Monday, December 26, 2016

Sometimes I Just Sits and Wonder

SOMETIMES I JUST SITS AND WONDER
By Jim “Gymbeaux” Brown, December 25, 2016

It’s Christmas morning, about 5:00 AM, no one is up but me and my puppy.  I get Sophie her treat, me a cup of coffee, put the Fireplace DVD on the big screen television in the living room, take up my position on the floor and turn on my trusty tablet and open it to a book that was written in 1914 by Orison Swett Marden, An Iron Will; I am almost finished reading it. 

Very relaxing, seeing the burning embers out of the corner of my eye and hearing the crackling of the fire’s song in my ear while I read on.  Then a paragraph from the book jumped from the page that caused me to “just sits and wonder”….

“James Sharpies, the celebrated blacksmith artist of England, was very poor, but he often rose at three o'clock to copy books he could not buy. He would walk eighteen miles to Manchester and back after a hard day's work, to buy a shilling's worth of artist's materials. He would ask for the heaviest work in the blacksmith shop, because it took a longer time to heat at the forge, and he could thus have many spare minutes to study the precious book, which he propped up against the chimney. He was a great miser of spare moments, and used every one as though he might never see another. He devoted his leisure hours for five years to that wonderful production, "The Forge," copies of which are to be seen in many a home. It was by one unwavering aim, carried out by an iron will, that he wrought out his life triumph.”

So as I “just sits and wonder” I realized that I just turned on a television set to experience a faux fire where not more than 100 years ago young men and women might be lying on a floor just to read a book by the flames of a real fire for lack of a simple candle.  Nor did I have to walk even one step to acquire a book; I could download almost any book I wanted within seconds from the Internet.  I think of the times I have heard  people say “I don’t have the time to read, I don’t know where you find the time.”  Time has always been there for everyone.  In fact we are each allotted the same exact amount of time; 60 seconds per minute.  What is lacking is a desire or drive to use the time we have been given wisely by educating ourselves.  Consider this excerpt from the same book by Marden, the words in parenthesis are by me;

“We hear a great deal of talk about genius, talent, luck, chance, cleverness, and fine manners playing a large part in one's success. Leaving out luck and chance, all these elements are important factors. Yet the possession of any or all of them, unaccompanied by a definite aim (focus), a determined purpose (goal), will not insure success. Men drift into business. They drift into society. They drift into politics. They drift into what they fondly and but vainly imagine is religion. If winds and tides are favorable, all is well; if not, all is wrong. Stalker says: "Most men merely drift through life, and the work they do is determined by a hundred different circumstances; they might as well be doing anything else, or they would prefer to be doing nothing at all." Yet whatever else may have been lacking in the giants of the race, the men who have been conspicuously successful have all had one characteristic in common--doggedness and persistence of purpose.”

When you “just sits and wonder” as I was doing this moring, your mind can take you to a lot of places that you will soon forget unless you write them down and record them for future use as I do now.  At first I wondered if I would have had the persistence and drive to even walk around the block to get a book let alone several miles in the snow.  Would I have set aside the time I thought I did not have to read the book instead of using that same time to sleep, daydream, play, eat or whatever else there was to do at the time.   Makes you wonder, does it not?  Does me!

For the record, I usually get up early, whether I want to or not.  I typically use the early morning hour(s) to read and/or write for at least an hour just like I did in writing this Nugget.  That would be time that most others, certainly not you, have said they do not have time for.  When the weather is nice and there are not other chores to do, I oftentimes sit out on the patio with book in hand, sometimes for 10 minutes, sometimes for an hour.  I was asked when I found the time to read and I usually say, “here and there” because that truly is when I read, “here and there.”

I write about the reading I engage in not to impress you or anyone who may read this not to impress upon them that I read, I do so to impress upon the reader that there is a great deal of information that I do not know and that reading is the best way to discover and learn it.  It was not always that way for me.  In fact I really didn’t start to read books until I was in my early 40s.  I spent 20 years in the U. S. Coast Guard during which time I would read Personnel Manuals, Federal Regulations, Commandant Instructions, beer bottle labels, you name it but books that I made the decision to read instead of books someone else told me I had to read, no way; “I could never find the time nor the desire.”

