Refinancing of interest only loans is very attractive, especially when the time comes for the loan to get amortized. That means the loan will have to be repaid at the current interest rate, along with the principle. Most people seek to refinance their interest only loan in order to buy more time, i.e. to delay the repayment of the principle further. However, this may also increase the risk on the loan, since the interest rates may go up further, the price of the house may come down or the economy may slump in the future.

Refinancing of interest only loans is ideal for people who are expecting huge capital gains in the next few years or are planning to sell their house by the time the interest-only period is over. This is a good alternative as long as the economy is good, the interest rates are steady and the prices of houses are increasing. Interest only refinancing is recommended for people who have irregular incomes like commissions or bonuses or those who are expecting a hike in their income in the coming years. The savings accrued from refinancing can also be used for home improvement, which will increase the value of the home in the future.

A few questions to be considered while refinancing are: how long do you expect to stay in the house? How much equity do you have in the house? Will you have to pay points for getting a low rate from the refinance? What would be the closing costs? Will the lower payments from the refinance enable you to cover the closing costs, points (if any) and the fees reasonably?

There are several lenders who are offering refinance options for interest only loans. The Internet is a good source for getting information about these offers and also to find out more about interest only loan refinance.

Despite the negative image that is associated with it and the various problems that come along with declaring a bankruptcy, it doesn’t have to be frightening; after all, it was designed as a way for those individuals and businesses who find that their finances are out of control to get the help that they need to organize their finances and pay off their debts. Once you take the time to understand what bankruptcy is and how it works, you won’t find it as scary as you did at first.

Definition

Bankruptcy is a legal term, meaning that an individual cannot within reason pay off their various debts and have allowed the court system to take over their finances for this purpose. When filing for bankruptcy, the court will appoint someone to work out the payments to your creditors and to determine how much of your income must go to repay these debts. The court will either allow you to make payments, or more likely will deduct a portion of your paycheck toward this goal. During this time, your credit will be limited, both by legal action and by the reluctance of creditors to issue credit lines to individuals who have declared bankruptcy. Once the total amount set by the court has been repaid, the bankruptcy will be discharged and you will be able to start rebuilding your credit from the ground up.

Different Types

Several different types of bankruptcy exist, defined by legal codes for certain purposes. The exact types available differ from one country to the next… in the United Kingdom it can only legally be applied to individuals and partnerships, whereas in other countries such as the United States or Canada they can be applied to businesses as well. Regardless of the limitations or allowances set by the government on who is allowed to declare bankruptcy, the general purpose remains the same.

Lasting Effects

While you are working towards discharging a bankruptcy, your options for credit will be exceedingly limited. Even after you’ve had your bankruptcy filing discharged, though, you’ll still find that you won’t have many options for a while… many creditors will still be hesitant to work with you from between six months to two years depending upon the creditor and the service that you’re applying for. You should also take care with any offers that you do receive, because they will likely come with high interest rates and additional fees attached.

Life After Bankruptcy

Bankruptcy isn’t the end of the world, it’s actually a chance for a new beginning. As time goes by, the bankruptcy on your credit report will begin to matter less and less as you eventually start to establish new positive credit lines and build up your credit again. Just like negative reports, your bankruptcy will eventually expire from your credit history; the process may take up to seven years, and until it expires there will still be those who are hesitant to deal with you. Once it expires, however, the negative reports that preceded it will also be long gone and you’ll find that your newer reports are all that remain.

This is true even after the debtor’s bankruptcy filing, which temporarily prevents creditors from getting at those funds. The bankruptcy filing however is not a cure all, and many debtors still have trouble paying utility, mortgage and car payments that the debtor might still need to pay after the bankruptcy filing.

So how can debtors protect that precious money floating in the checking account? There are several key strategies they can take.

The first strategy seems obvious, but can sometimes trip up debtors. The strategy is simple- Do not bank where you owe money. If you owe money to the bank (perhaps it is a credit union with a cross collateralization agreement on a car or credit card, or a bank where you also have a mortgage in default), the bank might exercise its rights of a “setoff” prior to filing.

For an example of the damaging domino effects of a setoff, check out the story of this Atlanta couple.

Once the bankruptcy case has been filed, the bank cannot exercise its right to a “setoff,” because to do so would be a violation of the automatic stay. However, there is still some risk with banking where you owe money even after you have filed bankruptcy. Some banks have taken the approach that they can setoff the funds that were in the account at the time of filing, meaning if you have $1,000 in your account several weeks after filing, but had $659 at the time of filing, the bank might try to setoff $659 and leave the rest.

