Personal Finance guide

Forex trading has soared in popularity recently and that is due to the proliferation of technology, which has made forex markets much accessible to retail traders. Up until recently, forex trading had been fairly unregulated, especially when compared to asset classes like stocks, options and commodities.

In other words, the regulations now facing US-based retail forex traders are dangerous to their bottom lines, almost to the point that it would appear that regulatory bodies there really aren’t on the side of the little guy. In fact, some of the recent regulations that have come down in the States could have a very adverse impact on the use of forex robots. Many traders have grown to love their forex robots and have used forex robots to grow their accounts, so these regulations could imperil US traders that use forex robots as part of a comprehensive forex trading strategy.

There are options for traders in the States, but are the regulations going to be too much to overcome? Let’s have a look.

Regulators Are On The Hunt

One great idea that US regulators have come up with recently, and no we don’t think it’s really a great idea, is to prevent only retail traders from hedging. Meaning retail traders in the U.S. can no longer go long and sell short the same currency pair at the same time. This is rather unfortunate because this is a great strategy to employ because it can keep risk to a minimum while hunting for big moves. Not to mention this strategy is easy to employ with a forex robot, but US regulators have said no to hedging.

The National Futures Association (NFA) is behind this idea and it would appear they simply don’t care about retail traders. It would also appear they have little regard for users of forex robots because the NFA has essentially said that good traders don’t need to hedge.

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Women are no longer just a powerful force in today’s economy. It is estimated over 60% of the nation’s wealth is controlled by women. Some may have inherited wealth and may or may not be employed. Some are corporate executives, entrepreneurs or middle management. They may be single, married or divorced. They may or may not have children. A woman’s financial situation is often unique, and an individual approach to financial planning is essential. However, areas of common concern do exist.

Many women work outside the home. If so, they may have income tax problems, especially if they face higher taxes because they are single and unable to file a joint return. To address these problems, women should consider the following areas: the role of tax-advantaged investments to reduce their tax burden; the taxation and treatment of executive perks from their employer; the effect of age-related tax and Social Security provisions; and the tax problems of a small business including choice of organization, the selection of a retirement plan and the taxes upon disposition of their business interest.

Closely related to income tax planning for women is investment planning. Investment selection and asset allocation involve much more than tax considerations. There are various questions women should consider. Do investment objectives line up with financial resources and needs? Is the investment advice they are receiving objective, reliable and in line with their goals, time horizon and risk tolerance? Will a trust help with their investment planning? Women who are too busy or unable to oversee the day-to-day management of their investments should consider a trust. A trust may provide the comfort that comes with knowing that financial affairs will be properly handled in all eventualities.

Estate planning, like tax and investment planning, depends on individual circumstances. Whether a woman has built her own estate through work investments, or a business, or whether a woman has inherited a husband’s estate is irrelevant. What matters is that she is aware of the estate planning options that are available. Unmarried or widowed, a single woman might use lifetime gifts to reduce her estate tax burden by using the gift tax annual exclusion and lifetime unified credit. Trusts may also be useful in a program of lifetime gifts, particularly where minor children or grandchildren are involved. Estate plan coordination, charitable contributions and life insurance can also be extremely important toward achieving estate planning goals.

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Many investors rely upon Financial Advisors to help them manage their investment portfolio. Ideally the Financial Advisor and investor should work together, as a team, to find the right investments and make informed decisions that can help meet investment objectives. Below are some keys to developing a partnership with a financial advisor that likely will provide the best possible combination of service and long-term investment results.

Review your investment objectives. Your Financial Advisor will help define your investment objectives, but he or she needs your assistance to do a thorough job. Start to think through your objectives before you meet. Your participation and feedback will greatly aid your Financial Advisor in formulating an investment strategy that fits your goals, time horizon and risk tolerance.

Your questions will lead to being an informed investor. Be sure you fully understand the investments your Financial Advisor recommends for your portfolio. If you don’t, it’s your responsibility as an investor to let your Financial Advisor know that you need more information. Don’t be afraid to ask questions about your financial advisor’s investment recommendations and advice, after all they’re your investments!