The Coast Guard made me grow up and grow up fast or be left behind.  It was a structured life except for promotions.  Promotions were 100% voluntary; you either pursued them or you didn’t.  I pursued them.  I found out what was necessary like time required in your current rank, recommendations by your commanding officer, completion of a course or all of them combined.  Marden wrote, “Yet whatever else may have been lacking in the giants of the race, the men who have been conspicuously successful have all had one characteristic in common--doggedness and persistence of purpose.”  My “purpose” or my “goal” was self-defined – I wanted to advance through the ranks as fast as possible; I had a family to support.  To do so you had to read and not only did I read, I studied what I had to in order to be the best at what I did. 

It was then I noticed a funny thing happened on the way to eventually retiring from the Coast Guard.  The more I read and the more I studied, the more people around me sought out my advice and counsel.  As that happened even better things came my way.  Funny how that happens.

I believe that there are incidents in our lives that act as catalysts that thrust us into bigger and better things and oftentimes may even redirect the rest of our lives.  For example, for me it was a cassette tape set by Lee Shelton entitled Creating Teamwork.  I was just hired as a manager for a large real estate office.  I managed Coast Guard personnel but never had I managed any civilian business concerns.  I was out of my element.  “When the student is ready the teacher will appear. When the student is truly ready... The teacher will Disappear.”  Lao Tzu.  I fully understand the first part of that quotation because for me it was Lee Shelton’s tape set.  I saw an advertisement in a magazine for the tape and although I had never purchased educational or motivational tapes before, I felt an urge to purchase this set of tapes.  I had become the “student who was ready” and Lee Shelton the “teacher.”

 

I listened to those tapes over and over again until I could actually recite them, maybe not word for word but certainly thought for thought.  I later met Lee Shelton and he would joke that I could give his seminar better than he could; not true but certainly appreciated.  During the tape, Shelton suggested that everyone and especially men and women in business and management should read the book I’m OK; You’re OK by Thomas Harris and read it every six months.  That one set of tapes by Shelton and that one book by Harris planted a seed within me that blossomed into a thirst to read more, to listen to more tapes, to attend more seminars all for the single purpose of becoming the best I could be in all things related to real estate sales and managing real estate agents.

 

How do you define success?  For me it was simple.  Was I satisfied with how I performing as a Real Estate Agent, a Designated Real Estate Broker, a Co-Owner of a Real Estate Office, and a Manager of Real Estate Agents?  The answer was very easy; no but I was always getting better, I was moving forward.  The education of yours truly was a never ending endeavor.

 

Here are the questions for you:

 

1.  Do you have a “definite aim” – focus?
2.  Do you have a “determined purpose” – goal(s)?
3.  Do you have a “doggedness and persistence of purpose” - dedication and determination?
4.  Are you willing to INVEST YOUR time in YOUR FUTURE, RIGHT NOW?

 

It has been my experience in dealing with hundreds of fellow Coast Guard men and women and hundreds of real estate agents that most would answer YES to #1, #2 and #3 but when it comes to question #4, that is where they have all fallen woefully short, they simply did not see the value of investing their time, their most precious asset, to achieve their desires; all of their desires!



"Most men (women) merely drift through life, and the work they do is determined by a hundred different circumstances; they might as well be doing anything else, or they would prefer to be doing nothing at all."

Saturday, December 17, 2016

You Too Can Refinance 100% of Your Home's Value

You Too Can Refinance 100% 
of Your Home’s Value
By Jim "Gymbeaux" Brown, December 15, 2016

You’ve seen the commercials on TV and in magazines where someone suggests that “We’re here to help you realize your dreams by borrowing 100% of your home’s value in order to pay your bills, take a vacation, or whatever else you want to do like spend it on a new car”, blah, blah, blah.”

I fell for that line and have regretted ever since.  If you refinance your home in order to obtain a lower interest rate that is one thing but if you refinance your home to withdraw equity (money) from its value that is entirely a different animal and it IS an animal, a vicious money-eating animal.

Before I explain why, let me suggest that you should ask and have answered a few questions that mortgage loan officers may or may not ask but should:

What is your purpose for wanting to build equity in your home; is it short term or long term?
Do you intend to live in your home for a long period of time?  Long in this case would be for 5 years or more.
Do you intend to pay off your home so that you will not have mortgage payments when you retire?
Do you intend to build equity in order to buy a bigger home or relocate in the future?
Do you currently have sufficient income to pay off your bills as they accrue?

