Financial Help Q & A

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Financial Help Q & A

Our Visitors Asked These Financial Questions

The examples below are from some of our visitors that needed financial help. Please note that any advice or suggestions made from this site are only suggestions and should not be deemed as professional, legal advice. Please see our disclaimer for more information.

Also:  See our other financial help pages:

Question:

We have a life insurance policy with Prudential Ins. We received a letter saying that we have 31 shares of Prudential stock and advising us to buy 69 more to bring our total to 100 shares. How do I know if this is a good thing to do? thank you.

p.s. We are a retired couple - our income and assets puts us on the low side of the tax scale.

Response:

Here is my advice:

Don't buy ANYTHING you don't want to buy and don't feel obligated to buy anything from Prudential. After all, it is their insurance policy; of course they are going to tell you to buy their stock.

With that said, there may be an advantage to you if you did buy the stock. For example, if your insurance contract stipulates that they will only hold stock for you in even lots (lots of 100). If that is the case, then your option may be to buy 69 shares or to have to sell the 31 shares. Even if this is the case, you still don't need to buy the extra shares of Prudential stock.

Decide for yourself what you want to do and, if you have money to invest and want to buy the stock, then it is a good investment.

Question:

My name is Tracy and I'm desperately trying to clean up my credit. I'm 34 years old and don't know that much about finance and credit. I have one credit card that I can't transfer or lower the rate - It's a CITI Bank card - (mastercard) which I had a bit of trouble in the past trying to pay it off. They (Citibank) closed the account which I didn't even know about. I haven't even tried to use it for years - over 6-7 - I'm just trying to pay off the balance and GET RID OF IT! - It's about 4,000 now - but it's over 18% - and they won't lower the rate.

I've set up automatic bill paying through my bank - and have been on time for 7 months now - But still no help from them. I've tried to apply for other cards - just to transfer the balance - but I keep getting denied.... Uhhhg?! - I just don't know where to turn? I've even tried getting a loan from my bank -- no dice -- Is there any hope??

On top of that - I've been trying to get a copy of my credit report - But all the sites tack on a "trial membership" of some junk that I don't want to be responsible for. I've heard that once a year - and especially after you're rejected for credit - that you're entitled to a free report?

I'm truly hoping you can help or maybe point me to a sight that can - I'm afraid of credit counseling - I don't know if that damages your report even more?

Response:

It sounds like Citibank isn't helping you at all and because of all the late payments reported by them to the credit agency, you are going to have a difficult time getting any credit to pay off the CITI card. According to your email, it sounds like you really have three questions. I'll try to answer them, or at least give some guidance below:

1 - How do you clean up your credit? The best, and often only way to clean up your credit is by not making any more late payments. What was probably happening with Citibank was that while you were struggling to make payments to your credit card, they were penalizing your credit report each time a payment was late. Unfortunately, a late payment typically stays on your credit report for 5 - 7 years, so until you have no late payments for that period, your credit will remain flawed. With that said, there are still a lot of ways to improve your credit. I do not specialize in this process, but some of the links from my site's credit page may be able to help you. The most important thing is that you don't get any more bad marks against you. The second most important thing is for you to continue to use credit, since it will add to your track record. In fact, you may want to get a secured credit card (for people with bad credit), use it to make small purchases, and then pay the balance off in full each month. This will help rebuild your credit faster than if you didn't use any credit at all.

2 - How do you pay off your credit card or at least lower your interest rate? This question may be tougher. You have several options, I'll list the two best here: First, if you own a home, it is by far the best option for you to take out a home equity loan to pay off the debt. This will result in a lower interest rate and a tax deduction. Second, if you don't have any equity to borrow against (no home or no equity in your home), then you can try to get Citibank to lower your interest rate. If you cannot do this on your own, you should hire a debt services company (like the ones listed on my site) to negotiate your debt with the lender. They will not only be likely to lower your interest rate, but they can probably even reduce the amount of debt by a fair amount. And even though this will hurt your credit, it will not really matter much since your credit is already flawed.

