6 Tips for Buying a Home in 2016

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Would-be homebuyers eyeing 2016 as the year have a fair bit working in their favor. Mortgage credit continues to thaw, interest rates remain surprisingly flat and more homes are expected to hit the market as Spring approaches.

To be sure, some buyers have a more streamlined path than others. Macro-level outlooks are one thing; it’s another to build the credit and finances necessary to lock down a home loan in the current lending environment.

Whether you’re a first-time explorer or a long-term dreamer, here are six tips to help you make the leap and take advantage of a promising housing market in 2016.

1. Tackle Your Credit Now

Credit looks to be loosening as we head into the Spring homebuying season. Through the first six months of 2015, the average FICO credit score for all closed loans was 730, but that decreased to a 722 FICO score by the end of the year, according to mortgage software firm Ellie Mae.

Still, building the strongest credit profile possible can save you money when it comes to things like interest rates and private mortgage insurance.

To improve your credit, you can get copies of your free annual credit reports each year from AnnualCreditReport.com. Review them carefully for errors or problems that might be dragging down your scores. (You can find more about how to dispute errors on your credit reports here.) Pay your bills on time and strive to keep your credit card balances under at least 30% and ideally 10% of your credit limit. You can track your progress by viewing your two free credit scores each month on Credit.com.

2. Explore Your Options

Homebuying education is key. Studies and surveys consistently show that buyers overestimate their mortgage knowledge or figure their lack of it doesn’t matter. The reality is ill-prepared buyers can wind up in bad loans or simply miss out on maximizing their budget and options.

Take time to learn about the major mortgage types, the upfront costs of homebuying and what might make the most sense given your unique credit and financial situation.

VA loans are arguably the most powerful loan on the market, but they’re not a great fit for every veteran. Federal Housing Administration loans allow for low down payments, but carry costly mortgage insurance. Conventional loans feature tougher credit benchmarks, but come with down payments as low as 3%.

3. Pre-Approval Is a Must

Shopping for homes is the fun part. But it’s way more fun, not to mention useful, to shop for homes you can realistically afford. Work on getting loan pre-approval before starting your home search.

A pre-approval letter shows sellers and real estate agents you’re a serious homebuying candidate. In fact, some agents won’t accept purchase offers without one. Pre-approval also gives you a clear sense of how much home you can buy.

But remember the prefix is there for a reason — loan pre-approval does not guarantee you’ll get a home loan. It’s a big step in the right direction that comes with conditions and contingencies.

4. Know Your Market

Bidding wars are breaking out in communities where housing inventory struggles to keep pace with demand. About a third of homes sold for or above their list price in October 2015, according to CoreLogic.

The likelihood of rising mortgage rates in 2016 may push even more buyers into the game. Look for seasoned real estate agents who really know your market and how to navigate a bidding war if need be. Coming in with a strong offer at the outset can be crucial for buyers competing in hotter real estate markets.

5. Be Patient

Getting to the closing table might take a little longer than normal this year, so plan accordingly. The average purchase loan closed in 50 days in December, eight days longer than the December prior, according to Ellie Mae.

Many mortgage industry professionals point to recent disclosure and documentation changes as the culprit. But those hiccups and delays may subside as lenders, title companies and other industry players better adjust to the new regulations.

A longer closing window can affect everything from purchase contracts and interest rate locks to closing costs and coordinating your move.

6. Avoid Costly Detours

It’s a good idea to keep a tight lid on your credit and finances once you’ve decided to pursue a home purchase. Taking on new credit, changing jobs and even moving money around accounts can raise a red flag with lenders and, in some cases, derail your loan.

Change isn’t your friend during the homebuying journey. It’s not enough to get your credit and finances in order before starting the process – work hard to keep them that way as you move toward closing day.

More on Mortgages & Homebuying:

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5 Ways Your Money Could Be Affected By a Marco Rubio Presidency

marco rubio

Right now, there are a lot of people who could possibly be the 45th President of the United States. Among the many contenders is Sen. Marco Rubio (R-Fla.), who came in a close third place to Donald Trump and Sen. Ted Cruz in the Iowa caucus on Feb. 1.

