Ahead of its initial public offering slated for mid-December, United Wholesale Mortgage is offering mortgage rates below 2% on FHA loans through its Conquest Program.
UWM, the second-largest lender in the country, is offering rates between 1.99% and 2.5% on FHA loans, the company announced in a statement on Wednesday. The rates will be available on FHA purchase mortgages, FHA rate and term refinances, and FHA streamline refinances.
On Wednesday, the FHA announced new loan limits for 2021, increasing those amounts to $356,362 for much of the U.S. and to $822,375 in high-cost areas.
The Conquest FHA announcement is the latest in a series of UWM product launches in 2020. The lender, led by CEO Mat Ishbia, has offered ultra-low mortgage rates on VA purchase and IRRRL loans, as well as purchase and refinances on both 30-year and 15-year fixed-rate products.
Not all borrowers have qualified for the products, and to obtain the lowest rates borrowers have had to buy points upfront.
5 reasons to refinance your mortgage right now
If you’re thinking about refinancing your mortgage, here are five reasons why you might want to act now and reach out to a loan officer.
Presented by: Citi Mortgage
Like many other mortgage companies, UWM has ridden a wave of record-low mortgage rates and rising home prices en route to its best-ever year in 2020.
As of the end of the third quarter, Pontiac, Michigan-based UWM closed nearly $128 billion in production, eclipsing the $108 billion it originated throughout all of 2019, the firm said. UWM originated $54.2 billion in closed loans during the third quarter, an 81% increase from the $29.9 billion it originated in Q3 2019 (loan volume was up 31.8% from Q2 2020).
According to company statements, net income totaled $1.45 billion in the third quarter, up from $198 million during the same period in 2019. The gain-on-sale margin also inched up to a record 3.18%; a year ago it was 1.29%.
In the summer, UWM announced it was merging with a blank-check company led by businessman Alec Gores. Ishbia, who will control 94% of the company, is seeking a valuation of about $16.1 billion. He’s described the impetus to go public as achieving greater scale, promoting the broker channel, and avoiding having to sell mortgage servicing rights.
The mortgage brokers that UWM bet its future on and championed have also reaped the rewards from low mortgage rates and a boom in mortgage originations over the last few quarters.
According to Inside Mortgage Finance, the wholesale and correspondent channels in the third quarter rose 34.1% from the second to the third quarter. By contrast, there was only a 9.2% increase in retail production and 16.9% growth in total first-lien originations, the publication reported. The third-party-origination share of third-quarter production rose 4.5 percentage points to 35.5% in the third quarter.
I realized something important for all of you who have automatic mortgage payments and also like to automatically pay down extra principal each month. It is don’t forget to adjust your mortgage autopay amount when rates change.
When I refinanced a primary residence loan in 2019, I decided to get a 7/1 ARM at 2.625% with no fees. I had gotten a 5/1 ARM when I purchased the house in 2014 for 2.875% and I wanted to refinance before the rate reset.
Given I have an ARM, I always like to pay extra principal with each mortgage payment. So instead of making the regular $2,814.14 mortgage payment, I decided to pay $4,500 automatically each month.
$4,500 is a nice even number which pays $1,685.59 extra toward principal. This amount is on top of the $1,847 (goes up every month) that is already going to principal from the $2,814.14 mortgage payment. Not bad since the mortgage rate is so low.
Not only do I like taking out cheap debt to live a better lifestyle, I also like the feeling of paying down debt. Automatically paying down extra principal each month ensures I am making financial progress, even if I didn’t do anything else.
Over time, the extra forced savings from paying down more principal adds up! And when you’re finally done paying off your mortgage, you own a nice asset that can be rented out for cash flow.
Why Adjusting Your Automatic Mortgage Payment Is Important
Reviewing my mortgage payment history since 2019, I have consistently paid $4,500 since the beginning.
Most people just pay the mortgage amount each month, but not me. And maybe not those of you who like to accelerate your debt repayment as well.
However, since 2019, mortgage rates have surged higher thanks to the pandemic, government stimulus, supply chain issues, and the strong economy. Since 2021, I’ve also written posts such as:
In other words, even though I was recommending to not pay down extra toward a mortgage in a high mortgage rate, high interest rate, high inflation, and inverted yield curve environment, I was doing just that!
As someone who tries to act congruently with my beliefs, I was surprised to learn I had missed this financial move. As soon as I realized my inconsistency, I called the bank and had them lower my payment from $4,500 down to $2,814.14.
Paying down extra principal when the yield curve is inverted is suboptimal because you reduce liquidity in the face of a potential recession. If bad times return, you want as much cash flow and liquidity as possible to survive.