3 - How can you get a copy of your credit report? To get a copy of your credit report, you can go to any of the three credit bureaus (Experian, Equifax or TransUnion). They each charge about $10 per report. If you want to order a report that covers all three bureaus (they often differ), you can do so at one of the credit companies listed on my site. Some of them offer them for free if you sign up for their service or you can pay about $30 to get one free and clear. Although there are some cases whereby you have rights to see a credit report without cost, I'm not sure of how to do this.

Question:

I have a question:

My wife and I are looking for a loan for three reasons in this priority:

I want to return to school at the university level. Which, as a second degree seeking student, will cost approximately $5,000.

We want to consolidate our $15,000 in credit card debt which averages at 17.6%

We want to remodel our kitchen at a cost of no more than $9,000.

We currently have $79,500 in home equity. We've owned this house for seven years. My wife earns $42,000 per year. I have left my full-time job to pursue my education; I work part-time earning $10,000 per year. We just re-financed our home earlier this year (March 2002) and moved our adjustable rate to a fixed rate at 6.5% for 15 years. We paid approximately $3,100 in closing costs at the time. We always did, and continue to pay an extra mortgage payment a year toward our principle. We have always paid against the principle on our credit cards as well.

What loan is best for us? My wife and I are interested in a Home Equity Line of Credit instead of a traditional home equity loan because of our re-finance this year. We wouldn't need ALL of the money right away and don't want to pay interest on monies not used. Our mortgage company's finance division has offered us a no closing costs/no prepay penalty/$40,000 home equity line of credit at 13.9%.

I think the interest rate is high, but it IS better than the 17.6% average we are paying on credit cards now. They won't budge from that interest rate because of no closing costs and our bankruptcy of six years ago. Even though I am not working full-time right now, our credit is manageable for us now and, despite the bankruptcy of years past, I have worked hard to sustain a decent credit score, which is 659. Our finance company said that, upon our good graces of one year, we my ask for a lower interest rate on this loan and will probably receive it. My wife and I are aware of the risks involved. We know that we are not eliminating debt with this loan, we are just exchanging this debt for another to save us $300.00 per month. This savings will allow us to pay our credit card debt off faster and more efficiently....and we are determined to do so. We realize that you are swamped with inquiries, but we would appreciate any advice you have on this matter.

Thank you very much for your time and consideration.

Response:

It sounds like you have a very good understanding of both what you want, and of what type of loan you need. I think you're on the right track but will add a few comments that may help you find the loan you're looking for:

- First, the deal your current mortgage company is offering you does NOT sound like a good deal to me. Besides the fact that they are offering you over $10k more than what you need, the interest rate of 13.9% (plus any fees on the unused LOC) seems too high and they don't seem very flexible.

- Second, you said your bankruptcy was 6 years ago. Assuming it was a Chapter 13 bankruptcy, it should fade off your credit report after 7 years. Realize that your credit will improve dramatically once this happens and use it to negotiate with the lenders that make you an offer.

- Finally, I would search other lenders (besides your current company) for a loan. I recommend using a single service that sends your loan request to hundreds or lenders so that you can find the most competitive loan and loan rate. The problem with using your current mortgage company is that they only have a few products to offer and are not always as flexible as another lender may be. By having many lenders look at your loan information (don't worry, they don't see your name and phone number), you are often able to find someone that specializes in the specific loan you are looking for and that can offer you a better rate. If this type of service doesn't appeal to you, you can go to another direct lender to get them to compete against your current offer. I have some links on my site to all of these types of companies at http://www.free-financial-advice.net/loans.html

Question:

I am overwhelmed by credit card debt and car payment. My husband is retired and has a mo. income of appx. $1200 per month. I bring home appx. $1600 per month. Following is our current obligations;

Home - none - paid in full - Doublewide mobile home appx 5 years old in a nice neighborhood on our own lot.

Car - recently purchased $25,000.00 - $430.00 per month at 7.8% interest for 6 years.

Truck - lease plan with 1 1/2 years to go at $300.00 per month - may purchase truck at end of lease for $12,000.00.

