Over the past five years, mortgage interest rates have been low! I know a lot of people who have moved during this time, and with their new house came a new loan that has these low interest rates. Those who haven’t moved also have the option of getting a new loan by refinancing. Refinancing our home almost a decade year ago saved us a ton of money (over $140k), but in order to know if it would benefit you, it’s important to understand your loan.
If loans never changed, it would be simple to explain all of the different types of loans, but they do change. For example FHA loans borrowed before June, 2013 are different from FHA loans borrowed after June, 2013. You can find out the details of your specific loan by looking at your loan documents. If you can’t answer these questions from your loan documents, call your lender or mortgage servicer, and ask them these simple questions.
Follow-up question #1: How much is my PMI (private mortgage insurance) payment?
Follow-up question #2: What is required to remove PMI? (For example, if you pay down 20% of the loan, the PMI should be removed. But if your home’s value has increased, you may be able to pay for an appraisal that shows you have 20% equity, which would allow you to eliminate the PMI much faster than paying down the loan by 20%.)
Follow-up question #1: How much are mortgage insurance premiums (MIP)?
Follow-up question #2: Is there an option to remove MIP by paying down the principal loan balance to 80% of loan to value?
Follow-up question #1: Is this fixed (locked in) or variable (not locked, which means it can increase)?
Follow-up question #2: How does my rate compare to interest rates today?
Most loans are 30. Some are 15 year terms, and a few are 20 or 40 year term.
Calculate this by dividing what you owe by the market value of the home
Storytime: Almost two years after we bought our home, the home’s market value had increased by thirty thousand dollars. The ratio of what we owed was 78%, meaning we had 22% equity. Our loan was conventional, so we were able to refinance and eliminate PMI. We did pay $4000 closing costs to refinance, but we also lowered our interest rate and the length of our loan. You can calculate how long it will take you to recoup those refinance costs. If you plan to stay in your home longer than that, refinancing will be worth the cost.
After you have gotten to know your loan, you can start to compare and see if it is worth refinancing your property.
Check here for more information on refinancing with Wasatch Peaks Credit Union. This calculator that Wasatch Peaks provides is a great tool to use to run through different scenarios. You can decide if refinancing is worth it to you.
What have you found out? Will it be worth it for you to refinance?
Why do you buy a lawnmower? Most people would answer “to cut the grass.” This is certainly true, but when a lawnmower company digs deeper, they might find that the real purpose is to keep the grass short and beautiful, make an impression on neighbors, or increase property value. Knowing this could allow the lawnmower company to fine tune their product roadmap.
As Theodore Levitt said, “People don’t want a quarter-inch drill; they want a quarter-inch hole.” People buy products and services to get jobs done. While jobs and services could go away, the foundational job to be done does not go away. This helps Wasatch Peaks Credit Union understand that members don’t buy products and services as much as they seek out solutions at various times to get jobs done.
As we better understand the jobs that our members are looking for, we position ourselves to create competitive products or services based on your member insights. And in the process, we create viable growth strategies that are beneficial to the credit union and to the members.
The easy part is to talk about it, while the hard part is to figure the whole thing out and we try to do this in a world that changes so fast. Do we build branches? Are they self-service branches? How many people do we put in them? What kind of payment systems do we implement? So many questions. As Steve Jobs of Apple said, “It’s really hard to design products by focus groups. A lot of times, people don’t know what they want until you show it to them.”
The goal of Wasatch Peaks is to “exceed your expectations” in understanding the financial environment in an innovative way so that we have products and solutions for the jobs that you need to get done.
When you reach a certain spending threshold, the mortgage loan process becomes different than it would normally be. There are limits to many mortgage programs, and people looking for larger amounts of financing have to take different avenues.
One such avenue is a jumbo loan, one of several options we offer at Wasatch Peaks Credit Union. This is a loan that’s for a larger amount than usual, and it can come with some other benefits as well. Let’s look at the basics of these loans, and whether they’re right for you.
