The Financial Forum Questions Thread: flame-free zone to ask your finance questions - everyone welcome

Hi,
why dont you use the table linked in the PEnfed 5/5 mortgage thread. somebody posted it on google docs and it is exactly what you are trying to do: the worst case scenario payments and mortgage amortization (plus a comparison to a 30 year fixed loan)

Hello:
I have a business account through Citibank for my business, unfortunately, I'm making less than 2% on my business savings account. I'm wondering if I can set up one of the accounts within the "Best current APY/APRs" thread for my business (and the tax ID assigned to the business not personal).

Any and all help is appreciated.

How does merging credit card accounts affect credit scores?

cloud1712000 said: How does merging credit card accounts affect credit scores?
When you consolidate two credit cards, one account is closed and the other one remains open with the combined credit limit of both accounts. It generally won't affect your score immediately unless you are closing one of your older accounts because the average age of your credit accounts is a factor in your credit score. FWers generally advise against closing an account because you might as well put the old card in your sock drawer and let it accumulate age to boost your score. Instead of consolidating, you can reallocate. You can usually call your CC issuer and have them move almost your entire credit limit from one card to another, e.g. you have two $10K credit cards, you can move $9,500 from one card to the other so you have a $19,500 and a $500 card, and then sock drawer the $500 card instead of closing it. This lets your $500 accumulate age. All things being equal, keep your cards open unless you have a specific reason to close one. If that reason is an annual fee, try to have your card converted to a card without a fee so you can keep the history and lose the fee. But if you still want to consolidate, you should generally consolidate into your older account so that the newer one is closed.

FatWalletLurker said: Thantoz said: Thantoz: Can someone please help me how amortization works with ARMs? I'm interested in the Penfed 5/5 mortgage, and am trying to do some projections on worst case scenario monthly mortgage payments.

Let's say I borrow $200,000 at 5%. At the end of year 5, I will have $183,657.73 in principle left. Let's say the rate adjusts up to 7%. Does the remaining principle get re-amortized at that time? (i.e. Calculate a 25 year mortgage on $183,657.73 at 7%?) Am I doing this calculation wrong?

Thanks for any help!

From Penfed:
"Year Fixed Rate Loan example: $100,000 at initial rate of 5.625% (5.377% APR), 60 monthly payments (based on 360-month amortization) of approximately $576 each (principal and interest only). The interest rate may adjust above or below the initial rate after every 60th payment by: no more than 2%."

Your payment goes up the appropriate amount to offset the increase in interest. To calculate payment, you could just recalculate as though it were a 25 year amortization with the 7% as you suggest.

Thanks for the tips. One other question...

If I make a large extra payment on the principle, will that cause the monthly payments to be lower when it adjusts, or will that cause the overall loan to end sooner like it would on an regular fixed mortgage?

Trinidon2k said: Are there any threads that discuss reasons for credit card application denials?

I recently applied for the Citi Premier Pass Elite card and was denied because I have another card on my TU credit report that is less than one year old. I think it would be a good idea to start a thread to save people from the worthless hard inquiry. I searched but couldn't find anything.

PM me if you know this thread already exist, otherwise i'll start one in the next few days or so.It wouldnt be very helpful - each situation is unique and based on your specific credit profile. The reasons given are generic - you werent necessarily declined because of the new account, but because of the new account in relation to the rest of your credit profile.

For example, I've been declined for having 'too many inquiries', when I've had 4 inquiries on my report. Others - including me at other times - have been approved with 10-to-20 inquiries (or even more). So just because someone was declined for XXX card for having 4 inquires doesnt mean no one with over 4 inquiries should bother applying.

Question:

I have 5 credit cards. 2 of the credit cards are done with the introductory APR. I have lots of credit on these and I'm not using them due to the high apr rates. So I'm wondering if I cancel these credit cards will my credit score increase. or I'm wondernig how I transfer my credit line on these 2 credit cards to a card that has no apr (introductory rate)
please help

I want to know when will my bank of america card world points will expire? Do they expire at all? or do they expire after 5 years from when they were earned?