Credit card #1 - $5,000.00 at 12.99% - pay about $100.00 per month

Credit card #2 - $5,000.00 at 8.9% - pay about $100.00 per month

Credit card #3 - $1,000.00 at 21.99% - pay about $100.00 per month

Credit card #4 - $2,000.00 at 21.99% - pay about $100.00 per month

With utilities and other living expenses we are struggling. When our home was mortgaged we paid about $5,000.00 a year in interest and was not able to use this amount as a tax deduction. Somehow it wasn't enough. I have a 401-k at work but only have $5600.00 dollars there. I am 59 1/2 now and don't want to work full time due to some minor health problems.

What are your suggestions?

Response:

I am sorry to hear of your predicament. I have some advice for you and a few options that you may want to look into. I am going to be as honest as as possible, so please don't take anything I say in a negative way.

- First of all, the car you recently purchased accounts for twice as much debt as all of your credit cards combined. If you are serious about getting out of debt, you should probably sell your car and purchase a much less expensive car (maybe in the $3-10k range). The same holds true for the truck that are leasing. When it's lease is due (or earlier if the penalties are low), instead of buying the leased truck, you could buy a used truck for half of the cost and cut your payment in half.

- Second, if you are interested in lowering your credit card payments (and interest rate), you could take out a loan against your home that would consolidate all of the loans into one monthly payment. If your credit is decent, the interest rate should be lower than what you are currently paying, and because the loans would be consolidated, your monthly payment would be less than the $400 per month you are paying now (for example, your car loan is for $25k and it's monthly payment is only $30 per month more than your total credit card payments of $400).

- Third, there are probably lots of ways to reduce your monthly living expenses. Find ways to save money and every dollar you save will help you pay down the debt faster. I have a page on my site that recommends lots of ways to save money. Saving money also means spending less money. Look closely at where all of your monthly income is spent to find spending that you can reduce or eliminate.

Question:

My company moved out of town in 1995 and I retired, at that time I rolled my 401k over into an insurance annuity. I made the mistake of trusting my insurance agent (a person whom I thought was my friend) and did not read the fine print, I later found out that I have to leave my money in there for 12 years or pay a large penalty for taking it out early. I will be turning 59 1/2 in January and would like to have access to my money. My question is: Is there any way I can get my money out early without paying this penalty?

Response:

There are two types of penalties on early withdrawals from retirement accounts: One type is mandated by federal law (as in 401ks, 403bs, etc). The other type is monitored by your individual insurance policy. It sounds like this penalty is in the fine print of you insurance policy. If that's the case, I would recommend reading all of the fine print and seeing if there are any exceptions to the early withdrawal penalty that you could qualify for. If you can't find any, contact the insurance company's customer service department and try to work something out with them. They should be open to negotiation (but it probably won't be easy to negotiate). They may be able to waive the fee (or at least part of it) or you may be able to roll the annuity back into a 401k account, whereby you'd have access to it without a penalty.

Question:

I have a question about finances after divorce. I'm in the process of going through a divorce. The court has granted me temporary support of $1340 per month, plus my husband has to continue to pay the mortgage ($1360). Our joint income was $110,000 annually. I've always worked part-time so I could be at home with the children. My annual income is $20,000. I know that I won't be able to afford the house we are currently living in, but I'm worry that I won't be able to qualify for a home loan with only my income. We have two children under the age of 18 and attend private schools, which I want to continue. I'm currently paying off credit card debit as fast as I can. Any advice on rather to stay in current home and refinance it, but another 30 year loan means that I will be 70 years old before it's paid off. I hadn't planned work for that long. Any suggestions would be greatly appreciated.

Response:

Sorry to hear your news. Unfortunately I don't have a lot of advice for you, other than to consider moving into a less expensive home if you cannot afford your current mortgage. Regarding getting financing, you will be able to use any child support or alimony as income when you apply for a loan. And by law, it is illegal for any lender to discriminate against you based on the source of your income. This means, that assuming you can afford the house with the support payments, it shouldn't be any harder to finance than if you were earning the support money yourself.

