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10 Things To Do When You Win The Lottery   (Powerball)

12/16/2013

 

Great Advice for Whenever you Come Into Money...

Personal Finance
|
2/11/2012 @ 6:26AM |970,084 views

10 Things To Do When You Win The Lottery   (Powerball)

Updated Dec. 14, 2013.
There was no winner of the Friday the 13th mega millions lottery last night. The jackpot has rolled over to an estimated $550 million. If you win it in the next Lottery drawing, you won’t ever have to worry about money again–right?

Wrong.


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Make this mistake and you'll lose thousands when refinancing your mortgage

1/1/2013

 
Make this mistake and you'll lose thousands when refinancing your mortgage

By Bob SullivanI had just borrowed about a quarter-million dollars and my question was simple: "How do I pay you back?"

The woman on the other end of the phone, however, couldn't tell me. Ten days had passed since I signed the papers to refinance my home and, with the holidays approaching, I was worried my first payment would be late. She tried to soothe me with perhaps the most misunderstood phrase of the refinancing process: "Don't worry. You get to skip a payment."


Follow @RedTapeChron Had I listened to her, it would have cost me thousands of dollars. And if you are one of the millions of homeowners who will refinance in 2013, it could cost you, too. 

If your new year’s resolution is to save money or get control of the family budget, refinancing remains a really good option. But the idea that “skipping” the first payment can be pain free, financially speaking, is a myth, repeated over and over by loan officers like mine. Sometimes they are lying, sometimes they are misinformed and sometimes they are just trying to get an annoying borrower like me off the phone. But with rare exception, they are giving bad advice.  (News flash: Whenever a bank seems to be doing you a favor, it probably has a hand in your wallet.)

Advertise | AdChoices Real estate transactions are already confusing enough. There are questions surrounding when you make your last payment on the old loan, when you make your first payment on the new loan, how many extra days of interest you pay toward both your old and your new loan, and when you are paying for both loans. We'll get to those tricky issues in a moment, but the priciest mistake you might make in a refinance is also the simplest one to correct. 

You've heard this before, but this time, it's probably true: mortgage interest rates are at historic lows, and there may never be a better time to refinance.  It's hard to imagine rates going any lower than the 3 percent range they are at now, but it's easy to imagine that, at the first signs of a real economic recovery or real inflation, they will climb sharply during 2013.  The low interest rates that the Federal Reserve has imposed to boost the economy have been punishing for many, notably savers, who can barely earn 1 percent interest on their bank accounts and certificates of deposit. The one perk for consumers from the Fed’s interest rate policy is the ability to get cheap home and auto loans. If you haven't refinanced your mortgage in the past 24 months or so, you are missing out.

Fortunately, many American homeowners have gotten the message. According to the Mortgage Bankers Association, mortgage holders engaged in $1.3 trillion worth of refinancing in 2012. In fact, more than four out of five new mortgages in 2012 were refinanced loans, not home purchases.

I wish there were a way to know how many of those borrowers chose to skip that first payment.

'Can I get that in writing?' 'No'
My loan officer was lazy, I believe, and -- knowing that my loan had closed and all the commissions were guaranteed -- just wanted me off the phone as soon as possible. My call was unusual.  I am always overly cautious when I set up any kind of new loan payment, as the chances for error are great: a wrong loan number on a check, a bad address, etc. So I always make the first payment early to make sure nothing goes wrong.  That good habit proved profitable this time.

When I signed my loan papers, there were no payment instructions in my closing documents (not terribly unusual). My loan officer said I would receive payment coupons later.  But when 10 days passed, and I heard nothing, I called. She sent me to the bank's customer service line, where I was informed that there was no record of my loan. (Did that mean I didn’t have to pay it back? Sadly, No.) Customer service transferred me back to my loan officer. She assured me that their computers would catch up to my urge to pay the loan, and I’d get payment information soon. Incredulous that they seemed not to want my money, I persisted. She tapped a few keys on her keyboard, made me wait a minute, then told me that my loan had funded on Dec. 5, so I didn't have to make a payment until Feb. 1.

"But my documents say repayment begins Jan. 1," I said. "So you're saying there will be no late fees if I don't pay Jan. 1?"

"Yes," she said.

"Can I get that in writing.?”

"No. I can't do that."

At that point, I did what any mature consumer would do: I laughed. And then I muttered something about the 100 pieces of paper they just made me sign, with innocuous documents putting the finest point on everything you can imagine, like the form I initialed in multiple places agreeing that, yes, I am known by Bob, Robert, Bobby, Robby and various other nicknames. Yet I couldn’t get the bank to put something in writing saying when I should make my loan payment?