Like every other presidential candidate, Rubio has all sorts of ideas about how he’d change the country. While it’s difficult to say exactly how these proposals could affect Americans — particularly because it’s hard to predict if and how they’ll materialize, not to mention how they’ll be paid for — they’re important to consider as voters decide in the coming months who will run the country for the next four years.

We’ve already rounded up a handful of ways other candidates could affect your money if elected president (read here about Trump, Cruz and Sen. Bernie Sanders), so here’s an overview of Rubio’s positions on issues that could impact your finances.

1. Healthcare Reform

Like other Republican presidential candidates, Rubio proposes repealing Obamacare. The law has significantly impacted the way in which many Americans pay for healthcare, as well as how much they pay, so getting rid of it would spur more changes in that area. Rubio’s idea for giving people access to affordable healthcare is to give Americans “an advanceable, refundable tax credit that can be used to purchase insurance,” according to his website. Where that tax credit would come from, however, is unclear.

2. Income-Based Student Loan Repayment

At the moment, people have a variety of student loan repayment options (for federal loans, at least). One of them is income-based repayment, which borrowers can apply for through their student loan servicers. Rubio proposes making income-based repayment the “universal repayment method for federal student loans.”

He hasn’t detailed how this simplified IBR would work — under the current IBR program for new borrowers, people pay 10% of their discretionary monthly income toward the loans, and any balance remaining after 20 years is forgiven. The rules are a little different if you have older loans. Right now, you have to qualify for IBR, but Rubio proposes it be automatic.

3. Social Security

Rubio wants to reform Social Security and Medicare, because the way he sees it, the programs can’t last the way they are now. He proposes keeping things the same for people who are near retirement, but he suggests gradually increasing the Social Security retirement age and exempting from payroll tax seniors older than 65 who wish to continue working. He also proposes reducing the growth in benefits for wealthier retirees to strengthen the benefits for low-income retirees.

4. Fewer Tax Brackets

There are seven tax brackets right now, which Rubio proposes replacing with three. The current tax brackets aren’t easy to explain concisely (here’s a more in-depth guide to current tax brackets), but Rubio proposes brackets of 15%, 25% and 35% of taxpayers’ incomes, depending on filing status and how much they earn. (The low end of the current tax brackets is 10%, and the high end is higher than 35%). If Rubio gets his way, it’s likely you’d see a difference in what you’re paying in taxes, though it’s difficult to say if you’ll pay more or less.

5. No Minimum Wage Increase

Rubio thinks Americans need higher-paying jobs, but he doesn’t think raising the minimum wage is the way to do it. Instead, he wants to focus on bolstering vocational education and cutting the corporate tax rate so business can offer more jobs to un- and under-employed people.

More Money-Saving Reads:

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9 Cities Where It’s Getting Cheaper to Rent This Year

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How We’re Planning Our Hibernation Vacation

We know we’re preaching to the choir when we say this winter has been rough. It’s for this very reason that we’re “leavin’ on a jet plane and don’t know when [we’ll] be back again.” We need sun, sand and warmth – like, now.

This is our strategy for keeping the costs of our trip down, or keeping it not-so-expensive (NSE).

Changing Course

When we first started this article, we were planning to head to Puerto Vallarta, Mexico in early Spring. We were relying on the credit card miles we built through managing our business. Unfortunately, on our quest for flights, we learned that the number of miles required to fly to Puerto Vallarta has increased. Now, it would cost us as many airline miles to fly to Puerto Vallarta as it would to fly to Brazil or Italy. As we’ve used miles to fly to Puerto Vallarta before, this felt like a bait and switch.

We have miles on other cards, but they’re more conducive to European travel. To use the miles we want to unload now, we decided to rethink our vacation destination.

Now we’re headed to Palm Springs, Calif. This will let us use the miles we need to dump and keep our travel expenses low. Because we’ve chosen a smaller town that offers a lot in a centrally located place, we won’t need to rent a car. We may, however, rent bikes because that sounds fabulous. (It may sound less fabulous once we’ve imbibed in a few libations, but we digress.)

The other strategy we’re implementing is monumental planning. We always say that planning is key maintaining any budget and it will be the key to controlling our vacation expenses. First, we’re scouting the restaurants, coffee shops and bars that have online coupons. We’re also researching which establishments offer promotions and when. Hey, we’re not above the Blue Hair special.

