage of the deal. But there is a specific process to owner financing, along with important factors to consider. You should begin by hiring people who can help you, such as an appraiser, Residential Mortgage Loan Originator, and lawyer.

Part 1 Hiring People to Help You.

1. Hire an appraiser. Both the buyer and the seller should hire their own appraiser to determine the value of the house. The seller receives an appraisal in order to select a price for the home, and the buyer gets an appraisal to confirm that the selling price is fair. You can find an appraiser in the following ways:

look in the Yellow Pages, ask for a referral from a mortgage company, bank, or realtor, contact your state’s licensing agency.

2. Hire a real estate attorney. Both parties should work closely with a real estate attorney. A real estate attorney can draft all of the necessary paperwork. The attorney can also protect your interests. For example, the buyer can include a protection clause just in case the property has to be sold in response to a life changing event, job relocation or loss, divorce or death.

You can get a referral to a real estate attorney by contacting your local or state bar association. Bar associations are organizations made up of attorneys, and they often provide referrals to their members or can help you find an attorney.

3. Get advice from a Residential Mortgage Loan Originator (RMLO). A Residential Mortgage Loan Originator can give you advice on how to manage owner financing in a way that is transparent and compliant with regulations. When you owner finance a home, you are essentially providing the buyer a loan until they complete their payments on the home. Since you want your agreement to be clear and binding, it's good to work with a mortgage professional.

Your RMLO can help ensure that your owner financing documents are compliant with the Safe Act and Dodd Frank Act.

Make sure your RMLO is properly licensed by your state. Check with your state’s Department of Business Oversight or equivalent state office to check.

Part 2 Preparing for the Sale.

1. Get approval if you still have a mortgage. Owner financed sales work best when the owner has title free and clear or the owner can pay off the mortgage with the buyer’s down payment. However, if the seller still has a large mortgage, they need to get their lender’s approval.

Check whether you can pay off the mortgage with the buyer’s down payment. If not, then contact your mortgage company and discuss that you want to sell the house.

2. Consider performing background checks to control risk. Both the seller and buyer should perform background checks on each other. Many owner financed sales are short-term, for five years or so. At the end of the term, the buyer is expected to refinance and then make a “balloon payment,” paying off the balance of the loan. As a seller, you will want assurance that a buyer can get a traditional loan at the end of the contract term, which means you definitely want to check their credit history and employment.

In fact, sellers should consider having buyers complete a loan application. You can verify references, employment history, and other financial information.

Buyers also benefit from background checks. For example, they might discover that the seller has been financially irresponsible. If the seller still holds a mortgage on the home, there is a risk of default.

3. Determine loan details. One advantage of an owner financed sale is that the seller controls details about the financing. Because the seller is assuming a lot of risk, they should come up with terms that protect them. Talk with your attorney about what the terms of the loan should be. Consider the following.

a substantial down payment (usually 10% or more), an interest rate that is higher than usual (though less than your state’s maximum allowable interest rate), a loan term you are comfortable with.

4. Ask your lawyer draft a purchase and sale agreement. You want to protect yourself legally by making sure that you have all of the necessary legal documents prepared. Your real estate attorney can draft a purchase and sale agreement, which both seller and buyer will sign. This document provides information about the following:

closing date, name of the title insurance company, final sale price, details about a down payment, if any.

contingencies which must be met for the sale to proceed, such as an acceptable inspection and a clear title report.

5. Draft a promissory note. The seller also needs the buyer to sign a promissory note or other financial instrument. Your lawyer can draft this document for you. It should contain the following information.

borrower’s name, property address, amount of the loan, interest rate, repayment schedule, terms for late or missed payments, consequences of default.

6. Have your lawyer draft a mortgage. The mortgage provides security for the loan. Your lawyer should also draft this document for you. The mortgage is what allows you to repossess the house should the buyer default on the loan.

Part 3 Completing the Sale.

1. Agree on an interest rate and term with the buyer. Your RMLO partner will calculate the agreed upon amount based on a specific period of time and if you have agreed on a balloon payment. Remember that not every state allows balloon payments.

For example, you can base monthly payment amount on a hypothetical 30-year mortgage, but schedule payment of the remaining amount in 5 years (balloon). The RMLO will also create required disclosures for the seller/lender.

2. Close the sale. Both the buyer and seller should have independent attorneys who can review all paperwork to make sure that it is complete. You should schedule a closing to sign everything and make copies.

3. Hire a loan servicer to manage payments. The seller should talk to their lawyer about whether they want to hire a loan servicer. If they do, then their lawyer can recommend someone. A loan servicer provides many important services.

collects the mortgage payments, sets up an escrow, handles tax statements and payments, makes insurance payments, processes payment changes, performs collection services, if necessary.

4. Record your mortgage or deed of trust. You can record it in the county land records office. Doing so will allow the buyer and the seller to take advantage of tax deductions. Making the deal official in this manner also proves that the sale took place.

Part 4 Deciding Whether an Owner Financed Sale is Right.

1. Analyze your situation as a seller. Owner financed sales are rare, and you shouldn’t jump into one until you have thoroughly considered your situation. Think about the following.

You usually must own the house free and clear of any mortgage. Otherwise, you will need your lender to give you permission to sell.

Taxes can be complicated and you’ll want to hire a tax professional to help you.

You might have to go through the foreclosure process if the buyer stops making payments. This can be costly and time-consuming.

However, you may make much more money on an owner financed sale than if you sell the traditional way.

2. Determine if an owner financed sale is ideal as a buyer. Buyers usually like owner financed sales because a seller might be less choosy than a bank or mortgage lender. However, you should consider the following.

You might have to come up with a larger down payment than you normally would. The owner-seller is taking a risk by financing your sale, and in return they might want a larger down payment or higher interest.

Owner financed sales often close faster than other sales.

You need to be sure you can make the balloon payment if one is written into the contract. If you break the contract, then you could lose the house and all of the payments you have made up to that point.

3. Talk with professionals if you have questions. In addition to working with a real estate lawyer, you might want to meet with a tax professional, such as a certified public accountant. Ask about the tax benefits of an owner financed sale compared to selling outright.

If you are a buyer, then you should talk about how to raise your credit score so that you qualify for a traditional mortgage when the balloon payment comes due.

4. Make sure your buyer can cover the balloon payment. Owner financing is most often used when the buyer or property does not qualify for a conventional loan. This means the buyer may not have the resources to cover the balloon payment at the end of your term. Discuss your buyer's options before entering into a contract with them.

If you are a buyer, make sure that you have your options for paying the balloon payment lined up before you agree to the seller's terms.

5. Consider a lease-to-own option. This option is often more advantageous for the buyer and less complicated for the seller. You and the person interested in your home will lock in a potential sale price for the home, as well as a lease agreement ranging from 2 to 5 years. During that time, the person will pay you rent on the home, with a portion of that rent going toward a down payment on the house. After the lease ends, the person can choose to proceed with the sale as arranged, or they can opt to walk away.

If they walk away, they don't get a refund on the extra money they paid toward the down payment.

If they do walk away, you'll need to relist your home.

Tips.

The seller should ask that the buyer purchase homeowner's insurance and confirm the seller as mortgagee.

The seller should establish a land contract. With a land contract, title doesn’t pass to the buyer until the final payment has been made. Discuss this option with your attorney and see if such a contract is feasible.

December 03, 2019

how to prepare your finances for a job leave

How to Prepare Your Finances for a Job Leave.

Working people depend on having an income to live. You need to pay for housing, food, health care and many other things. Nevertheless, there may come a time when you want to be able to leave your job. The most common reasons are either retirement or a temporary leave to change jobs or careers. Whatever your reason for wanting to leave work, you will need to make financial plans. You will need to set aside some savings and make changes to your spending. Your mortgage and insurance costs will be an important part of the picture as well. With adequate planning, you can make it happen.



Method 1 Setting a Target.

1. Choose a date. Some people may decide at the start of their career that they want to work to age 50, or 55, or some other number. If you would like to make this a goal, you need to set your target and then work toward it. Claiming to have a goal means nothing unless you take steps to get there, but your first step is to decide what you want.

2. Identify an event. Your target to leave your present job may be some event, such as reaching a particular level of expertise or the day your supervisor leaves. Some of these targeting events may be under your control, and some may not. The less certain the event, the more prepared you will need to be.

For example, you may have decided that you want to leave your present company if they ever sell out or merge with some other company. Since you cannot control something like this and may not know when it is coming, you should try to have some alternative source of employment at least in mind for when the time comes.

