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Boomer Financial Advice to Ditch

Boomer Financial Advice to Ditch

It's easy to dish out what you might think is great financial advice if you're from the boomer generation — the most recent generation to accumulate copious amounts of wealth compared to others.

But does the financial advice of this aging generation still hold up today?

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Mortgage Forbearance: What to Know

What do you do when financial hardship hits and you can't make your monthly mortgage payments? This is a question on many homeowner's minds as nearly 17.8 million Americans are reportedly unemployed during the coronavirus pandemic.

When homeowners face financial hardship, such as the loss of a job, they often look to obtain a forbearance agreement from their lender. A forbearance happens when your lender grants you a temporary pause or reduction in monthly payments on your mortgage. Forbearance is not the same as payment forgiveness, in that you still have to pay the entire amount back by an agreed-upon time.

Mortgage lending institutions differ on their mortgage relief policies and qualifications; however, the Coronavirus Aid, Relief, and Economic Security (CARES) Act were signed into law in late March of this year to protect government-backed mortgages.

Federally backed mortgages include:

  • Fannie Mae
  • Freddie Mac
  • The Federal Housing Administration (FHA)
  • The US Department of Veteran Affairs (VA)
  • The US Department of Agriculture (USDA)

Under the CARES Act, homeowners with a federally backed loan who either directly or indirectly suffer financial hardship due to coronavirus automatically qualify for mortgage forbearance.

Even if your mortgage is not secured by one of these agencies, you still can call and see if you qualify, as many lenders will still offer the option in order to avoid foreclosures.

Under the CARES act, homeowners can claim mortgage forbearance due to financial hardship from COVID-19 for up to 12 months without requiring any documentation or verification. During the forbearance period, mortgage lenders cannot charge late fees or penalties.

Additionally, as long as your mortgage is current at the time you claim forbearance, the lender is required to keep reporting your mortgage as paid current throughout the entire period.

At the end of the forbearance, the CARES act protects consumers from having to make a lump sum payment. Instead, you will be given a repayment plan from your provider. Since repayment options vary, it's important you ask your provider about all of your repayment options.

Possible Repayment Options:

You may be eligible for a loan modification at the end of your forbearance. With modification, the mortgage terms are changed in order to add payments that were missed during the forbearance onto the end of the loan, extending the term.

Another option that may work for some is a reduced payment option. This allows you to keep paying monthly payments at a reduced amount. The amount missed is usually added back into the monthly payments at the end of the forbearance.

For example:

Regular payment: $1000 per month

Reduced payment: $500 per month

Payment after forbearance period: $1500 (until caught up)

Balloon payments, or lump sum payments at the end of the forbearance, are prohibited under the CARES Act. However, mortgage lenders may require homeowners who are not protected under the CARES Act to make a balloon payment at the end, so again it is best to check first with your provider.

Mortgage forbearance should only be considered in true financial hardship. In other words, just because of the pandemic, you should not take a forbearance on your mortgage if you can still afford your payments. Likewise, if you are able to start making payments before the forbearance period is up, it's best to do so as soon as possible.

The Next Steps:

Before you get in touch with your mortgage servicer, save time by gathering as much documentation about the mortgage as you can. Also, be ready to list your income and monthly expenses. Due to an influx in calls, financial institutions are experiencing extremely long wait times right now, and having your information at the ready will help.

Have questions ready to ask. Here are some questions you should be asking:

  • What fees are associated with the forbearance?
  • What are all the repayment options available to you at the end of the forbearance?
  • Will you be charged interest during the forbearance period?

If your forbearance is approved, make sure to keep all documentation pertaining to it. Make sure to cancel any automatic payments to the mortgage during the forbearance period, and keep tabs on your credit report to make sure your lender doesn't report the loan as unpaid.


For more information on forbearance, contact your lender and discuss your options. If you need more assistance with understanding your options, you can contact a local agent for the housing counseling agency, or call their hotline at 1-800-569-4287.
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So What Is a Home Equity Line of Credit?