Advertise | AdChoices My loan officer didn't laugh, but eventually she put me on the phone with a supervisor who sounded very grave. She'd done additional research, she said, and found out that the reason customer service couldn't find my loan was because it had already been sold to another bank. We called that bank together and found out my loan actually funded on Nov. 30, so my first payment was indeed due on Jan. 1. And I would have been liable for about an $80 late fee if I had listened to my loan officer. The manager profusely apologized.

Steep penalty anyway
But I'm not writing to warn you about late fees. There's a much bigger culprit here you have to worry about.  Had I followed my loan officer's advice and skipped a payment, even if the bank waived the late fee (which the manager said was likely), I would have paid a steep penalty anyway.  You've probably guessed the punch line: there's no such thing as skipping a payment. In reality, homeowners are borrowing that money and extending the loan term for an extra month.  The payment will be tacked onto the end of the loan, with interest.  How much? If it's a conventional loan, that’s 30 years’ worth of interest.  Effectively, you are borrowing one month's payment for 30 years. Ouch!

"Skipping is a misnomer. A better description would be ‘deferring with additional interest added,'" said Jack Guttentag, a professor emeritus at the University of Pennsylvania who also runs a consumer education website called MortgageProfessor.com. 

Just how much extra interest can skipping that first payment cost you? There are too many variables to create a decent rule of thumb. But here's an illustration from Guttentag's site with deliberately round numbers. Skip the first payment of $500 on a $100,000 loan at 6 percent, and you will pay an additional $2,993 in interest during the 30 years.

Forget the $75 late fee. That's real money. As Guttentag puts it, "a payment that is miniscule to one is a fortune to another."

Some loan officers say they only won't offer the "skip-a-payment" option unless the refinance closes toward the end of the month, when the homeowner might have trouble coming up with the extra cash for closing costs and a fresh mortgage payment close together.  Others say they offer it all the time.

To be clear: Most borrowers don’t actually complete their 30-year loans before moving or refinancing, so few would end up paying that high a penalty. Also, it's important to note that my bank didn't even hold the loan, so they weren't profiting from the “skip-a-payment” advice.  I believe this is usually a lazy mistake, not a greedy one. Still, the basic truth holds.  Don't be tempted to skip a payment when you refinance unless you really, really need the cash for some unusual expense (Christmas credit card bills are probably not the best reason.)

Skipped payments are not to be confused with other loan closing related interest payments, including:

*Your last payment on the old loan. You can't skip that, either. If your loan closes near the end of the month, you should still make the scheduled payment to your old bank. Why?  Interest is actually paid in arrears, meaning you pay at the end of the month the cost of borrowing the money for that month.  It's confusing, because mortgage payments are really two payments at once -- last month's interest and next month's principal.  To keep it simple, if your loan closes on the Nov. 30, you will be paying November's interest with your Dec. 1 payment, along with December’s principal. You won't need to make the December principal payment if you refinance on Nov. 30, but most folks pay far more in interest than principal because they are early in their loan's term, so the overpayment won't be large. Just pay it to avoid late fees, and enjoy any refund that comes your way. 

Advertise | AdChoices *Pre-paid interest. When your loan closes in the middle of the month, your new bank will make you pay up-front (as opposed to in arrears) daily interest for the remaining days of the month. If you close on the 20th, you'll pay 10 more days of interest payments.  That's OK, it means you won't owe the money on the back end of the loan.

*Money for nothing: The three-day (or more) overlap. There's an odd quirk in most refinancing deals in which there are several days when the homeowner will be paying interest on the same loan to both banks. In most states, consumers have a three-day "right of rescission" after signing their refinancing papers, meaning they can cancel the new loan if they get buyer's remorse.  Such regret laws are very consumer-friendly and are necessary because of nefarious loan officers who tricked consumers into bad deals in the past. But, in this case, the consumer-friendly law is also costly, as it means both banks have liability for the loan during that rescission period, and are both entitled to collect interest.  Note: The regret period is usually three business days, so if your closing stretches over a weekend, the double-interest period can be even more costly.

It's important to keep all these quirky, refinance-related interest payments straight when talking to your loan officer, so you'll know what to do when he or she suggests you can skip a payment. None of this should scare you away from refinancing, which is really the only way you can make the recession work for you.