Additionally, there is case law that supports the bank’s right to place an administrative hold on the funds in the debtor’s bank account. In that scenario, the bank does not “take” the funds, but it does place a hold on the funds during the debtor’s bankruptcy case. This prevents the debtor from accessing the funds during the case, which can be devastating for a debtor who needs the funds immediately for living expenses.

So if you owe money where you bank, what is your best strategy? Open up a new account where you don’t owe money. If you want to keep your account where you owe money, then only keep enough money in there that you can stand to lose. Hint- $10.

It is not enough to just pull money out of the account. Many debtors are set up with an automatic draft of their paycheck into their checking account. Therefore, if the draft is set to go into the account the debtor holds with a bank who he/she owes money, then the debtor must contact HR and stop that draft immediately and get a paper check.

Furthermore, many debtors have automatic payments set up through their checking accounts, or even worse, have allowed creditors access to their checking account to directly make the debits. It is a good idea to stop these payments in general, as it is never a good idea to allow someone access to your account; however, it is even more important in this scenario where the debtor has hopefully removed funds from his/her checking account and does not have the funds in that account to make those payments. Therefore, if the debtor does not stop the automatic payments, the debtor will bounce checks and incur late fees and penalties.

It should be noted that several banks have recently taken the dubious position that they can hold the funds of any bankruptcy debtor regardless of whether the debtor owes any funds to the bank. This position is likely to be challenged in court. Until such time as it is litigated or the banks change their position, if you have a Wachovia banking account and are filing bankruptcy, be aware that Wachovia might freeze your account during your bankruptcy whether you owe the bank money or not. Therefore, it would be wise for the debtor to remove all or nearly all funds prior to filing, as a preventative matter.

The state where an individual lives determines how much they pay, which may be higher or lower. An individual’s economic status can also be a factor in how this type of tax impacts their pocketbook.

In fact when it comes to the decision on taxes and renting versus owning, this may be the only time renting is the best option. States collect property taxes on:

Land
Improvements to land such as additions to property
Man made objects that are not stationary structures

It is usually assessed by individual county tax collectors in each state. Land and property are mailed tax payment notices that are the result of appraisals of the property’s value. Notices of assessments can be disputed by contacting the tax collector in the land owner’s county, and the tax bill is typically paid from a homeowner’s escrow amount on their mortgage.

As mentioned, property taxes can disproportionately affect some homeowners. Increases in a state’s tax rate can often double or even triple a homeowner’s tax liability and often leave them with no option but to sale their residence or land.

Critics of this form of taxation have also decried the fact that it does address the situations of some individuals. Although it is ordinarily paid as part of an escrow account, increased property tax means they would have to pay more into escrow.

Senior citizens on a fixed income have been identified as a group sometimes hit hard by taxes on their property. Such individuals may have high taxes due to an increase in the value of their property, yet find them selves unable to pay because of a reduced income during retirement. This mandatory tax, in some cases, does not take into account factors that may impact someone’s ability to pay, such as personal tragedy or acts of nature.

Property tax has also been criticized because of the difference individuals must pay between states. Alabama has the lowest rate at 1.3 percent on property value, while New Hampshire has the largest at 4.9 percent. The average percentage among is somewhere in the range of 2.3 percent.

While Alabama has a tax rate of 1.3, which would seem to make it an attractive location for a home or business owner, someone with property a few feet away in neighboring Georgia would have to pay 2.6 percent, and more than double in Florida with a tax rate of 3.1 percent.

Just how to spend the revenue (or waste it, as is the case with many governments) generated by taxing property values is determined by state legislatures. A state’s legislature also has say over reducing or raising the tax rate along with determining how often it should be collected. Additionally, there may also set limits on how much increase, if any, there can be every year.

Property tax definitely helps states with revenue. But while much needed, property tax can also be a deciding factor in where an individual lives or their ability to retain the American Dream of owning land.

If you’d like to buy a home and can qualify for a loan, you are one of them. If you’re concerned about inflation, you really should buy a home. If you’re right about inflation, you will pay off your loan with money that’s worth less and less, and the value of your home will go up over time. If you don’t buy a home and you’re right about inflation, your rent payments will go up and up again. There are no guarantees in life, but the government’s borrowing and its practice of “monetization” of debt make some of us believe inflation is almost inevitable, so if that describes you, you have your marching orders.

