Apache is functioning normally

June 20, 2023 by Brett Tams

It doesn’t matter how you slice it, parenting is an extremely difficult job. Which isn’t made any easier by having to discuss difficult topics with your children. Finances and financial hardship are just a couple of these topics that fall into that category. However, when you find ourselves in a state of financial hardship, that can be the best time to teach your children.

How you teach our children about financial hardship can look very different depending upon their ages and maturity level. So, before you begin giving an in-depth lesson about financial hardship to your children, please read on.

I get into the nitty-gritty of what sorts of lessons may be appropriate for each age level for the best understanding and long-term retention.

What’s Ahead:

Why should you talk to your children about financial hardship?

There are many different reasons why you could choose to discuss financial hardship with your children. But, the main reason should be to help educate them now for their potential maximum long term financial wellness. Since we, as parents, only want what’s best for our kids and for them to live a better life than we have had, teaching them about finances falls right in line with that ideology.

They’ll learn how finances affect credit scores

One of the first lessons you could teach your children about financial hardship is how it directly affects your credit score. While a lot of children have never even heard of a credit score yet, this would be a good place to begin. An easy way to break this down to your children is to explain:

A credit score is a rating of your responsibility with credit.
Your credit report begins the first time you take out any credit in your name (such as a credit card, loan, rent/mortgage, etc).
A credit report tracks when you make an on-time payment, a late payment, apply for new credit, overdraw your account, use too much of your revolving credit, etc.
The more mistakes you make with your credit, the lower your overall credit score.
The lower your credit score, the harder it is to get any future loans.

Once they grasp the concept of a credit report and credit score, then you can go on to explain how your financial hardship has affected your credit score. This is the point where you want to be as blatantly honest as possible. Since children learn best by example, your own credit score, and things that have affected it, will carry more weight with them.

Open up your latest credit report and go through everything line by line with them. If your children are much younger, they may not be able to grasp the more intricate details you want to convey, so stick with a broader description. But, if they are older, they will more than likely be able to understand the full credit report diagnosis.

While being this open and honest with your children may make you feel shameful, it shouldn’t. This is the prime opportunity for a true life lesson that directly affects their life right now.

They can understand how financial hardship directly affects day-to-day living

Most children won’t have a concept of how financial hardship can affect our day to day lives. But that is because they aren’t living in an adult world full of responsibility yet. Of course, you want them to be kids as long as they can and fully enjoy their childhood. But, it’s also a great time to teach them about financial consequences while the stakes aren’t as high.

Since most children want everything right away, this is a good time to dive into this lesson with them. Explain to your children that most of us don’t get to have everything we want as soon as we want it because things cost money. And if you’re in a position of financial hardship, you probably don’t have any to spare. This can lead to a great discussion about disposable income, and lack thereof.

When you are living in a state of financial hardship, you are playing a juggling game every day. A great way to explain this to your children is to show them exactly how much you make for the month. Then, break down your monthly living expenses for them. These should include:

Mortgage or rent.
Homeowner’s or renter’s insurance.
Car payment(s).
Car insurance.
Electricity.
Water.
Trash.
Gas.
Phone.
Internet.
Gas.
Groceries.
Streaming services (if any).

No matter what their age, you can help them do the basic addition and subtraction math to figure out how much money is left, if any. Next, you should go through any other loan or credit card payments you have to make each month also. Once they see these numbers, they should be able to understand that there is simply not enough money to cover everything.

After you have laid everything out for them in this way, then it’s time to explain how all of these bills happened. You should give them as much detail as they can handle, based on age and maturity level. This way they can see how easily a situation like this can, and does, occur.

They’ll know how financial hardship affects relationships

If you are in a position of financial hardship, it is likely that this has affected a lot of your personal relationships. When you find ourselves in this position, you don’t always like to talk about it with others. So, instead, you avoid the topic and pretend like everything is just fine.