We’re using tech, as well. Here’s how.

1. Vacation Alerts

We’ve signed up for alerts with sites like Airfarewatchdog.com and Jetsetter.com, which offer customized alerts. We choose the kind of vacation we want, where we want to go and what we want to do — and receive alerts tailored to these needs. These sites offer a lot of ingenious money-saving travel tips and share potential deals on social media as well.

2. Discount Codes

Sites such as RetailMeNot.com offer discount codes for just about everything. For our pending vacation, we’re looking for hotel options, but we can also search for airline tickets and car rentals. Discounts range from a few dollars to 40% off. RetailMeNot also offers vouchers for free meals at hotels and bonus rewards points and miles for hotels and airlines. If the stars are aligned, we may even be able to use our existing hotel and airline rewards with discount codes.

3. Planning Ahead

We want this vacation to combine relaxation with adventure. On vacation, everything costs money and expenses add up quickly. We’re using sites like Living Social and Groupon to plan our activities ahead of our trip. These apps and others let us change locations even before getting to our vacation destination so we can find discounts in that area.

To avoid luggage fees, we’ll each take one carry-on bag at the most. This vacation will only be one week. We survived 30 days down under with only two carry-on bags. Seven days will be a piece of cake.

4. Coupons

We’re downloading coupons for groceries, restaurants and other entertainment and activities in Palm Springs. Sites such as Coupons.com and TheKrazyCouponLady.com offer more coupons than one needs. Some coupons can be sent via text directly to our phones.

There are also apps, like The Coupons App, that can help you find discounts in your travel destination.

5. Gift Cards

Similar to holiday shopping, we can buy discount gift cards in advance and use them on our vacation. Sites such as Giftcard.com, Giftcardgranny.com and Plasticjungle.com offer a wide variety of discount gift cards including ones for clothing and other retail stores, movie theaters, spas, airlines and car rentals.

6. Travel Apps

Apps such as Travel Zoo offer discounts on hotels, airlines, entertainment and local attractions in both foreign and domestic cities. There are also apps, like Larky, that track your loyalty programs and membership benefits. Larky, for instance, notifies us when we’re near an establishment that offers a discount through a loyalty program we belong to.

This is our strategy for getting away from Old Man Winter and not succumbing to becoming Poor Richard in the process. Hopefully this gives you an idea how to lower the cost of your hibernation vacation so can still reach your financial goals. (You can monitor your financial goals like building good credit for free on Credit.com.)

More Money-Saving Reads:

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Renters Pay $112 More a Year for Car Insurance. Is That Fair?

Auto insurers levy something akin to a home renters’ surcharge on policy-holders, and that’s unfair, the Consumer Federation of America alleged on Monday. The interest group says it secret-shopped for typical driver policies in 10 U.S. cities and found renter rates averaged 7% higher – costing those consumers $112 annually – over rates offered to an identical consumer who was a homeowner. Renter rates were as much as 47% higher, the CFA said.

“To raise people’s auto insurance premium because they can’t afford to buy their homes unfairly discriminates against lower-income drivers,” said J. Robert Hunter, CFA’s Insurance Director and the former Insurance Commissioner of Texas. “A good driver is a good driver whether she rents or owns her home. Insurance companies should not be allowed to target people based on homeownership status.”

The organization says it tested rates for minimum limits liability coverage in 10 cities from the nation’s largest insurers – State Farm, Geico, Allstate, Progressive, Farmers, Liberty Mutual and Nationwide. It used company websites to solicit two premiums in each city for a 30-year old female motorist who drives a 2005 Honda Civic and has a perfect driving record.

Liberty Mutual penalized the renter the most, with premium hikes averaging $307 per year, or 19% more, CFA said. The firm did not immediately respond to a request for comment, but directed questions towards industry group the Insurance Information Institute.

But there were several double-digit percentage increases around the country. For example, Allstate charged renters in Tampa 19% more than it charged homeowners; Liberty Mutual charged Baltimore renters 23% more and 26% more in Newark; and Farmers Insurance charged renters in Louisville 47% more (or $768) than homeowners for a basic auto insurance policy.