Building Equity:  If your intent is to build equity, you do not want to refinance for 100% of your home’s value as you then eliminate some or all of the equity you have already built up.  The only possible exception to this would be that you have an opportunity to REINVEST the equity in another investment that is guaranteed NOT TO FAIL.  The last time I checked, those opportunities are few and far between if they exist at all and rarely stand up and shout HERE I AM; BUY ME!  Those types of opportunities usually look pretty good AFTER the opportunities to invest have already past.  If your goal is to build equity you want to pay off your home as fast as you can.  As you are paying down your loan, you are building up your equity.  Hopefully at the same time your home is also increasing in market value thus increasing your equity even more.  When you couple these two things you are creating a sizeable amount of equity (money) within your financial portfolio.  For most people their home is their single biggest investment for their future.  The equity could then be utilized to help fund your life in retirement or provide an inheritance to your children or both.

The days of working for a company that provides a retirement income for most people are dwindling for two reasons.  People no longer start at one company and remain there through retirement and secondly more companies have decided it is better to pay people more and not include a retirement program.  The later requires you to invest in your own retirement plans and to do that you have several alternatives.  The first is to build up the equity you have in your home or homes.  The second involves investing a part of  your earnings into retirement accounts.  A third plan would include both the equity in your home as well as a separate financial retirement plan.  Retirement plans could include stocks, bonds, mutual accounts, and any other investments designed for retirement purposes.  But if you are lured into retrieving the equity from your home by refinancing for 100% or even more, you are removing MONEY from your future retirement financial plan and simply extending the time required to continually be making house payments, something most retirees would prefer not to be making.

DO YOU INTEND TO LIVE IN YOUR HOME FOR A LONG PERIOD OF TIME?  This is a question that should be answered when you FIRST finance your home.  Far too often mortgage loan officers simply assume you want a fix rate thirty year mortgage.  Just look around and ask what your friends have done.  Most people do not consider any other alternatives.  In brief, if you know you are only going to be in your home for a short period of time like 3 or 4 years, you may want to consider a variable rate mortgage where the interest rate starts low and increases over time and eventually becomes permanent at a much higher rate at a time when you know you will no longer be in the home.  Therefore a variable rate mortgage might be in your best financial interest as you will be paying less interest for the home while you live there and still increasing your equity at the same time.  Then you sell it BEFORE the interest rate increases to an unacceptable rate.

But…if you plan to live in your home for an indefinite period of time, you probably want or should want more stability in the interest rate you are paying and the total monthly note you are paying (principle, interest, taxes and insurance known as PITI).  In this case you may want a thirty year mortgage at a fixed rate.  Over my lifetime, interest rates have been as low as 2.5% and as high as 21.0%.  Therefore TIMING is critical as to when you buy and what interest rate you will be paying.  If you bought a home when the interest rate was 21% you would be wise to refinance every chance you get to lower it and that may mean refinancing your home every 2 or 3 years as the interest rates drop.  I AM NOT A FINANCIAL MANAGER OR EXPERT.  However, I have been told by people who are that it is probably in your best financial interest to refinance when the interest rate drops approximately 2% over what you are currently paying.  On the surface you would think that any drop in interest rate would be beneficial to you but that may not be true.  There is a cost involved in refinancing and depending upon the market at the time you decide to refinance and incentives being offered by loan companies, that cost could be thousands of dollars in legal fees, appraisal fees, inspection fees, and fees in general. 

If you are planning on living in your home into your retirement years, you probably want to pay off your home as quickly as possible or at least to be near a payoff by the time you retire.  Remember that your income for most people will be reduced upon your retirement and if you did not plan accordingly, you may not have sufficient income to live as you did before and still have funds to pay your existing mortgage.  If that is the case, that may be a reason to refinance for a longer period of time to reduce your monthly out-of-pocket expense of your home.  In an ideal situation you retire and your home is paid off leaving you with only Taxes and Insurance as well as your home’s routine maintenance and improvements.

Another important consideration involves a “what if” situation.  What if you were to lose your primary source of income like losing your job?  If you have refinanced your home and removed most if not of its equity, you no longer have your equity as a potential asset that you can borrow on or acquire through the sale of your home.

EMERGENCIES:  Life has a way of dealing us problems that require money to fix like medical expenses, college tuitions, or just about anything you can think of.  If you find yourself in such a situation, refinancing your home to withdraw equity may be your best or only chance to pay these types of expenses when money is NOT available to do so.  Of course that will dictate your decision.  But even in those cases, I would strongly recommend you get the assistance of a financial expert to help you with finding the best solution. 

Keep in mind that mortgage companies are in the business of loaning money because they make money on every loan they grant; it is called making profits.  Their due diligence is to the mortgage company not necessarily to you the customer because they are in the business of making a profit for the company.  When companies such as you see on TV encourage you to consider refinancing your home for up to 100% of its current value or more they are NOT NECESSARILY making that suggestion because you need it as much as they are planting a seed in your mind.  Just imagine what you can do by extracting the equity in your home; thus making a profit for the mortgage company.  I am not faulting loan officers only suggesting that you look at ALL options available to you - first.