Please if someone with experience can help. TIA

range said: I want to know when will my bank of america card world points will expire? Do they expire at all? or do they expire after 5 years from when they were earned?

Please if someone with experience can help. TIACalling the customer service number on your credit card and asking BOA will give you an authoritative answer.

By the way, bolding your question is not required, we can all read it.

I am planning to do a AOR but am wondering how to allocate cash out the money from the cards?

thanks!

I'm not sure if it's taboo to answer your own question, but I have a partial solution. I called my HELOC lender FedChoice, who offered to increase my HELOC to the max balance of $250,000 (from $155,000) without any fees or paperwork. Still not sure about multiple HELOCs, but my problem is solved (needed larger line as backup for a A-O-R mortgage payoff).

Venturion said: Are multiple HELOCs permitted on a primary residence? I am assuming that the sum of the HELOCs does not violate the maximum LTV requirements on the most stringent individual HELOC. I want to expand my HELOC limit (no current balance) as I rapidly pay down my first mortgage. My current HELOC has to remain open for 3 years to avoid paying the closings costs the lender covered at the outset. So I can't just close it and open a larger HELOC. Thanks.

motionbord said: Question:

I recently did an AOR this year in summer, and after getting mere $60,000 in credit with about an $800 bonus, FIA did a review on my cards, and today, they CANCELLED all of them! All of my BOfA cards got cancelled as well as my Fidelity Visa...

THIS IS CRAP! I thought that AMEX had bad CR's but this is horrible..

anyone else have the same thing happen to them?Its called adverse action, search that term and see threads like this one. You cant really blame them, after seeing so many new accounts opened and a rapid runup in your debt. You can call the number on the letter informing you of this action and ask them to reconsider - if you have the cash sitting in a HYSA they might very well do something for you. But you have to call them (or send a letter) and ask.

Date Posted: Sep/28/2007 12:01 PM
Rating: 0

Sorry for the long story, but I am unable to make it short...

backstory: Property in trust, North Lawndale area of Chicago( Enterprise/Empowerment zone), per ditech and other eapprasial sites, property's mid value estimated at $250k( willing to believe it's on lower side), 2 flat, full and furnished basement w/ coach house(only one in this area) and 2 car garage

Cons: Not my property(parent's), location( anywhere else, property would be valued more), major rehab needed(at least $125k to make rentable), lack of any knowledge regarding property management,no means to add to current personal financial responsibilities, 2 siblings who think they are going to get the money after sale( so pushing the sale)

Pros: no mortgage, parent's living elsewhere( so no urgency),ability to get into property management, rental unit needed in the area, since housing sales are down

Since my parents care more about getting their name off the property than the amount of proceeds from the sale, I would like to know if it is possible to use the equity to pay them a discounted amount and use the rest to rehab, or is it possible to have them obtain an equity loan, then later I can have take over the loan and assume the debt with the loan company. This option is not likely, as I stated, they are now in the stage of life where they want to simplify everything, and this option would just make them worry more(I think).
At least 3 units would be rented out, which would basically break even with mortgage. In 5-10 years, I may occupy a unit, but no time before then..

I am just looking for suggestions regarding funding w/o added more debts to my current responsiblities. Will answer all questions as presented.

Thanks!

DavidScubadiver said: This is why I never would consider doing an AOR. I have had "adverse action" taken by Chase cutting back credit lines when my balances on other accounts spike, but I steadily ask for credit line increases and get them, slowly but surely. That way everybody knows what they are getting into every step of the way.

When you do an AOR, you are "fooling" the credit card company into extending you credit. When its discovered, they don't know WHY you are doing it but they don't like it, because they extend you credit under false pretenses and that's a bit on the shady side of things. In truth, I doubt they care why you are doing it. They don't like being fooled on their dime.