Understand the risks with each investment. It’s important that you fully understand the risks in every investment you own and the reasons why the value of your investments may rise and fall. Your Financial Advisor can help explain the risks involved with each type of investment, and your questions will help make sure that nothing is overlooked. If you don’t completely understand the risks associated with your investment, ask more questions until you do.

Meet regularly to review your portfolio. Use these meetings to your advantage, go over your current investments, their performance and evaluate other investment opportunities. Scheduled meetings with your Financial Advisor is also a good time to inform him or her about significant changes in your life that could require shifts in your investment strategy. Also, major changes in the economy or new tax laws should also prompt a review.

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If you are trying to repair your bad credit history, reputable secured loans for bad credit may well be the best way to go. However, there are a few things that you need to know about finding them and picking the ones which can help you the most.

The world is full of people who want to lend you money. Unfortunately, once your credit history has become less than immaculate, the reputable money lending institutions often will not be interested in helping you out. This may leave you scrambling in the event that you suddenly need money for unexpected expenses.

There are a few things that you need to know about finding a reputable lending company that will loan you money. As well, you need to know how to pick the loans that fit your situation and income best. This is important because if you have a loan that ends up being too difficult to pay off you may end up defaulting and damaging your credit history even more.

You can find many different companies who are willing to give you secured loans even if your credit history is less than pristine. This is because the loans put up items as collateral. That means if you are unable to pay off the loan, the lending institution takes over ownership of the items listed in the lending agreement. Often, it is easier for you to get a secured loan if you own property such as a home. This is because the lending institution has some recourse to recoup some of the money it has lost.

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If your credit history has been ravaged by bad debt, the best way to curb the debt and recover your financial situation are seeking a reliable financial aid. There are many loan schemes available in the market, which you can go for and get one to curb your debt. But, like most debtors, if your concern is to find a debt solution to erase multiple debts in an easy going manner, the rational and effective way is by getting a debt management help.

Although paying monthly dues, at least the minimum payments won’t cause your debt situation goes worse if you don’t add new debt into the existing balances, but it definitely won’t help you from overcoming debts permanently. For this reason, you may need to seek specific advice from a credit counselor, who can advise you on the available debt relief options that best fit your financial situation.

In order for a credit counselor to advise you with the best debt relief solution, you have to provide accurate information about your financial and debt status. Therefore, you have to compile all debt balances, monthly payment requirements together with your total monthly earnings before visiting a credit counseling agency. If you are pressured with overwhelming debt or you have no idea how to compile this information, at least bring along the monthly payment statements, the credit counselor should be able to help you. It is important to let the credit counselor know the true financial situation. Don’t try to hide anything if you are looking for a debt solution that can get you out of debt.

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A good home loan modification letter should include three crucial elements. These three crucial points will help you to arrange your mortgage modification hardship letter in such a way that it will include all the necessary information and get you the desired results. So when you are drafting a home loan modification hardship letter include the following:

Financial adversity: The first thing that you need to mention in your mortgage modification hardship letter is the financial hardship that you are experiencing and the status of your current financial situation, this should include information about your earning and expenses. Also include the reason for the reduction in income. It is important to make your home loan modification hardship letter as pertinent as possible. You can include factors like work related injury leading to medical expenditure, job loss and interest rate reset among others.

The Time: It is also important to tell the bank about the time when the financial hardship began in your mortgage modification hardship letter. It would be good to verify facts with relevant documents. Your home loan modification hardship letter should include a brief, clear and chronological list of the difficulties and ensuing problems. Include information about late payments or defaults here.

Talk about what you want: The next step is to itemize the plans that you feel will help you to be more regular with your payments. In order to grant a mortgage modification, the bank needs to know that you are a responsible person who will definitely make the payment once the home loan modification has been granted. Tell the bank how reducing the interest rate will help you to meet your monthly payments. If possible also include your new budget plans that you intend to incorporate once the mortgage modification has been approved.