But, you know that you can’t do a lot of the things with our friends and family that you may have previously been able to. Which, therefore, begins to affect our relationships. I can tell you that when I was going through my own period of financial hardship, most of my friends didn’t understand. They wanted me to go meet them for coffee, dinner, or a drink to socialize. But I didn’t even have enough money to pay for the gas to drive there.

Sometimes friends and family will foot the bill for you just so you can join them. But, for a lot of us (me included), that creates a feeling of guilt during the whole experience. So, it’s just easier to turn down the offer instead. But, that means weakening the bonds of your relationship because you are distancing yourself.

It can be a slippery slope which could potentially lead to a further downward spiral. Therefore, as painful as it may be, it’s much better to be as honest with your friends and family as you can be about your financial hardship situation. Instead, give alternatives to spend time together that don’t cost any extra money. Some great ideas include:

Hiking.
Watching movies/documentaries at home.
Game night.
Swimming in a local lake or river.
Having a potluck meal at your house.
Listening to music and catching up at your house.

Whatever you choose to do, get creative, and just focus on keeping your relationship bonds strong. The message you should try to convey to your children is that a good support system can really help you get through the financial hardship.

When should you talk to your children about financial hardship?

There may not be a right time to discuss financial hardship with your children. But, the best time to begin discussing it is as soon as possible. Before you approach the subject with them, though, you need to make sure you are in the right state of mind. Figure out what you want to convey to your children before you ever begin a conversation about your finances.

It might be best to write down some bullet points prior to your first conversation. Tell your children that you want to schedule a meeting with them at a certain place and time. Choose a place that is comfortable for all of you, since this will likely be a longer conversation.

When you begin the conversation, you will need to be as honest with them about your situation as possible. After all, children are like little sponges and will be eager to soak up the information you are doling out to them. Make sure to convey that your financial situation is in no way, shape or form a direct result of them. Because children will naturally take on responsibility and blame that doesn’t actually belong to them. So you might need to reiterate this point, depending upon your child’s personality.

Also, explain that you aren’t asking for their help with solving the financial hardship issue. You just want to use your current situation as a learning tool for them so that they don’t end up in the same place you have found yourself. This is the primary objective for sharing all of this in-depth information with your children about your financial hardship.

And the earlier you can do it, the better. Because then they can go along for the ride and see how you ultimately get yourself out of the situation.

How should you talk to your children in age-appropriate ways about financial hardship?

With different ages and stages of childhood come different financial lessons that will work better. After all, trying to teach a preschooler about investing may be a bit outside their capacity. Therefore, how you explain different topics regarding financial hardship should have a direct correlation to the ages of your children.

Toddler

Having a toddler can be one of the most challenging time periods as a parent. They are testing all of the boundaries and want to be completely autonomous. It is fantastic to watch their independence and confidence grow and see how fast they learn. But they need to learn smaller lessons in order to retain the information for the long-term.

This means that there are some great smaller, more basic lessons you can begin to work with them on now. Some of the best ways to teach your toddler about finances and financial hardship can include:

Saving their money in a piggy bank.
Help them count their money every month so they can see how it grows when they leave it alone.
Taking them shopping with you and having them use their own money to buy something.
Lead by example by paying with cash whenever they are around so they can grasp the monetary exchange.

These options may not seem like a lot, especially with regards to financial hardship. But, these are the building blocks of their financial education.

Preschooler

Preschoolers have begun to grasp more complex concepts than they did when they were toddlers. If you didn’t start teaching them about money when they were toddlers, I would suggest starting with the aforementioned lessons first.

However, if you started with your children when they were toddlers, now it is time to build upon those lessons. Some great ways to do this can be:

Have them split their piggy bank up into three (spend, save, donate) different piggy banks.
Explain the importance of saving and donating vs. spending and have your child figure out how much to put in each category based on the level of importance to them.
Take your children grocery shopping and have them help you determine the best values.
Have your kids help you count out the money and pay the cashier for groceries.

By adding on to previous financial lessons you have already taught them, you are just solidifying the concepts for them. And this will definitely help with mirroring behavior and long-term retention.