In the event of a maternity leave, you may not know for years exactly when it is coming, but then in the final nine months (or so) you will know almost exactly. You can plan in general to have some savings set aside, and then when you get pregnant you can begin making some specific last-minute preparations.

Sometimes, the "event" that triggers a temporary leave might be a long-term illness, either yours or someone you need to care for. This can come with almost no advance warning. You need to plan for the general contingency and make some emergency preparations.

3. Plan a savings target. This is probably the most controllable concept. You can sit down with a financial planner and decide how much money you would need to have in savings to allow yourself and your family to survive adequately without your income. Then work toward setting aside that amount of money. As time goes by and interest rates fluctuate, you may need to adjust your plans accordingly. However, setting the target and doing the work up front will help you be as prepared as you can be.

If your target is to retire early, financial experts recommend that your savings target should be about 25 times your annual salary. You will then be able to withdraw money at the rate of about 4% per year.

If you target is to be able to leave work temporarily to look for a new job or another reason, then your target will be whatever amount you need to meet your expenses for that time. For example, the average job search is approximately four to six months, so you should plan to have savings to cover your living costs for that long.



Method 2 Reaching Your Target.

1. Work with a financial adviser. If you want to plan for leaving your job, you should enlist the help of a qualified financial adviser. Someone with expertise in investing can help you decide how much you need to save and can help you find the best ways to invest. If you want some help with finding a qualified financial adviser, read Hire a Financial Advisor or Select a Financial Advisor.

2. Invest your savings carefully. Working with your financial adviser, you will want to do more than just place your earnings in a bank account. Simple savings accounts earn very low interest. You will do better to invest in bonds, stocks or other securities, in accordance with your adviser’s opinions.

Investing works best when you begin as early as possible. Your best ally when saving is time. Your interest compounds more effectively when you begin early.

If your focus is to be able to take a temporary leave at some time, then you may need to have your savings in a readily accessible account. Long-term IRA savings are good for retirement planning, but you may need to be able to withdraw money sooner. Work with your adviser to find the best investment or savings plans for your needs.

If you want to plan for a lengthy, temporary leave, such as for a maternity or family illness, you will want to have savings in some readily accessible account. A short-term bond or money market may be the best bet, or even a simple savings account that you earmark for such an emergency.

3. Cut your expenses as much as possible. Many people live their lives from month to month and use a great deal of their income. If you manage a budget this way, you will do fine from month to month, but you will greatly delay your savings plan. If your goal is to be able to leave work, you should begin by cutting expenses as much as possible.

To begin cutting expenses, start by listing them all. Then review how you spend your money over a one- to three-month period and identify the expenses that you believe you can live without. Perhaps you can reduce the number of times that you go out to dinner. Maybe you can cut some entertainment expenses.

Manage your utilities. Try to reduce some of your monthly expenses by reducing utility usage in your home. Manage the heat, turn off lights, and do what you can to save water. These sound like small steps, but over time they can all add up.

Cutting expenses is a powerful financial tool for any job leave, whether permanent/retirement or a temporary leave for illness, maternity or some other reason. You need to consider the absence from work as an overall change in your lifestyle.

4. Plan to spend some on your new job search. Part of setting your target, if you are anticipating leaving your current job, should be to have some savings available to spend on a search for a new one. You will need money for correspondence, printing resumes, travel, parking, and possibly one or two new interview suits. You should anticipate these costs, estimate the amount of money that you will need, and set this aside as part of your target savings.



Method 3 Handling Your Mortgage.

1. Recognize the importance of your mortgage. For most people, housing payments make up the largest expenses they have. If you are paying rent, rather than owning your residence, those monthly payments are effectively doing nothing for you. If possible, purchase a property and get a mortgage. In this way, your monthly payments will be building equity for you. At the end of your mortgage, you will own the property outright in your own name.

2. Aim for your target date. As much as possible, try to align your mortgage to your target retirement date. That is, if you are relatively young and just starting out, then you may want to get a 30 year mortgage to last the duration of your career. However, if you can afford the monthly payments of a shorter mortgage, you will be setting aside money toward your equity at a faster rate.

3. Refinance when possible. When mortgage interest rates go down, you should try to refinance. By refinancing, you will get a lower interest rate and reduce your monthly payments. You may also take that opportunity to refinance into a shorter term. For example, if you started out with a 30 year mortgage, you may be able to refinance to a 20-year or even 10-year mortgage, for roughly the same (or even lower) monthly payment amount. More of the money, that way, will be going to pay down the principal loan.

4. Downsize after retiring. When you do leave your job, whether for permanent retirement or as a temporary leave, you may want to consider changing your residence. Many retirees choose to move to a smaller house with a lower expenses and mortgage costs. You may also wish to move to a different part of the country with lower overall costs of living.



Method 4 Making Other Miscellaneous Arrrangements.

1. Investigate your employer's maternity leave benefits. Some employers will offer paid maternity leave for some period of time. Others may stick to the allotted unpaid leave that is required under the Family and Medical Leave Act, which allows up to 12 weeks of unpaid leave. However, many small employers are even exempt from this. You need to find out what policy your employer has, and use that information to help you determine what financial help you will need.

For a maternity leave, you can also investigate whether you can be covered under short term disability insurance. This could provide a portion of your salary during your leave. To investigate coverage, you should talk with your employer or human resources personnel, or your own insurance company.

2. Plan some alternative, temporary income. If you are out of work temporarily, either looking for a new job, on a maternity leave, caring for an ill family member or for some other reason, you may want to plan for some temporary work that you can do. Find something that gives you the flexibility that you need to go along with your leave, but still provides some income for you and your family. For example.

Even with a new baby or an ill family member, you can probably find some time to tutor a few students a week or teach music lessons (if you have that talent).

You might be able to do some freelance writing or editing.

3. Transfer your company-based savings plans. If you participated in an employer-based savings or retirement plan, you should transfer that plan when you leave. Your financial adviser may be able to help you set up a personal IRA, or you might talk to an investments adviser at your bank.

4. Collect any payout benefits. If your company allowed you to accrue vacation time or sick time, you might be able to cash that in and collect an additional payment in accordance with your contract. In some cases, this can be a valuable payoff amount.

In some cases, you may be able to collect a partial cash payout for unused sick or vacation days to provide some cash for a temporary emergency leave, such as a family illness or bereavement leave. Even if such a benefit is not standard, you may want to talk with your employer and come up with some creative possibilities.

If you are not aware whether or not you have such a benefit, contact your company’s human resources department and ask.

5. Maximize stock options, if any. If you were granted the option to purchase stock in the company, and you have not exercised that option to its fullest potential, you should do so before leaving. These options can often be very valuable and will not be available to you later.

Depending on your contract, you may have a set period of time to purchase such options upon your separation from the company.

6. Plan for health insurance. One of the primary benefits of employment is having health insurance. When you plan to leave, whether for permanent retirement or a temporary leave for a job change, you will need to make plans for some replacement health insurance. You may wish to investigate the following options:

If you are under age 26, your parents may be able to add you to their health plan.

If you participated in the insurance plan through your employer, you may be eligible through COBRA to continue on that plan for up to 3 years by making your own monthly payments.

Your spouse or partner may be able to add you to their health plan.

February 11, 2020

How to Prepare Your Finances for a Job Leave.

How to Prepare Your Finances for a Job Leave.

Working people depend on having an income to live. You need to pay for housing, food, health care and many other things. Nevertheless, there may come a time when you want to be able to leave your job. The most common reasons are either retirement or a temporary leave to change jobs or careers. Whatever your reason for wanting to leave work, you will need to make financial plans. You will need to set aside some savings and make changes to your spending. Your mortgage and insurance costs will be an important part of the picture as well. With adequate planning, you can make it happen.



Method 1 Setting a Target.

1. Choose a date. Some people may decide at the start of their career that they want to work to age 50, or 55, or some other number. If you would like to make this a goal, you need to set your target and then work toward it. Claiming to have a goal means nothing unless you take steps to get there, but your first step is to decide what you want.

2. Identify an event. Your target to leave your present job may be some event, such as reaching a particular level of expertise or the day your supervisor leaves. Some of these targeting events may be under your control, and some may not. The less certain the event, the more prepared you will need to be.

For example, you may have decided that you want to leave your present company if they ever sell out or merge with some other company. Since you cannot control something like this and may not know when it is coming, you should try to have some alternative source of employment at least in mind for when the time comes.