Question:

Help!! I don't know who to ask so am seeking your help. I have been unable to work for 3 years (in fact, had to work part time even before that) because I had to take care of my terminally ill husband. Needless to say, without working, money set aside was used and my credit cards are up and I want to pay them off. Now, what is the best way to do that? Dissolve my "small" IRA and sell some stocks, take out a home loan, line of credit, refinance (my rate is 5.875). Please advise me. This is driving me batty. Thank you.

Response:

The right choice for you depends on many factors (of which I don't know most), but one of the most important factors is what your estimated future income looks like. If you are only paying off your credit cards by taking on more debt than you will be able to pay off with your future income, then it doesn't make any sense at all. If that's the case, you'd rather keep the credit card debt because it is not secured by your home and would not affect you adversely (except for your credit) if you defaulted on it.

If, on the other hand, you are expecting to return to a profitable budget sometime in the future and only need to finance the credit card debt until then, there are many options that would work equally well. The best choices would be to get a home equity line or line of credit on your home. Rates are very low right now and the interest is deductible on your taxes. If you do this, it probably makes sense to sell some of your stock (not your IRA though) each month or quarter to make the payments on this debt. That will insure that you don't go into credit card debt again.

However, I must say that this is only a temporary solution. In the longer term, you'll have to find a way to either live within your current means or to increase your income.

Question:

My husband is 54 1/2 and i am 53 we are currently in our 4th year of a 30 year mortgage with am arm of 11 % that will adjust to 11 1/2 in june we also have a 401 k account in a minimal risk profile , with enough in it to pay off our mortgage. one of my husband's big worries is having a high price mortgage to pay for on retirement income. We have an opportunity to refinance our mortgage for 15 years at 5.75 Would we be better off financially to refinance or pull the money from the 401 k and pay off the mortgage We would then invest what we currently pay for house ($600) and what we put into 401k ($400) into a mutual fund at 7% interest paid to us over the 10 year period until my husband is retirement age We realize that we would lose a tax deduction but would the money saved in interest and the new investment interest override the loss?

Response:

It looks to me like the best plan is to refinance the mortgage and invest the savings into mutual funds. Here's why I believe this:

- By refinancing the mortgage you will drop your interest rate from 11.5% to half that rate. This should drop your mortgage payment from $600 to $300-400. You can then invest this money in your 401K or into mutual funds.
- If you took the money from your 401K you would not only have to pay a 10% penalty on the withdrawal (I think you can only avoid the 10% penalty if you are buying a new house, not paying it off), but you would also have to pay regular income taxes on the total amount. This would likely put you into a higher tax bracket for the year and would make the after-tax
portion of the 401K worth much less.
- By paying off the mortgage with your 401K you would also lose all of the beneficial tax benefits of carrying the mortgage. Similarily, you would also lose the tax-free compounding effect of your 401K.
- Finally, your investments in your 401K and mutual funds should return a higher percentage than the after-tax mortgage rate that you will be paying. This alone is reason to keep your investments rather than pay off your mortgage. Combined with the other points listed above, it seems like a no brainer to keep your 401K and refinance the existing loan.

Question:

My husband has a government school loan that has jumped from an initial balance of $30K to $72K. The original balance compounded to a balance of $45K before the loan was consolidated with US Dept of Education in May 2000. This is when the balance jumped to $68K. The account has been kept in deferment or Forbearance to keep the monthly payment affordable($100/month), however, the monthly interest is still building, currently almost $500/month. The amount of interest is is added to the principle. The current bal. is $72K. We need HELP. How can we reverse this? We can now pay more each month, but to keep up the the interest we would put ourselves in severe financial straights. We've heard that there is a way of reversing the the consolidation in order to get back to the original balance of $45K.  I would much rather make higher payments on a $45K balance than to have to pay on a loan that will keep us in debt for the next 20 or so years. Thanks for this great website.

Response:

I'm not an expert on government funded school loans, so I don't know if there is a legal way to reverse the consolidation that you've heard of. Try checking with the person that gave you that idea to see what they are talking about. If that doesn't work then contact the government office that holds the loan and ask them what your options are.  If those approaches don't work, you may be able to work with a legal company to help reduce your debt. These companies would basically call the lender and negotiate a better interest rate or a reduced principal balance for you, but depending on how it is done it could harm your credit.

