Category: Money

The Make Home Affordable mortgage refinance and modification program was announced earlier this year as part of the 2009 stimulus package.  The idea behind this refinancing program was to enable some home owners who are having difficulty making payments on their house a way to refinance even though they wouldn’t normally qualify because their mortgage is worth more than 80% of the house.  With a little bit of help, hopefully these home owners can keep their house and get back on track.

Allowable Loan to Value ratio (LTV) has been increased to 125% from 105%

When this refinance program was first announced – it only applied to home owners who had a loan-to-value (LTV) ratio of between 80% and 105%.  This meant that if the value of your outstanding mortage (the amount still owing) divided by the value of the house was between 0.8 and 1.05 then you might qualify for this loan modification.  However, it appears that not many people have been able to take advantage of this program so the government decided as of July 1 that the criteria for loan modification would be eased to allow more home owners to get their mortgage refinanced.  The new rule is that the loan-t0-value (LTV) has to be between 80% and 125%.  In other words if your outstanding mortage (the amount still owing) divided by the value of the house was between 0.8 and 1.25 then you might qualify for this loan modification.

This is great news for home owners who didn’t have a high enough house value to qualify under the old rules but can now apply.  This article answers the question – Do I qualify for the Making Home Affordable Refinance program?

How do I calculate the Loan to Value ratio (LTV)?

Ok, so maybe math isn’t your strong suit.  Here are the steps to calculate your loan to value ratio to see if it falls between 80% and 125% which is what you need for this refinancing program.

Step 1 – Determine how much you owe on your mortgage

You should be able to check online with your mortgage provider or by telephone to see how much you owe on your mortgage.  Perhaps you get a statement mailed to you from your mortgage provider which will contain this information.  It’s important to note that you only want the amount of mortgage that you still owe.  This is not the original amount of the mortgage when you bought the house!

If you don’t have the exact mortgage amount in front of you then don’t worry – just estimate as best you can and verify the exact amount later.

Step 2 – Determine the value of your house.

This value should be the appraised value of the house.  I would suggest calling your mortgage broker to see if they can help obtain this value.  If you don’t have a proper appraisal then just estimate as best you can.

Step 3 – Do the calculation

The basic calculation is to divide the mortgage amount owing by the house value.  So for example if your house value is $300,000 and the amount owing on your mortgage is $312,000 then you should divide $312,000 by $300,000.  To get the percent then multiply by 100.  in this example the answer to $312,000 / $300,000 * 100 = 104% which is within the criteria of this program.

The state of Texas has recently announced that a 13 week unemployment benefit extension has been made official.  This will affect anyone who has exhausted or will exhaust their 59 weeks of unemployment benefits.  The money for this extension will be coming from the 2009 stimulus package announced by President Obama at the beginning of the year.  This extension was prompted by a jobless rate of 7.5% in June.

When will the 13 week extension start?

According to the Texas WorkForce Commission (TWC), the benefits should start paying out by the end of July.  Letters will be sent to claimants with instructions on how to file for the extension.  There are about 82,000 Texans who might be eligible for the 13 week extension.

There had been some concerns recently that the benefits might be delayed by a month or more because of problems converting the computer system but according to the TWC – that is not the case.

If you have any more information about the extension then please leave a comment.

Please note that Texas will benefit from the H3548 employment benefit extension – since Texas is not considered a high unemployment state since it has less than 8.5% unemployment rate – the potential total weeks of benefits for unemployed Texans will be increased by 13 weeks. States with a higher unemployment rate will see their total benefit weeks extended by 20 weeks.

Here are the rules for the new “Cash For Clunkers” government program.  If your car qualifies then you could receive a credit of either $3500 or $4500 towards the purchase or lease of a new car.  Read more about the details of the Cash for Clunkers bill.

[edit Aug 30 – Cash for Appliances program announced – Get rebates for new fridge or other appliances.

[edit July 31 – the Cash for Clunkers program has ended]

[edit July 31 – the Cash for Clunkers program has been continued]

[edit Dec 9 – Cash for Remodeling]

Is the Cash for Clunkers credit considered taxable income?