Jim Lynch, chief actuary for the Insurance Information Institute, did not dispute CFA’s findings, but he said the advocacy group mischaracterized the results. He said data shows that renters are more likely to have accidents than owners, so the difference in rates are the result of “an actuarially justifiable variable.”

“The CFA has their spin on it,” he said. “They are really, really eager to call something a penalty. What I see is that homeowners (pay less). ..Most consumers would say if you present less risk you should pay a lower rate.”

He speculated that there are many reasons renters file more claims: as one example, many renters park in crowded surface lots, where the likelihood of accidents is higher than in homeowners’ driveways.

“It would be difficult to go to a homeowner and say, ‘We’re going to charge you the same rate because somebody else says that’s the way it ought to be.’ If I were that homeowner, I would say, ‘That’s not fair.’ But that’s how fairness operates in the insurance (industry),” Lynch said.

There were a couple of exceptions to the renters “penalty” in the CFA data.

“Geico was the only company tested that did not consider homeownership status in any of the 10 cities,” CFA said. “The only premium decrease for renters was found in Chicago, where Allstate lowered rates by 11% compared with premiums for homeowners.”

Also, state laws in California prohibit using homeownership status when setting premiums. When CFA tested rates in Oakland, California, it found that all companies charged the same premium to a good driver whether she owned or rented her home.

Many factors go into determining your car insurance rate, including your credit score. You can check your credit scores for free every month on Credit.com to see where you stand.

More on Cars:

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Decoding the Reducing Educational Debt (RED) Act

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We have a massive problem in our country: student loan debt. Clocking in at over $1.2 trillion, it has been assessed as the next market bubble, and a massive detriment to the personal finances of the millennial generation.

Some policymakers have recognized the issue, and taken initiative to fight against it. On January 21, 2016, a coalition of Senate Democrats announced their newest proposal: the Reducing Educational Debt Act, or RED Act. The act contains versions of a series of bills that have previously been proposed, but not enacted.

America’s College Promise Act

When President Obama called for educational reform via tuition-free community college during his 2015 State of the Union address, Senator Tammy Baldwin of Wisconsin took action. She proposed America’s College Promise Act, which is now included as a part of the three-pronged RED Act.

This version of the legislation would provide federal funding to states that made free community college a priority. For every $1 the state set aside for community college tuition waivers, the Federal government would contribute $3. This money would only go to eligible students, and would be applied before any other aid.

Currently, those who qualify for the maximum award level of the Pell Grant are largely able to go to community college without paying for tuition out of pocket. Oftentimes, though not always, the maximum award is sufficient to not only cover tuition and fees, but also books, and a marginal amount of living expenses.

This portion of the RED Act would also provide funding to Historically Black Colleges and Universities, along with other Minority Serving Institutions, to ensure that low-income students have enough funding to cover their first two years of attendance.

Bank on Students Emergency Loan Refinancing Act

In June of 2014, Senator Elizabeth Warren’s Bank on Students Emergency Loan Refinancing Act was turned down in the Senate. Not one to give up on the issue, the Massachusetts senator’s legislation is featured prominently in the RED Act.

This portion of the proposed act would allow those with student loans to refinance through the Federal government. It would allow eligible individuals carrying FFELP and Direct student loans initiated prior to 2010 to refinance at the 2013-2014 school year rate: 3.86%. Those who borrowed through the Federal government between the years of 2006-2009 were subject to rates between 6.0%-6.8%.

Those with private student loans would also be able to refinance through the Federal government. They would be able to do so at whatever current rates were at the time of refinance. For the 2016-17 school year, that rate is 4.29%.

Currently, you are able to refinance through financial institutions in the private sector, but not through the Federal government. Those in good standing with a high credit score may be able to get rates as low as 3.50% in this way today, though they have to be discriminating when making this decision.

Refinancing Federal student loans in the private sector may put them at risk of losing the benefits of certain federal programs, like deferment and PAYE.

Pell Grant Legislation

In 2015, Senator Mazie Hirono of Hawaii proposed a series of bills that would protect and strengthen the Pell Grant both immediately and long term. Aspects of some of those bills have been integrated into the RED Act.