But remember, you are refinancing to save money, and you probably shopped around trying to save $50 here or $100 there on closing costs; don't lose thousands of dollars because of one false move after closing.

http://redtape.nbcnews.com/_news/2013/01/01/16239394-make-this-mistake-and-youll-lose-thousands-when-refinancing-your-mortgage?lite

More Americans Stashing Cash in Home Safes

5/5/2012

 
More Americans Stashing Cash in Home Safes

Have Americans lost trust in banks?
More folks are keeping valuables at home, whether in room-size vaults or under-bed safes.


By Charles Passy | SmartMoney – Thu, May 3, 2012 10:58 AM EDT

When Carlos Felipe decided to shop for the ultimate night's sleep, he headed to the New Jersey showroom of Hollandia, an Israeli manufacturer that creates custom beds running as much as $35,000. And sure enough, Felipe, a sales representative, found plenty of appealing features and options, from the adjustable bed frame powered by German-made motors to the hypoallergenic, antimicrobial latex mattress (the cover is "treated with aloe vera for a soft feel," Hollandia boasts). But the accessory that most caught Felipe's eye was designed to help him rest easy in a different way. It was a small safe, good for holding a few valuables or gold coins, ingeniously built into the base of a bed -- a modern-day answer to the idea of stashing your savings under a mattress. A duly impressed Felipe plans on using it to store his wife's jewelry and some extra cash: After all, he asks, what thief would look for such valuables in the frame of the bed itself?

In an era marked by financial turbulence, it's probably not surprising that safes have become a popular commodity, with some manufacturers, retailers and installers reporting sales increases of as much as 40 percent from a few years ago. But the bigger eyebrow-raiser is what has happened to those iconic gray-steel boxes of yore: They've undergone an extreme makeover -- or several of them. Taking the place of those old square combination jobs are a range of custom safes, from boutique showpieces to decoy models for the family den -- not to mention the truly offbeat (a hideaway lockbox resembling, ahem, a pair of men's underwear) and the seriously safe (an in-home vault with a price tag of more than $100,000). And that's not even getting into the ever-broadening array of color choices (champagne marble, anyone?) "None of our safes should be hidden in a closet," says Markus Dottling, principal at Dottling, a German specialty-safe manufacturer whose museum-worthy designs can cost more than the average American house.

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One thing that isn't driving the safe boom, apparently, is crime. Indeed, U.S. burglary rates have been plunging for years. Still, experts say that many savers and investors feel a lingering sense of insecurity in their finances -- a hard-to-shake fear borne out of the jolting recession and, at times, wobbly recovery -- which is helping to spur the new safeguarding mentality. Tyler D. Nunnally, founder and CEO of Upside Risk, an Atlanta firm that researches investor psychology, says sticking tangible assets in a safe can be a natural reaction to volatility in the markets. "People dislike loss twice as much as they like gains," he says. "They want to protect what they have." Growing numbers of these fearful types simply don't trust their banks to protect them: In a Gallup poll last year, a record-high 36 percent of Americans said they had "very little" or "no" confidence in U.S. banks. (In 2008 and 2009, when the financial crisis was peaking, that figure stood at 22 and 29 percent, respectively.) And growing concern about identity theft has made some people more eager to keep their assets in a form they can see and count, says R. Brent Lang, an investment manager in Surrey, British Columbia: "By acquiring one password, someone can wipe out all your digital wealth," he says.

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Still, it says something about the resilience of the American consumer's mentality that even when purchasing an item associated with all sorts of negatives (theft, fire, global economic collapse), more buyers are demanding products with a little flair. "When somebody is building a $100,000 custom closet, they don't want a safe that looks like it belongs in the back of a delicatessen," says Robert Tompkin, president of Prestige Safe, a high-end New York manufacturer. That sentiment has fed the growth of an incongruous industry, where financial paranoia meets a willingness to pursue a little luxury. When firearms collector Gary Hansen looked for a safe to store his $100,000 trove of rifles and pistols, he found out he could customize the interior so that his wife could also use it to store her jewelry -- in velour-covered drawers, no less. The cost? Around $7,500, but Hansen says the his-and-hers combo saved him from a lot of squabbling. "I knew it couldn't just be a safe for 'Gary's guns,'" he says.   If there's an irony to this safety seeking, it's that the trend makes the stewards of most people's money -- their financial advisers -- throw up their hands in frustration. "It's all based on fear and the failure to look long-term," says Mark Matson, founder and chief executive of the Cincinnati investment firm that bears his name. Matson and others find themselves stating the obvious: You can't earn anything on a $100 bill that's sitting in storage. Even advisers who are bullish on gold generally don't like bullion or jewelry because it represents the commodity in its most illiquid form; it will take at least a trip or two to the local pawnshop or jeweler to cash in those coins and bracelets. Finally, when you put your savings in a safe, you can forget about collecting insurance from the Federal Deposit Insurance Corp. if it actually does get stolen.