There are some other influences that make now a good time to buy a home. Labor Day and back-to-school are just around the corner. This has not been a strong selling season for real estate in most of the United States, and now we’re moving into the time of year in which sales typically slow. That situation makes would-be sellers more likely to negotiate. Low interest rates, historically low home prices, and sellers who are apt to be willing to negotiate all combine to make this a good buying time.

Now then, there is another group who can take advantage of low interest rates from a different perspective. The easiest way to outline this is to tell you about a very thoughtful and financially disciplined couple. This couple recently refinanced their home and pulled some of their equity out. Their new loan is at 4.25%. They used the equity to pay off loans on several rental properties which were financed at much higher rates. This maneuver has noticeably reduced their monthly mortgage payments and the amount they will pay overall for their real property purchases. However, that’s not the end of the story. They have several more rental properties that will be paid off in a few years. Their plan is to increase their payments on their home when this happens so that their home is paid off ahead of schedule. When they retire, all their real estate will be paid for. They’ll have some fixed income from retirement plans, and they’ll have rental income that, presumably, they can increase if inflation is a problem. Not a bad way to use real estate in a long term financial plan, is it?

If your situation resembles this couple’s, you might want to do something similar.

If it doesn’t, you might want to position yourself more like they have. As we’ve observed, there are no guarantees, but we can each take actions that are designed to make us as invulnerable to financial strain as possible, and real estate ownership can be a very useful tool in this effort.

Raynor James

August 2010

Equity finance is cash that is invested into your business in return for a share of your business. These investments of cash never have to be repaid and don’t have interest attached to them. Equity finance is true risk capital as there is no guarantee that the investor will get their money back at all and these investments are not tied to assets that can be removed from your business should it fail.

The way in which investors get a profit from their investment is the fact they have a share in your business. This share means that investors either get money that is generated either through a sale of the shares once the company has grown or through dividends, a discretionary payout to shareholders if the business does well.

There are several types of equity finance such as business angels and venture capitalists. Each type of equity finance varies in the amount of money that is available for investment and the process of completing the deal.

If your business can support a growth rate of a least 20% you are more likely to be able to get equity finance. If you can’t generate a growth rate of at least 20% in your business then you are unlikely to be able to gain equity finance. It is the idea of control and the prospect of higher returns if your business is successful that attracts people to invest in your business

Sadly however many people are still highly reluctant to seek the help of equity finance as they see the idea of it as ‘relinquishing control’ of their business. Many small businesses are especially reluctant if their business is growing fast. As a business owner you should ask yourself the following questions below making any decisions about choosing to use equity finance:

o Are you prepared to give up a share of your business as well as some of its control?

o Are you and your management team confident in the business and the products and services that are on offer?

o Does your business have a unique selling point?

o Do you have drive to grow your business?

o What industry experience and knowledge does your management team have?

You should also consider the following when it comes to obtaining equity finance:

o How much funding do you need?

o How much control are you hoping to retain?

o How long do you need your funds for?

Each business should investigate the options that are open to them when it comes to finance. Equity finance is medium to long term finance and is the perfect type of finance that is open to small businesses, especially if you are an entrepreneurial business. Entrepreneurial businesses are what private equity investors are mainly interested in. This is because they have aspirations and a high potential for growth.

If you are interested in the use of equity finance it is important that you speak to a financial team who can put you in touch with people who will be able to put you in touch with the right investors.

Secured and Unsecured Loans

There are secured and unsecured personal loans available to suit your needs. The choice between them depends on the amount of money you need to start your own business and the loan terms you are willing and able to face. This is due to the fact that secured loans and unsecured loans’ contracts differ significantly on the loan conditions.

Since secured loans provide collateral which is usually a real estate property or the equity left on it, the risk that lending in such terms implies is significantly lower. Thus, for starters, the interest rate charged for the money borrowed is lower. But also, the rest of the loan terms are more advantageous: you can get lower monthly payments, higher loan amounts and more flexible repayment programs so you can customize a loan to suit your needs.

Unsecured loans on the other hand, lack collateral and thus, imply a greater risk for the lenders. That’s why unsecured loans charge higher interest rates and come with lower loan amounts, higher monthly payments and shorter repayment schedules that are not suit for every borrower. However, the most important fact is the loan amount. Since the money will be used for starting a business, you can’t be too limited as to the amount of money you can request.