In a conventional loan situation, there’s a threshold known as the conforming loan limit. This is the highest amount a traditional loan can be, and it’s often between roughly $400,000 and $650,000 depending on several factors, including location. In our case, the conventional limit is $424,100.
A jumbo loan allows you to receive more than this amount on a single loan, and as a result, there are some different requirements. Higher credit is typically required, and the down payment will often be larger. Jumbo loans can take longer to close, and have to go through two underwriting processes – and sometimes two appraisals. In most cases, the mortgage rates will begin higher than usual – the lender is taking more risk by loaning this much money, so that has to be accounted for in the interest rates.
The key benefit of a jumbo loan is the ability to finance a much larger sum without worrying about multiple loans or any other details. Qualified buyers can typically finance up to $2.5 million in a single shot, which is often a larger amount than most people would be able to get even through multiple lenders under the conforming loan limit.
Despite stringent qualification requirements, jumbo loans are quite flexible for those who qualify. They allow a choice between fixed or adjustable rates, and pricing is competitive. Many houses financed using jumbo loans are great options for quick turnarounds or to refinance a mortgage, and in-house underwriting can be done.
Interested in learning more about jumbo loans, or any of our other programs? Speak to the financial advisors at Wasatch Peaks Credit Union today.
Summertime is vacation time! Someone seems to be on vacation at any given point in the summer. I love vacations! Some vacations consist of camping trips. Others are more exotic vacations. Where do you want to go on vacation? I often wonder how others pay for big trips — especially unexpected trips. Have you also wondered this? I would love to hear what you do. Here are a few ideas that my family does:
This is a fancy accounting term for savings. I like to have a plan for everything in life, but it’s just not possible. So, I plan and prepare as much as possible and then I try to have some flexible savings. Sometimes we don’t know exactly what vacation opportunities will come up, so having some retained earnings allows us to take advantage of these opportunities. It is also fine to turn down a vacation that we can’t afford, but I would rather find a way to be able to afford it and enjoy it. My daughter had the chance to visit family in Alaska with only a few weeks notice. She had savings, and we had some money budgeted for general vacations, which is how we paid for her to go. That worked out well, but now our family has a chance to go to Alaska in a year. This is a much bigger and more expensive trip because there are six of us going this idea won’t work for us.
We have a budget category called vacation, and we put some money into it each month. Since most of our trips have been inexpensive, this has worked well for us. We try go to a family cabin once a month. For those trips, we use some money from our grocery budget to pay for food, and we use money from our transportation budget to pay for travel. So, we don’t have to dip into our vacation money for those trips. If you like to travel, but don’t have a specific destination in mind, regularly putting money into a savings account might be the solution for you. That way, when friends or family invite you to go on vacation, you’ll be ready. Wasatch Peaks Credit Union has resources to help us do this. The Christmas Club Savings Account is one tool that can help you save for your dream vacation by providing a separate account for you to automatically save each month.
We all have received unexpected income. This could be in the form of a gift, inheritance, commission, or bonus. We don’t have control over the timing of this income, but when it comes, unexpected money can be used for vacationing. When our family receives a gift, there are usually many expenses which compete for that income, so we have to prioritize and pay for the top priority. Sometimes tax returns can also be unexpected money. My goal is to not have a tax return because it ties up our money, but last year our income was lower than I expected and we overpaid taxes, so we received a return. I budgeted it for vacation, which is also going to be our Christmas present (see #4). I don’t like to have more tax withheld than necessary, but it is a forced savings account.
We don’t need or have room for anymore stuff around our home, so we are going to start giving our kids trips for Christmas and birthday gifts. (Most of our trips are local and don’t require flying.) We do hope to fly more in the future. We are giving our family a trip to Alaska next year so we can attend a family reunion there. Even though we don’t leave for a year, we will need to pay for airfare ahead of time. This is a challenge for our family. My husband and I have been discussing how we will pay for this since we need more than the amount that we usually spend on Christmas. Do we borrow from savings that we have set aside for emergencies and a car? Vacations are not usually an emergency, but it is a challenge to pay for a vacation before you actually go on the vacation. I’ll let you know how it turns out in a future post.
