Monday, March 22, 2010

Finding Your Way Out of the Debt Dungeon

This economy roller coaster ride is all upward spikes and downward spirals. The truth is, between the time traveling up and then plunging back down, our finances don’t seem to have gotten anywhere near the destination we’d like. We want financial stability, and freedom from the worry of how we’re going to pay the bills with our income as strapped as it has become. If your mortgage payment and all the other bills you owe equal more than your monthly salary, you may be in a position where you need an intervention in the form of a refinance or a debt consolidation loan.

Refinancing your house, especially if it has retained its value and your current interest rate is either fixed and high, or worse yet, adjustable, is a great way to get out some of what you’ve put into the house, equity. Still, if your credit history is less than wonderful or the house has, due to the plummeting housing market, lost value, a mortgage refinance may not work for your particular set of circumstances.

Consolidating all your monthly debts into a loan, which leaves you with one monthly payment, instead of a dozen, is the best option in this situation. Suppose you have a mortgage payment that would not be so bad, but you also have four credit cards, a car loan and maybe an unsecured line of credit that are all vying for slices of your income. There is no way you are going to come out on top at then end of the month without some help. That is what it means to consolidate your debt. It means you take all those smaller loans and lump them into one big loan. The new payment will be a lot lower than the combined sum of the individual loans, leaving you with more money to spend each month.

There are, of course, down sides to both options. As mentioned before, a home refinance may not be smart for consumers whose homes have not retained or gained any value since they entered into their existing mortgage. In addition, a consolidation of debts will buy you some breathing room, but you will have a long-term loan that, for all intents and purposes, is almost like having another mortgage payment every month.

Only consider bankruptcy as a last resort. For some people who have managed to sink so far into debt that there is no way out, filing bankruptcy can allow them to get out from under the burden and start again. They will, however, start with a broken credit rating and in some states, even the home in which they live is not protected under bankruptcy law.

Wise consumers who find they are considering any of these options during these difficult financial times would benefit from the advice of a professional. You can find qualified debt counseling services that can help you weigh your options and assess your circumstances. These financial advisors can then give you an unbiased opinion of what your best option would be. Choosing the right option to get your debt under control now will give you back something the economy has taken from most of us, the sense that somehow you are in charge once more.

Thursday, March 18, 2010

Guide to Individual Savings Accounts

ISA limits

Each tax year, every UK citizen is entitled to an ISA allowance of at least £7,200 – depending on their age. You can either invest as a lump sum, a series of lump sums or a regular deposit, but ISA providers offer varied terms and conditions so you will need to check with your ISA manager to find out the minimum amounts you can invest.

If you are under the age of 50, you can currently invest up to £7,200 between both cash ISAs and stocks and shares ISAs. However, all those over 50 can benefit from a new limit of £10,200 – made up of up to £5,100 in a cash ISA and the rest into a stocks & shares ISA, or the full allowance into stocks & shares ISAs - which applies during the current tax year. This new limit comes into effect for all other savers in the new tax year (6 April 2010).

In the current tax year, if you are under 50 the maximum that can be invested into a stocks & shares ISA is £7,200. The maximum amount that can invested into a cash ISA is £3,600. This means that you could use your full annual allowance for stocks & shares ISAs, or a combination of the two. For example, £3,600 in a stocks & shares ISA and £3,600 in a cash ISA or £6,200 in a stocks & shares ISA and £1,000 in a cash ISA.

It is possible to transfer money from cash ISAs to stocks & shares ISAs. Any funds moved from an existing cash ISA to a stocks and shares ISA will not affect your annual allowance, but you must not simply withdraw cash and move it across manually, this is something your ISA provider must deal with. This feature does not work the other way round, so you cannot transfer money from a stocks & shares ISA to a cash ISA.

What are the benefits of ISAs?