Paying down extra principal is also suboptimal when Treasury bond yields and inflation are high. You could earn a greater return risk-free and inflation is already paying down debt for you.
Why I Missed Lower My Mortgage Payment
With over 40 financial accounts to manage, it’s easy to miss things. I set up automatic payments for everything to eliminate missing payments. But the downside is that I sometimes fail to adjust my payments when conditions change.
The more complicated your net worth, the more you will miss things. There might be some big winner stock you’ve been holding for years that’s now in the gutter. It’s easy to lose track.
This is why tracking your net worth diligently using Empower or another free wealth management tool is important. Having at least a quarterly, if not monthly financial checkup, is important.
Benefits Of Autopay And Paying Down Extra Debt
Paying an extra $1,685.59 toward principal for 48 months ($80,908.32) isn’t the end of the world. I now have $80,908.32 less mortgage debt for this one property. I’ve accelerated the time to completely pay off the mortgage by several years.
However, from March 2022 until August 2023, I could have earned a guaranteed 4% – 5.5% return in Treasuries. This return compares favorably to the 2.625% return I made paying off the debt.
There is also another benefit to paying off a negative real estate rate mortgage. And that is saving money from a potential bear market. The extra mortgage principal payments I made in 2022 saved me from a ~20% loss plus the 2.625% in mortgage interest expense.
If I had never remembered to adjust my mortgage autopay, things would still be fine. I would simply have a lower principal balance in 2026, when my ARM resets.
I know only about 11% of mortgage holders have an ARM. However, if you get an ARM to save money, you might be more inclined to pay off your mortgage quicker. With a 30-year fixed mortgage, there is no sense of urgency to pay extra toward principal.
When To Resume Paying Down Extra Principal
It’s optimal to stop paying down extra principal automatically each month when rates are high and the yield curve is inverted. Therefore, the logical conclusion is to resume paying down extra principal when rates are low and the yield curve is upward sloping.
Specifically, I would resume paying down extra principal automatically when Treasury bond yields are equal to or less than your mortgage rate. The lower the 10-year Treasury bond yield is below your mortgage rate, the more you want to pay down extra principal.
Another time to start paying down extra principal automatically is when your cash flow and savings amount is strong, and you don’t know where to invest the extra cash. When in doubt, pay down debt.
We Will Earn, Save, And Invest More If We Want To
One final takeaway from this post is that most of us will rationally take action to improve our finances if we need to. Therefore, I wouldn’t worry too much about being permanently stuck financially.
I found this mortgage payment mismatch because I was motivated to find more ways to improve cash flow. We are in the process of buying another house. In addition, there is the potential for another recession.
As a result, I reviewed all our expenditures and realized this was the one expenditure that could free up a significant amount of cash flow ($20,227/year). I’ve also thought about going back to work to boost income and reduce healthcare expenses.
If I didn’t feel the need to boost our finances, I probably wouldn’t have connected the dots about this automatic mortgage overpayment. But I would if I found myself in a cash crunch.
If we need more money, we’ll find a way to save more, slash costs, and/or earn more. This logical behavior is a win for us all.
Reader Questions And Suggestions
Do you pay extra principal through your automatic mortgage payments? If so, how much more do you decide to pay? Have you remembered to lower your extra principal payments once risk-free rates surpassed your mortgage interest rate? Are you trying to improve cash flow due to another potential recession?
If you’re shopping around for a mortgage, check out Credible, a mortgage market place where you can find personalized prequalified rates. Credible has a handful of lenders on its platform competing for your business.
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A new bill introduced today by Congresswoman Maxine Waters (D-CA) aims to make sweeping changes to the Fair Credit Reporting Act (FCRA).
In a news release, she noted that credit reports have become far too important to contain widespread errors and inaccuracies, given the fact that they’re used to extend mortgages and homeowners insurance, and even determine whether someone is hired or not.
The proposal, known as the “Fair Credit Reporting Improvement Act of 2014,” could have major implications for former and prospective homeowners alike.
Restoring Credit for Mortgage Victims
For one, it would require the credit reporting agencies to remove any adverse information related to mortgage loans that were later found to be deceptive, abusive, fraudulent, illegal, or unfair.
That’s a pretty broad definition, but I’m assuming there are plenty of borrowers out there with checkered credit histories thanks to bad loans they probably should have never wound up with.
So if a borrower had their property foreclosed on thanks to a predatory lender, they could get that nasty foreclosure mark off their credit report. And ideally the late payments leading up to the foreclosure (or short sale) as well.
This would greatly improve the credit scores of countless borrowers and make them eligible for a subsequent mortgage a whole lot sooner.