The real thing to look at is whether or not you are going to be able to pay off this loan. If you are going to continue accruing interest faster than you can pay it off then you need to do something about it. The four solutions I can think of are (in the best order): 1 - find a way to reduce your interest rate so that the interest is manageable, 2 - find a way to make more money to pay the debt faster, 3 - renegotiate the debt to lower your payment, 4 - declare bankruptcy (which lowers or eliminates the debt but severely harms your credit for 7-10 years).

Question:

My husband wants to refinance the house again (!) in order to consolidate credit card debt. The bank has offered us a loan of 1% (6 something %) less than we currently have. No fees or points. There are two options actually: refinance and roll in the credit card debt or just get a low interest loan to consolidate the credit card debt, of about 10,000. I'm in favor of the latter. We are 63 and 64 years old, with no assets except the house (Isn't that sick!) on which we carry a balance of 102,000. Oh....and we also have a home equity loan of 22,000. Our income is about 40,000 gross. I know, we sound stupid.

Response:

Sorry it's taken me so long to get back to you, I just haven't had the time to answer all the questions I receive.

Anyway, if you haven't acted on the refinance yet, here's my advice: It makes sense to refinance if you can really reduce your interest rate by 1% and not pay any points or fees. Regarding whether or not you want to roll in the credit card debt, there are pros and cons. The pros are that the interest will become tax deductible, your payments will be lower, and your overall interest rate will decrease. The cons are that the credit card debt will now be secured by your house and you will have less equity in your house (in case you need to take out money at some time in your future). Also, having some credit card debt is a good reminder for some people. Once it is refinanced, it is easy for people to fall back into the credit card trap, so if you pay off your credit card debt with a refinance, make sure you cut up your credit cards or only save them for emergencies.

Question:

Yes, I would like some advice about a company who you pay monthly a fee and in 3 years you are debt free of 20K. They negotiate with creditors. have you ever heard of this and is it a good thing do you think?

Response:

This could or could not be a good deal, but it sounds like a scam to me.  If they are going to negotiate your debt then you shouldn't pay a monthly fee, but rather take on the responsibility of the after-negotiation payments. It sounds to me like they are asking you to pay a fixed amount regardless of how well they negotiate. This gives them ample incentive to get rid of as much of your debt as possible, but it also gives them
incentive to charge you more than the value it is worth to you.

My advice, I would not recommend this unless you can get a guaranteed of a minimum debt payment that is much lower than your current payment.  And at $20k, the minimum debt payment for 3 years at 8% is $626. Also, be careful of the risk to your credit.

Question:

Please answer this question for me. My husband passed away Nov. 21st 2002, he left me with a huge amount of credit card debt. I need to know how to pay these bills, would it be better to take the money from the 401k acct or try to get a loan? I was told that if I take the money from the 401k acct. I will have to pay a lot of taxes, i am not able to work and I am 65yrs. old.

Response:

If the credit card bills are not under your name, then I don't believe that you are responsible for them.

However, if you are responsible for the credit card bills and want to pay them with your 401K, you should be able to take out money from your 401K without paying a tax penalty (because you are over 59 1/2), however, you will have to pay normal income taxes on the amount you withdraw. Therefore, if this is how you want to proceed, then you may want to pay only a portion of the debt off this year and defer some of it until next
year (if it would keep you in a lower tax bracket for both years than paying it all at once). The money withdrawn will show up on your taxes as ordinary income, so if you don't have much income now the taxes shouldn't be too high.

If I were you, I'd really investigate whether or not you are responsible for the debt in the first place. If your name is not associated with the credit cards, then there is little the credit card companies can do to recover the money. And even if you they tell you that you are responsible and you can't afford to pay it, the worst that they can do is tarnish your credit, which I assume would probably not dramatically affect your life given that at this stage in your life you probably won't need to borrow
much more money. In my opinion, you should be looking out for yourself right now - if you need the 401K money to retire, then don't pay it back to the credit card companies. But hey, that's just my opinion, and you are free to do what you deem is right.