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The safe industry doesn't take exception to arguments like these -- but theirs is not to question the logic of their growing customer base. For the market in general, the sweet spot remains what you find at the local Home Depot or Wal-Mart: plain combo-lock safes that sell for as little as $50. But even in this broader segment, there's room for innovation and styling. For example, SentrySafe, the nation's category leader, has rolled out a line of pink safes in support of breast-cancer research. The company has just come off the best year in its eight-decade history, with the help of products like these and customers like Jessica Savage, an advertising executive in Rochester, N.Y. Last November, Savage bought two of the pink safes at a charity event. Her 5- and 6-year-old daughters are fanatical about the color, she explains, and she thought the safes would be a good place to store the girls' papers, such as birth certificates and passports, along with keepsakes. "I call them treasure boxes," she says.

The more valuable the treasure, the more complicated the box. For Richard Krasilovsky, owner of Empire Safe, a New York retailer that's been in business for more than a century, that means an emphasis on customization: A safe can be designed to fit into any space -- beneath a staircase, inside a closet -- with appropriate finishes and fronts (say, European ash burl wood), and interiors can be crafted to suit the needs of the buyer. There's also a steady market for James Bond worthy "diversion" or "decoy" safes -- like those fronted by bookcases or curio cabinets. Customization has its costs, certainly. Krasilovsky says a job can run $3,000 and up -- way up, especially for the small coterie of customers who want a safe that can stand front and center as an objet d'art. Need a secure place to store your cigars? Dottling, the German manufacturer, suggests its $23,000 Colosimo safe, a tabletop model that's billed as "the smallest high-security safe in the world." "It's a toy for big boys," says owner Markus Dottling.

Pessimists like precious metals collector Don Magnus, though, aren't looking for toys; they want their safes to be simple, bulky and Armageddon-ready. "I'm worried about the banks crashing," says Magnus, who's keeping his stash of gold and silver bullion in a $200 home safe, bolted to the concrete floor of his basement. By his estimate, gold will climb to $5,000 an ounce, and in a financial panic, consumers won't get access to their bank accounts for a "long period of time, if ever." After a nasty one-two punch in recent years -- a bad hurricane near his home, then the financial crisis -- North Carolina contractor Pat Brabble spent $9,500 on two plain but very large safes, including one "you could fit five people in," he says. The safes hold gold, silver and cash totaling about $7,000 in value, Brabble says. He's also holding on to about 50 bottles of Jack Daniels. "I don't drink," he says, but "if things do fall apart, I've got something I can trade with."

For their part, security experts say that a more expensive or elaborate safe is not necessarily a safer safe. Most take a dim view when it comes to "diversion" concepts, because they often rely more on trickery than on, say, state-of-the-art locks. "You don't replace security by obscurity," says Christopher Falkenberg, president of Insite Advanced Security Management in New York. Antique safes -- a hot-selling category -- pose a different issue in that they tend to be built less sturdily than high-end safes today. Guy Zani Jr., an antique safe collector and dealer in New Port Richey, Fla., who owns about 100 safes, notes that some highly prized 19th-century safes are made with wood. "You could take a fire ax and go right through the side," he says.

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But modern safes have their own issues as well: For example, custom or other small-production safes often reach the market without undergoing the rigorous testing for theft and fire common to off-the-shelf models. At the same time, ratings pose other problems. Retailers say they confuse many buyers, who fail to understand that just because a safe is rated for fire, it doesn't mean it's theft-proof, and vice versa. Underwriters Laboratories, a certification group that rates safes for fire and theft protection, agrees there's a degree of misunderstanding: "People think a safe is a safe," says John Drengenberg, the group's consumer-safety director. And even a top-rated safe isn't impenetrable. As the ratings imply, all a better safe does is buy more time -- whether it's time in a fire or time at the mercy of a burglar with a crowbar.

That said, the pros in the field generally agree that you're better off safe than sorry -- and that many folks are more likely to use a safe if it's attractive. Which is precisely the way Zani, the safe collector and dealer, feels about the vault in which he stores his "mad money" (about equal to a house payment or two). It's a safe he considers a true work of art: an 1867 model with a hand-painted exterior covered in 22-karat gold leaf. Zani estimates the safe is worth $10,000. But it's also a mini-fortress, protecting his stuff behind nine layers of steel plate. (The door alone weighs 500 pounds.) "It's the difference," he

Thanks to My Good friend Dave

http://finance.yahoo.com/news/more-americans-stashing-cash-in-home-safes.html?page=2
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