In the event of a maternity leave, you may not know for years exactly when it is coming, but then in the final nine months (or so) you will know almost exactly. You can plan in general to have some savings set aside, and then when you get pregnant you can begin making some specific last-minute preparations.

Sometimes, the "event" that triggers a temporary leave might be a long-term illness, either yours or someone you need to care for. This can come with almost no advance warning. You need to plan for the general contingency and make some emergency preparations.

3. Plan a savings target. This is probably the most controllable concept. You can sit down with a financial planner and decide how much money you would need to have in savings to allow yourself and your family to survive adequately without your income. Then work toward setting aside that amount of money. As time goes by and interest rates fluctuate, you may need to adjust your plans accordingly. However, setting the target and doing the work up front will help you be as prepared as you can be.

If your target is to retire early, financial experts recommend that your savings target should be about 25 times your annual salary. You will then be able to withdraw money at the rate of about 4% per year.

If you target is to be able to leave work temporarily to look for a new job or another reason, then your target will be whatever amount you need to meet your expenses for that time. For example, the average job search is approximately four to six months, so you should plan to have savings to cover your living costs for that long.



Method 2 Reaching Your Target.

1. Work with a financial adviser. If you want to plan for leaving your job, you should enlist the help of a qualified financial adviser. Someone with expertise in investing can help you decide how much you need to save and can help you find the best ways to invest. If you want some help with finding a qualified financial adviser, read Hire a Financial Advisor or Select a Financial Advisor.

2. Invest your savings carefully. Working with your financial adviser, you will want to do more than just place your earnings in a bank account. Simple savings accounts earn very low interest. You will do better to invest in bonds, stocks or other securities, in accordance with your adviser’s opinions.

Investing works best when you begin as early as possible. Your best ally when saving is time. Your interest compounds more effectively when you begin early.

If your focus is to be able to take a temporary leave at some time, then you may need to have your savings in a readily accessible account. Long-term IRA savings are good for retirement planning, but you may need to be able to withdraw money sooner. Work with your adviser to find the best investment or savings plans for your needs.

If you want to plan for a lengthy, temporary leave, such as for a maternity or family illness, you will want to have savings in some readily accessible account. A short-term bond or money market may be the best bet, or even a simple savings account that you earmark for such an emergency.

3. Cut your expenses as much as possible. Many people live their lives from month to month and use a great deal of their income. If you manage a budget this way, you will do fine from month to month, but you will greatly delay your savings plan. If your goal is to be able to leave work, you should begin by cutting expenses as much as possible.

To begin cutting expenses, start by listing them all. Then review how you spend your money over a one- to three-month period and identify the expenses that you believe you can live without. Perhaps you can reduce the number of times that you go out to dinner. Maybe you can cut some entertainment expenses.

Manage your utilities. Try to reduce some of your monthly expenses by reducing utility usage in your home. Manage the heat, turn off lights, and do what you can to save water. These sound like small steps, but over time they can all add up.

Cutting expenses is a powerful financial tool for any job leave, whether permanent/retirement or a temporary leave for illness, maternity or some other reason. You need to consider the absence from work as an overall change in your lifestyle.

4. Plan to spend some on your new job search. Part of setting your target, if you are anticipating leaving your current job, should be to have some savings available to spend on a search for a new one. You will need money for correspondence, printing resumes, travel, parking, and possibly one or two new interview suits. You should anticipate these costs, estimate the amount of money that you will need, and set this aside as part of your target savings.



Method 3 Handling Your Mortgage.

1. Recognize the importance of your mortgage. For most people, housing payments make up the largest expenses they have. If you are paying rent, rather than owning your residence, those monthly payments are effectively doing nothing for you. If possible, purchase a property and get a mortgage. In this way, your monthly payments will be building equity for you. At the end of your mortgage, you will own the property outright in your own name.

2. Aim for your target date. As much as possible, try to align your mortgage to your target retirement date. That is, if you are relatively young and just starting out, then you may want to get a 30 year mortgage to last the duration of your career. However, if you can afford the monthly payments of a shorter mortgage, you will be setting aside money toward your equity at a faster rate.

3. Refinance when possible. When mortgage interest rates go down, you should try to refinance. By refinancing, you will get a lower interest rate and reduce your monthly payments. You may also take that opportunity to refinance into a shorter term. For example, if you started out with a 30 year mortgage, you may be able to refinance to a 20-year or even 10-year mortgage, for roughly the same (or even lower) monthly payment amount. More of the money, that way, will be going to pay down the principal loan.

4. Downsize after retiring. When you do leave your job, whether for permanent retirement or as a temporary leave, you may want to consider changing your residence. Many retirees choose to move to a smaller house with a lower expenses and mortgage costs. You may also wish to move to a different part of the country with lower overall costs of living.



Method 4 Making Other Miscellaneous Arrrangements.

1. Investigate your employer's maternity leave benefits. Some employers will offer paid maternity leave for some period of time. Others may stick to the allotted unpaid leave that is required under the Family and Medical Leave Act, which allows up to 12 weeks of unpaid leave. However, many small employers are even exempt from this. You need to find out what policy your employer has, and use that information to help you determine what financial help you will need.

For a maternity leave, you can also investigate whether you can be covered under short term disability insurance. This could provide a portion of your salary during your leave. To investigate coverage, you should talk with your employer or human resources personnel, or your own insurance company.

2. Plan some alternative, temporary income. If you are out of work temporarily, either looking for a new job, on a maternity leave, caring for an ill family member or for some other reason, you may want to plan for some temporary work that you can do. Find something that gives you the flexibility that you need to go along with your leave, but still provides some income for you and your family. For example.

Even with a new baby or an ill family member, you can probably find some time to tutor a few students a week or teach music lessons (if you have that talent).

You might be able to do some freelance writing or editing.

3. Transfer your company-based savings plans. If you participated in an employer-based savings or retirement plan, you should transfer that plan when you leave. Your financial adviser may be able to help you set up a personal IRA, or you might talk to an investments adviser at your bank.

4. Collect any payout benefits. If your company allowed you to accrue vacation time or sick time, you might be able to cash that in and collect an additional payment in accordance with your contract. In some cases, this can be a valuable payoff amount.

In some cases, you may be able to collect a partial cash payout for unused sick or vacation days to provide some cash for a temporary emergency leave, such as a family illness or bereavement leave. Even if such a benefit is not standard, you may want to talk with your employer and come up with some creative possibilities.

If you are not aware whether or not you have such a benefit, contact your company’s human resources department and ask.

5. Maximize stock options, if any. If you were granted the option to purchase stock in the company, and you have not exercised that option to its fullest potential, you should do so before leaving. These options can often be very valuable and will not be available to you later.

Depending on your contract, you may have a set period of time to purchase such options upon your separation from the company.

6. Plan for health insurance. One of the primary benefits of employment is having health insurance. When you plan to leave, whether for permanent retirement or a temporary leave for a job change, you will need to make plans for some replacement health insurance. You may wish to investigate the following options:

If you are under age 26, your parents may be able to add you to their health plan.

If you participated in the insurance plan through your employer, you may be eligible through COBRA to continue on that plan for up to 3 years by making your own monthly payments.

Your spouse or partner may be able to add you to their health plan.

February 25, 2020

how to finance investment property

How to Finance Investment Property.

You might find the perfect investment property, but before you can buy it you need to obtain financing. Many people will go to a bank and ask for a conventional loan with a repayment period of 25-30 years. Before doing so, however, you should analyze your credit history to check that you are a good credit risk. You have more options than simply relying on a conventional loan. For example, you could cash out the equity in your home or seek owner financing of the investment property.

Method 1 Obtaining a Conventional Loan.

1. Pull together a down payment. You can’t rely on mortgage insurance to cover your investment property. Accordingly, you will need a sizeable down payment, around 20-25%.

2. Consider a neighborhood bank. Smaller banks might be more flexible about lending to you if you don’t have a large down payment or if your credit score isn’t perfect. Local banks also may have a stronger interest in lending for local investment, so they are a good option.

You might not know anything about smaller lenders, so you should do as much research as possible. Ask people that you know whether they have ever done business with the bank.

You can also check online. Look for reviews.

3. Gather necessary paperwork. Before approaching a lender, you should pull together required paperwork. Doing so ahead of time will speed up the process. Get the following.

two months of bank statements, prior two months’ statements for investment accounts and retirement accounts, last two pay stubs.

information about self-employed income, such as last two year’s tax returns or business financial statements, driver’s license.