Question:

I have a deferred compensation plan that I did not take out when I retired from State Service. I had $56,000 75% equity, l5% bonds, l0% money market , now with the same allocation it is down to 45,000. I was suppose to have distribution divided over 12 years beginning Jan 27, 2003. I do not need the money now and want to know if I should roll it over into a traditional IRA or change allocation and leave it where it is?

Please answer quickly, I do not have much time to decide.

Response:

I hope I got to your question in time to help. I'm not sure how old you are, but if you won't need the money until at least 59 1/2, then it is likely to your advantage to roll the money over to an IRA. By rolling it over (and waiting until you are 59 1/2) you will be able to have access to the money whenever you need it. You will also be able to have more control over your money. I have rolled over two of my 401Ks into E*trade and am able to invest the money in any stock, fund or money market I want. If you want more guidance over your investments, you could roll the plan over into an account with someone like Charles Schwab or some other full service or discount service investment advisor. Another reason it makes sense to defer the payments is so that you can time the withdrawals to correspond to the years that you face the smallest tax rates (which usually occur when you actually need the money).

Regarding your investment allocation. I think your allocations are okay (at 75% equity), but as the portfolio grows over the next 5 to 10 years, you'll probably want to reduce your equity exposure to 40-50%.

Good luck no matter what you decide.

Question:

Thank you for developing this wonderful site. I am going to take the time to go through it page by page and will put some of your ideas into practice. Please help me with a question, if you don't mind.

My wife and I have about $45,000 in the bank that we were going to use on a down payment for a house in about 18 months. We are carrying about 25,000 in credit card debts between the two of us. My wife is pregnant and will not be working after May 2003. I will need to get a second job (maybe a third) to make all of the bill payments. My question is this:

Should we use some of our down payment money to eliminate the credit card debt and build back our savings with my second job, or should I use the second job money to pay down the debt?

Any help you could give would be appreciated.

Response:

Your choice of whether to pay down credit card debt immediately or with your second job should depend on where you get your highest return. If you are paying high rates on your credit cards, then I would pay them down immediately. If you are getting zero percent interest rates on your credit cards, then I would pay them down with your second job. Somewhere in between the two rates and you need to decide which method is more beneficial.

Also, I would compare your credit card rates to the rate you are earning on the money you have in savings. If you are earning 1-2% on your savings account, and are paying 4-5% on your credit cards, then it makes sense to pay the credit cards off instead of earning 1-2%.

Also, another benefit of paying off the credit cards immediately would be that, from that point forward, you will be able to use the money you would have been paying to credit cards to save for your house down payment. It will also be easier to qualify for a loan if you do not have any credit card debt.

Question:

I was wondering if you want a FHA loan does it matter who you go through?

Response:

When applying for an FHA loan, it does matter who you go through to get your loan. Each company will offer different rates, different mortgage points and even different terms. Like any other loan, you should shop around for the best rate and the most favorable terms.

Here is a link to a site with more information on FHA loans:

http://www.fhalibrary.com/

Question:

I'm hoping that perhaps you can answer my question, or at least refer me to another web-site, or book, or non-profit...

My mother has declared bankruptcy, leaving me to pay off her outstanding debt that remains on an account I'd co-signed.  My question is: When my mother passes away, am I obligated to take over ALL payments on any other debts that she leaves? How can I protect myself from being responsible for all of her debts? I'd appreciate any referrals or suggestions.

Thank you.

Response:

I'm not a bankruptcy expert, but if you haven't cosigned for any of the other debt, then you will not be responsible for any of it. The only way that it could affect you is if you inherit anything of value from your mother that is tied to some of the debt. For example, if she has a home that you inherit, and there are secured debts against it (like mortgages or second mortgages), then you will owe on those debts. If her debts are to unsecured creditors (like credit cards or unsecured personal loans), then you will not be held responsible and the lender will have no recourse to you.