Sure, some borrowers might have been granted relief from lenders, but if their credit report is still full of delinquencies, their chances of getting another mortgage are low to nil.
The same goes for those who received assistance through programs like HAMP, only to find that lenders continued to report their payments as delinquent or “incomplete.”
Foreclosure Falls Off a Credit Report After Just Four Years?
Waters’ bill would also shorten the amount of time negative information remains on credit reports by reducing such periods by three years.
She noted that the predictive value of most negative information on credit reports diminishes after just two years, yet remains for as long as seven or 10 years.
In places like Sweden and Germany, max reporting periods are three and four years, respectively.
As it stands now, foreclosures remain on credit reports for seven years. So if I’m interpreting her new bill correctly, a foreclosure will drop off a credit report after just four years.
The waiting period to buy a home after foreclosure also happens to be seven years, so it’s unclear what effect this legislation would have if foreclosure information couldn’t be accessed after four years.
Additionally, lenders may not be comfortable extending new home loans to previously foreclosed borrowers so soon, which could create a bit of headwind for this legislation.
Her bill would also remove adverse information related to fully paid or settled debt, including medical collections, which is consistent with the latest FICO and VantageScore models.
That could potentially make it easier to qualify for a mortgage seeing that applicants’ credit scores would likely be higher.
Asks FHFA to Consider Alternatives to FICO Score
Speaking of scoring models, Waters also wants the FHFA to consider alternative credit score products that determine eligibility for Fannie Mae and Freddie Mac loans.
At the moment, it’s all about FICO. Perhaps VantageScore could eventually be used in the mortgage industry as well.
There’s a lot more to the bill, which is basically a complete overhaul of the antiquated FCRA that can be read here.
Among other things, it prohibits the use of disputed information in credit reports and scores, lengthens the mortgage shopping window to 120 days (for it to count as just a single credit inquiry), and restricts the practice of using credit reports to screen job applicants.
Additionally, it would limit the cost of a credit score to $10, indexed for inflation, and require the credit reporting agencies to provide free annual credit scores, not just free credit reports.
Obviously it sounds super ambitious, so the chances of it passing might be slim. But a pared down version could potentially pass. Stay tuned.
The decision to allow the ICE – Black Knight merger to proceed announces the digital integration of the real estate value chain anticipated for over 25 years. Digitization redraws industry boundaries and changes how the value of information is expressed, enriched and exchanged. The capital, capability and content are present to make all real estate markets smarter, faster, safer and connected. Consumers, communities and taxpayers are major beneficiaries.
Residential property transactions are manufactured with data components assembled from disconnected and diverse sources. Many industries began to deploy electronic supply chains in the 1980’s. Real estate still relies on a “system” unable to integrate production across the silos of media, brokerage, lending, insurance and trading. The result is higher costs, lower productivity, unmeasured quality, and systemic exposure as government monopolies take most of the risk and make most of the money. The GSE’s $8B profit in 2Q could buy most of the brokerage industry.
Technology and the trust model
Real estate is too vital to our economy to be so financially concentrated and functionally outdated. Technology hasn’t been the barrier since 1998 when Equifax, and later other firms, developed systems to secure complex, multi-party transactions over the Internet. Lenders began to define the “trust model” of standards, contracts and shared services necessary to achieve cross industry interoperability.
Conflicts among special interests and then the GFC prevented full adoption. Low interest rates and purchases of Agency securities helped to foster a – don’t fix what’s not broken mindset. The reckoning has brought staff reductions, loan repurchases, higher reserves and mass consolidation.
Behind the headlines of locked-in supply and tighter credit is the start of a new real estate cycle driven by the urbanization of the suburbs. Information deficits are a feature of secular shifts until new insights fill the knowledge gaps. Geographically aware marketplaces that link listings, lending and liquidity will unlock actionable information.
ICE is best known as the owner of global marketplaces including the New York Stock Exchange. It entered real estate in 2012 after buying DebtMarket, an exchange for distressed home debt. A sequence of acquisitions followed that targeted the control points of a next generation operating system.
MERS provided a trusted “golden record” of the owner of the mortgage loan asset, Simplifile reaches the county recording end-points, IDC integrated $5.2B of data services, Ellie Mae added $11B of origination processing, risQ made location risk visible and now Black Knight delivers another $11B of MLS capability, public data and consumer payments. This massive bet on a digital future delivers trusted connections to verify parts (data), eliminates rework, assures quality and collapses the cycle time of a loan.