  • They provide Income Tax and Capital Gains Tax benefits, allowing you to avoid paying anything to the tax man on the returns earned.
  • Your ISA does not need to be declared on your tax return.
  • Your ISA can be built up over time with the full amount providing tax free savings
  • You can transfer your ISA each year to take advantage of the best ISA rates on offer
  • Higher rate taxpayers are exempt from paying the additional 25% tax on dividends earned through equity investments which would normally be required on investments outside an ISA wrapper.
  • Any gains received from an investments sold within an ISA are not subjected to Capital Gains Tax (CGT), but it is important to remember that any losses cannot be offset against gains made elsewhere.

Guest author:

UK Price Comparison website Compares Credit Cards, Savings Accounts, Fixed Rate Bonds, Bank Accounts, ISAs, Loans, Mortgages, Insurance, TV & Broadband and Gas/Electric bills to find the best UK deals.

Wednesday, March 17, 2010

Hard Money Loans – The Ultimate Investment

The greatest fear for many new Real Estate Investors is where to get money for real estate investing. But this fear has been overcome now by hard money lenders as they give out 100 percent financing with very easy qualifying and fast closing also. The collateral of the loan becomes the real estate property. Thus hard money loans have become the first stop for almost every mortgage industry insiders.

Hard money loans are very easy to get and funded very fast. It does not require much documentation and the terms are very easy to qualify for. Credit scores or bad credit history also does not affect the application of such loans. Hard money loans also give benefits when you are in emergency and need to close the loan. You do not have to wait for a long time and close the loan on the same day itself.

Based upon their lending criteria, hard money lenders lend money usually on a short – terms basis like 6 months to 1 year. These may include loans like bridge, refinance, development, acquisition, rehab, etc. The borrowers get a financial gain as the rates of interest of such loans are higher than other conventional loans. The type of loan will usually vary from lender to lender. This will include the application fees, due diligence fee and commitment fee. Some lenders also may charge for fund interest, origination fees, rehab money, etc. while others will not. So while selecting a hard money lender, you have to verify all the options which fits you the best.

There is a scenario of someone involved in foreclosure. If a homeowner falls behind their house payments, most lenders will not provide them loan or restructure their current loan. But sometimes an individual in foreclosure may obtain hard money loan to avoid foreclosure proceedings and use the time to sell the property. The question arises to why the hard money lenders loan money when traditional institutions avoid this kind of gamble. This must be because the lenders charge a higher rate of interest than traditional institutions. Secondly the lenders require the borrower to keep at least 25 – 30 percent equity in real estate as collateral.

Thus a hard money loan is a bond between a lender and a borrower in a tough spot. The lender is always there with a higher risk to chance a greater return. This all scenario has made hard money loans the first stop to many mortgage industry insiders.

Friday, March 12, 2010

Short Selling: An overview

Short selling, other wise as “going short”, or “shorting”, is a method of selling assets that has been borrowed from a third party, with the intention of buying identical assets back to return to the lender later. It is one of the many finance tricks people use to make money.

Short sellers wish to “sell high and buy low”, therefore profiting when the stock to go down instead of go up.

Here are the steps used by short sellers:

1. The short seller sells a security to a buyer, either on a virtual stock platform or in person. However, he does not possess the security he sold.

2. The short seller has three days (in US) to borrow a security from his broker, who in turn borrows it from an investor who is holding the security long, either in a mutual fund, pension fund, or other forms of long investment. During the three day period, some form of collateral is required for the initial short margin.

3. The short seller delivers the borrowed shares to the buyer.

4. Upon completion of the sell, the shorter can close the position by buying the shares and returning them to the lender, or keep staying short. However, the shorter must buy the shares and return it to the lender whenever the lender decides to sell the shares to someone else (otherwise known as “recall”). A “buy in” occurs when a broker does the purchase and return automatically.

Short selling, as can be interpreted from the above steps, can only occur if there is a ready supply of securities to borrow, and when the securities that are returned to the seller don’t have to be physically the same (ie. the same piece of paper) that is borrowed. The latter characteristic of securities is known as fungible.

A theoretical aspect of short selling involves the fact that the losses in short selling is unlimited while the gains are limited. This arises from the fact that a stock can’t fall below zero, so the maximum gain is the stock price when the position is opened per share. The stock, however, may go up in value indefinitely, perhaps forcing huge losses when the shorter has to buy back the stock at a much higher price.