Currently, Pell Grants are funded largely through discretionary spending, with a small portion of the funding coming from a mandatory add-on. In general, Republicans have a history of trying to cut Pell Grant funding, while Democrats have a history of trying to stabilize and raise it. The Health Care and Education Reconciliation Act expanded funding short-term, adjusting the maximum Pell Grant award to inflation for the years 2013-2017.

Sen. Hirono’s bill aims to extend the adjustment for inflation, making it a built-in part of the mandatory add-on, rather than leaving it up to debate as a part of discretionary spending. It also aims to protect the inflationary adjustment so it cannot be deliberated every time Congress sits down to evaluate the Pell Grant.

Keep Up On the RED Act

Want to follow this act as it makes its way through the legislative process? Follow #IntheRED on social media to get the latest news and opinions.

The post Decoding the Reducing Educational Debt (RED) Act appeared first on MagnifyMoney.

9 Expert Tips for First-time Homebuyers

Mortgage

Buying your first house can be an excellent test of patience, endurance and resilience. If you’ve never been through the process before, it can certainly be an intimidating one. From scary terms and bidding wars to that tiny matter of plunking down a whole heck of a lot of money for a down payment, most people who are buying their first homes could stand to use a little help along the way.

We’ve tapped into some experts from across the country to find out what their top tips are when helping first-time homebuyers find and purchase their dream houses. Use some of these whenever it’s your turn to take a ride down Homebuyers’ Lane.

Tip No. 1: Determine a comfortable budget

Expert: Russell Vilt, Managing Broker & Owner Excel Condos, Chicago, IL

What it means: Nothing can be done when it comes to buying a home without first understanding your budget. “I always suggest speaking with a lender who can help determine their buying power,” says Vilt. “The sales price of a home is not the only expense, so they need to be aware of taxes, assessments (if it’s a condo), homeowners’ insurance, etc.”

A tip from MagnifyMoney: be sure not to let a mortgage lender or realtor talk you into buying more than you can truly afford. Just because you get approved for a $300,000 mortgage, it doesn’t mean you should get a $300,000 house. You should also learn how to hack your way to a cheaper mortgage.

Tip No. 2: Get pre-approved by a lender as soon as you think you want to purchase a house

Expert: Rhonda Fee, broker/realtor, Aspire Realty Services, Pleasanton, CA

What it means: Pre-approval will be your road map for a successful purchase, which is why it’s so important to get this part rolling right away. “Understand what bills need to paid off, and how much down payment you’ll need,” says Fee. “The lender should be someone they have been referred to by a friend who had a successful transaction with that lender, or … a realtor. A lender can kill a deal if they are not on top of their game.”

Check out this piece for more about what to know before getting pre-approved for a mortgage.

Tip No. 3: Know what loans are available to you

Expert: Tory Sheffer, realtor, Berkshire Hathaway HomeServices, Michigan

What it means: Sheffer has come to realize that most first-time homebuyers tend to know the basics about buying a home — like what a mortgage is, for example — but that’s about it. “They aren’t aware of the different options available to them with Conventional, FHA, Rural Development and 80/10/10 Piggyback loans to help buyers who do not want to pay Private Mortgage Insurance,” she said. To help, Sheffer makes sure to take some time and explain to her clients the difference between these additional options. For example:

  • Rural Development is a zero down payment program
  • FHA is a 3.5% down payment
  • 80/10/10 is a 10% down payment with 10% as a second mortgage to avoid PMI, which in turn lowers the monthly rate, more often than not
  • Conventional Mortgages are not insured by the federal government, but more often than not PMI is required until the buyer has built 20% equity in their home. Learn more about why you should aim for a 20% down payment.

Ask your broker or lender for more specific information about each. 

Tip No. 4: Find an agent you trust, and don’t be afraid to shop around if your agent isn’t meeting your needs

Expert: Leize Gaillard, agent, William Means Real Estate, Charleston, SC

What it means: As with any other large purchase you would make, it only makes sense to shop around for the best options. “I find that the agent/buyer bond is particularly strong with first-time homebuyers,” says Gaillard, “as the buyers often need extra detailed explanations of each step in the process. This certainly takes more time, effort and patience on the part of the agent, and not all agents are naturals in this department.” It’s important to feel comfortable with your agent, like you can ask questions and get reliable answers, and a patient agent will work hard to earn your trust and business, and will stick with a first-time buyer without making them feel rushed. 