School-aged

If you have been involving your school-aged child in all of these lessons since they were a toddler, then kudos to you! It can be extremely difficult to teach toddlers and preschoolers because of their shorter attention spans. But it gets a bit easier once your children are school-aged.

They have a higher capacity for reasoning and problem-solving now. So you can throw some higher-level financial concepts at them. Some of these can include:

Waiting to make any purchases for at least 24 hours.
Make them use a percentage of their own money to purchase any items they want.
Explain about opportunity costs and how if they purchase an item they want now, they might not have the money needed for another item in the future.
Pay them for work they have actually done (chores), as opposed to money for nothing (allowance).

At this age, it is good to have them more involved with their own purchases. This way they feel it more deeply and have a more solid idea of how much things actually cost. It also reiterates to them that there is no magic money tree growing in the yard that will fund their every wish and dream. Therefore, it brings the concept of money and how we use it in today’s world into a more realistic space.

Preteen

Preteens are at the age where they have begun to know everything! While it’s great that they are so much more cognizant of how the world around them works, sometimes you have to bring them back down to reality.

At this age, I like to get each child a checking account that I am a co-signer on. This way they can begin to spend only their own money on things they want. However, I don’t give them access to see what is in their account. They also have to ask permission to make any purchases ahead of time. If they don’t, I revoke the access temporarily.

Besides getting your preteen a checking account, here are a few other great options to help teach them about finances:

Have them start putting a larger chunk of money away in savings for larger items they may want in the future.
Dive deep into the compound interest topic. (I wish my parents had done this for me because it would have changed how I looked at money when I got my first real job).

Since they are at the point now where they have gotten into more difficult mathematical equations, compounding should be an easy concept for them to grasp. In fact, we started talking about it with some of our kids when they were a little bit younger, and they still seemed to get it. If you are still having a difficult time explaining here, here is a great compound interest calculator that you can play on with your kids. It has really made a huge difference in our children’s financial mindset!

Teenager

If you thought your preteen knew everything, then your teenager is a guru. They have surpassed your intelligence level, or so they think, and wonder how you have made it this far. While they are close to being out in the big, bad world all on their own, they still have a thing or two to learn.

The best lessons you can give them now are about how the bigger things in life can really affect them financially. Some of these can include:

These lessons are going to take a lot more work on your end because they are more in-depth concepts. But, these will be some of the final financial lessons you leave your children with before they fly the coop, so you want them to be good.

Important budgeting tools to help explain financial hardship

One of the first places to start when dealing with financial hardship is a budget. Not everybody has one or wants to stick with one. But I have found that continually having a budget, and visiting it weekly, has really helped us stay on track. In fact, creating a budget and sticking to it helped us get out of debt much faster than we otherwise thought possible. So I am a huge proponent of a budget.

No matter which budget you decide to use, just make sure that it works for you and your lifestyle. If you don’t have a budget yet, then this might be a great time to include your children in the process, depending upon their ages. And if you already have one, then going through your budget with them is a great built-in teachable moment.

Savings tools to include in your explanation of finances

Another topic that simply must be broached with your child is saving their money. This can be one of the most difficult topics to discuss because most kids want to spend every dime they have. Expressing just how important saving their money for a rainy day is might be more difficult to get across to them.

Using yourself and your current financial hardship situation as an example is the best way to get this message across. Explain why not having a decent emergency fund can only hinder them financially in the future.

Easy investment tools to explain getting back on track with your finances

Teaching your children about investing while they are young is the best time to introduce them to the subject. After all, we all want to retire someday. And for most of us, the sooner the better.

While investing may be near impossible when you are in a state of financial hardship, it’s still a good thing to have in the back of your mind. Because getting to the point where you can invest in your future can help possibly prevent any future financial hardship situations from occurring. Investing is much easier with today’s app friendly age also.

A couple of great places to start an investment portfolio are M1 and Betterment. Both of these sites have multiple account type options, such as:

Individual taxable account.
Roth IRA.
SEP.
Traditional IRA.
Trust investments.