Social Security card, papers related to bankruptcy, divorce, or separation (if applicable).

4. Work with a mortgage broker. A mortgage broker will apply for loans on your behalf with many different lenders and will compare the rates. The broker can also try to negotiate better terms for you. Using a mortgage broker is a good idea if you are too busy to comparison shop by going to many different lenders.

Mortgage brokers don’t work for free. You typically will pay about 1% of the loan amount. For example, if you borrow $250,000, then you can expect to pay around $2,500 to the mortgage broker.

You can ask other investors or a real estate agent for a referral to a broker. Before hiring, make sure that you interview the person and ask how much experience they have and what services they offer.

5. Compare loans. If you don’t want to work with a mortgage broker, then you will need to educate yourself about the basics of home financing. You might be an experienced pro who has borrowed before. However, if you haven’t, then remember to consider the following when comparing loans.

Interest rates. An interest rate is a percent of the loan amount that you pay as a privilege for borrowing the money. Interest rates can be fixed for the entire length of the loan or fixed for only a portion of the loan term.

Discount points. For some loans, you can pay points, which will lower your interest rate.

Loan term. This is the length of the loan. A shorter loan will cost more each month, but you will pay it off sooner and with less interest.

Origination charge. This amount of money covers document preparation, fees, and the costs of underwriting the loan.

6. Seek pre-approval. You should try to get pre-approved for a loan before searching for properties. Make sure to request the pre-approval in writing because sellers might want to see that you are pre-approved.

7. Don’t forget other team members. Purchasing investment property requires the expertise of many different professionals. You should begin assembling your team early—even before you get financing. You will probably need the help of the following people.

An accountant who can help you understand investment tax strategies.

A realtor who can help you sign an appropriate real estate contract.

An attorney who can help you protect your assets, for example by forming a limited liability company to hold the property.

An insurance agent.

Method 2 Using Other Finance Options.

1. Use the equity in your home. You might be able to use the equity in your current home to purchase an investment property. Generally, you can borrow around 80% of your home’s value. There are different ways you can tap the equity in your home, such as the following.

You could get a Home Equity Line of Credit (HELOC). A lender will approve you for a specific amount of credit, and you use your current home as collateral for the loan. The credit is available for a certain amount of time. At the end of this draw period, you must have paid back the loan.

You might also get a cash-out refinance. The lender will pay you the difference between the mortgage and the home’s value, but is usually limited to 80-90% of the home’s value. For example, if you have $20,000 remaining on your mortgage, but your home is valued at $220,000, then $200,000 could be available. You could get 80-90% of $200,000 ($160,000-180,000). This option usually has a lower interest rate than a HELOC.

Both a HELOC and a cash-out refinance put your home at risk if you can’t make repayments. For this reason, you should think carefully before tapping the equity in your home to finance investments.

2. Obtain a fix-and-flip loan. You might be able to get this type of loan if you want to purchase a property in order to renovate and then quickly sell. The loan will be short-term and is secured by the property. Fix-and-flip loans have high interest rates, so you need to renovate and sell quickly.

You might find it easier to qualify for a fix-and-flip loan compared to a conventional loan. However, lenders will still look at your credit history and income.

The lender will also want to know the estimated value after repair, which can impact whether they extend you a loan and the terms.

3. Research peer-to-peer lending sites. Peer-to-peer lending connects investors with lenders who are willing to lend. Two of the more well-known peer-to-peer lending sites are Prosper and LendingClub.

Peer-to-peer lenders will require that you complete an application. They look at your credit score and credit history. They may also have minimum credit scores in order to qualify.

You might not be able to get a large personal loan through peer-to-peer lending. However, small businesses can typically borrow more, so if you create an LLC then you might be able to borrow up to $100,000.

4. Find a business partner. You might not be able to secure a loan on your own, in which case you will need to consider other options. One option is to find a business partner who you can invest with.

You will want to screen any potential business partner, just as a bank would screen you. If you are counting on the partner to help pay for the loan, then you will need to check their credit history and employment.

You also need to consider how you will hold the investment property. For example, it might be best to create an LLC and to both be owners of the LLC. The LLC will then hold title to the investment property.

5. Consider owner financing. With owner financing, the owner lends you the money that you use to buy the property. Sometimes the owner will lend only a portion of the price, which you then supplement with a conventional loan. You should analyze the pros and cons of owner financing.

A benefit of owner financing is that an owner might be willing to lend if you don’t have perfect credit or a huge down payment available. You and the owner can work out loan terms that are acceptable to both of you.

Typically, the seller’s loan will be for a short period of time (such as five years). At the end of the term, you are obligated to pay off the loan with a “balloon payment.” This usually means you need to get a conventional loan to make this balloon payment. You should analyze your credit to see if you can qualify for a conventional loan in the near future.

See Owner Finance a Home for more information.

Method 3 Analyzing Your Credit Score.

1. Obtain a free copy of your credit report. Your credit score will have the largest impact on your ability to get a loan, so you should obtain a copy of your credit report.[18] You are entitled to one free credit report each year from the three national Credit Reporting Agencies (CRAs). You shouldn’t contact the CRAs individually. Instead, you can get your free copy from all three using one of the following methods.

Complete the Annual Credit Report Request Form, which is available here: https://www.consumer.ftc.gov/articles/pdf-0093-annual-report-request-form.pdf. Once completed, submit the form to Annual Credit Report Request Service, PO Box 105281, Atlanta, GA 30348-5281.

2. Find errors on your credit report. You should closely look at you credit reports to find any errors that might lower your credit score. If your score is below 740, then you will probably have to pay more to borrow. For this reason, you should do whatever you can to increase the score. Look for the following errors.

credit information from an ex-spouse, credit information from someone with a similar name, address, Social Security Number, etc.

incorrect payment status (e.g., stating you are late when you aren’t), a delinquent account reported more than once.

old information that should have fallen off your credit report, an account inaccurately identified as closed by the lender.

failure to note when delinquencies have been remedied.

3. Consider whether you should fix certain problems. There may be negative information on your credit report that you want to fix. For example, you might want to pay an old collections account. However, you should think carefully before fixing certain problems.

Negative information must fall off your credit report after a certain amount of time. For example, an account in collections should fall off after seven years. If the account is six years old, you might want to wait and let it fall off rather than pay it off.

If you need help considering what to do, then you should consult with an attorney who can advise you.

4. Fix errors. You can correct errors by contacting each CRA online or by writing a letter. To protect yourself, you should probably do both. Mail your letter certified mail, return receipt requested.

The Federal Trade Commission has a sample letter you can use: https://www.consumer.ftc.gov/articles/0384-sample-letter-disputing-errors-your-credit-report.

See Dispute Credit Report Errors for more information on how to fix errors.

December 15, 2019

How to Finance Investment Property

How to Finance Investment Property.

You might find the perfect investment property, but before you can buy it you need to obtain financing. Many people will go to a bank and ask for a conventional loan with a repayment period of 25-30 years. Before doing so, however, you should analyze your credit history to check that you are a good credit risk. You have more options than simply relying on a conventional loan. For example, you could cash out the equity in your home or seek owner financing of the investment property.

Method 1 Obtaining a Conventional Loan.

1. Pull together a down payment. You can’t rely on mortgage insurance to cover your investment property. Accordingly, you will need a sizeable down payment, around 20-25%.

2. Consider a neighborhood bank. Smaller banks might be more flexible about lending to you if you don’t have a large down payment or if your credit score isn’t perfect. Local banks also may have a stronger interest in lending for local investment, so they are a good option.

You might not know anything about smaller lenders, so you should do as much research as possible. Ask people that you know whether they have ever done business with the bank.

You can also check online. Look for reviews.

3. Gather necessary paperwork. Before approaching a lender, you should pull together required paperwork. Doing so ahead of time will speed up the process. Get the following.

two months of bank statements, prior two months’ statements for investment accounts and retirement accounts, last two pay stubs.

information about self-employed income, such as last two year’s tax returns or business financial statements, driver’s license.

Social Security card, papers related to bankruptcy, divorce, or separation (if applicable).

4. Work with a mortgage broker. A mortgage broker will apply for loans on your behalf with many different lenders and will compare the rates. The broker can also try to negotiate better terms for you. Using a mortgage broker is a good idea if you are too busy to comparison shop by going to many different lenders.