Question:

Hi there...I am in a 'dither' here and don't know what to do.....We are retired seniors...we have a debt of $25000 on Home equity loan and $10,000 credit card loan....We are in the process of selling our rental property and will clear about $42,000....

My home equity loan is for 5 yrs at 5.50 %...and my credit card is 0% APR for one year and then I will switch again to low apr....

My question is...should I pay off some bill and which one or should I keep the money in the bank and try to keep up the payments on my debts...If I go the whole term on the HE loan...I will be paying over $29000 as opposed to $25000 if I paid it off now....Please help me...any advice would be so much appreciated....Thank you....

Response:

First of all, I would pay off the credit cards in full. If you want to wait until just before the 0% APR expires, that would be acceptable because you could invest the same $10,000 in a CD and earn a few hundred dollars in the meantime. However, there is really no benefit to having credit card debt. And as soon as interest rates rise, the credit card companies will dispose of all the low interest rates they are currently offering on balance transfers, and you could get stuck with a much higher rate.

Regarding paying off the home equity loan, your decision depends on what else you would do with the money. Because the 5.5% interest is deductible on your taxes, the effective interest rate that you are paying is about 3.5 - 4.0% (assuming a 30-35% tax rate). If you are earning more than that on the money that you would use to pay off the loan, than you probably shouldn't pay off the loan. However, if you don't need the money and you are not earning at least 4% on the money, then you should pay off the loan in full. Think of it as a guaranteed way to earn 5.5% (3.5-4.0% after taxes), which is the interest rate that you would have paid on the loan.

Question:

We have currently paid off $14,000.00 on a house on the Central Coast NSW which we purchased for $162,000.00.  We owe $130,000.00.  The House is valued at average: $280,000.00

We would like to sell this house and move back to Sydney where houses are about $600,000.00

Mother in law will live with us and input $120,000.00,please advise us with any ideas you may have, can this be done given that mother-in-law earns $70,000.00 per year and we "running a business" are just paying the bills having had a bad year?

Response:

I'm not really sure how the Sydney mortgage market works, but if it is anything like the US market, then you shouldn't have a problem buying a house. If you sell your current house for $280,000 you should net about $140,000 ($150,000 less sales costs). Assuming you can roll the gain over into a new house without paying taxes, you have a 25% down payment on a $560,000 home. And it is much easier to get a 75% loan than an 80% or 90% loan. However, if you have good credit and your mother in law is willing to co-sign and pledge her income (and maybe even contribute to the down payment), then your odds are pretty good.

There are probably many banks that will turn you down, but I'm almost certain that there will be several that will give you a loan. The only decision you'll have to decide is whether or not to accept their loans. If you find one with good terms and a market rate, then accept it for sure, but because of your circumstances many of the offers you get may be for higher interest rates. Higher interest rates will make it significantly harder for you make the mortgage payments, so make sure you don't step into something you're not comfortable with. In the worst case, live in an apartment, save your money, and revive your business before applying. Also, if you do accept a loan with somewhat high interest rates, make sure you position yourself to be able to refinance as soon as things get better for you.

Also, when finding a loan, don't just check with your local banks. Find a good mortgage broker who can search hundreds of loan programs and who can negotiate with the lenders to get you the best deal. Look for a broker who is very aggressive, motivated and is an independent thinker.

Question:

I love my wife dearly but she continues to apply for credit in both our names without my input or approval. She is a stay at home Mom and I generate our only income. Yet she still seems to be able to be able to get credit with Art Van on furniture, Dell on a new computer, JC Penny on clothing, etc.... How can she do this without my signature and is there a way to block requests for credit presented against my income?

Response:

To answer your question, there is something you can do to protect your credit (even if it's from your wife). You can call the three credit reporting companies (Experian, TransUnion and Equifax) and ask them to put a block on your account that requires any creditor to get your specific approval before creating any new accounts for you. You would also want to call the credit card companies that your wife currently uses and ask them to either remove your name from the credit card account or to require your confirmation on each purchase. If they won't do this, you could close the account or possibly block the card from any future purchases.

See Also:  Financial Help