Johns Money Blog

Homeowner refinance for various reasons: to get lower interest rate; the oppurtunity to shorten the  mortgage term; the chance to convert an adjustable-rate-mortgage(ARM) to fixed-rate mortgage; and the desire to consolidate debt. Refinancing also gives them an opportunity to tap a home’s equity so as to finance a large purchase; and the desire to consolidate debt.

Reasons to refinance

The three reasons to refinance are given below:

• Securing a lower interest rate: One of the reasons to refinance is to lower the interest rate on your current loan. It is worth the money to refinance if you can reduce the interest rate by at least 2%. According to the lenders, 1% saving is enough of an incentive to refinance. Lower interest rate decreases your monthly payment and helps you to save money.

• Consolidating debt: If the borrower is financially unstable, with several personal debts, then refinancing a home loan can help to consolidate all personal debts into one low fixed rate loan. Refinancing a home mortgage is a good option if the borrower is almost at the end of a mortgage term.

• Converting between Adjustable-rate and Fixed-rate mortgages: In the beginning ARMs offer lower interest rates than fixed-rate mortgages. But the interest rate of ARM is variable. Often, the periodic adjustments increase the interest rate which is higher than the rate available through a fixed-rate mortgage.

Through refinancing one can convert ARM to a fixed-rate mortgage. This lowers the interest rate and eliminates the possibility of future interest rate hikes. One can also convert fixed-rate mortgage loan to an ARM through refinancing. However, it will benefit the homeowners only when they don’t plan to stay in their home for more than few years. If  the interest rates are decreasing then the homeowners can reduce the interest rates of the loans and monthly payments, but won’t have to worry about the future interest rate hikes.

Normally, refinancing costs between 3% to 6% of the loan’s principal and it requires appraisal, application fees, appraisal. Therefore, it is important for a homeowner to determine whether his  reasons to refinance offer true benefits.

Europe Replaces North America As Richest Region

http://online.wsj.com/article/BT-CO-20090915-702924.htmlrope-eclipse-North-America-as-worlds-richest-region-new-survey-finds.html

A survey by the Boston Consulting Group has revealed that Europe has replaced North America has the richest region but US remained the most wealthy country in 2008. Measuring the assets under the management of a region, the survey revealed that Europe had $32.7 trillion under its management (5.8% lower than 2007) while North America which comprises of the US and Canada had assets worth $29.3 trillion under its management (21.8% lower than the 2007 levels). The US had assets worth $27.1 trillion and had 4 million millionaires in the latest year. Japan, ranked second, had assets worth $13.5 trillion under its management besides 1 million millionaire households. The global wealth has been hit by the 18-month old economic crisis and declined by 12% to $92.4 trillion.

How Significant Is 10,000?

http://www.newsobserver.com/front/story/1668522.html

So the Dow is approaching that five figure mark…. again. Does it mean anything to us? We have all been there before, so it is definitely not a summit on which we want to plant our flag as we conquer it for the first time. Then why are we talking about the Dow approaching 10,000?

I would think that these are psychological supports. Once the Dow crosses this point, investors can hope that this 10,000 mark will provide a support to the market, and trading will happen in a range above this mark. This time around, unlike the first time when there was much celebration when the Dow crossed 10,000, it should be more of a relief to investors. Relief that they have been able to see through more than six months of increase on the markets.

FDIC Expands Problem Bank List

http://abcnews.go.com/Business/wireStory?id=8425453

The Federal Deposit Insurance Company’s (FDIC) list of Problem Banks has risen to 416 in the second quarter of 2009. Although bad loans have remained a big problem area, regulators feel the industry is showing some signs of stabilization. The rising level of bad loans and falling asset values has pushed the industry to 2Q losses of $3.7 billion from the first quarter profits of $7.6 billion, the FDIC said. The combined assets of the country’s problem banks have risen from $220 million at 305 banks in the first quarter to $299.8 billion at the 416 banks. The expanded list has led to a 20% decline in FDIC’s deposit insurance fund to $10.4 billion in the second quarter. The number of bank closures has risen from three in 2007 to 25 in 2008 and 81 in the current year so far.

US Home Sales Increase In Second Quarter

http://www.usatoday.com/money/economy/housing/2009-08-12-higher-prices-homes_N.htm

Falling home prices, a tax credit for first time buyers and lower interest rates have pushed the US home sales higher in the second quarter of the current year. Although foreclosure rates have also continued to rise, improved home sales provides some consolation and indication that the US real estate markets may stabilize soon. According to the latest data released, existing home sales increased by 3.8% to a seasonally adjusted annual rate of 4.78 million units in the second quarter from 4.58 million units in the first quarter. Home sales in the second quarter were, however, 2.9% lower than the year ago period. Several US states witnessed a double digit growth in sales between the second and the first quarters.

Planned For Three Months, To End In A Week?

http://www.msnbc.msn.com/id/32228179/ns/business-autos/

Unconfirmed reports suggest that the Government’s “cash for clunkers” program is likely to be suspended any time now. In this program, car owners were offered $3,500 to $4,000 to trade in their old fuel guzzling cars for a new and more fuel-efficient car. 

The scheme was launched on Friday, and cars have been literally flying off the shelves. Inventory with dealers is practically zero, and there is already a huge backlog of applications for the scheme. The budget set aside for the program which was scheduled to run till October, 31st was $1 billion. Back of the envelope calculations indicate, that this number has already been crossed in less than a week. Hence the thought of suspending the program.