The power of innovation
ICE’s network, data and trading system architecture can power innovation to transform fixed income capital markets. A “Housing Capital Cloud” would unify the fragmented ecosystem to package, evaluate and distribute information based “durable goods.” Lenders should expect to redesign workflows and business rules to determine if a loan is “Fit 4 Sale.”
Homebuyers and other investors will gain better views of risk and return as hyper local “Forward” projections inform valuations and pricing for a range of assets. A “Lens” that creates a shared understanding of all property sub-markets may enable the private and public sectors to effectively target capital that meets the challenges of housing affordability, struggling downtowns, fiscal imbalances and social inequities that unevenly affect every community.
The basis of competition is shifting as ICE, CoStar, Zillow, and the GSEs after release, contend for consumer attention, top producer loyalty and data supremacy. ICE has previewed a Consumer Engagement Suite which could deliver a list-to-loan-to-servicing experience. Realtors have a structural advantage as the listing event is the signal to downstream transactions. Will they ever share in the value of their data to profit beyond the first point of sale?
ICE promises a systemwide upgrade where everyone wins except the unstable status quo. Digitization will enable industry efficiency, new choices for consumers and communities, reliable liquidity for capital markets and risk aware pricing of guarantees. The “on platform” first movers will grow profit margins, gain market share and build brand equity by controlling their digital rights, adopting interoperability standards and creating greater value from local networks. Success means zero defect loans, costing $2K to manufacture, for 5M new homes, built in the right places.
This merger means modernization that advances real estate toward an adaptive, sustainable and connected future.
Stuart McFarland is the former EVP Operations and CFO at Fannie Mae, EVP General Manager at GE Capital Mortgage Services, and CEO at GE Capital Asset Management.
Every time I get my hair cut, I’m faced with a dilemma — should I tip the barber or not? I usually get my hair cut in a small-town shop. I tip $2 on a $12 haircut. If I get to hear stories about Vietnam or histrionic political rants, I tip $3, even if I don’t agree with the barber’s viewpoints. (I tip because I’ve been entertained.) Sometimes, if I don’t have enough cash, I don’t leave a anything at all. Are these tips appropriate?
What about when I pick up Chinese takeout? Should I have tipped the guys who delivered our new gas range last fall? What about a hotel bellhop? A parking valet? Out of curiosity, I did some research on tipping practices in the United States. There’s actually significant disagreement about how much to tip for even common services.
For example, you know you should tip your waitress. But how much should you leave? Some people claim that 10% is adequate. Others claim that 20% is standard. But I suspect that most of us learned to tip 15%, and to give more for exceptional service. (The wikipedia entry on tipping currently contains the bizarre claim that “18% is generally accepted as a standard tip for good service”.) Which amount is correct?
The concern around tipping stems from the need to get it right — offer too little, and you run the risk of offending someone; offer too much, and you needlessly impact your budget. Plus, there’s actually significant disagreement about how much to tip for even common services.
After browsing dozens of pages, I drafted the following guide. The amounts listed are based on averages or on consensus, when possible.
“Tip: (noun) — a small present of money given directly to someone for performing a service or menial task; gratuity” — Dictionary.com
Food Service
It’s common knowledge that you should tip your waitress. But how much should you leave?
Some people claim that 10 percent is adequate; others believe that 20 percent is standard. But a majority of us learned to tip 15 percent, and to give more for exceptional service. (The Wikipedia entry on tipping contains the rather bizarre statement that “18% is generally accepted as a standard tip for good service.”) So which is it?
Service
Tip Suggestion
Comment
Barista
None
Many people suggest putting coins in the tip jar.
Bartender
15% of total bill or $1/drink
Pre-tip for better service
Delivery Person (including pizza)
10%
$2 minimum
Maitre d’
$5
(… up to $25 for special effort)
Takeout
None
None
Waiter
15% for adequate service
20% for exceptional service. For poor service, leave 10% or less.
General holiday tipping guidelines
Holiday tipping is never required. Even when it’s the social norm, you shouldn’t tip if you can’t afford it or you don’t feel the person deserves it.
Tipping tends to be more common (and on a larger scale) in big cities than in small towns. The best way to determine the etiquette in your area is to ask around.
In general, you should consider giving a holiday tip to the folks who take care of your home and family, especially those you see often. The more often you see someone and the longer you’ve known them, the more you should tip. (Someone who works in your home regularly — such as a housekeeper — usually expects a tip.)
For personal services like manicures, massages, pet grooming, and fitness training, tip up to the cost of one session, but only if you see the same person regularly. For example, if you get a $60 massage every six weeks, your holiday tip should be about $60.
Public servants are not allowed to accept cash tips in the U.S., but it’s acceptable to give a non-cash gift of up to $20. You might give a plate of cookies to your mail carrier, for example, or a book or a gift certificate to your child’s teacher.