My parents gave our family a trip to Hawaii for Christmas when my step-dad retired. It was an amazing trip, and we wouldn’t have been able to go without it. We really appreciate their generosity and hope to be able to do this in the future for our children and grandchildren.
Although this suggestion won’t immediately allow us to travel more, eventually it will. As debt is paid down, the freed up money becomes available for trips! We have been working on paying down debt so that we free up the money used for debt payments. I don’t recommend borrowing money for trips because that does the opposite: it ties up money.
While our kids are young, we decided to stay close to home and explore Utah, but as they get older, we would like to go farther, and these trips cost more. I’m considering go back to work to pay for some of the trips which we would like to take in the future. We dream of going to Spain, South Africa, Norway, and other international destinations. These are going to cost a lot and we don’t have room in our current budget to pay for these, so one option we are considering is for me to go back to work.
Which one of these ideas have you used to pay for vacations? What are some other ways that you have paid for vacations?
When was the last time that you felt like quitting? It was a couple of weeks ago for me. I was writing my post for the week, which talked about de-cluttering our finances. The post was turning into a guilt-inducing post, which I did not want, but I couldn’t figure out why it wasn’t coming together. I had worked on it, and I woke up early in the morning unable to sleep and worked on it. I started to wonder if these posts had helped anyone. I felt like quitting. As these negative thoughts bombarded me, I started remembering the reasons why I am so passionate about helping others learn to manage their personal finances. The reason has to do with grief, pain, and peace.
A couple of years before my Dad died, he went through financial stress. My parents owned many assets, but all of their wealth was tied into the real estate market. Dad worked as a realtor and a landlord. He also ran a construction crew, and he owned his home. During the recession of 2006, home prices plummeted, building of new homes decreased, and lending practices tightened. As his income decreased, he borrowed against some of the properties.
After Dad died in 2009, I prepared the accounting reports for the rental units and realized that there wasn’t enough cash coming in to pay the expenses of all of the rentals. One morning I woke up at 4 am to work on his business accounting. As I realized how much pain he experienced during the last few years of his life due to financial stress, my chest hurt! It was one of the most painful times of my life! I remembered these lines from Emily Dickinson's book, The Complete Poems, which I had memorized in my youth: “If I can stop one heart from breaking, I shall not live in vain. If I can ease one life the aching or cool one pain…. I shall not live in vain.”
At that point, I decided to direct my pain outwards by serving others. If I could help one family, even if it was my own family, then it was worth my effort.
I contacted my family finance professor from college and thanked her for encouraging me to live what she taught. I will never forget when Professor Lown told our class that if we earned an “A” grade in her class, but we didn’t live what she taught us, that the “A grade” wouldn’t mean a thing. I started volunteering at a financial counseling nonprofit agency. When I could no longer work in the office, I wrote a blog for them. I taught a class in my church about financial principles and then wrote a book about those principles. I was later asked to write for Wasatch Peaks Credit Union, which I felt grateful to be able to do.
Although the pain surrounding my father’s death has subsided a lot, grief does resurface. Sometimes grief is almost predictable: holidays, my dad’s birthday, Father’s Day, and family events. Other times grief hits me unexpectedly, like snow hits in May.
That’s what happened the night before I finished the post about decluttering finances. I had a bad dream and woke up in the middle of the night crying for my daddy. I was missing him. No wonder the post would not come together! Finally, I ran out of time and had to pause work on my post so I could wake up my kids and help them get ready for school.
My husband Ty came home from the gym that morning and said, “I wasn’t feeling it. I couldn’t get into a rhythm while I was swimming. My arms felt dead tired.” Then my son threw tantrums after he woke up. He and I got into the car 3 minutes before school started. Several kids were already in the car, and the emergency lights were flashing. I turned the key, and nothing happened. My five-year-old was innocently sitting in her pajamas. The neighbor’s cat pooped in our sandbox. Then, the internet stopped working on my Chromebook, losing half of my work. It was my version of a Terrible, Horrible, No Good, Very Bad Day. After a good cry, I got back to work.