Tip No. 5: Don’t fall in love with houses you see online

The expert: Wendy Roudybush, Broker, Jamboree Homes, Colorado City, CO

What it means: Unfortunately Roudybush has seen it happen all too many times — a first-time homebuyer finds something online that looks great, falls in love with it, and then is disappointed when seeing it in person. “It can be very different in person,” she says. “Also, when looking at houses, don’t make snide comments about the house in front of the seller or the seller’s agent — it won’t endear you, and it could make it difficult to get your offer accepted. Understand how the real estate industry works.” 

Tip No. 6: Unless you have lots of extra cash, forgo foreclosures, auctions and bank sales

Expert: Leize Gaillard, agent, William Means Real Estate, Charleston, SC

What it means: Gaillard says she is often presented with first-time homebuyers who expect to get their dream home for 20% or more under market value through a foreclosure, auction or bank sale — but there are stipulations with these types of sales. “What these buyers don’t understand is that by the time homes have reached the open market, they have been left vacant in poor condition for some time,” she said. “Simply getting them back in reasonable habitable condition could take thousands of dollars in maintenance work. It isn’t to say there won’t be some good foreclosure deals out there, but in general, if it looks too good to be true, it probably is.” 

Tip No. 7: Visit at least 20-30 properties in person before making a decision

Expert: Ari Harkov, Harkov Lewis Team at Halstead Property, New York, NY

What it means: There are many factors that go into determining your perfect home, and it takes a developed eye to pick up on them. “Price, neighborhood, immediate street, size, views, condition, monthly carrying costs, etc.,” says Harkov, are all factors to consider. “Searching online is incredibly value, but nothing replaces in person visits. Taking the time to visit numerous properties through private appointments and open houses will allow you to confidently narrow in on your preferred criteria and make an offer with confidence once you do find a home that you love.”

Tip No. 8: Don’t be afraid to look everywhere

Expert: Will Johnson, realtor and founder of the Sell and Stage Team, Hendersonville, TN

What it means: It can be intimidating to check out houses the first few times, but just remember how much money you’ll be spending if you were to buy the place, and use that as incentive to put your nosiest foot forward. “Open drawers, cabinets and closets to see how much storage space you really have,” says Johnson. “Turn lights on and off. Walk down to the basement or up to the attic and look for smells and leaks.” On the other hand, Johnson says to remember that there are elements about a house that you can change. “Don’t miss out on a great house because you don’t like the paint or the appliances,” he said. “These are small parts of a bigger picture. Try to imagine the house as your own.”

Tip No. 9: Read your contract

Expert: Will Johnson, realtor and founder of the Sell and Stage Team, Hendersonville, TN

What it means: While it might seem like a bunch of “standard legal jargon,” you need to understand everything that’s in your contract, says Johnson. “If you’re confused about something, ask your realtor or attorney.”

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Lowering Student Loan Payments After Filing a Joint Tax Return

The Marriage Penalty

If you’re recently married and you have student loans in income-driven repayment, you may have run into this common problem.

You file taxes jointly because that’s what married people do, right? Then you re-apply for income-driven repayment, which you have to do annually, and your required monthly student loan payments spike way up.

If you find yourself in this situation, you may be wondering two things:

  1. What the heck just happened?
  2. What can you do about it?

In this post you’ll get the answers to both questions.

The Conundrum of Marriage and Student Loans

Under income-driven repayment plans, your required monthly student loan payment fluctuates with your income. The more you make, the more you are required to pay (up to a point).

When you’re married, how much you make for the purposes of this calculation depends on how you file your taxes. If you file separately, only your income is counted. But if you file jointly, your spouse’s income is counted as well.

So if you file jointly, and if both spouses are earning money, it’s likely that your required student loan payment will increase.

This presents married couples with a potentially difficult choice:

  1. File jointly, which often saves you money on taxes in exchange for bigger student loan payments.
  2. File separately, which often reduces your student loan payment in exchange for a bigger tax payment.