When you give a tip, include a card or a hand-written note thanking the person for their service.
If you tip cash, crisp new bills make a better impression than old wrinkly ones.
Home Care Service
Here’s a list of people who often receive holiday tips and what they typically receive:
Service
Tip Suggestion
Comment
Babysitter or Nanny
One week’s pay
None
Housekeeper
One week’s pay
None
Building Superintendent
$20 – $100
It varies. Some people think this helps to keep a harmonious relationship with the super.
Doorman
Holiday gift
Bottle of wine
Furniture Deliverer
$5 – $20
It varies. Some people recommend offering cold drinks.
Garbage Collector
$15
(… up to $25 for special effort)
Gardener
One week’s pay
None
Mail Carrier
$15
(… up to $20 non-cash.)
Newspaper Delivery Person
$15 to $25
(… up to $25 for exceptional service.)
Personal Care
Service
Tip Suggestion
Comment
Babysitter
One week’s pay
It varies. Don’t pay this for one-time babysitting.
Barber or Hairstylist
10-15% or 15-20%
Some people recommend $5 to each person who shampoos or blow-dries your hair, and others recommend up to the cost of one visit for the holidays.
Coat checker
$1 per coat
It varies. Some people recommend $2 to $5 upon retrieval.
Home Health Employee, Private Nurse or Personal Caregiver
(… up to a week’s salary)
Check with the agency as some prohibit gifts.
Manicurist
15%
None
Masseuse
10%-15%
None
Nanny
One week’s pay
None
Personal Trainer or Yoga Instructor
$20-$50
Tip discreetly.
Shoe Shiner
$2 or $3
None
Spa Service
15-20%
None
Office Service
Service
Tip Suggestion
Comment
Janitor
$15-$25
None
Parking Attendant
$15-$25
None
Travel
Service
Tip Suggestion
Comment
Bus Driver (not mass transit)
$1-$2
(… if he handles luggage.)
Cab Driver
10%
($2-$5 minimum)
Chauffer
10%-15%
None.
Gas Station Attendant
None
(or $2 -$4 – there’s no agreement on tips).
Porter or Skycap
$1 per bag
(… $2 for heavy items, if the porter brings luggage to counter)
Hotel Staff
Service
Tip Suggestion
Comment
Bellman or Porter
$1-$2 per bag, $5 minimum
Or $1 per bag, $2 minimum
Concierge
$5
(… up to $20 for something exceptional; nothing for directions.)
Housekeeper
$2-$5 per night, paid daily or as a lump sum at checkout
Most suggest you tip daily.
Parking Valet
$2-$5 paid when your car is retrieved
Some say to pay when it’s parked too.
Room Service
$5 minimum
(unless the gratuity is included in check)
Most of these relate to holiday tipping, but some suggestions are appropriate any time of year. Of course, giving a tip is an individual decision. J.D. Roth used to tip the barber extra if he got to hear an entertaining story about Vietnam or histrionic political rants. What influences you to give a larger or smaller tip? Do you have any suggestions to add?
Here’s one for you: How many fintech companies does it take to reduce the cost to originate a loan? There’s no great punchline to throw in here — only the sobering fact that it cost a record high of $13,171 to originate a loan in the first quarter of 2023, according to Fannie Mae’s recent lender sentiment survey.
Still, the FHFA set out to answer this question by gathering more than 60 companies together in Washington, D.C. for the inaugural Velocity TechSprint in July. This hackathon of sorts had a single goal: determine the best solution to effectively use data to reduce loan cost and make lending more attainable and fair for consumers.
I was one of 80 participants assembled together in 10 different teams. Each team contained a cross section of lenders, fintechs, consultants and others united by a common goal. We had three days to engineer a viable solution to some of the biggest challenges in lending — oh, and boil down those three days of solutioning into a five-minute pitch in front of industry judges. No pressure there.
This was very much an exercise for optimists, innovators and maybe even dreamers. Loan costs have risen every quarter since the first of 2020. So what could really be done in three days that hasn’t been tried in three years? We have watched the record rise and fall of investment in technology solutions over the past few years amidst record loan volumes, many of which promised to automate a better borrower experience and deliver shorter loan closing times. But the stubborn fact remains that transformative change has yet to materialize.
Still, that evidence made the idea of locking arms with industry leaders and working with competitors even more compelling. People arrived ready to ideate, compete and cooperate.
A few things became apparent within our team on the first day of working together, and we were ready to attack every aspect of the loan lifecycle to make it better. From consumer financial readiness to loan servicing years after close, everything was on the table. Our knowledge of how the whole thing fits together was exciting. To make a big impact, we have to have a big solution, right?