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During the recent credit crisis, refinancing is becoming an increasingly popular word. In simple terms, refinancing means adding more debt to an existing mortgage, only with different terms that allow you to pay less in your monthly mortgage and use the cash to pay off your high-interest credit cards.

The measures of U.S. government to restore the real estate market have led to a significant drop of the mortgage rates that can offer you the opportunity to save money by refinancing. Currently, mortgage interest rates are close to their historical lows. 30-year fixed rate is at 5.08% (as of 12/17/09), whereas one year prior it was at 5.53%. Similarly, 15-year fixed rate is at 4.48% (as of 12/17/09), whereas one year prior it was at 5.26%. Even better, 1-year ARM (adjustable rate mortgage) is at 3.92% (as of 12/17/09), whereas one year prior it was at 5.70%. (Source: Bloomberg). Therefore, by refinancing your mortgage now, you will have lower mortgage monthly payments. The math is simple: lower mortgage rates, lower mortgage payments.

However, as the mortgage crisis is still on, you should implement solid refinancing strategies to ensure that you save money on closing costs.

In particular:

Refinancing Strategies

a) Refinancing from an adjustable rate mortgage (ARM) to a fixed rate mortgage (FRM)

If you took your mortgage loan with an adjustable rate mortgage (ARM), you should probably consider fixed rate refinancing. The logic is the following: adjustable rate mortgage, as the name implies, will adjust at some point. Typically, adjustment ranges between 2% to 5% on the initial adjustment. Refinancing before adjustment to a fixed rate is a good strategy because you avoid considerably higher rates in the following years. Home payments are subject to fluctuation, which will make any financial planning extremely difficult and you may not be able to be in control of your finances. Therefore, refinancing to a fixed rate after fifteen years can save you from considerably higher payments and you can secure a good rate when interest rates are low.

b) Refinancing with a cash down-payment

Another successful strategy to retain all of the equity is refinancing with a cash down-payment. When refinancing, you are obliged to pay the closing costs, which range between $3,000 and $7,000 as of August 2009. This obligation increases your monthly payments and may considerably decrease your equity. Also, in case you decide o sell your house, you will get less money back. By doing a cash-out refinancing, refinancing amount will be higher than your current principal balance leaving you the extra funds as cash.

c) Calculating the refinancing break-even point

Calculating the refinancing break-even point if you plan on paying closing costs upfront is very important in developing your refinance strategy. Until a full reimbursement on these closing costs that will lower you monthly mortgage payments, you actually don’t save any money on refinancing. For instance, if closing costs are $3,000 to lower your mortgage by $100, your refinance break-even point if 30 months. If you sell your property or refinance again prior to 30 months, you lose money on the deal.

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With interest rates at historic lows, refinancing is an increasingly attractive option for many homeowners who could save a substantial amount of money on their mortgage interest repayments. Besides, refinancing enables homeowners to spread their mortgage over another 15 to 30 years depending on the terms agreed. In any case, they can benefit from lower interest rates to have lower monthly mortgage payments.

Due to the credit crisis, requirements for refinancing are quite tight, particularly after Freddie Mac and Fannie Mae have changed the percentage of home value that can be financed. This has put the savings from refinancing to a lower rate out of the grasp of millions of Americans. Yet, the banking industry, enabled also by the President Obama’s $75 billion ‘Homeowner Affordability and Stability Plan’, has made refinancing possible based on certain requirements that need to be met.

Here are the factors that you need to consider to determine if they you are qualified for refinancing:

A) General Requirements

1. Debt-to-Income Ratio (DTI)

Before approving an application for refinancing, lenders calculate your debt-to-income (DTI) ratio. In simple terms, they weigh household debt against household income to see if the money your household spends is more than the money your household earns. In general, lenders ask information about your income, debt and housing costs. A high DTI ratio may delay the process of refinancing so it makes more sense to payoff some of your debt before applying. Normally, an accepted DTI ratio is maximum 38 percent, but it depends on the lender and the flexibility of the programs offered.

