Coffee Break Blog!

What “extra services”

The cost of an interstate move is primarily determined by three things: distance, weight, and extra services rendered.

Distance and weight are easily understood, but many people are uncertain about fees for “extra services.”  These fees can mount up if you don’t know in advance what is covered by extra services.

Extra services are often required to ensure that valuable or cherished items are moved safely from one location to another. This may include dismantling, reassembling, and/ or crating and uncrating of items.

Items requiring additional attention may include:

- Artwork
- Trophies
- Plasma televisions
- Pool tables
- Grandfather clocks
- Antiques
- Pianos
- Hot tubs
- Exercise equipment
- Glass table tops

Since the van line provider assumes liability for the safe shipment of these items, it is often at their discretion whether these services will be required. Sometimes it is the customer that requests additional services for items that are especially important to them.

Another extra service which may be required is a shuttle. A shuttle is a smaller truck which is used to transport household goods to or from the home in places where the large truck is unable to navigate, or where damage to property might be possible.

Other additional services may be requested by a transferee including:

- Packing and/or unpacking
- Carpet cleaning
- Debris removal
- Maid services
- Storage

People may want to consider visual surveys of their household goods. An on-site survey will allow the surveyor to note any items that will require special handling and those charges will be reflected in the written estimate. A visit to the home will also give the surveyor an opportunity to anticipate the need for a shuttle. If the transferee believes a shuttle may be required at destination it is a good idea to mention this to the van line.

Don’t forget the “extra services” when you plan your next move.  Call us today for more information.

The Frozen Chosen

Have you heard about this? Homeowners with home equity lines of credit (HELOCs ) are getting a rude surprise: They’ve been told by their lender that they can no longer take money out on their credit lines because sinking home prices have put them 'upside down' on their mortgages.

A short while ago, a very large nationwide lender sent letters to 122,000 customers telling them they could no longer borrow against their credit lines because the total debt on the home exceeded the market value of the property. The lender says it is using computer modeling to determine which of its customers would have their cash spigot shut off.

In this market of unstable house prices, lenders are hedging their bets against further loss by freezing the HELOCs of maxed out borrowers. In the past, lenders provided borrowers with credit lines equal to 100% of the value of their homes. But the past is the past and today is a very different economic environment than yesterday.

Suddenly lenders do not want to be to be left holding the stick for borrowers who have pulled all of the value out of their homes. As home prices continue to fall and credit markets are crunched, lenders will provide money much less freely. Lenders are returning to previous credit rules by forcing borrowers to keep at least 20% of the value in their homes.

Recently you could get a HELOC for 100% of the value of your home. Today your credit line may be capped at 80% of your home's value. If you've already been granted a HELOC that goes above this margin it may be frozen.

Homeowners who took out credit lines for home repairs or other long term, large scale financial transactions may be in big trouble. You may be half-way through home repairs when your credit line is frozen. Leaving you with half a kitchen, half a bathroom, etc.

What about homeowners who utilize HELOCs as an emergency fund? With the new lending policies, if you have sub-par credit or own less than 80% of your home's value, you may not be able to access the money. This may force a lot of homeowners to reconsider their financial strategies. Do you maintain an emergency fund or do you rely on the value of your home in case of an emergency?

To learn more about the freezing of HELOCs, call us today.  Waiting could find you in the freeze!

The difference between a 30 and 40 year mortgage....

This is a great article by Broderick Perkins and was posted on Realty Times on March 13, 2008. Enjoy!

Forty year mortgages can reduce your monthly mortgage payment, but is that enough to offset the extra cost of tacking 10 more years onto the conventional 30-year mortgage?

The question is probably too simplistic, says Dan Green, a mortgage planning specialist at Mobium Mortgage in Chicago.

He says loan products like the 40-year mortgage are deemed risky because they are viewed in a vacuum, without considering the needs of the individual borrower or without comparing their benefits with other mortgages.

"It's not the loan that is risky, it's the behavior of the person paying the loan," is the advice he offers in his treatise on home loans longer than 30 years.

The draw of a 40-year mortgage is its relatively lower payment -- compared to a 30-year loan -- due to stretching out the amortization schedule over a longer period of time.

That could be attractive to those in high-cost housing areas, those who can't qualify for a 30-year mortgage payment or for those who want to qualify for a larger home. Longer term loans are also beneficial for people who don't plan on moving for a long time.

But here's the rub, not only will you pay more over the life of the loan for a 40-year mortgage, the higher interest rate on a 40-year mortgage bites into some of the expected monthly savings.

According to LendingTree.com the rate on a 40 year mortgage could be 0.25 percent to 0.375 percent higher than the rate on a 30.

So let's do the math on a $250,000 mortgage, at 6 percent for a 30 year mortgage and 6.25 percent for the 40, using Nolo.com's "How much will my fixed rate mortgage payment be?" calculator.

The interest and principal payment on the 30-year loan would be $1,498.88 with a total of $539,593.37 paid over the life of the loan.

For the 40-year mortgage, the payment would be, $1,419.35 with a total of $681,285.85 paid over the life of the loan.

That's less than $100 savings each month in exchange for more than $140,000 in extra cost over the life of the loan.

Also consider the fact that the principal is not paid down on a 40 as fast as it is on a 30, toss in a market with flat or falling home values and homeowners with a 40 year mortgage could really feel a pinch instead of relief.

Or so the theory goes.

"These arguments are all based on a single tenet -- that paying down a principal balance is a good thing. That's not always true," says Green.

Green says the more a homeowner invests in the home, the smaller the return because the cash-in investment isn't generating the return. It's the home's value that grows -- market permitting.

The 40-year mortgage behaves somewhat like a no- or low-down mortgage in terms of using more leverage and leverage is the tool investors use to play the game, for good reason.

You get the same level of market-based equity growth with a 30-year, 40-year or even 15-year mortgage. With a 40-year mortgage it's just that you get that equity growth at a smaller monthly cost. Greater leverage.

Most people move or refinance within five to seven years and the low monthly payment could work from them in the right market. Given home equity growth historically shows up during a 10 year housing cycle, but not for the entire cycle, timing is important.

The 40-year mortgage can be a good fit if for those at an early stage in their career. It can allow them buy a home they might not otherwise be able to afford. Later during the next equity-growth cycle they can sell and buy anew sell or refinance with the next appropriate financing tool.

A 40-year mortgage can also be advantageous for high-income earners whose mortgage interest payments may be their only large income tax deduction. And it can be used by vacation rental owners to reduce carrying costs.

Other mortgages can perform the same high-leverage trick, provided you can qualify for them, provided they are a risk-fit for your financial status and planning and provided the market cooperates.

The key, says Green, is running all the numbers, both the cost-comparisons of mortgages along with your financial goals, planned tenure in the home and lifestyle.

"New loan products like the 40-year mortgage are not dangerous to everyone. They are only dangerous to homeowners who operate without a financial plan," says Green.