It wasn’t until the second day that the truth finally became clear: We only had time to flesh out and describe one good idea, not the more than five we had packaged into one big solution. As the team debated and consumed an intense amount of coffee, it became clear that every solution idea we wanted to build upon was lacking one key component that had yet to be solved for the industry. There was a lack of data trust.
Lenders and other stakeholders spend countless hours checking, verifying, rechecking and reverifying the same data over and over again. That data usually comes in the form of a document, which gets sent around to various stakeholders, sometimes with accompanying structured data, sometimes not. Data gets re-extracted over and over again. There’s an industry-wide inability to easily understand whether the data or document has changed since the last time it was checked, and to understand if that data is from the original, direct source.
The mortgage industry loves using the phrase “checking the checker,” because this is common practice even when GSE automated underwriting systems are fully in use. Our team set out to solve this data trust issue and give lenders a way to check an authoritative source to verify if data has changed since last delivery, instead of having to reverify all the data from scratch again.
It turns out we were not the only team that arrived at this conclusion — at least half of the pitches featured some aspect of data trust. Whether the focus was on providing better ways for consumers to control and securely share their own financial data, or on enabling lenders to more efficiently consume new alternative sources of credit data, data trust was a central theme.
There were some strong cases made for the use of blockchain and NFTs to provide a tokenized way of securely sharing and trusting consumer data, but in the end it wasn’t the lack of technology that was identified as the biggest speed bump, it was the lack of standardization and central authority.
Which leads us to one of the most surprising themes of the week: fintechs asking for government involvement. There seemed to be a common realization that a healthy cooperation between the public and private sector was needed to create a major change to the status quo.
Yes, I realize that the event was hosted by the FHFA, so maybe this isn’t surprising. The cold hard truth is this: The need for centralized data trust in an ecosystem as complex and regulated as the mortgage industry is beyond what any one innovator can bring about quickly. Some sprint teams proposed cooperatives with public and private organizations, while others asked for outright government agency and mandates.
I was reminded of the recent plea from generative AI companies asking for government regulation. Interestingly enough, reducing the risk of bias in generative AI models comes down to data trust as well, so it appears we are onto something here.
I came away from the event encouraged once again in the mortgage industry’s willingness to work together to solve big problems, but the real test is what happens next.
Social Security Disability Insurance (SSDI) isn’t the only benefit you can claim if you have a disability. You can qualify for other benefits while receiving SSDI, including Supplemental Security Income, Medicare, Medicaid, private and employer disability insurance, disability benefits from the Department of Veterans Affairs (VA), food and heating assistance and more.
Other federal programs
Supplemental Security Income
Supplemental Security Income (SSI) is a Social Security Administration (SSA) benefit program that provides a financial benefit to adults and children with disabilities and nondisabled adults older than 65 with limited income and resources
. Many people who receive SSDI are also eligible to receive SSI payments.
Medicare
Receiving SSDI makes you eligible for Medicare. There are a few exceptions, but typically, a 24-month waiting period for Medicare starts when you first receive SSDI
.
Medicaid
Medicaid is a health care program that provides medical coverage to low-income adults, children, older adults, pregnant people, and people with disabilities. The program is funded jointly by state and federal governments and administered by individual states.
If you receive SSI, you may automatically be eligible for Medicaid. In many states, the SSI application is also a Medicaid application, but in some states, you may have to apply separately for Medicaid and SSI.
Food and energy benefits
If your income is limited, you may be eligible for benefits that help pay for necessities like food and heat. These include:
Supplemental Nutrition Assistance Program.SNAP benefits supplement the cost of groceries for low-income families. These benefits are disbursed on an electronic benefits transfer (EBT) card that works like a debit card in authorized food stores. Those receiving SSDI or SSI may also be eligible to receive SNAP.
Low Income Home Energy Assistance Program. This federally funded program subsidizes heating, cooling and other energy costs. If you receive certain benefits, including SNAP and SSI, you may be automatically eligible for LIHEAP.
Veteran benefits
If you’re a disabled veteran, you may qualify for a Veterans Affairs disability benefit. The amount you receive depends on how severe your disability is and whether you have dependents. VA disability and SSDI are not affected by one another, and you may be able to receive both benefits.
Nongovernment benefits
Private insurance benefits
If you bought disability insurance from a private insurer before becoming disabled, you may be eligible for monthly payments of a certain percentage of your wages. Private insurance payments don’t affect your SSDI; you can receive both benefits.