I'm am new to the BTing. I also only have a few years on my credit history, but it would seem to me that if you can successfully manage your lines with high balances that later it would look good on your report. Am I Incorrect?

I did have a credit line with Juniper cut from $7500 to $6350 with $6000 BT, but with other issuers that I had a relationship with before I did my AOR have been very helpful with actually helping me get the money that I wanted, especially BOA.

Ecuadorgr said: Rent question.
I rented a very nice appartment at a good price over a year ago, which was actually the 2nd floor of an old lady's 2-floor house. The lease was for one year, the year came and gone and the landlady did not ask for either a raise or a new contract. The question is, should I ask to sign a new contract?
She likes us (me and my fiancee) very much, as we always help her with various things, so I am sure she would not even ask for a raise, however I would guess her niece/nephew who she would ask to prepare the contract would convince her to raise our rent (for their future benefit).
What happens if I don't get a new contract? For example if the house falls in somebody else's hands, I imagine I won't have any protection, i.e. they can ask me to leave immediatelly or ask for whatever rent they want?
TIA!
Once your lease was over, if she accepted rent for another month from you, you became a month-to-month tenant. In most states, a month-to-month tenancy can be ended on 30 days' notice by either party. If she hasn't accepted your rent yet, you're a holdover tenant, and she can probably evict you immediately without notice.

No matter who gets the house, you're still entitled to your 30 day's notice, but if you want more than that, you'll need a new lease. They can't raise the rent without your consent, but if you don't give it, then they can just give you your 30 days' notice.

Glitch99 said: kaydubness said: Date Posted: Sep/28/2007 12:01 PM
Rating: 0

Sorry for the long story, but I am unable to make it short...

backstory: Property in trust, North Lawndale area of Chicago( Enterprise/Empowerment zone), per ditech and other eapprasial sites, property's mid value estimated at $250k( willing to believe it's on lower side), 2 flat, full and furnished basement w/ coach house(only one in this area) and 2 car garage

Cons: Not my property(parent's), location( anywhere else, property would be valued more), major rehab needed(at least $125k to make rentable), lack of any knowledge regarding property management,no means to add to current personal financial responsibilities, 2 siblings who think they are going to get the money after sale( so pushing the sale)

Pros: no mortgage, parent's living elsewhere( so no urgency),ability to get into property management, rental unit needed in the area, since housing sales are down

Since my parents care more about getting their name off the property than the amount of proceeds from the sale, I would like to know if it is possible to use the equity to pay them a discounted amount and use the rest to rehab, or is it possible to have them obtain an equity loan, then later I can have take over the loan and assume the debt with the loan company. This option is not likely, as I stated, they are now in the stage of life where they want to simplify everything, and this option would just make them worry more(I think).
At least 3 units would be rented out, which would basically break even with mortgage. In 5-10 years, I may occupy a unit, but no time before then..


I am just looking for suggestions regarding funding w/o added more debts to my current responsiblities. Will answer all questions as presented.


Thanks!So you want your parents to borrow the money to rehab, then you buy it from them later on?

The simple thing to do, seeing as though it is within the family, would be to 'borrow' the $250k (or whatever the sale price is) from your parents then immediately use it to 'buy' the house from them. Then you will own the property free and clear, thus able to get a HELOC/loan to do the rehab, and owe your parents on the unsecured loan with specialized repayment terms that suit the both of you. You will of course have to make the payments on the home equity loan.

But if you are so concerned about not taking on more financial responsibilities right now, you best bet is to sell it for what you can get, then look for another investment opportunity when your finances are in better shape. It sounds like you will be stretching yourself too thin and may end up hurting everyone.

It is actually a bit more complicated than it sounds you have to be careful how the money is "borrowed" in order to avoid gift taxes. Your parents will need to charge interest at a "market rate" as well.

