Tag Archives: saving money

Money Matters: Refinancing Your Debt

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5-Not-So-Smart-Debt-SolutionsBy Nathaniel Sillin

Have you ever considered how lenders compare applicants? Typically, the lowest rate goes to those who have the highest likelihood of repaying the loan on time.

A lot of data goes into determining that probability, including the person’s credit, income and outstanding debt.

As these factors improve, your terms on new loans might improve as well. You could also refinance debts you took on earlier in life to take advantage of the changes. As a result, you might be able to decrease your interest rate, lower your monthly payment and save a lot of money.

Refinancing, which is often done by taking out a new loan to pay off existing debt, can be surprisingly simple. In some cases, you can submit all the information online, and the entire process will only take a few days. However, refinancing more complex debts, such as a mortgage, can take considerably longer.

While refinancing doesn’t always make sense, it’s worth considering if you’re in one of the following situations.

Interest rates dropped. Some loans’ interest rates depend on a benchmark interest rate, such as the London Interbank Offered Rate (LIBOR). Even if your financial profile stays the same, when the benchmark rate rises or falls, your interest rate on a new loan could rise or fall as well.

You want to change the terms of your loan. Because you’re taking out a new loan to pay off existing debt, you might have the opportunity to change the terms of the loan. For example, you could have a variable-rate student loan whose interest rate rises or falls with a benchmark. You might be able to refinance with a fixed-rate student loan and have certainty that your monthly payments won’t change in the future.

If you have a lower interest rate after refinancing and have the same amount, or less, time to repay the loan, you can save money over the lifetime of the loan.

You want to lower your monthly payments. Say you have a 30-year mortgage that you’ve been paying off for five years. If you refinance with another 30-year mortgage, you have an extra five years to pay off approximately the same amount of money. As a result, your monthly payments could be lower, but be sure to take into consideration the fact that you will likely wind up paying more in interest.

Your loan has a cosigner. Perhaps you asked someone to cosign your auto loan to improve your chances of getting approved or getting a lower interest rate. If you’re eligible for refinancing on your own, you might be able to release your cosigner and take full responsibility for the new loan.

Proceed carefully because applying for refinancing could hurt your credit. Applying for refinancing often results in a hard inquiry, when a potential lender reviews your credit. Generally, a single hard inquiry won’t have a large negative impact on credit, but multiple hard inquiries might.

When you’re refinancing a mortgage, auto loan or student loans you can still shop around and try to find the best rate without worrying about your credit too much. As long as the hard inquiries happen within a 14- to 45-day period (depending on the credit-scoring model) the credit-scoring model will consider them a single inquiry.

Consider the fees and find your break-even point before refinancing. Depending on the type of debt and the lender, there could be costs associated with refinancing debt. For example, some loans have an origination fee, either a flat fee or a percentage of the loan amount, which could be significant.

The break-even point is how long it’ll take you to recoup the costs associated with refinancing. For example, it could cost you $3,000 to refinance your mortgage, but you’ll save $150 each month. You’ll break even after 20 months because that’s when you’ll have saved $3,000 in monthly payments. If you plan on selling the home before the break-even point, it likely doesn’t make sense to refinance.

Use the same sort of calculations to weigh the pros and cons of refinancing other types of debts. When it looks like refinancing could be beneficial, shop around to try and find the terms that best fit your needs.

 

Money Matters: 2017 brings Medicare Price Changes

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cardBy Nathaniel Sillin

If you’re eligible for Medicare, or will be in the coming year, there are a few changes you should know about for 2017.

An increase in the Department of Labor’s Consumer Price Index (CPI) means there’ll be an increase in Social Security benefits and Medicare Part B premiums. For most recipients the increases almost offset each other, but those who aren’t covered by the “hold harmless” provision (about 30 percent of recipients) face a larger Part B premium increase.

These changes, along with several others, will go into effect soon and you should consider how they could affect your budget.

A slight increase in your Social Security benefits. Since 1975, Social Security benefits have an automatic cost-of-living adjustment (COLA). The adjustment depends on the CPI and helps keep your benefits in line with the rising cost of goods.

There wasn’t a COLA for 2016 benefits, but there is a .3 percent adjustment for next year. Meaning, you’ll get an additional $3 per $1,000 you receive in benefits. The estimated average monthly benefit for all retired workers is expected to increase $5, from $1,355 to $1,360.

Medicare Part B premiums will also rise. The COLA also affects Medicare Part B premiums, the part of Medicare that covers some types of procedures and medical equipment. However, for about 70 percent of Medicare recipients, the Social Security Act’s “hold harmless” provision prohibits an increase to Medicare B premiums of more than the previous year’s COLA adjustment.

According to the Centers for Medicare and Medicaid Services, held harmless recipients will pay $109 per month, an increase of $4.10.