There’s no easy answer here and it’s important to look at both the short-term and the long-term consequences. After all, lower student loan payments may be easier on your budget right now but may also lead to more payments over the life of the loan.

But in any case, it’s likely that your combined income from filing jointly is what caused your monthly student loan payments to increase.

What You Can Do

So, if you can’t handle those higher payments right now, is there anything you can do to fix it?

There is.

You can file an amended tax return and change your filing status from joint to separate. Once you’ve done that, you can re-apply for income-driven repayment so that your monthly payment is recalculated using only your income.

Here are a few things to keep in mind as you consider this process:

  1. If possible, file your amendment before April 15 to avoid any interest and penalties on the extra tax you owe.
  2. Make sure to amend your return with your state too. You can check with your state’s tax agency to learn how to do this.
  3. This may or may not be the best financial decision. While there is no one-size-fits-all answer here, filing separately is most likely to be a good idea under the following conditions:

Steps to Take

No one likes a bigger monthly payment, so it’s totally understandable if you’re rushing to file an amended tax return right now so you can get those payments reduced.

But before you do that, it’s important to consider the trade-offs so that you can make the best possible decision for your specific situation.

Here are some steps you can take to do that.

Estimate your student loan payments 

There are a few tools you can use to estimate your student loan payments in various situations:

  • Studentloans.gov has a repayment estimator that will help you figure out what your monthly payment will be if you change your filing status.
  • The VIN Foundation has a great repayment simulator to help you understand the long-term implications of various repayment plans.

Estimate your tax payment

How much money are you saving by filing jointly? How much extra would you have to pay filing separately? How do those numbers compare to the potential change in student loan payments? After all, a smaller monthly payment isn’t worth if it your tax bill spikes way up. You can use a tool like TurboTax’s TaxCaster to estimate the change.

Talk to a professional

If you’re unsure, it may be worth finding a good accountant and/or financial planner who can help you sort through your options and figure out which one is best for you.

Amend your tax return

If you want to amend your tax return, you can start with this guide.

Re-apply for income-driven repayment

After you’ve filed your amended return, you can re-apply for income-driven repayment to get your monthly payment reduced.

Are You Sure This is Legal?

It is completely legal to file separately in order to protect your student loan repayment status. However, it could be possible in the future that married couples will be required to file joint tax returns and pay income-driven repayment plans based on their joint income.

The post Lowering Student Loan Payments After Filing a Joint Tax Return appeared first on MagnifyMoney.

When Paying an Annual Fee for a Credit Card Is Worth It

Black woman using credit card and laptop

With a whole slew of awesome no-fee credit card options out there that also offer rewards (check out this piece for some of the best ones), you might wonder why anyone would ever pay an annual fee for a credit card.

As it turns out, there are some instances when coughing up fees for a credit card could be worth it. Nick Clements and Brian Karimzad, former bankers and co-founders of MagnifyMoney, point them out here.

Reason 1: You’ll earn enough in rewards and/or benefits to make the fee worthwhile

While it’s true that some no-fee cards will offer you rewards, these rewards might pale in comparison to those offered by cards that come with annual fees. For example, many airline credit cards charge an annual fee, but the card also allows you to check your first bag for free (a rarity on most domestic flights these days). “If you travel frequently, the free checked bag benefit could more than pay for the annual fee,” says Clements. Karimzad agrees. “If you find out a few weeks before your trip that you’ll need to check bags, you could save $50, $100 or more for you and your family by opening a card before your flight,” he added.

In addition, if you spend a lot every month on the card, the miles you earn could more than pay for the fee, as well.

Reason 2: You want the benefits, and you can afford them

Sometimes it’s worth paying a little bit more for certain luxuries, as long as they fit into your overall budget. “American Express is building beautiful airport lounges with amazing food and wine,” says Clements. “Again, if you travel frequently, you might want to have access to these facilities, and you might be willing to pay for them. So long as the fee fits your budget, and you want those benefits, you shouldn’t feel guilty paying for them.”