Structure the purchase with a "gift of equity" from your parents to cover downpayment and closing costs. Structure financing with an FHA 203k (if you will live in one of the unts) or a rehab loan that can build in your monthly payments for the first 6 months until the rehab is finished.

How does a ‘Gift of Equity’ work? For example: house worth $200,000; buyer wants to pay Parents $150,000 but doesn’t want to put anything down and doesn’t want to pay mortgage insurance and wants a good interest rate. If Parents give him a Gift of Equity of $50,000, doesn’t this mean the sale price is actually $200,000? What happens with the mortgage and their tax situation?

We actually run into this type of scenario more often than you might think. Benevolent parents are willing to give what you accurately describe as a gift of equity when they sell a property within the family. With proper documentation, we treat this as a gift in the usual sense, just as if it were dollars being handed over, and the transaction would meet most loan program requirements.

Yes, the sale price in your example would be $200,000 for our purposes, and it will be important that the lender’s appraisal support this sale price as the property value. However, I would urge your parents to consult with their accountant on how best to structure the transaction for their purposes. They may be required to use the $200,000 in their tax reporting, yet I understand any tax is calculated on the consideration paid, so $150,000 could be the reportable sale price.

They might also want to file a gift tax return, depending on their accountant’s viewpoint. Under current federal tax law, you can gift up to $675,000 during your lifetime, so I believe no gift tax would be due. However, there might be a capital gains issue for them if they have not lived in the property two of the last five years. In any event, it is wise to consult with an accountant before finalizing the figures.

As to the mortgage, the lender would be concerned that this is a bonafide, arms-length transaction, with a true value and a true gift. In your example, the mortgage being requested is at 75% loan-to-value if an appraisal will support the $200,000 sale price. Generally, most conventional mortgage programs require a 20% down payment when it is all gifted; if less, in standard programs, the borrower would be required to bring 5% of his own money to the transaction. Your example more than fits the typical program requirements.

more ongift of equity

I recently got 5 cards cancelled from damn FIA...

I am currently in the process of bumpage with TrueCredit, but was wondering how I could get the 5 card cancellations off my record?? Do I have to wait 2 years??....

tuckeg said: If a couple have a joint account (CD) worth $270,000 that is POD with a sibling named as beneficiary and the bank folds, does FDIC pay sums to individuals if so to whom and how much to each? Or is the account re-established at another institution by FDIC as a joint account that is POD for the beneficiary?
If you think the bank is going to fail, this isn't a great setup because only $200K is insured. If I understand you correctly, this is how the insurance plays out:

Assuming the best possible scenario (makes it easier to explain, though unlikely to be true), that Beneficiary is the qualified beneficiary of BOTH Owners (qualified beneficiary means related to owner as sibling, parent, grandparent, child or spouse -- in-laws don't count):

The insurance for a POD account adds up as follows:

Owner1 POD Beneficiary: $100K
Owner2 POD Beneficiary: $100K
TOTAL: $200K

The more likely scenario is that Beneficiary is only related to one of the Owners, so you get $100K for Owner1 POD Beneficiary (assuming they are related). Owner2 POD Beneficiary (if they are unrelated) doesn't qualify for POD insurance, so it would fall under Owner2's own Single Ownership insurance just like an account owned only in Owner2's name with no beneficiaries. Owner2 would be insured for a combined $100K for all his Single Owner accounts. If Owner2 has additional single owner accounts in the same bank, there could be an even larger insurance shortfall since the combined total would be insured for only $100K.

In either case, each Owner gets $100K in insurance proceeds plus up to $35K depending on what can be recovered from the failed bank's assets. Not sure how the FDIC normally handles accounts that are partly uninsured when transitioning them to a new bank.

Someone can correct me if I'm wrong, but that's my understanding of FDIC insurance coverage. If you have questions and want a definitive answer, you can call the FDIC. They have a customer support number where you can bounce questions off them -- I've heard they are responsive and helpful. 877-ASKFDIC.