Car must be less than 25 years old from manufacture date

This applies to the date of trade-in relative to the manufactured date of the car.  See this article on the cash for clunkers program for exact instructions on determining the age of your car.

You must purchase or lease a new car

The credit will only be received for a trade-in on a new 2008,2009 or 2010 car with a purchase price of $45,000 or less.  It has to be a purchase or lease.  Used car purchases are not eligible.

Mileage limits

The old trade-in car must get 18 mpg or less (city/highway combined).  See this website to find out the mileage for your car or this site to find your car.  The new car must have a combined fuel economy of at least 22 mpg.

Domestic and foreign cars

Applies to new cars of any country – domestic and foreign cars are all eligible.

Eligible trade-in dates

The trade-in must occur after July 1, 2009 and before November 1, 2009 or until the program funding (1 billion dollars) is depleted.

Amount of credit

Credit will be either $3500 or $4500.  If the new car gas mileage is between 4 and 10 mpg more than the old car then the credit is $3500.  If the difference is at least 10 mpg then the credit is $4500.

Proof of ownership

The trade-in car must have been owned by you and insured for the past year (ie 365 days).  You must provide documentation for this.   Car must be driveable!!

See this article for answers to more common questions about the Cash for Clunkers program.

More information on the Cash for Clunkers program

2009 Cash for Clunkers

Cash for Clunkers program

Cash for Clunkers bill

Gas Guzzler Rebate – Get cash for your old car

Car Allowance Rebate System (CARS) has been finalized

President Obama has recently signed the “Cash For Clunkers” program – officially known as the Car Allowance Rebate System (CARS).  This federal program is being run by the National Highway Traffic Safety Administration and has a budget of $1,000,000,000 (1 billion dollars).  The basic idea of the program is that you can trade in your old gas guzzler pimp-mobile for a new car which has better mileage.  The government will pay you either $3500 or $4500 for your trade in which is likely a lot more than the car is worth so there is profit to be made.  This is yet another dimension of the 2009 stimulus package which has seen quite a few different efforts already.

[edit Aug 30 – Cash for Appliances program announced – Get rebates for new fridge or other appliances.

[edit July 31 – the Cash for Clunkers program has ended]

[edit July 31 – the Cash for Clunkers program has been continued]

Is the Cash for Clunkers payment considered taxable income?

[edit Sept 27 – Cash for Appliances – List of Eligible Appliances]

[edit Dec 9 – Cash for Caulkers

There are several motivations for this program:

• Environmental – Getting people out of fuel-hogging gas guzzlers and into smaller, newer more efficient gas-sippers is better for the environment.
• Help the car industry – Car sales are down dramatically this year so any sort of boost which motivates people to buy new cars will help the car companies.
• Stimulus money – Adding more stimulus money into the economy should help (in theory) revive the economy and reduce unemployment.

Rules of the 2009 Cash For Clunkers program

• Car must be less than 25 years old (built in 1984 or later).  This applies to the date of trade-in relative to the manufactured date of the car.  See section below for more info.
• Can only be used for trade-in on a new 2008,2009 or 2010 car.  Outright purchase or lease.  Used car purchases are not eligible.
• Trade-in car must get 18 mpg or less (city/highway combined).  See this website to find out the mileage for your car or this site to find your car.
• Programs ends on November 1, 2009 or when the program funding (1 billion dollars) is depleted.  Trade-in must occur on July 1, 2009 or later.
• The new car must have a purchase price of $45,000 or less.
• Credit will be either $3500 or $4500.  If the new car gas mileage is between 4 and 10 mpg more than the old car then the credit is $3500.  If the difference is at least 10 mpg then the credit is $4500.
• Applies to new cars of any country – domestic and foreign cars are all eligible.
• The new car must have a combined fuel economy of at least 22 mpg.  See this website to find out the mileage for your car or this site to find your car.
• The credit will be applied to the purchase of the new car.
• The car buyer doesn’t have to file anything – the car dealer will handle the documentation.
• The credit will not be considered as income for the car purchaser.
• All the normal credits and rebates for the new car will still apply in addition to the ‘cash for clunker’ credit.
• The trade-in car must have been owned by you and insured for the past year (ie 365 days).  You must provide documentation for this.
• Car must be driveable!!