Even though I felt like quitting, I remembered the quote, “We are not our feelings.” It came from Steven Covey’s book, 7 Habits of Highly Effective People. He taught that no matter what happens to us, we can choose how we respond to it. I teach this saying to my kids, but that day I applied it to my situation. The sun was shining! Friends and family came to help me work on the car and take the kids to school. I finished the post late, but it wasn’t a big deal. The credit union staff treated me graciously.
I’ve been thinking about what I learned from my dad’s passing. With Father’s Day coming this week, I want to share some financial lessons I learned from my Dad’s death. I hope that they can help you and your family.
While planning my dad’s funeral, I searched through mom’s piano books for the right song to play. When I flipped to Bridge Over Troubled waters I knew that it was the song Dad wanted. I wasn’t very familiar with it at the time, and the music was too difficult for me to learn to play in that short period of time. Obstacles kept coming. Our family friend told me that he was just getting his voice back from laryngitis and didn’t think he could sing because he could barely speak. He also did not know the song, and we only had a couple of days to prepare. I almost gave up, but we found a way to perform it: my sister played the left hand while I played the right hand, and our friend was able to sing.
Here are a few of Simon & Garfunkel’s lyrics that I felt were like messages from my dad to my mom. Even though it isn’t the typical song I’ve heard at funerals, my dad wasn’t the typical person.
“When tears are in your eyes
I will dry them all
I'm on your side
When times get rough
And friends just can't be found
Like a bridge over troubled water
I will lay me down….
When darkness comes
And pain is all around
Like a bridge over troubled water
I will lay me down
Sail on, silvergirl
Sail on by
Your time has come to shine
All your dreams are on their way
See how they shine
If you need a friend
I'm sailing right behind
Like a bridge over troubled water
I will ease your mind.”
Because my dad had life insurance, my mom didn’t have to worry about finances at the time of his death. Our lives stopped. There was so much grief, sorrow, and adjustment to having him gone from our lives. Mom had to get used to daily life without him and had to do many of the tasks that he used to do. His life insurance policy provided the “bridge” to help us get through this troubled time. What a relief that my mom was able to pay any bills. Even the mortuary bill was paid directly from the life insurance so that we didn’t have to pay money upfront. That period of time was rough enough without the financial stress!
When I refer to life insurance, this includes being self-insured. If you have enough assets, you can get to the point where you can self-insure if you choose, but I still consider that life insurance. Life insurance enables your family to continue on paying for their financial expenses after you and the income you provide are gone.
Last Saturday, we saw a lot of dads teaching their kids how to fish as part of Free Fishing Day. Picture this: A man was walking with his fishing pole in his left hand and his daughter’s hand in his right hand. It reminded me of fishing and camping trips with my dad. He taught me to ride a horse. He taught me to love being outside in the mountains. Dad also taught me to help others.
Dad taught me to pay off debt. He paid off cars as fast as he could, and he refinanced his home into a fifteen-year mortgage. But in 2006, when his income decreased, he overleveraged, and this taught me that financial storms will come to everyone. I learned that we can lower our risk by decreasing our debt and saving for emergencies. Because of what my parents went through, I have spent the last 8 years working on paying off our debt and “saving for a rainy day.”
When we had a income crisis two years ago, we were prepared and we worked through it together. We had a lot of peace during that turbulent time. We experienced peace knowing that we both had marketable degrees with experience. We had peace knowing we could pay for six months of expenses. Emotionally, this was one of the hardest times of our marriage, but it strengthened our marriage. I was Ty’s cheerleader to help him recover his lost confidence. Within a few months, he realized that his employer did him a favor by releasing him. He felt very fortunate. Our story could have ended in bankruptcy, foreclosure, or divorce. I’m thankful that we were spared all of those.
The housing market is really good where I live right now. Homes are selling within a few hours in some cases. I considered selling our home this year, but I realized that to upgrade our home, we would increase our debt, which will increase our risk. We didn’t feel comfortable doing that.
