When should I refinance my home?

Refinancing becomes worth your while if the current interest rate on your mortgage is at least 2 percentage points higher than the prevailing market rate. Talk to some lenders to determine the available rates and the costs associated with refinancing. These costs include appraisals, attorney’s fees, and points.

Once you know what the costs will be, determine what your new payment would be if you refinanced. You can estimate how long it will take to recover the costs of refinancing by dividing your closing costs by the difference between your new and old payments (your monthly savings).

Be aware that the amount you ultimately save depends on many factors, including your total refinancing costs, whether you sell your home in the near future, and the effects of refinancing on your taxes.

Should I obtain a home equity line of credit or a traditional second mortgage loan?

If you are thinking about a home equity line of credit you might also want to consider a traditional second mortgage loan. This type of loan provides you with a fixed amount of money repayable over a fixed period. Usually the payment schedule calls for equal payments that will pay off the entire loan within that time.

Tip: Consider a traditional second mortgage loan instead of a home equity line if, for example, you need a set amount for a specific purpose, such as an addition to your home.

In deciding which type of loan best suits your needs, consider the costs under the two alternatives. Look at the APR and other charges.

Tip: Do not simply compare the APR for a traditional mortgage loan with the APR for a home equity line–the APRs are figured differently. The APR for a traditional mortgage takes into account the interest rate charged plus points and other finance charges. The APR for a home equity line is based on the periodic interest rate alone. It does not include points or other charges.

What loan interest is tax-deductible?

The deductibility of interest has been limited in recent years. The following types of interest are at least partially deductible:

  • Mortgage interest
  • Business interest
  • Investment interest
  • Education related interest

What are the limitations on deductibility of mortgage interest?

Generally, interest expense on the taxpayers’ primary residence and a second (but not a third) home is deductible. Interest is only deductible on the first $1,000,000 of the acquisition loan. As the loan is paid off the limit is reduced. In other words you can not refinance a loan for a higher amount than the current principal balance and increase the deduction. In addition interest on a home equity loan of up to $100,000 can be deducted.

How can I raise money for my small business?

Even though, raising capital is the most basic of all business activities, it can be a complex and frustrating process. There are several sources to consider when looking for financing. The primary source of capital for most new businesses comes from savings and other forms of personal resources. While credit cards are often used to finance business needs, there may be better options available, even for very small loans.

Many entrepreneurs also look to private sources such as friends and family when starting out in a business venture. Often, money is loaned interest free or at a low interest rate, which can be beneficial when getting started.

Outside of personal resources, the most common source of funding are banks and credit unions, which provide a loan if you can show that your proposal is sound. Finally, venture capital firms help companies grow in exchange for equity or partial ownership.

What do banks look for when considering a loan request?

When reviewing a loan request, the bank official is primarily concerned about repayment. To help determine this ability, many loan officers will order a copy of your business credit report from a credit-reporting agency.

Using the credit report and the information you have provided, the lending officer will consider the following issues:

  • Have you invested savings or personal equity in your business totaling at least 25 percent to 50 percent of the loan you are requesting? (Remember, a lender or investor will not finance 100 percent of your business.)
  • Do you have a sound record of credit-worthiness as indicated by your credit report, work history and letters of recommendation? This is very important.
  • Do you have sufficient experience and training to operate a successful business?
  • Have you prepared a loan proposal and business plan that demonstrate your understanding of and commitment to the success of the business?
  • Does the business have sufficient cash flow to make the monthly payments on the amount of the loan request?

What banking fees do you need to look out for when shopping for a bank account?

Fortunately, banks are required to give you a list of fees for their accounts. Even with interest, the best account is usually the one with the lowest fees.

Checking accounts are minefields for potential banking charges. Be sure you ask about monthly fees, fees for check processing, and ATM fees. A no-cost checking account may impose a charge if your balance drops below a minimum dollar amount. Check printing charges have sky-rocketed in recent years to as much as $24 at some banks. You can have your checks printed for much less by an outside financial printer.

It rarely makes sense anymore to park money in an old-fashioned “passbook” savings account. Monthly account fees may overshadow the small amount of interest you will earn. Put it in your checking account instead if you can refrain from spending it. If it’s a big enough sum, you might want to put it in a money market account. You will earn more interest than in a savings account, but make sure you don’t get hit with a monthly charge if your balance falls too low.

How do automated teller machine (ATM) and other electronic transfer transactions work?

There are various transactions that fall under the umbrella term “electronic funds transfer.”

Automated Teller Machines (ATMs). You can bank electronically and get cash, make deposits, pay bills, or transfer funds from one account to another. ATM machines are used with a debit or EFT card and a code, which is often called a personal identification number or “PIN.”

Point-of-Sale (POS) Transactions. Some EFT cards can be used when shopping to allow the transfer of funds from your account to the merchant’s. To pay for a purchase, you present an EFT card instead of a check or cash. Money is taken out of your account and put into the merchant’s account electronically.

Preauthorized Transfers. This is a method of automatically depositing to or withdrawing funds from an individual’s account, when the account holder authorizes the bank or a third party (such as an employer) to do so. For example, you can authorize direct electronic deposit of wages, Social Security, or dividend payments to their accounts. Or, you can authorize financial institutions to make regular, ongoing payments of insurance, mortgage, utility or other bills.

Telephone Transfers. You can transfer funds from one account to another-from savings to checking, for example-or order payment of specific bills by phone.

People who use EFT systems are often concerned about safeguards in the system. Since there is no check-no piece of paper with information that authorizes a bank to withdraw a certain amount of money from your account and pay that amount to another person-EFT users wonder about recordkeeping, errors, and theft:

Recordkeeping. If you use an ATM to withdraw money or make deposits, or a point-of-sale terminal to pay for a purchase, you can get a written receipt-much like the sales receipt you get with a cash purchase- showing the amount of the transfer, the date it was made, and other information. This receipt is your record of transfers initiated at an electronic terminal.

Your periodic bank statement must also show all electronic transfers to and from your account, including those made with debit cards, by a pre-authorized arrangement, or under a telephone transfer plan. It will also name the party to whom payment has been made and show any fees for EFT services (or the total amount charged for account maintenance) and you’re opening and closing balances.

Your monthly statement is proof of payment to another person, your record for tax or other purposes, and your way of checking and reconciling EFT transactions with your bank balance.