Funny, as I am working on this Nugget the TV is on and in the background I am listening to the THIRD commercial for 100% financing encouraging you to lower your payment, or withdrawing cash to help you with your needs.  It makes me sick because for most people, that is not a good decision as I have explained.

I believe in working backwards to determine your path to reach your goal(s).  For example, if your financial goal is to live and retire in your present home, or even if you want to buy a retirement home in another location, you want to have as much cash available to you as possible.  Building the equity in the home you currently live in is one way to do that.  You can then remain in the home you live in without a mortgage or you can sell your current home and use the equity you have built up to buy your retirement home.

Either way, your equity remains intact and it continues to be an asset for you.  It is simply “money in the bank.”  If you do nothing else, you can always withdraw some or all of that equity by taking out a new mortgage for the amount you need, provided it is less than the current market value of the home, or you can sell your home for its current market value.  I continually refer to “market value” because that is what determines the amount of your equity minus any current loans that may remain on the home.  Market Value minus Loan(s) amount equals Equity.

Your equity can be accessed in several ways, one of which is setting up a line-of-credit on your home with a bank.  The bank agrees to make money available to you that you can withdraw by simply writing a check on your equity.  The interest rates on lines of credit vary with the money market and while this is an extremely easy access to your equity it is also dangerous because of its simplicity AND because the interest rate is more likely to increase than to decrease.  Still it is a great thing to have access to as an insurance policy to available cash - just in case. 

The second way to access the equity in your home applies to people 65 years and older and that is the Reverse Mortgage.  It is too complicated to fully explain but it means that you are selling your home to a bank that pays you the equity you have accumulated in your home in a lump sum or payments over time and you continue to live in the home.  I would strongly recommend you talk with a financial planning expert and your family members instead of getting advice from your neighbors, friends or even a mortgage company none of whom have responsibility for your best interest; especially the mortgage company who wants to make a profit.

I decided to write this Nugget because the barrage of TV commercials encouraging you to refinance your home and withdraw the equity you have accumulated.  They all sound so good and so easy that you begin to think, why not?  There are so many reasons NOT to fall for their ads than there are TO fall for the ads.  Do not think you know what is best for your financial future UNLESS of course you have been trained in such matters and/or have studied and researched the situation.  Get financial help before you make such long-lasting decisions that you will be paying for long into your retired years.

Human nature has proven that most people, certainly not you, tend to spend not only what they make but a little more through the use of credit cards and personal loans.  Credit cards, retail stores and car dealers selling on credit are like a cancer to your personal financial security.  They make it far too easy to spend money that you do not have; much like our Federal Government whose debt may be 20 Trillion Dollars by the time you read this.  Whether it is a home, a car, a coat, a dress, new golf clubs, whatever, how do you know you can afford to purchase the item(s) if you do not have a personal/family budget that provides you with a BOTTOM LINE showing you if you are in PLUS or a MINUS financial posture?  How can you go into a refinancing situation if you do not know your family budget, both income and expenses?  Unfortunately commercial concerns makes it far too easy for you to exceed your budget and you therefore make the sale. 

If you ever priced out a $300 TV set that you finance, you would be shocked at the total amount paid for that $300 TV.  It could approach $700 or more by the time it is paid off.  I found an easy check and balance approach that has stopped me from purchasing “things” by asking a simple question.  How long would I have to work to pay for this $300 TV?  You will be surprised at how quickly that stops you in your tracks from buying the item unless you absolutely NEED it.  Refinancing your home is no different.  How long will it take to pay off my home?  How much interest will I eventually pay to pay the loan off (a staggering amount, sometimes 3 times the original loan amount depending upon the interest rate charged)?  How long will I have to work in order to pay for this home plus interest?  Remember you already have a loan on the home and you have hopefully already built up some equity.  What damage to my equity will refinancing THIS home cost me/our and my/our future(s) if I remove all or part of the equity out of the home in the refinancing process?


I’ve been there; I’ve done that; and, I’ve regretted it ever since!  I will not do it again EXCEPT of course if I am able to refinance my loan in order to obtain a LOWER interest rate PLUS a SHORTER loan period.  And consider this, it does not cost all that much more to finance a home for a period less than 30 years like 20, 15 or even 10; think about it.  Run the numbers, see what works best for you and your family.