Mortgage brokers don’t work for free. You typically will pay about 1% of the loan amount. For example, if you borrow $250,000, then you can expect to pay around $2,500 to the mortgage broker.

You can ask other investors or a real estate agent for a referral to a broker. Before hiring, make sure that you interview the person and ask how much experience they have and what services they offer.

5. Compare loans. If you don’t want to work with a mortgage broker, then you will need to educate yourself about the basics of home financing. You might be an experienced pro who has borrowed before. However, if you haven’t, then remember to consider the following when comparing loans.

Interest rates. An interest rate is a percent of the loan amount that you pay as a privilege for borrowing the money. Interest rates can be fixed for the entire length of the loan or fixed for only a portion of the loan term.

Discount points. For some loans, you can pay points, which will lower your interest rate.

Loan term. This is the length of the loan. A shorter loan will cost more each month, but you will pay it off sooner and with less interest.

Origination charge. This amount of money covers document preparation, fees, and the costs of underwriting the loan.

6. Seek pre-approval. You should try to get pre-approved for a loan before searching for properties. Make sure to request the pre-approval in writing because sellers might want to see that you are pre-approved.

7. Don’t forget other team members. Purchasing investment property requires the expertise of many different professionals. You should begin assembling your team early—even before you get financing. You will probably need the help of the following people.

An accountant who can help you understand investment tax strategies.

A realtor who can help you sign an appropriate real estate contract.

An attorney who can help you protect your assets, for example by forming a limited liability company to hold the property.

An insurance agent.

Method 2 Using Other Finance Options.

1. Use the equity in your home. You might be able to use the equity in your current home to purchase an investment property. Generally, you can borrow around 80% of your home’s value. There are different ways you can tap the equity in your home, such as the following.

You could get a Home Equity Line of Credit (HELOC). A lender will approve you for a specific amount of credit, and you use your current home as collateral for the loan. The credit is available for a certain amount of time. At the end of this draw period, you must have paid back the loan.

You might also get a cash-out refinance. The lender will pay you the difference between the mortgage and the home’s value, but is usually limited to 80-90% of the home’s value. For example, if you have $20,000 remaining on your mortgage, but your home is valued at $220,000, then $200,000 could be available. You could get 80-90% of $200,000 ($160,000-180,000). This option usually has a lower interest rate than a HELOC.

Both a HELOC and a cash-out refinance put your home at risk if you can’t make repayments. For this reason, you should think carefully before tapping the equity in your home to finance investments.

2. Obtain a fix-and-flip loan. You might be able to get this type of loan if you want to purchase a property in order to renovate and then quickly sell. The loan will be short-term and is secured by the property. Fix-and-flip loans have high interest rates, so you need to renovate and sell quickly.

You might find it easier to qualify for a fix-and-flip loan compared to a conventional loan. However, lenders will still look at your credit history and income.

The lender will also want to know the estimated value after repair, which can impact whether they extend you a loan and the terms.

3. Research peer-to-peer lending sites. Peer-to-peer lending connects investors with lenders who are willing to lend. Two of the more well-known peer-to-peer lending sites are Prosper and LendingClub.

Peer-to-peer lenders will require that you complete an application. They look at your credit score and credit history. They may also have minimum credit scores in order to qualify.

You might not be able to get a large personal loan through peer-to-peer lending. However, small businesses can typically borrow more, so if you create an LLC then you might be able to borrow up to $100,000.

4. Find a business partner. You might not be able to secure a loan on your own, in which case you will need to consider other options. One option is to find a business partner who you can invest with.

You will want to screen any potential business partner, just as a bank would screen you. If you are counting on the partner to help pay for the loan, then you will need to check their credit history and employment.

You also need to consider how you will hold the investment property. For example, it might be best to create an LLC and to both be owners of the LLC. The LLC will then hold title to the investment property.

5. Consider owner financing. With owner financing, the owner lends you the money that you use to buy the property. Sometimes the owner will lend only a portion of the price, which you then supplement with a conventional loan. You should analyze the pros and cons of owner financing.

A benefit of owner financing is that an owner might be willing to lend if you don’t have perfect credit or a huge down payment available. You and the owner can work out loan terms that are acceptable to both of you.

Typically, the seller’s loan will be for a short period of time (such as five years). At the end of the term, you are obligated to pay off the loan with a “balloon payment.” This usually means you need to get a conventional loan to make this balloon payment. You should analyze your credit to see if you can qualify for a conventional loan in the near future.

See Owner Finance a Home for more information.

Method 3 Analyzing Your Credit Score.

1. Obtain a free copy of your credit report. Your credit score will have the largest impact on your ability to get a loan, so you should obtain a copy of your credit report.[18] You are entitled to one free credit report each year from the three national Credit Reporting Agencies (CRAs). You shouldn’t contact the CRAs individually. Instead, you can get your free copy from all three using one of the following methods.

Complete the Annual Credit Report Request Form, which is available here: https://www.consumer.ftc.gov/articles/pdf-0093-annual-report-request-form.pdf. Once completed, submit the form to Annual Credit Report Request Service, PO Box 105281, Atlanta, GA 30348-5281.

2. Find errors on your credit report. You should closely look at you credit reports to find any errors that might lower your credit score. If your score is below 740, then you will probably have to pay more to borrow. For this reason, you should do whatever you can to increase the score. Look for the following errors.

credit information from an ex-spouse, credit information from someone with a similar name, address, Social Security Number, etc.

incorrect payment status (e.g., stating you are late when you aren’t), a delinquent account reported more than once.

old information that should have fallen off your credit report, an account inaccurately identified as closed by the lender.

failure to note when delinquencies have been remedied.

3. Consider whether you should fix certain problems. There may be negative information on your credit report that you want to fix. For example, you might want to pay an old collections account. However, you should think carefully before fixing certain problems.

Negative information must fall off your credit report after a certain amount of time. For example, an account in collections should fall off after seven years. If the account is six years old, you might want to wait and let it fall off rather than pay it off.

If you need help considering what to do, then you should consult with an attorney who can advise you.

4. Fix errors. You can correct errors by contacting each CRA online or by writing a letter. To protect yourself, you should probably do both. Mail your letter certified mail, return receipt requested.

The Federal Trade Commission has a sample letter you can use: https://www.consumer.ftc.gov/articles/0384-sample-letter-disputing-errors-your-credit-report.

See Dispute Credit Report Errors for more information on how to fix errors.

December 15, 2019

How to Managing Stress and Your Finances During the COVID-19 Pandemic

How to Managing Stress and Your Finances During the COVID-19 Pandemic.

By Monika Ritchie.

There’s no doubt that as we weather the coronavirus pandemic, stress has increasingly become a regular part of our lives. As if worries about our own health and the health of our loved ones isn’t enough, many of us are feeling the pressure of financial stress from mounting bills, reduced incomes, and job uncertainty.

That kind of stress can lead to many health issues, and decreasing it is a great way to help us stay healthy in a time when that’s so crucial. So what can you do to manage stress during the coronavirus pandemic? Getting your finances sorted out as soon as possible will go a long way to mitigating your money worries. Pair financial stress relief with tips to take care of your mental health, and you’ll be able to manage this difficult time more effectively.

4 Tips to Take Care of Your Finances During COVID-19.

During this time your health really does come first, but taking care of your finances will alleviate some of the tension and stress you might be feeling. Knowing that your money issues are taken care of will also allow you to focus more on your wellbeing. Here are a few steps to help you move forward:

1. Reach Out to Your Bank and/or Creditors.
The best time to talk to your financial institution is before things have gotten out of hand. Concerned about paying your mortgage? The sooner you reach out, the better. As nervous as you might feel about talking to your bank, keep in mind that a lot of people need help right now, and many banks, credit unions, and lenders are working to support you. They’ll appreciate you being proactive and will help you find solutions.

2. Get Familiar with the Resources Available to You.
Right now, there are a variety of resources available to help you through this difficult time. Whether it’s support during unemployment, deferred payment plans, or other emergency benefits, learn about which programs are for you. Visit this comprehensive coronavirus resource page to find all of the key resources available for Canadians in one spot.

3. Build and Adjust Your Budget for Reduced Income.
If you don’t have a budget, now is a good time to put one together. If you’re facing a significant reduction in income due to the COVID-19 pandemic, then track your expenses carefully and build an emergency budget. If you already have a budget, consider reviewing it to see if you can pare it down and reduce your expenses further. Take advantage of staying home for all this time and implement a no-spend challenge to help yourself save on discretionary expenses.