Meet Jane.

Jane is a thirty-something homeowner with two young kids. She walks into her local bank one day to talk to someone about taking out a loan to replace her outdated furnace. She wanted to put it on her credit card, but she got herself into trouble with credit cards when she was younger, so she wants to look at other options. After talking with her a while, her personal banker, Joe, suggests a home equity line of credit, to which Jane replies, "A what?"

I met many customers like Jane during my time as a personal banker. Many people simply don't know what or how home equity lines of credit work.

A HELOC (home equity line of credit) isn't for everyone, but it often can be the perfect solution for many. First off, you have to be a homeowner and have equity in your home.

What is home equity?

The equity in your home is what you truly own, debt-free. Let's say Jane's house is valued at 200k and she has a mortgage balance of 60k. This would mean that Jane's home equity value is 140k. Over time, the more you pay off any lines against your house (mortgages), the higher your equity value goes. Home improvements that increase the value of your home also raise equity.

A home equity line of credit works much differently than a mortgage or home equity loan. I find it best to view it as working similarly to a credit card. You may draw funds out of the line of credit only as needed. Therefore, technically you can take out a HELOC without ever actually touching the money and having to pay it back.

How much do I qualify for?

Typically, most banks will let you borrow anywhere from 75% to 90% of the equity in your home. To figure this out yourself, take the value of your home, subtract any loans against your home, and multiply that number by the percent the bank will let you borrow. Jane's banker tells her she is able to borrow up to 80% of the equity in her home. You would multiply 140k by .80, coming to a figure of 112k being the maximum amount Jane can borrow. It's important to note that you do not need to borrow the max available. Keep in mind that your debt to income ratio and credit score can also affect how much you qualify for.

How much should I take out a line of credit for?

This is the number one question that was asked to me by customers looking to take out a line of credit. And really, there is no right or wrong answer. You can always take the max available, but you don't have to. There are things you need to consider when deciding how much to borrow. If you are a person who is easily tempted to use that money, even when it's not needed, it probably isn't best to request the max amount unless you know that you will be able to afford the monthly payments.

On the other hand, I also tell people it can be a good idea to take more than you need right now, so you have it as a "cushion." One of my customers came to me to request a HELOC to update her kitchen. Although she qualified for a much higher line, she insisted on only taking what she needed at that time. Not even a year later she came back to me. She had used up the entire amount available on the line of credit and now needed more to fix her roof. She had to go through the entire application process again to do a HELOC increase, and she wasn't happy that it wasn't as simple as saying "I need more money" and having the money readily available. This is the reason I tell people to have a cushion. That cushion can be a lifesaver in emergencies.

What can I use my HELOC to pay?

Most people assume HELOCs can only be used for home renovations, but, in reality, you can use the money for anything. A HELOC can be a great tool to consolidate credit card debt. According to the federal reserve, the average credit card rate was around 15% in 2019, and that rate is often higher for people without excellent credit standings. In contrast, the average HELOC interest rate, according to Bankrate, is around 6%.

What's the application and fee process?

Before heading to the bank, make sure you have the following documents:

  • W2s / 1099 forms
  • Last 2 years federal tax returns
  • Recent pay stubs
  • Proof of any other income

The application process usually takes anywhere from a few days to sometimes weeks, depending on how much information the underwriters may need. The bank typically does an appraisal of the house. In some instances, they may need access to the inside for appraisal, although this is typically not necessary.

After the HELOC is approved, the bank will schedule a closing date and time for you to come in and sign the mountain of paperwork. It can seem like a lot, but you will receive copies of everything, and you have three business days to look it over and cancel if you want.

Common fees associated with HELOCs are lender fees, annual fees, and cancelation fees. Do yourself a favor and research lender options before applying, as there are plenty of banks that do not charge most of these fees. When I worked at M&T Bank, the only fee applicable to a HELOC was a cancelation fee, and that only applied if the line was closed entirely within the first three months.