Employer-provided benefits
Workers’ compensation. Most businesses are required to provide some wage replacement, medical treatment and disability compensation if you become disabled because of something that happened while working. Receiving workers’ compensation will only reduce your Social Security disability payments if the combined amount of these benefits is more than 80% of your average earnings before you became disabled
.
Disability insurance. Many employers in the private sector offer workers short- or long-term disability insurance. These plans can pay a percentage of your salary if your disability prevents you from working. Short-term plans typically pay for three months to a year, while long-term policies can pay from 90 days to years or even for life.
Government employees. Government and civil service positions may also offer disability insurance. The Civil Service Retirement System (CSRS) covers most civilian federal employees, providing disability, retirement and survivor benefits. State governments also may provide disability benefits for their employees.
Tax benefits
People with disabilities may be eligible for certain tax breaks and benefits:
Reduced or waived income tax on your SSDI income. If you don’t have other substantial income besides your SSDI and your total provisional income totals less than $25,000 annually (or less than $32,000 for joint filers), you won’t owe any income tax on your SSDI. If you exceed these limits, you’ll still only owe income tax on up to 85% of your SSDI, depending on your income. SSI benefits are not taxable.
Earned income tax credit. The EITC is a tax break for low-income families and individuals (including those with disabilities). This credit can reduce what you owe in income taxes or increase your refund amount. SSI, SSDI and military disability pensions don’t count toward your income when you claim an EITC
.
Extra tax exemptions or deductions. The IRS offers an increased standard deduction for those who are legally blind and other tax breaks for those with physical or mental disabilities.
How to increase your SSDI benefit
There are a few ways to increase your SSDI benefit:
Your spouse, minor child or adult child, who became disabled before age 22 may be eligible to receive benefits on your record, which increases your total family income. You may also qualify for survivor’s benefits on a family member’s record if your eligible spouse, dependent parent or child has died.
Request to have your benefit recalculated if you feel the amount of your SSDI is incorrect and the SSA didn’t include all your income in its calculations.
Frequently asked questions
How long will it take to begin receiving my SSDI benefit after applying?
If your application is approved, you must wait five months before you can begin receiving payments, so you should receive your first payment in the sixth full month after the SSA learns of your disability. If you previously received SSDI benefits, the five-year rule can waive this waiting period.
Can I get SSDI and a Social Security retirement benefit at the same time?
In most cases, if you’re receiving SSDI, you can’t also receive Social Security retirement benefits. When you reach full retirement age, your SSDI will automatically convert to a retirement benefit.
How can I find out what disability benefits are available where I live?
One of the most comprehensive listings of benefits nationwide, including those for people with disabilities, is benefits.gov. This online tool allows you to tailor your search by the desired benefit type and state. The National Council on Aging also offers information on a variety of benefits. You may also want to contact your state or local government to learn about benefits programs specific to your area.
If I receive private disability insurance payments, will this reduce my SSDI?
No. Any disability payments you receive from private sources (such as private insurance or pensions) don’t affect your SSDI.
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On television, you may have noticed the Gerber commercial that talks about buying a life insurance policy for your child.
Ask any parent how far they would go to protect their child and most would tell you as far as they have to go.
Ask any financial expert if buying life insurance for kids makes sense and you might get an earful with half voting ‘yes’ for insurance and the other half voting ‘no’.
For me, I’m definitely on the ‘no’ side. Why you ask? We’ll get to that in a moment.
The Plus Side
Many argue that purchasing a life insurance policy for your child is a low-cost money move that will be beneficial in the future. It can be an effective plan for the future should the child grow up with health problems or have a family history of health problems that would make it difficult for them to get insured as an adult. Generally, life insurance is based on the amount of income you earn. Since you can not make an accurate assumption as to the amount of money your child would make in the future, you can use your own income as a guideline.
The Down Side
The experts who recommend against life insurance for kids generally feel the policies are outdated and there are now better options for investing in your child’s future. They feel that other resources like the 529 plans can be better suited for future savings. Not everyone is buying their children life insurance policies today. If there is coverage, it’s generally only to cover the costs of burial if something should happen, typically around $5000.
Personally, I’ve come across several clients that were “sold” life insurance policies for their kids to have insurance on them as well as a savings tool for when they get older. Now that the kids are older, the parents are disappointed (I’m being nice here) that the cash value hasn’t accumulated nearly as much as they were led to believe. If you’re being sold life insurance as investment stop and remember this:
I have not and do not intend to take out a life insurance policy on my kids. We started 529 plans for both as well as custodial accounts that we’ve used to purchase stock certificates. As they grow older, I’ll also plan to open Roth IRA’s for them as soon as they have earned income (Dad’s ready to get them on the payroll 🙂 ) From my end, I just don’t see the need for life insurance on them. Amy I wrong? I’m sure others have their opinion on the topic, but it won’t make me change my mind.