How to Manage Your Money During an Unexpected Financial Crisis.

4. Stay Safe and Be Aware of Scams.
Unfortunately, even during a worldwide health emergency, scammers are trying to take advantage of the situation. With so many individuals anxious about the state of their health and finances, many are susceptible to frauds around COVID-19. Be wary of any unsolicited emails, phone calls, or other communications, especially ones that request donations or sensitive information. Do not give out any of your personal information to unfamiliar individuals or businesses, and don’t fall victim to text message scams that ask you to get your money by clicking on a link. When in doubt, contact a company or the government directly by looking up their contact information yourself.

Tips to Manage Your Mental Health During COVID-19.

By now, everyone is familiar with the guidelines around social distancing and self isolation, but that doesn’t mean you need to resign yourself to loneliness and zero social contact. Your mental health is just as important as your financial well-being, so check out these six tips for self-care:

1. Connect with Family and Friends.
While in-person visits are not possible right now, phone calls, video chats, and emailing are all great ways to stay in touch with loved ones. You can share photos and videos, favourite songs, recipes, and more. Make it a priority to (remotely) interact with at least one person outside of your house every day. It will do wonders for your mood and emotional health as well as theirs.

2. Catch Up on Unfinished Projects.
For many of us, there are simply not enough hours in the day to catch up on our various chores and miscellaneous projects. If you’re “stuck” at home, it can be a great time to finish these off. Not only will you check some items off your to-do list, but you’ll get a great mental boost from being productive. However, be wary of tacking a project with a higher price tag than what you can afford on reduced income.

3. Use Community Resources.
Many communities across the country have risen to the challenge of providing support services to those who may need extra help during this time. If you have mobility issues or other challenges, you don’t need to struggle alone. Look into programs in your area that can help you with running errands, grocery shopping, and other necessities. On a larger scale, many grocery stores now have options for online shopping and delivery to help with social distancing. Try connecting with your community on Facebook or see if your province has a central resource centre to coordinate offers of help.

4. Get Creative with Exercise.
You may not be able to go to the gym for now, but many fitness providers are offering online and remote classes that you can follow along with. If you’re not really a gym person, you can lift weights and do strength training from the comfort of your own home. Or you can simply put on your favourite music and have a dance party. You’ll burn calories and get a great boost from all those endorphins!

5. Get Outside If You Can.
Most public spaces like playgrounds, parks, and pools have been closed. But going out for a walk, hike, or run is acceptable if you’re doing it in areas that allow you to keep your distance from other people. If that’s not possible, simply sitting on your balcony or in your backyard with a book is a great way to get some fresh air and vitamin D.

6. Reach Out for Help If You Need It.
If you’re starting to feel overwhelmed or anxious with what’s been going on, counsellors and other support professionals are often available for appointments over the phone or online and can help you work through feelings of anxiety, panic, or depression. You don’t have to suffer alone, so reach out if you need to. If you’re not sure where to turn, contact the Canadian Mental Health Association to find services in your community.

When to Ask for Help from Professional Credit Counsellors.
There’s nothing wrong with getting some professional help before you back yourself into an even tougher spot with a do-it-yourself (DIY) debt relief program. Building budgets, accessing government resources, and speaking to creditors can be a daunting task – especially if you’re new to the experience and feeling stressed and overwhelmed. An accredited financial counsellor can help with navigating the resources available to you, building an emergency budget, and working through your options in an objective and pressure-free environment. Don’t be afraid to reach out – the best non-profit consumer credit counselling services are ready to help.

July 16, 2020

how to finance real estate

How to Finance Real Estate.

Real estate can be a very good investment. Depending upon your resources, you may need to know how to finance the real estate. When financing, there are a number of considerations and options for you to consider.

Steps,

1. Review your financial background. Prior to considering a loan you should be aware of several factors which may affect your loan approval.

Check your credit score. A low credit score may affect the interest rate that you will pay or may prevent you from getting the loan.

Make sure you save enough money to cover a down payment. Although no money down loans have existed, it is likely you will pay an upfront payment of anywhere from 3.5% to upwards of 20% of the cost of your new real estate. A second loan may help defray that cost.

You may need to establish that you have a stable level of income, and a lender may consider the ratio of your debt to income. A high percentage of debt to income could disqualify you for a loan.

2. Assess the maximum amount of mortgage you can afford. You will need to take a look at your income and expenses, including your debt. That debt should include any installment debt, mortgage debt on a second property, loans, credit card debt, child support and additional debt which will be acquired with the new property. That additional debt should include the new projected insurance, taxes and home owners fees. You should add that debt to any other monthly expenses, such as food, clothing, health care, and transportation costs to determine the amount of your overall obligations should you complete your purchase. Of course certain expenses such as your current rent payments would be excluded. Subtract the obligations from your income to determine the maximum mortgage payment you could make and decide the mortgage amount you would be comfortable making.

3. Secure pre-approval or pre-qualification for a loan with a lender. A lender will review your finances and give you an idea how much you can borrow. The pre-approval process goes through a more in depth analysis of your finances and more accurately reflects an amount that you can borrow. Neither review is binding on the lender.

4. Determine the type of loan you want or need. The first option most people consider is the conventional loan. There are several types of conventional loans.

The fixed loan locks in the interest rate and the payment amount for the duration of the loan.

In the adjustable rate mortgage, the interest rate is subject to change over the course of the loan.

A jumbo mortgage comes into play when a loan is higher then a certain amount which then results in a higher interest rate.

A loan may also have a balloon payment which usually allows for a lower interest rate for a period of years and then finishes with a final lump sum payment.

5. Pursue alternative financing if a conventional loan is unavailable or not your best interests. One option is to see if the lender will consider taking on other collateral you own to secure the loan. Also, the seller may agree to either finance part of the loan, or agree to lease the property to you with the intent to sell it to you. One other option is to secure a private money loan from private investors looking to make money on their investment.

Tips.

The process of pre-approval or pre-qualification not only gives you an estimate of your maximum mortgage, it tells a potential seller that you are a serious buyer which can give you an advantage over offers from other buyers.

Warnings.

Even though you are pre-approved for a mortgage at a certain amount, it does not guarantee that you will be able to afford that mortgage. Remember to review your current financial situation and try to anticipate any future expenses before taking on a mortgage that ends up too large to handle.

December 17, 2019

How to Finance Real Estate

How to Finance Real Estate.

Real estate can be a very good investment. Depending upon your resources, you may need to know how to finance the real estate. When financing, there are a number of considerations and options for you to consider.

Steps,

1. Review your financial background. Prior to considering a loan you should be aware of several factors which may affect your loan approval.

Check your credit score. A low credit score may affect the interest rate that you will pay or may prevent you from getting the loan.

Make sure you save enough money to cover a down payment. Although no money down loans have existed, it is likely you will pay an upfront payment of anywhere from 3.5% to upwards of 20% of the cost of your new real estate. A second loan may help defray that cost.

You may need to establish that you have a stable level of income, and a lender may consider the ratio of your debt to income. A high percentage of debt to income could disqualify you for a loan.

2. Assess the maximum amount of mortgage you can afford. You will need to take a look at your income and expenses, including your debt. That debt should include any installment debt, mortgage debt on a second property, loans, credit card debt, child support and additional debt which will be acquired with the new property. That additional debt should include the new projected insurance, taxes and home owners fees. You should add that debt to any other monthly expenses, such as food, clothing, health care, and transportation costs to determine the amount of your overall obligations should you complete your purchase. Of course certain expenses such as your current rent payments would be excluded. Subtract the obligations from your income to determine the maximum mortgage payment you could make and decide the mortgage amount you would be comfortable making.

3. Secure pre-approval or pre-qualification for a loan with a lender. A lender will review your finances and give you an idea how much you can borrow. The pre-approval process goes through a more in depth analysis of your finances and more accurately reflects an amount that you can borrow. Neither review is binding on the lender.

4. Determine the type of loan you want or need. The first option most people consider is the conventional loan. There are several types of conventional loans.

The fixed loan locks in the interest rate and the payment amount for the duration of the loan.

In the adjustable rate mortgage, the interest rate is subject to change over the course of the loan.

A jumbo mortgage comes into play when a loan is higher then a certain amount which then results in a higher interest rate.

A loan may also have a balloon payment which usually allows for a lower interest rate for a period of years and then finishes with a final lump sum payment.