I feel thankful for the lessons grief has taught me. They are gifts that have helped me so much. I’m thankful for my dad. He is my hero! I’m celebrating his life and celebrating dads! What’s one thing you have learned from your dad?
We’re here to provide excellent mortgage loan options for first-time homebuyers at Wasatch Peaks Credit Union, and some of the best options on our list are federally-backed loan options. These programs are guaranteed or insured by arms of the government, lowering risk for lenders and allowing you to get better mortgage rates and qualify for more advantageous loans.
A great example here is an FHA loan, insured by the Federal Housing Administration. They offer several more flexible options than many conventional loans. Here’s how you can benefit from an FHA loan.
There are several areas where the requirements for qualifying for an FHA loan are much lower than they would be for a similar loan in a different format. Credit score is the most important: Only a 600 minimum credit score is typically required for an FHA loan, with some wiggle room depending on the institution.
There are other qualification benefits as well. You will be required to pay a much smaller down payment, as low as 3.5 percent rather than up to 20 percent for most traditional situations. There are no prepayment penalties, either. This makes these loans perfect for first-time homebuyers.
The rates you can get through FHA loans far outstrip those you’ll find through the equivalent standard loan. If you have a credit score of 660, for instance, this will qualify you for an FHA interest rate roughly equivalent to what a score of 740 would have qualified you for in a conventional format.
FHA loans are perfect for refinancing. They allow options for members who got their first mortgage from outside lenders, never a guarantee during a traditional loan situation. They’re offered in both fixed and adjustable rates, and you can typically refinance up to 98 percent of a home’s value.
When a buyer is allowed to take over an existing home loan from someone else rather than taking out a new one, this is called an “assumable” loan. FHA loans fall under this classification, meaning you can pick the best option between assuming a previous loan at its rate and looking for a new loan with a better market rate. There are no penalties here in either case.
Want to learn more about FHA loans, or any of our other mortgage services? Speak to the financial advisors at Wasatch Peaks Credit Union today.
You've learned to invest 15% of your household income into retirement. Now what? The ultimate goal of investing is to let your money work for you and provide you with stable, passive income.
But getting there is going to cost a pretty penny.
This month, take the time to learn the dollars and cents of investing. Of course, you knew that investing was going to mean coming up with the actual money you’re putting into the market, which always holds the possibility of being lost forever. But did you know there are going to be various fees, commissions, and taxes you’ll have to pay, too?
Let’s take a peek at an actual investment to illustrate this. The company and amounts have been changed, but they’ve been accurately scaled down to size.
Suppose that, on Aug. 13, 2015, a share of stock in Apple closed at $43.26. During the next few months, Apple issues four dividends of $0.55 per share. On Aug. 25. 2016, a share of stock in Apple closed at $51.23.
Let’s say you chose to invest $1,000 in Apple on Aug. 13, 2015 and you withdrew it on Aug. 25, 2016.
At the time of your investment, $1,000 would buy you 23.25 shares of Apple. Over the year, you would have received $51.16 in dividend payouts. When you withdrew from the company a bit over a year after your initial investment, you’d sell that stock for $1,191.09.
It seems like your gain from this stock is $242.25, broken down into $51.16 in dividends and another $191.09 from selling the stock. Simple, right?
The problem is, though, you haven’t exactly earned that much. Here’s where the costs of investments come into play.
First, the dividends would be subject to income tax. In this case, the dividends are considered qualified dividends, and would therefore be taxed at a rate of 15% by the federal government and possibly more by state and local sources. As a result, $7.67 of that dividend gain is eaten up by these taxes.
Second, you’re going to have to pay your broker for the cost of buying and selling the stock. Let’s say, hypothetically, you’ve used an online discount stock brokerage firm. The buy and the sell would each cost $9.99. That’s another $19.98 dropped from your gain – although this fee is tax deductible.
Third, the gain on the sale would be a long-term capital gain, so 15% of that gain goes to the federal government. Since your gain was $191.09, you’d be paying an additional $28.66 in taxes on the sale.