Click here for more information on the Cash for Clunkers program.

How do I know exactly how old my car is?

To be eligible for this program there has to be less than 25 years from the date of car manufacture and the trade-in date.  To find out the manufacture date of your car – check the following:

The month and year of manufacture (e.g., 1-96 (January 1996)) appear on the safety standard certification label that is located on the frame or edge of the driver’s door in most vehicles.

• If the car was built in 1985 or later then it is less than 25 years old.
• If the car was built in 1984 and the car manufacture month and day is greater than the trade-in date then it is less than 25 years old.
• If the car was built in 1984 and the car manufacture month and day is less than the trade-in date then it is greater than 25 years old and not eligible.

For example if you do the trade-in on Aug 1, 2009 and the car was built on Sept 18, 1984 then it is less than 25 years old.

If you do the trade-in on Aug 1 and the car was built on April 1, 1984 then it is older than 25 years and is not eligible.

Please note that having a car less than 25 years old does not mean you automatically qualify for the rebate.

Is it worth doing?

This program is worth taking advantage of only if both of the following scenarios apply:

1. Your old car is worth less than the rebate.  This might seem obvious but if your old car is worth $8,000 then you don’t want to use this program to get a $3500 or $4500 rebate.
2. You were planning to buy a new car anyway.  New cars are expensive so if you are using this program to help you justify a new car purchase using credit then it’s probably not a good idea.  Some people are better off just selling the old car and buying a used car if they can’t afford a new one.

Downsides of this program

This program seems very slanted towards benefitting the car industry.  Undoubtedly there are a few consumers who might benefit from this (if they were going to buy a new car soon) but there will also be others who buy a new car because of this program when they should really just buy  a used car or even just hang on to the old junker for a while longer.

Some issues:

• More consumer debt – Some consumers will be tempted to take on more debt because of this program which might hurt them.
• Environmental impact – The environmental impact of making the new car might outweight the gas mileage reduction.  In some cases the difference in gas mileage won’t be enough to offset this.
• Lack of eligibility – It’s hard to imagine that there are very many people who can afford a new car but are driving an old junker around.  A lot of people who buy new cars sell them before they get to the $3500 value level.
• Dealer scams – Consumers might be “rushed” by dealers to pay a higher price for the new car since the program only has a certain level of funding.

More information

Does my car qualify for the “cash for clunkers” program?

Clunkers for Cash – Is it even worth it?

Online savings account interest rates are not very high these days.  It wasn’t long ago when you could get 4% or 5% on your savings which seems pretty good right now!  It’s very easy to dismiss rates that are as low as 1% or 2% but keep reading – I hope to show you that it’s still very worthwhile to put your savings into a high interest savings account.

Do you keep some savings in a bank account?  Perhaps your emergency fund, perhaps a house down payment or saving up for a new car or house remodeling?  Sometimes when you are saving for a specific goal, you get so focused on the goal that you don’t think about some of the details like where to invest your money.  Most people get their paychecks in a checking account and will either leave their savings there or will open up a savings account at their bank assuming that the interest rate paid will be competitive.  It’s possible that your normal bank pays a competitive savings account interest rate but don’t count on it.  There are banks that are offering 2% interest rates right now – if you aren’t getting close to that amount then shop around.

I don’t have much money – Is it worthwhile to look for a higher interest rate?

While it’s true that the less money you have in your savings account, the less the interest rate matters – let’s take a look at an example to see exactly how much impact the interest rate has.

Read a full review of Ally Bank which has very competitive interest rates on their savings account.