5. Pursue alternative financing if a conventional loan is unavailable or not your best interests. One option is to see if the lender will consider taking on other collateral you own to secure the loan. Also, the seller may agree to either finance part of the loan, or agree to lease the property to you with the intent to sell it to you. One other option is to secure a private money loan from private investors looking to make money on their investment.

Tips.

The process of pre-approval or pre-qualification not only gives you an estimate of your maximum mortgage, it tells a potential seller that you are a serious buyer which can give you an advantage over offers from other buyers.

Warnings.

Even though you are pre-approved for a mortgage at a certain amount, it does not guarantee that you will be able to afford that mortgage. Remember to review your current financial situation and try to anticipate any future expenses before taking on a mortgage that ends up too large to handle.

December 17, 2019

Personal finance: How to manage money during the pandemic | Managing Your Finances During a Pandemic

Personal finance: How to manage money during the pandemic | Managing Your Finances During a Pandemic.

Times of crisis can bring uncertainty for many reasons, and the current coronavirus pandemic is no exception.

Whether you have experienced a change in your financial situation because of layoffs, reduced hours or wages or through increased medical expenses, it is important to take stock of where you are and make a plan to ensure financial success now and in the future.

Many organizations are offering support to those impacted by the coronavirus. Knowing where to go for help, what to ask, and how to document your situation is key to successfully managing your finances and recovering once the crisis is over.

Steps to help you manage your money during and after a pandemic.

1. Analyze Available Resources.

If there is one upside to the current situation, it’s that many programs are being offered to help consumers stay healthy, both physically and financially. Identify all available resources and take advantage of those that fit your needs. Beyond any savings you may have put aside for emergencies, community resources, like the ones below, could help you bridge a temporary income gap:

Military relief societies are offering grants or zero-interest loans for service members affected by coronavirus. Contact Army Emergency Relief, Air Force Aid Society, Navy-Marine Corps Relief Society, or Coast Guard Mutual Assistance for more information.
Depending on your situation, you may qualify for unemployment benefits. Check with the Department of Labor in your state for eligibility criteria.
Many banks and financial institutions are offering to help consumers impacted by the coronavirus. Contact your individual lenders to find out what is available to you.
Many school districts are providing free meals for children at school pick-up locations or bus stops. Contact your local school to find out whether this is an option where you live.
National and local service providers have a variety of assistance options, from payment plans to free services. Visit 211 from United Way and scroll down for available resources.

2. Create a Priority-Based Spending Plan.

Once you’ve identified resources you qualify for, evaluate your budget and create a priority-based spending plan. Consider all sources of available income and make a realistic list of your expected monthly expenses, prioritizing the "must-haves."

These are things like rent or mortgage, food, utilities, insurance, transportation and medication. Then, do the math. If your adjusted income adds up to less than your total monthly expenses, anything that is not a priority item will need to be deferred as much as possible until the crisis is over and your financial situation changes.

3. Contact Your Creditors.

If you cannot meet all of your financial obligations, contact your creditors to ask for assistance. Some programs are already in place to help stop evictions and foreclosures, so whether you are a renter or homeowner, contact your landlord or mortgage servicer right away to ask for help.

The same goes for providers of automobile, student and personal loans, including credit cards. Creditors might offer reduced payments and fees, deferred payments through forbearance, or other hardship plans.

When you talk with your creditors, be sure to take notes. Write down.

The date and time of your call.
The name of the representative you spoke with.
What you were offered.
How information will be reported to the credit bureaus.
The plan you ultimately agreed on.

Once you agree on a plan, put together a letter summarizing your discussion and mail it to the creditor. Then, monitor your monthly statements to be sure you are receiving the assistance you discussed.

4. Recover Strong.

Although it is difficult to think about future emergencies when you are in the middle of a crisis, consider making a financial recovery plan for once things get back to normal so that you are prepared to handle the next emergency that may arise.

Once you are back on your feet, revisit your monthly budget and commit to regular savings to build or rebuild your emergency fund. Start gradually and set a goal to save $1,000, then keep saving until you have three months of your living expenses put away to handle future emergencies.

If you have debt, consider implementing a rapid repayment plan to pay it down or consider talking with a credit counselor to see if a debt management plan is right for you.

And please remember, these are unprecedented times, and although you may feel alone, everyone is affected by the current pandemic. Take steps to safeguard your physical, emotional, and financial health, and reach out if you need assistance.



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July 16, 2020

How to Help Elderly Parents With Finances.

How to Help Elderly Parents With Finances.

Helping your elderly parents with finances can be a tricky thing to do. It can be frustrating for you and can cause hurt or embarrassment for your parents. If you go about it with discretion and respect, though, you can streamline your parents’ finances and remove a lot of stress from your and their lives. By communicating properly, budgeting, and simplifying their affairs, you’ll be able to help your elderly parents with their finances. In the end, you and your parents might be come closer, and you'll both have a lot less to worry about.



Method 1 Budgeting.

1. Find out their sources of income. Sit down with your parents and ask them to list their sources of income. If they are unable to list their income, keep an eye on their mailbox and wait for checks to arrive. In addition, contact their bank to find out if they have recurring direct deposits into their accounts. Some sources of income might include.

Social security.

Pensions.

Retirement accounts that include stocks, CDs, and bonds.

Real estate holdings.

2. List their expenses. After you’ve determined your parents’ income, you’ll need to list their expenses. You can also do this by sitting down with them and asking them to list expenses. However, if they can’t remember, you’ll have to wait on bills to arrive in the mail or for businesses to call them asking for payment. Some common expenses include.

Phone.

Cable and internet.

Utilities like electricity, gas, and water.

3. Meet with professionals who manage their affairs. In addition to getting records from your parents and tracking them down yourself, you should also meet with any professionals who manage aspects of your parents’ affairs. This includes lawyers, accountants, management companies, insurance agents and brokers. They will likely have valuable information about your parents' finances you need.

Don't be intimidated by professionals you may have to meet with. In most cases, they'll be happy to help you and your parents.

4. Cut expenses, if needed. Once you’ve gathered a list of their income and expenses, you’ll have a very good idea of what they can afford and what they can’t afford. When you have this information, start trimming expenses. This way, your parents’ income and savings will last them a lot longer than it would otherwise. Some things to cut include:

Cable.

Very large life insurance policies.

Magazine and newspaper subscriptions.

Charitable donations.

Cars or homes that have been financed.

5. Raise money for your parents, if they need it. In the case that your parents don’t have the income to meet their expenses, you’ll have to raise money to help them. There are a variety of things you can do without reaching into your own savings account. Consider:

Selling their home or getting them a reverse mortgage. A reverse mortgage is a loan that the borrower does not need to pay back until they sell the home.

Auctioning cars and other valuable possessions. Your parents might have valuable artwork, a car collection, or a piece of land somewhere that could be sold. That money may be just enough to meet their expenses.

Avoid taking loans or selling your parents' property before talking to them about it.

6. Find out if there are entitlements they are eligible for. In addition to identifying their current sources of income, you may be able to find entitlements or other sources of income for your elderly parents. To do this, check with your local, state/regional, or national governments. Don't worry, though, there are many resources available that will make this search easy.

For people in the United States, visit http://www.benefitscheckup.org to identify new sources of financial help for your parents.



Method 2 Organizing Their Affairs.

1. Get a power of attorney. A power of attorney will give you the legal right to act on your parents’ behalf in managing financial (and legal) aspects of their life. As a result, you’ll have the right to talk to your parents’ insurance companies, bank, pension administrators, and more. Without a power of attorney, you’ll have serious problems managing your parents’ finances.

2. Reduce the number of credit cards and checking accounts they have. Shut down all checking accounts and close all credit cards except for one or two. It will be very difficult for you to monitor their finances if they have many cards and accounts. Ultimately, it’ll be easier for you to follow one card and one checking account.

Verify that accounts and cards you intend to close do not have automatic payments or direct deposits attached to them.

3. Set up automated payments. Contact all the businesses that your parents have regular or recurring payments with. Provide them with a credit card number or a bank account number from which they can draft money that they are owed.

You may be able to do this through the business’s website.

4. Hire someone to manage their finances. If your parents’ finances are too complicated or their estate is too large for you to manage on your own, you may need to hire a third party to help you. In this event, a financial advisor, management company, or a law firm may be able to help you help your parents.

Determine if you or your parents have enough money/income to employ a professional financial manager.

5. Get their tax information. Ask your parents for their prior income tax returns. If they can’t find them, ask their accountant. With their tax information, you’ll be able to file the current year’s taxes, consolidate loans, and much more.