Loan or Line of Credit?

There are two possibilities when it comes to personal loans for starting your own business. One is to request a simple personal loan with a fixed amount and a predefined repayment program. These options provides you with the financing you need for starting your own business but is not too flexible and requires that you budget your needs thoroughly so your expenses do not overpass the funds that the loan can provide.

On the other hand, you can always request a personal line of credit. A line of credit is a revolving source of funds that lets you withdraw the amount of money you need and repay it the way you want. A credit limit is defined and up to that limit you can withdraw as much money as you need as many times as you want provided that you don’t exceed the amount limit or the due date. This last option provides a lot more flexibility and is ideal for starting a business.

There is a wide variety of finance magazines in the market and they all have varying aspects. You can also go online to research on the affordable magazine subscriptions available and also the most popular magazines. You can come across great offers and save money. It is essential that you shop around and get the magazine that will be a good read at a good rate. When looking for one, it is important that you go for one that covers every aspect of your business. This may mean having to buy more than one magazine. You should not limit your spending and see it as a long term investment since you can keep them for years and refer to them in the future.

It is also advisable to look for free magazine subscriptions. This will usually require you to fill out information about your qualifications. Be as accurate as possible and do not exaggerate. This could influence the decision to get the free subscriptions since they are provided on a limited basis.

Make the most use of your subscriptions and read your magazine from cover to cover since it is not a cheap venture. Try to get as much information and tips as you can from your finance magazine, after all you bought it.

Property management companies exist to do exactly that: manage the day-to-day headaches that arise from owning a rental investment property. They screen tenants to fill vacant rental units, sign rental agreements & disclosures, receive rent, keep accounting records, oversee legal obligations like lead paint tests, act as a contact for maintenance and repairs, and for any questions from tenants.

That all being said, there are some tasks that management companies can’t or don’t perform in most circumstances. Typically, they don’t pay property taxes, or maintain rental property insurance (although your mortgage lender may be able to handle that for you in the form of escrows). Management companies usually don’t make payments on your behalf, except to contractors or handymen. Lastly, they don’t usually handle rental property registrations with local municipalities or government entities.

At about this time, you might be wondering what property management companies typically charge for their services. As a landlord, I’ve usually paid 7-10% of gross rental income; so, if a property’s rent is $1,000/month, a management company may charge $80/month for that property. Therein lies the disadvantage of hiring such a company, as many landlords have only slim cash flow margins each month on their rental income.

The primary advantage of using a property management company, aside from the obvious time and expertise that they bring to the table, is simply this: they will take on the recurring headaches and sleepless nights brought on by the stress of managing real estate. Keeping all of the accounting, laws, tenants, repairs, contractors, and vacancies straight is a full time job for anyone managing more than a few properties, and the fact is most landlords just don’t have the time or inclination to be responsive and available. The answer? Let someone answer the 2:38 AM phone calls.

You may feel overwhelmed with the amount of debt you currently owe. The first thing to do is step back, take a deep breath, and realize that there are millions of others out there dealing with the same problem. An Internet search can help lead you to some viable options for credit repair. There is actually credit repair software available for purchase that can help you do this on your own without having to pay major fees to companies that offer the same service.

If you are deep enough into debt that you feel hopeless, you may seek to file bankruptcy. You should try your best to fix your credit yourself and only use bankruptcy as a last resort. It causes you to accrue a lot of costs, involves a lot of paperwork, and damages your credit score.

Many people look at bankruptcy as a way to start over with a clean slate. This is not necessarily true. There are different forms of bankruptcy. Chapters 7 and 13 are the forms that are available to individuals. Chapter 7 is akin to a complete surrender. Yes, your debts will go away, but many of your possessions will be repossessed. To file for this type of bankruptcy, you must prove that you legitimately cannot pay off your debts. This may happen in cases of sudden illness or death of a family member.

Chapter 13 can be seen as a sort of payment plan. Creditors do get a portion of what you owe them, but you also have to pay a lawyer and a lot of other fees. If you’re going to set up a payment plan, why not just try to repair your credit yourself?

Using credit repair software can help you get organized and not feel so plagued by your situation. It can assist you with figuring out credit inaccuracies, which debts you can dispute, how to do so, and even help you create a system to keep track of your debts and disputes.

Don’t pay someone else to set up a payment plan and wipe out your good name when it comes to credit. You can fix bad credit and negotiate debts on your own, and you’ll be back on your feet in no time.