In total, your expenses for your gain add up to $56.31. Just like that, nearly 30% of your gain is gone!
Even if your investment is a loser, you’re still paying the brokerage fees and will earn less in dividends.
The moral of the story? Investing costs. You’re taxed if you gain, and you’ll get hit with brokerage fees whether you win or lose.
Some forms of investing have lower costs than others. If you invest directly with an investing house, you can bypass the investing fees and only pay the taxes on your gains. However, you’re limited to the offerings that the investing house has available, and you’ll be subject to their often inflexible minimums for investing.
You could also simply invest in a money market account or other savings option at Wasatch Peaks Credit Union. Your returns will come with fewer or no costs. Plus, your balance isn’t at risk. Yes, you might “lose” some gains by only having the cash in a savings account, but your money is earning a steady return. If you invest elsewhere, it’s possible that the costs, the fees and the taxes can easily eat up a substantial amount of whatever you gain or make an already painful loss even harder.
It’s important to note that the bigger your investment, the smaller the impact such costs have. At the $1,000 level, the investment fees in the above scenario typically eat up about 2% of your balance. If you’re investing $10,000, the fees will only eat up 0.2% of your balance, and if you invest $100,000, the fees eat up only 0.02% of your balance.
Thus, as a beginning investor, it’s crucial to know the total cost of ownership of an investment as you consider it. Even a small fee can significantly lower your total return when you’re starting out with small investments.
That’s why it’s best to take it slowly at first and continue learning about the market and stocks you’re interested in. Know exactly what you’re going to invest in – and what all of the costs of that investment are – before you put down any of your money. After working out the math, you may find you’d rather wait until you have a substantial amount saved up for investing, as these fees don’t make such a big dent when the gains are larger.
So, before you make that first investment, learn the costs and be sure it’s worth the price!
Did you get hit with any surprise costs on your first investment? Share your experience with us!
Credit score is one of the most important factors of mortgage rates and many other important elements of a home loan, but many people have several misconceptions about the basics of credit score. At Wasatch Peaks Credit Union, our financial advisors are here to help clear up any confusion you may have in any element of the mortgage loan process.
We’ve found that much of our clients’ confusion often relates back to a simple lack of knowledge about credit score numbers – how many scores you have, how they’re calculated and what you can do to view your current score without dinging yourself financially. Let’s look at a few of these lesser-known areas of credit scores.
The most popular form of credit score monitoring is called FICO score, introduced by a company called the Fair Isaac Corp. over 25 years ago. It uses a proprietary formula designed to predict how likely someone is to repay a debt balance. Its chief competitor is VantageScore, a metric designed by three major credit bureaus that has gained popularity in recent years – we’ll compare the two in a moment.
Even within each type, though, know that things won’t always be standardized. Each different one is frequently updating their algorithms, and different individual creditors or lenders may not be on the exact same versions. Think of it like updating your computer to a new version of Windows – some lenders might have the FICO 8, but others might have the newer FICO 9, and your score may not come out exactly the same. If you want to standardize here, you’ll have to make sure you use the same version of a credit report, not just the same brand.
FICO is used more commonly by lenders, while VantageScore is gaining ground with consumers and lenders alike. There are a few other key differences:
Many people assume that you simply can’t view your credit for free, but this is no longer true. A site like NerdWallet offers free scores online and score simulators, and there are other tools available to landlords.
To learn more about credit score, or any part of the mortgage process, speak to a financial advisor at Wasatch Peaks today.
Utah saves money with historically low interest rates!
You can save money with your Wasatch Peaks auto loan:
Getting your auto loan started is as easy as coming into any branch, applying online, or calling 801-627-8700!
Wasatch Peaks makes it easy for you by preparing your loan documents and paying off your current loan balance with another financial institution. All you have to do is sign and drive away with a lower rate on your new auto loan!
*Annual Percentage Rate (APR). On Approved Credit (OAC). This is our best rate; your rate may be different depending on credit history and underwriting criteria. Rates subject to change based on vehicle loan-to-value and term. Limited time offer.