If you aren’t held harmless, Part B premiums could increase by about 10 percent. The remaining 30 percent of Social Security beneficiaries will have their Part B premium increase by about 10 percent. You could fall into the non-held-harmless group if you:

  • Are a new enrollee
  • Enrolled in Medicare but don’t receive Social Security benefits
  • Get billed directly for Medicare Part B
  • Receive Medicare and Medicaid benefits and your state Medicaid programs pay your Part B premium
  • Are a high-income earner subject to an income-adjusted premium

For the non-held-harmless group, the premium depends on the recipient’s (or couple’s when filing a joint tax return) adjusted gross income (AGI).

  • The lowest monthly premium, for individuals who have an AGI of $85,000 or less ($170,000 for couples), will increase from $121.80 to $134 a month per person.
  • On the high end, for recipients with an AGI over $214,000 ($428,000 for couples), the monthly premium will increase from $389.80 to $428.60 per person.

Medicare Part A and B deductibles will also increase. Most people don’t have to pay Medicare Part A premiums, but you could still have to pay a deductible or coinsurance for some Part A benefits.

  • The deductible for inpatient hospital coverage, which helps cover the first 60 days of care, will increase from $1,288 to $1,316 per benefit period.
  • Daily coinsurance for the 61st through 90th day of treatment will increase from $322 to $329.
  • Daily coinsurance for day 91 on will rise from $644 to $658.
  • Each day past day 90 counts towards your lifetime reserve. You have a maximum of 60 lifetime reserve days; after which you could be responsible for all costs.
  • Skilled nursing facility care is completely covered for your first 20 days.
  • Daily coinsurance for day 21 to 100 of skilled nursing care will increase to $164.50.
  • You could be responsible for all costs beyond day 100.

The Part B annual deductible will also increase, from $166 to $183. Generally, after you’ve met your deductible, you’ll pay 20 percent of Medicare-approved costs for services covered by Part B.

Bottom line: Social Security benefits, Medicare Part B premiums and Part A and B deductibles and coinsurance will increase in 2017. Whether you’re held harmless or not, take steps to understand which changes could affect you and alter your budget accordingly.

Money Matters: Stay Warm for Less

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staying-warm-700x500

By Nathaniel Sillin

Do you turn the thermostat a notch higher or put on an extra sweater when it gets cold? It’s a common household debate as family members try to maintain a balance between comfort and savings during the winter. It’s also a debate you may be able to put to rest by investing in energy-saving maintenance and upgrades.

You can start with a home energy audit, an inspection that focuses on finding areas where your home wastes energy. Professional auditors can cost $300 to $800 depending on the type of audit, but you could consider tackling an audit and some of the changes yourself. Doing so could make your home more comfortable, lower your ecological footprint and save energy and money.

See if you qualify for state-funded weatherization assistance. Look into state-based financial assistance programs before going at it alone. Contact your state’s weatherization agency to review eligibility guidelines, find a local service provider and start an application. If approved, you could receive a professional energy audit and improvements.

If you can’t or don’t want to pay for a professional audit and don’t qualify for assistance, consider conducting a do-it-yourself (DIY) audit.

A DIY energy audit can help you identify ways to save money and stay warm. A thorough inspection of your home can uncover opportunities for improvement, and you be able to rent an infrared camera to help you spot trouble areas. Look over the DOE’s Office of Energy Efficiency and Renewable Energy’s guide to conducting a DIY home energy audit, and create a log of your findings as you go. Keep in mind, where you live can impact what fixes you want to focus on, the type and amount of insulation you’ll need and even your heating system.

Typical trouble spots and simple solutions. The following are common trouble spots and potential improvement you might want to make.

  • Keep the cold outside air out. The DOE estimates that you can save 5 to as much as 30 percent on your energy bill by just reducing drafts. Check for leaks around your doors, windows, plumbing, cabinets and other potential outlets. Also look for dirty spots on your wall, ceiling and floors as that could indicate air or moisture is getting in. Use foam sealant to fill in large gaps you find and caulking or weather stripping for smaller leaks. Covering drafty windows and doorways with storm windows or doors could also be a worthwhile investment.
  • Consider adding more insulation. The insulation in your walls and ceiling may not meet today’s recommendations. Reinsulating or supplementing what you have could help your home stay warm, or cool, and might not be as difficult as you imagine in easy-to-access attics or basements. However, you may want to check with a professional who can recommend what type of insulation to use and warn you of potential ventilation, fire or moisture hazards during and after installation.
  • Regularly inspect your heating systems. Heating systems can cost thousands of dollars to replace. While it may not be a DIY job, you may be able to prolong your system’s life by hiring a professional HVAC contractor to inspect and tune up your system before each winter. Some utilities also offer free in-home inspections of gas appliances. A job you can take on is checking the air filter and replacing it to the manufacturer’s specifications or when it looks dirty. You could also check for, and seal, holes, leaks and poor connections in the ducts.

Weigh the costs and benefits before investing your time or money in a winterization project. Some of the items on your checklist could be no-brainers, but others might require more thought.

Bottom line: A home energy audit can help you identify ways to improve your energy efficiency and make your home more comfortable. Whether you hire professionals, apply for government assistance or do it yourself, preparing before winter hits means you can enjoy a warm home without stressing over the energy bill.