If you’re already paying for exclusive lounge access, then you can assume you’re probably paying too much, and paying an annual fee on a credit card would probably be less. “For Delta clubs, the Amex Platinum will get you in for the same fee Delta charges, but adds in over 800 other lounges and a $200 annual airline fee credit,” said Karimzad. “For American, the Prestige gets you into its club, plus over 800 others and gives you a $250 credit on airfare that takes the real cost of the card down to $200, versus $450 for a standalone club membership.”

Reason 3: You have a secured credit card and are building your credit

While there are some no-fee secured credit cards available now (check them out here), if you can’t find one that works for you, paying a small fee while you’re working on building your credit might be worth it in the long run. “You might have signed up for a secured credit card which has an annual fee to build your score,” says Clements. “For the first one-to-two years, while your score is building, you could be comfortable paying the fee. However, at the end of those two years, you should try migrating the card to standard, no-fee credit card.”

Reason 4: You’re paying for a balance transfer fee

Interest rates on credit cards can often be high, but doing a balance transfer gives you the opportunity to save a significant amount of money. “Most balance transfers will offer a low interest rate (typically 0%), and charge a one-time balance transfer fee (typically 3%, but can be higher for longer balance transfers),” says Clements. “The fee should not scare you away immediately. Instead, do the math.” A good rule of thumb in these circumstances, according to Clements, is if you can pay off your credit card in six months or less, it’s probably not worth doing a balance transfer. “But if you think it will take longer than six months, you will likely save a significant amount of money,” he said. To calculate exactly how much you could be saving by doing this, check out the MagnifyMoney balance transfer tool.

If you fit into one of those four categories above, then go for it — pay that fee! Otherwise, if you’ve done the math and it just doesn’t make sense, stick to the no-fee cards. You might not get as many rewards, but at the end of the day, if you don’t use them, then the fee just isn’t worth it.

The post When Paying an Annual Fee for a Credit Card Is Worth It appeared first on MagnifyMoney.

Do You Understand Your Mortgage’s Fine Print?

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When shopping for a mortgage, it’s critical to have a general understanding of how points affect your mortgage rate and payments, and ultimately connect to your bottom line. Below are some guides to help you identify your net tangible benefit on a home loan.

Points

When you pay points, you are paying a premium to buy the interest-rate down, thus lowering your monthly mortgage payment. In most mortgage scenarios, you have the choice to pay this point based on the interest rate, and other times you might not due to factors like loan-to-value, loan size, loan program, loan purpose, property occupancy or credit score.

A point is essentially1% of the loan amount. Also referred to as mortgage pricing, points can change daily until you lock in your loan rate. Some lenders allow you to lock your rate up front while others require your loan to be underwritten or have the home appraisal ordered prior.

No Points

This is the most common scenario for buyers, but your financial goals should dictate your decision. If lower interest rates over the life of the loan are better for your situation, paying points might be worth considering.

Basis Point Credits

When a particular interest rate generates an overage, a premium is paid back to you and applied toward closing costs. Here’s how it works:

Let’s say you’re looking at that 30 year fixed rate at 3.75%, but you want no points. The next day mortgage pricing deteriorates by 25 basis points making the rate 3.75%  at .25% charge. If the 3.75% rate improves by .25% then that would be a credit as a function of your loan amount to pay the closing costs .

Mortgage Tip: Anytime you’re seeing a mortgage rate with any form of credit, it is based on the rate chosen for specific day in real time. Always review APR as the benchmark cost measure.

Determine Rates and Fees Consistent With Your Financial Goals

Ask yourself:

  • How long will you keep the loan or property for?
  • Do you plan to buy another property?
  • Is retirement around the corner?
  • Do you intend to pay the mortgage off in full?
  • Do you want to pay dollars today to line up the future?
  • Are the figures available based on your financial pictures consistent with any other goals you may have?

If you are uncertain about your short- and long-term financials goals, taking a conservative, low-cost, low-payment loan is usually a sound bet. An experienced mortgage professional can help you weigh costs versus benefits to determine which rate and pricing scenario best suits you.

Looking to get a sound mortgage loan? Get a free rate and cost offer online now!

This story is an Op/Ed contribution to Credit.com and does not necessarily represent the views of the company or its partners.

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The post Do You Understand Your Mortgage’s Fine Print? appeared first on Credit.com.