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7 Energy-Saving Home Goods to Save You Money

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Whether you're shelling out for rent or paying off a hefty mortgage, the cost of living doesn't come cheap. And that's not even factoring in all the other monthly bills you're covering just to keep the lights on and the heat humming.

The average American household spends about $2,200 a year on energy bills alone. Meanwhile, the cost of running water spiked by 41 percent in recent years, resulting in annual bills as high as $600 or more. Even if you cut off your cable TV (which can run you between $120-$240 a month), and choose the absolute slowest, most excruciating WiFi plan, you can't exactly live without light, heat or running water.

One cost-cutting solution is to invest a fortune in solar panels; another is to live off the grid. And then, there's the third option: buying a few low-cost household products that will significantly cut down your utilities and other household bills. It's true—there is a slew of everyday items that are simple to use and built with your budget in mind. Here are seven must-haves if you want to start saving ASAP.

Draft Stopper ($9.99, Bed, Bath and Beyond)

Behold, the $10 solution to the sky-high cost of warming your house in the winter. Seal off cold air that seeps in from door-cracks and windowsills with this simple sand-filled wedge, and discover how much cozier your home can be without ever turning up the thermostat.

Water Filtration System ($19.99, Home Depot)

A water filtration system filters fresh, clean water into your home, reducing the need for bottled water (good for the environment, good for your grocery budget.) It also cuts down on sediment and rust, extending the life of your pipes—and cutting down on pricey plumbing emergencies.

    Energy-Saving Power Strip ($22.97, Amazon)

    Surge protectors are essential if you have more than two electrical appliances in your home, and, hey, we know you do. We also assume you don't unplug your lamps and laptops every time they're not in use. That's where those hidden fees add up unless you have one of these power strips specifically designed to reduce standby idle energy use. Spend around $20, save a fortune in the long run.

    .


    Energy-Efficient Bulbs ($15.48, Lowes)

    If you have to make one change to reduce your energy bill, switch out your light-bulbs. Energy star-approved bulbs use up to 80 percent less energy than regular bulbs. According to the US Department of Energy, swapping out your conventional bulbs for LEDs, CFLs or Halogen Incandescents can save you upwards of $75 on your annual energy bill. Plus, these babies last longer—which means you spend less time and money replacing them.


    Water-Efficient Showerhead ($11, Amazon)

    If you want to cut down on your water usage, consider switching to a more efficient showerhead, which reduces water usage by up to five gallons a minute without skimping on the water pressure. So go ahead and take nice, long guilt-free shower without sweating about your next bill. Look for a showerhead with the EPA-approved Water Sense label, and you might even qualify for rebates and vouchers in your area.

    Air Purifying Plant ($19, The Sill)

    If you want to reduce the number of allergens, pet dander, and germs that float through your home daily, you could spend anywhere from $200 to $600 on a clunky air purifier that also runs up your electricity bill. Or, better yet, you could spend significantly less on a gorgeous houseplant. "I am a fan of attempting to get an indoor clean air boost with various NASA-studied plants that have been found to potentially scrub and purify indoor air of common pollutants," Dr. Clifford Bassett, founder and medical director of Allergy and Asthma Care of New York, tells Today.com. ZZ plants, Peace Lily and English Ivy are all durable, year-round plants that naturally cleanse your home of toxins the old-fashioned way and cost a fraction of the man-made versions.



    Space Heater ($20.10, Home Depot)

    The more square footage you have, the costlier it is to heat your home. But you don't need to crank up the thermostat and heat every room in the house if you're only hunkering down in one area. In fact, you could save a bundle by throwing down a twenty for a portable space heater. Bring it with you from room to room and warm up without running up your heating bill on empty rooms in your home.

    The next time you're feeling like your household bills are out of control, consider making a few small changes and investing in everyday items that will save you bundles in the long run.

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