2. Loan-to-Value Ratio (LTV)

The loan-to-value ratio calculates the amount you want to borrow for refinancing as a percentage of the total current value of the house. In simple terms, lenders weigh the amount you want to borrow against the value of your house. Under the current conditions, mortgage refinancing is allowed where the loan-to-value ratio does not exceed 80% with a form of credit insurance. For instance, if your home is worth $280,000 and you want to refinance for $220,000, the loan-to value ratio is 79%, which is accepted. Yet, a major consideration is the credit insurance required. In some parts of the U.S. it is difficult to obtain because they are viewed as declining markets by insurers with the risk of further deterioration in values.

President Obama’s ‘Homeowner Affordability and Stability Plan’ allows for a 105% loan-to-value ratio provided you have a good record of mortgage payments, your loan is backed by Fannie Mae or Freddie Mac and you are do not owe more than 105% of your home’s value. If you meet these requirements, then you qualify for refinancing under the ‘Homeowner Affordability and Stability Plan’ even if you owe between 80-105% of your mortgage.

3. Credit Score

Credit score is very important when applying for refinancing. If your credit history is damaged, lenders will offer you refinancing with higher interest rate and terms that might not make it an attractive option. Having a good credit score and a good track record of mortgage payments, you are more likely to be offered a lower interest and better terms.

B) Under the ‘Homeowner Affordability and Stability Plan’

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‘No-cost’ mortgages often seem like a great deal for the most part because they don’t carry the closing costs that are typically around 3 to 5 percent of the loan amount. However, the truth of the matter is that all mortgages carry costs. The difference is that a ‘no-cost’ mortgage converts the upfront costs to costs paid over time at a higher interest rate. This means the borrower saves money now, but ends us paying more money in the long run.

Example

To illustrate better how a ‘no cost’ mortgage works and how it differs from a traditional mortgage we assume that a borrower is looking for a $200,000 mortgage at a 30-year fixed rate.

Lender A offers a traditional mortgage at 6 percent with $2,200 fees (including lender fees $600, credit report $50, appraisal $300, title insurance $800, Reconveyance fee $75, recording fee $45, wire & courier fee $55, endorsement feel $75, title closing fee $125, document preparation $30, other fees $45).

Lender B offers a ‘no cost’ mortgage with a rate of 6.5 percent.

Monthly payments:

Traditional mortgage (6.00%): $1,211

‘No-Cost’ mortgage (6.50%): $1,276

In simple terms, this means that if the borrower buys a traditional mortgage, he would have to pay $2,200 more upfront, but monthly payments would be $65 lower ($1,211 rather than $1,276). If he buys a ‘no cost’ mortgage, there are no upfront costs, but monthly payments are $65 higher ($1,276 rather than $1,211).

By buying the ‘no cost’ mortgage to avoid the upfront fees it doesn’t mean the borrower saves money. After 3 years (36 months) of paying that extra $65, he would have exceeded the $2,200 he originally saved ($65 x 36 = $2,340). Eventually, he will pay a lot of money in the ‘no cost’ mortgage, unless he chooses to refinance in three years.

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Mortgage rates have been declining in concert with falling interest rates on long-term Treasury bonds. The situation in the mortgage market facilitates the plans of home buyers, who can find 30-year fixed rate at 5.08% (as of 12/17/09). However, there is no guarantee that these rates will last. The mortgage market is highly fluctuating and a possible rebound in long-term Treasury yields is likely to cause mortgage rates to increase again.

If you worry about a mortgage rate spike before you can find a new property, there are ways to hedge against this probability provided you realize that if mortgage rates rise considerably, you may end up ‘trapped’ in your property. When mortgage rates are so low, consumers do not sell their properties until their mortgage matures. Although the solutions available may not the simplest, they are worth considering because they can save you from the cost of even a slight rate change, which can be a lot of money on an amount of $200,000 mortgage.

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