Let’s say you have an emergency fund of $2,500.  Now in reality this amount might go up or down depending on emergencies that might happen.  For the sake of this example let’s say your emergency fund never changes.  I’m going to use a 10 year example but it’s very possible that your emergency fund might be in existence a lot longer than that.

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You can see from the table that while the differences in total interest paid between a higher interest rate (2%) and a lower one is significant. Keep in mind that this example is only for 10 years – if the savings account is maintained for 20 or 30 years then the differences will be that much more dramatic. If your savings account is only paying 1% or less then it’s probably worthwhile for you to switch to a high interest savings account.

I have a lot of money saved for a house downpayment

One of the times in your life when you might have a lot of cash is when you are saving up a down payment for a house.  Sums like $10,000, $25,000, $50,000 are not unreasonable for someone who has been saving for a while.  In this scenario we have savings of $35,000 and we are going to buy a house in exactly 1 year.  Should you be happy with getting 1.0% from your bank or should you shop around for a higher rate of around 2%?

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In this case there are very dramatic differences in the total interest paid for the different interest rates.  If you are getting paid 2% on your savings then the total interest earned in the year will be $350 more than if the account only pays 1% which is pretty common.  Getting paid $350 to switch to a new bank is great reward.   $350 will also help pay for your moving costs!

Read another interesting post about High interest savings accounts.

Other bank account alternatives

SmartyPig Review – Online Savings Account

Update – Feb 7, 2011 – Legislation to add extra weeks for 99ers

Democratic Reps. Barbara Lee (Calif.) and Bobby Scott (Va.) are reintroducing legislation this week to provide additional weeks of unemployment insurance benefits for “99ers,”

Main article

In 2009, the 2009 stimulus package was created by President Obama and provided extra funding for states to extend the length of unemployment benefits if necessary.  Most states have a fixed number of weeks available for benefits but can increase the number of weeks if necessary.  The Florida unemployment rate in April was 9.6%.

The state of Florida recently approved an extension of the unemployment benefits by 20 weeks as a result of Senate Bill 810 sponsored by Sen. Rudy Garcia, R-Miami and Rep. Dave Murzin, R-Pensacola.  This applies to unemployed persons who have already used up the previous maximum of 59 weeks of unemployment benefits.  The legislation allowing this EB extension was signed by Governor Charlie Crist and will provide more benefits for up to 250,000 unemployed Floridians.  The payments will be up to $300 per week.

The money to pay for these extended benefits will come from the stimulus package of 2009 – about $415 million in total.

The agency responsible for these benefits is called the Agency for Workforce Innovation – they expect to start sending out the extended benefit checks in July.  According to a spokesman from the agency Robby Cunningham – some people might be able to collect benefits retroactive to February of 2009.

“It’s actually retroactive to February 22nd of this year so some qualifying receiptence could receive initial payments up to 5,100 dollars.”

Please note that any retroactive payments will be from February 22, 2009 or when your last claim ran out – whichever is later.

How to apply for extended benefits

If you qualify for the extended 20 weeks then you still have to apply – go to www.floridajobs.com and click on the big red “Extended Benefits” square near the top of the right side of the screen.  The actual link which will open up the application form is here.  You can also fill in and mail the EB application to the address indicated on the EB notice/application you will be receiving in the mail.

How do I know if I’m eligible?

Here are a few guidelines you can use to determine eligibility:

• You are totally or partially unemployed.
• You exhaust all entitlement to regular and emergency unemployment compensation (EUC) benefits prior to February 22, 2009 but your benefit year ends after February 22, 2009.
• You exhaust all entitlement to regular and emergency unemployment compensation benefits after February 22, 2009.
• You are not eligible for unemployment compensation benefits in any state (including Puerto Rico, the Virgin Islands, The District of Columbia) or Canada.
• You satisfy all requirements of the Florida UC Law that apply to regular UC and EB, such as being able and available for work, and have not been disqualified from receiving benefits based on your reason for separation.
• You actively seek work for each EB week claimed and provide the work search record as instructed.
• You do not refuse an offer of suitable work or fail to apply for suitable work.