If you are unable to get tax information from your parents or their accountant, visit https://www.irs.gov/individuals/get-transcript to get transcripts of prior years taxes. Remember, though, you’ll need to have a power of attorney to do so.

6. Have them write or update their will. One aspect of your parents’ finances that they might neglect is their will. Their will is important as it will allow their estate to be settled relatively easily if they pass away. While this will probably be a tough conversation for both of you, you should ask them to write a will.

7. Document everything you do. Keep good records of everything you do for your parents. This includes keeping copies of checks you write, holding onto receipts for things you pay for, and taking notes of complicated financial issues. If you don’t document things well, you could find yourself in a legal battle with a sibling later on.



Method 3 Communicating Properly.

1. Ask if they want help. Before you take matters into your own hands and try to take control of your parents’ finances, you should ask them if they want help. Depending on their personality and position, they may respond negatively or affirmatively. Whatever their response, you'll at least open up communication and let your parents know that you are thinking of them.

If your parents are terminally ill or intellectually diminished, you may not need to ask them. Instead, talk to them and let them know you are going to try to organize their affairs.

2. Respect their wishes. Depending on your parents’ circumstances, you should respect their wishes as best as you can. If you disregard their wishes, you’ll probably alienate them and poison your relationship. By respecting their wishes, you’ll turn managing their finances into a positive experience.

3. Keep them involved. While you may be tempted to just take care of everything yourself, make sure that you keep your parents part of the discussion for a long as you can. This is important, as you don’t want them to ever be surprised about where they stand financially. In addition, if they stay active, they might fare better in terms of their health.

Schedule monthly meetings with your parents to talk about their finances. At the very least, take some time to let them know where they stand.



Tips.

Keep an eye out for signs of dementia; this is a signal to start taking great control of your parents' assets.

If you are working with your parents' finances, be sure and keep siblings informed in writing. This will help alleviate any tension about financial matters when your parents pass away, as that sibling or those siblings will be aware of what the state of your parents' finances are.

Warnings.

Educate your parents about scams. Request that they not mail any large payments to anyone for any reason without discussing it with you first.

February 25, 2020

how to help elderly parents with finances

How to Help Elderly Parents With Finances.

Helping your elderly parents with finances can be a tricky thing to do. It can be frustrating for you and can cause hurt or embarrassment for your parents. If you go about it with discretion and respect, though, you can streamline your parents’ finances and remove a lot of stress from your and their lives. By communicating properly, budgeting, and simplifying their affairs, you’ll be able to help your elderly parents with their finances. In the end, you and your parents might be come closer, and you'll both have a lot less to worry about.



Method 1 Budgeting.

1. Find out their sources of income. Sit down with your parents and ask them to list their sources of income. If they are unable to list their income, keep an eye on their mailbox and wait for checks to arrive. In addition, contact their bank to find out if they have recurring direct deposits into their accounts. Some sources of income might include.

Social security.

Pensions.

Retirement accounts that include stocks, CDs, and bonds.

Real estate holdings.

2. List their expenses. After you’ve determined your parents’ income, you’ll need to list their expenses. You can also do this by sitting down with them and asking them to list expenses. However, if they can’t remember, you’ll have to wait on bills to arrive in the mail or for businesses to call them asking for payment. Some common expenses include.

Phone.

Cable and internet.

Utilities like electricity, gas, and water.

3. Meet with professionals who manage their affairs. In addition to getting records from your parents and tracking them down yourself, you should also meet with any professionals who manage aspects of your parents’ affairs. This includes lawyers, accountants, management companies, insurance agents and brokers. They will likely have valuable information about your parents' finances you need.

Don't be intimidated by professionals you may have to meet with. In most cases, they'll be happy to help you and your parents.

4. Cut expenses, if needed. Once you’ve gathered a list of their income and expenses, you’ll have a very good idea of what they can afford and what they can’t afford. When you have this information, start trimming expenses. This way, your parents’ income and savings will last them a lot longer than it would otherwise. Some things to cut include:

Cable.

Very large life insurance policies.

Magazine and newspaper subscriptions.

Charitable donations.

Cars or homes that have been financed.

5. Raise money for your parents, if they need it. In the case that your parents don’t have the income to meet their expenses, you’ll have to raise money to help them. There are a variety of things you can do without reaching into your own savings account. Consider:

Selling their home or getting them a reverse mortgage. A reverse mortgage is a loan that the borrower does not need to pay back until they sell the home.

Auctioning cars and other valuable possessions. Your parents might have valuable artwork, a car collection, or a piece of land somewhere that could be sold. That money may be just enough to meet their expenses.

Avoid taking loans or selling your parents' property before talking to them about it.

6. Find out if there are entitlements they are eligible for. In addition to identifying their current sources of income, you may be able to find entitlements or other sources of income for your elderly parents. To do this, check with your local, state/regional, or national governments. Don't worry, though, there are many resources available that will make this search easy.

For people in the United States, visit http://www.benefitscheckup.org to identify new sources of financial help for your parents.



Method 2 Organizing Their Affairs.

1. Get a power of attorney. A power of attorney will give you the legal right to act on your parents’ behalf in managing financial (and legal) aspects of their life. As a result, you’ll have the right to talk to your parents’ insurance companies, bank, pension administrators, and more. Without a power of attorney, you’ll have serious problems managing your parents’ finances.

2. Reduce the number of credit cards and checking accounts they have. Shut down all checking accounts and close all credit cards except for one or two. It will be very difficult for you to monitor their finances if they have many cards and accounts. Ultimately, it’ll be easier for you to follow one card and one checking account.

Verify that accounts and cards you intend to close do not have automatic payments or direct deposits attached to them.

3. Set up automated payments. Contact all the businesses that your parents have regular or recurring payments with. Provide them with a credit card number or a bank account number from which they can draft money that they are owed.

You may be able to do this through the business’s website.

4. Hire someone to manage their finances. If your parents’ finances are too complicated or their estate is too large for you to manage on your own, you may need to hire a third party to help you. In this event, a financial advisor, management company, or a law firm may be able to help you help your parents.

Determine if you or your parents have enough money/income to employ a professional financial manager.

5. Get their tax information. Ask your parents for their prior income tax returns. If they can’t find them, ask their accountant. With their tax information, you’ll be able to file the current year’s taxes, consolidate loans, and much more.

If you are unable to get tax information from your parents or their accountant, visit https://www.irs.gov/individuals/get-transcript to get transcripts of prior years taxes. Remember, though, you’ll need to have a power of attorney to do so.

6. Have them write or update their will. One aspect of your parents’ finances that they might neglect is their will. Their will is important as it will allow their estate to be settled relatively easily if they pass away. While this will probably be a tough conversation for both of you, you should ask them to write a will.

7. Document everything you do. Keep good records of everything you do for your parents. This includes keeping copies of checks you write, holding onto receipts for things you pay for, and taking notes of complicated financial issues. If you don’t document things well, you could find yourself in a legal battle with a sibling later on.



Method 3 Communicating Properly.

1. Ask if they want help. Before you take matters into your own hands and try to take control of your parents’ finances, you should ask them if they want help. Depending on their personality and position, they may respond negatively or affirmatively. Whatever their response, you'll at least open up communication and let your parents know that you are thinking of them.

If your parents are terminally ill or intellectually diminished, you may not need to ask them. Instead, talk to them and let them know you are going to try to organize their affairs.

2. Respect their wishes. Depending on your parents’ circumstances, you should respect their wishes as best as you can. If you disregard their wishes, you’ll probably alienate them and poison your relationship. By respecting their wishes, you’ll turn managing their finances into a positive experience.

3. Keep them involved. While you may be tempted to just take care of everything yourself, make sure that you keep your parents part of the discussion for a long as you can. This is important, as you don’t want them to ever be surprised about where they stand financially. In addition, if they stay active, they might fare better in terms of their health.

Schedule monthly meetings with your parents to talk about their finances. At the very least, take some time to let them know where they stand.



Tips.

Keep an eye out for signs of dementia; this is a signal to start taking great control of your parents' assets.

If you are working with your parents' finances, be sure and keep siblings informed in writing. This will help alleviate any tension about financial matters when your parents pass away, as that sibling or those siblings will be aware of what the state of your parents' finances are.

Warnings.

Educate your parents about scams. Request that they not mail any large payments to anyone for any reason without discussing it with you first.

February 11, 2020