Sometimes “shorting” is used as a blanket term for all strategies that allow the trader to take a bearish point of view (that is, for the trader to profit when the value of the asset involved goes down). For example, the concept in options known as puts, and to be short on a futures contract, are both described as “shorting”.

During “bubbles”, such as the Dot-com bubble, short sellers may sell hoping for a market correction. FDA announcements that cause an irrational growth are sometimes shorted when traders wait for the exaggerated reaction to subside.

If the seller fails to borrow the security from somewhere, a naked short occurs. This is illegal and is supposedly detected as a “fail to deliver” or “fail”, but systemic abuses arising from the fact that the stock market is dematerialized that involve turning over short positions to avoid T+3 detection is possible. This results in more shares turn up to vote in the annual general meeting than were issued, and may be used in a bear raid to bring down a stock. New regulations by the SEC were put in place to prevent widespread naked short, and more stringent measures were legislated in the stock market crash of 2008 to prevent exacerbation of market conditions.

Dividends are given to the new buyer of the stock, but the lender may be unaware that his shares are lent and will also expect a dividend. Therefore, the short seller has to pay the lender an amount equal to the dividend to compensate, and this is known as “short the dividend.”

Short selling had historically aroused much controversy and attack from political leaders, simply because that by speculating on a downward trend when a stock goes down, the seller sells more and causes the stock to go down more. A downward spiral results. The Wall Street crash of 1929, for example, was partly blamed on short sellers, and the congress enacted regulations to ban short selling stocks that are going down (known as the “uptick rule”). This ban was only lifted in July of 2007 (SEC Release No. 34-55970).

Short selling is viewed as contributing to unwanted market volatility, and in 2008 many financial companies in the US, UK, Australia, and Spain were prevented from shorting stocks when they stabilize the market.

Wednesday, March 3, 2010

Sacramento, A Great City To Live In

If you are tired of the smog and the crowd of LA and are planning to move somewhere better to raise a family, think Sacramento. Sacramento is one great place to live in, in Cali. If you like warm summers, this is the place to be. Mild winters, hardly any snowfall at all, and the great American River Parkway right there in the midst of 2 million people when you feel like getting out of the city without actually getting out of it.

Sacramento Property Management bureaus will help you find a place, and if you are on the market for an actual buy, make sure to use a good agent because property in Central Sacramento, especially the Land Park area, can be very expensive. You may not be able to afford a decent house for less than a million, and that’s a lot of dough.

If you are not keen on staying in the middle of the city, are ok with a 30 minute commute, and want to live in the midst of brighter people, try Folsom, Loomis, Laguna or Oaksville. These suburbs of Sacramento offer better safer neighborhoods, the schools are nicer, and property is less expensive. You will still have to negotiate office hour traffic on the Highways 50 and 80, so make sure you are fine with that.

Sacramento offers many things that would enhance your living conditions. It is known as one of the most diverse cities in the US, and that means a variety of culinary and cultural attractions. It is also only about 75 miles from the San Francisco Bay Area, which gives you access to the attractions of that city. Being the capital of California, Sacramento has a lot of government job opportunities, besides work in finance, trade, manufacturing and the like. Sacramento has two rivers, the Sacramento and the American, and these offer opportunities for water sports like kayaking, rafting, fishing and canoeing. It is also about an hour’s drive to the Sierra Nevada Mountains, where you can do camping, backpacking, and generally enjoy the wild life scene with your family.

However, real estate is pretty expensive in the city, which is probably true for all urban areas of California. The rougher neighborhoods, like the West and the South Sac, are of course, cheaper. But, due to the crime rate and the population demographics, you may not want to live in these places. That lives you with 2 choices, central Sacramento, which can be prohibitively expensive, and the suburbs, which can be prohibitively far from the city. But then, you have probably been through such options before if you have lived anywhere in urban north America. Use a good Sacramento Property Management agent to look for your home, and you will, probably, get a better deal than you could get looking for property by yourself. Although it is advisable to initially research property by yourself, it is easier to close with a recognized agent because that will give you a wider set of options than if you looked for housing yourself.