How to Purchase a Child’s Insurance Policy
If you absolutely feel that you have to have some sort of life insurance on your child, here’s a strategy that many financial experts can agree with. In addition to having a life insurance policy, utilizing other savings tools is also good financial practice. A parent’s best bet is to purchase a 20 year term policy that is renewable and can later be converted to whole life insurance.
For instance, a $10,000 policy can be later increased to $280,000 worth of insurance coverage. As an adult, the child would have life insurance coverage without medical tests and procedures. Some also use life insurance policies as a way to invest money tax-deferred. Since you are taxed on the gains of the investment, the first withdrawals are from the tax-free premiums. This will not be a replacement for when they have a family and need 1 million in life insurance, but if they have any health problems it does give them something.
After you have used all of the premium funds, you can take a loan against the gains tax-free also. You will have to keep the policy for your lifetime or you have to pay taxes on the amount taken.
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Not a Guilt Trip
Unfortunately, there are unsavory agents that will take advantage of a parent and use guilt as a sales tactic. When I hear stories like this it sickens me. Purchasing life insurance is a financially smart move and should not be done simply because you love your children.
However, if you as a parent do not have adequate life insurance coverage yourself or not enough going toward your retirement accounts, you should not spend the cash on insuring your children.
In the event something does happen to you, your child will have nothing to fall back on. Review your own insurance needs, especially as your family is changing. Speak with your insurance agent or financial advisor and make sure the amount of insurance you have is adequate to cover your own needs before purchasing a child’s policy.
The policy is subject to substantial fees and charges. Investment portfolios are subject to market risk. Death benefit guarantees are subject to the claims-paying ability of the issuing life insurance company. Loans will reduce the policy’s death benefit and cash surrender value, and have tax consequences if the policy lapses.
Purchasing a home is a significant milestone, and securing a home loan is a common way to fulfill this dream. However, the interest rates associated with home loans can significantly impact the overall cost of borrowing. To reduce the burden of interest and make your home loan more affordable, consider implementing the following strategies.
Opt for a shorter loan tenure
The duration of your loan tenure is a crucial factor affecting the interest you will pay. While longer tenures of 25 to 30 years may lower your monthly installment, opting for shorter tenures of 10 to 15 years can substantially reduce the overall interest payable. Use a home loan EMI calculator to visualise the significant reduction in interest for loans with shorter tenures. Carefully choose the loan tenure to avoid paying higher interest over the long term.
Consider prepayments
On floating-rate loans, lenders typically do not charge prepayment or loan foreclosure fees. Take advantage of this by making periodic prepayments on your loan. During the initial years of your loan, a significant portion of your payments goes towards interest. By making regular prepayments, you can substantially reduce the principal amount, leading to lower overall interest costs. Be aware that lenders may charge a percentage on prepayments for fixed-rate loans. Check with your bank or lender to understand the applicable prepayment charges.
TRENDING NOW
Check if your lender allows you to revise your monthly installment annually. If you experience an increase in income, consider opting for higher EMIs to shorten the loan tenure. A reduced tenure will lead to lower overall interest costs throughout the loan period. Consult your lender to explore such options.
Compare interest rates online
Thoroughly research loan products and compare interest rates from different lenders before finalising your decision. Utilise third-party websites that provide comprehensive information on rates and charges levied by various lenders. By comparing home loan interest rates across different banks, you can identify the most competitive offers and choose the one that best suits your needs.
Lenders often offer preferential rates to customers with a solid credit history. If your credit score is near 800 and you have maintained a responsible repayment track record, you may be eligible for better rates on your loan. Additionally, maintain a good business relationship with your lender to negotiate lower interest rates. Keep an eye out for festive offers, as banks frequently lower their interest rates during such periods.
Home loan balance transfer as an alternative
Home loan balance transfer becomes a viable option once you have started making prepayments on your loan. If you believe that your current lender’s interest rate is too high, you can transfer the remaining principal amount to another bank or lender offering a lower interest rate. However, consider balance transfer as a last resort, as missed payments on balance transfer loans can result in higher penalties. Explore this option only if you have exhausted all other possibilities.
Make a larger down payment
Instead of paying the minimum required down payment, consider contributing more from your savings as a down payment. Most financial institutions finance between 75% to 90% of the property value, leaving you responsible for the remaining 10% to 25%. A higher down payment will lead to a lower loan amount, directly reducing the interest you need to pay.