If your child is at working age and making some of their own money, then opening a Roth IRA account may be the best option. No matter which accounts they, and you, choose to open, these accounts can only help solidify future financial wellness.

Summary

Overall, explaining financial hardship can be a very sticky subject to tackle with your child. But, imparting our financial mistakes and wisdom onto our children is one of our most important jobs. So, include your children in your discussions about your financial hardship. Explain how you got there and how you plan to get out.

At some point, our kids will become adults and have plenty of opportunities to make their own mistakes. But, it would be great if they didn’t relive our mistakes. If we can help them live more financially stable lives than we have, then we have done our parenting job well.

Apache is functioning normally

June 20, 2023 by Brett Tams

Mortgage cost rises: how other countries compare with the UK

Borrowers are protected from shocks by long-term loans in US and paternalistic approach in Europe

The big increases in monthly mortgage costs Britons are facing “just don’t happen here”, says Roger Bartlett, who bought a home in Belgium while working in the country as an air traffic controller.

He says his experience was the same in the Netherlands, where mortgages with 30-year repayment terms are the most common loans used by homebuyers.

The rapid increase in UK mortgage rates – the average two-year fixed deal has hit 6% for the first time this year – has raised questions over how the British home lending market compares with overseas nations as interest rates rise across the globe. A picture of a comparatively short-term, highly competitive UK industry quickly emerges.

Sunak says no extra help with mortgages as fixed rates climb to 6%Read more

Bartlett’s first mortgage carried a 9% interest rate, but when new mortgages were beginning to be offered at nearer 4% a few years later, he paid a charge – equivalent to three months of payments – to transfer to the lower rate.

“The benefit to the customer is that you can plan your outgoings for the total period. And for society it brings stability into the market, with most lenders not being affected by the rate changes,” he adds.

Variable mortgages are on offer, but the rate is only 0.5% lower, he says, making it a big gamble for little gain.

His daughter recently moved back to Belgium from the UK and bought a home with a 20-year mortgage, fixed at 1.49%.

As in the Low Countries, there is a strong paternalistic element to mortgage lending in France that allows homebuyers to take a punt on a 30-year fixed rate loan.

If the mortgage-payer moves home, there are no early repayment penalties. And if someone loses their job or becomes ill, the lender is expected to be lenient, says Miranda John, the director of international property finance at the broker SPF Private Clients.

The central bank cushions borrowers from the ups and downs of the financial markets, at least from its weekly mood swings, by issuing an average percentage rate (APR) that banks must use as the basis for their loans.

A state-influenced mortgage market might have the benefit of allowing borrowers to adjust to higher borrowing rates over a longer time period, but it means that in a period of quickly rising loan costs, the lag between what banks can offer and what they must pay themselves to borrow on international markets is squeezed. The average 30-year mortgage rate in France is still 3.5%.

John says French borrowers might, in theory, be enjoying much lower borrowing costs than their counterparts in the UK, but the reality is that most banks are not lending because their margins are squeezed to the extent that they would be making a loss.

“A standard APR was introduced by the central bank as a consumer protection measure, but it has stalled the whole market at the moment now that ordinary mortgages are not profitable,” she says.

mortgage chart

Culturally, it means the French system is a world away from the UK mortgage market, which has about twice as many lenders vying for business and many times more products on offer.

In the US, a more long-term approach to mortgages has prevented households facing an immediate jump in borrowing costs. While steep interest rate rises and political instability have caused tremors in the mortgage market, the popularity of mortgages that are fixed for the full 15-year or 30-year term has shielded homeowners.

The average US mortgage term is 23.3 years and shows no sign of shortening in response to rising rates. A similar level of flexibility applied by continental banks is offered to buyers in America should their circumstances change.

The lowest rate for a 30-year mortgage in the US is about 5.7%.

In the UK, mortgagers are also encouraged to buy short term by a finance industry populated by many more brokers than can be found in France and standard rules that allow mortgage companies to apply early redemption charges on those who want to bail out of a long-term fixed rate product.

Financial stability is another hurdle UK mortgage lenders must overcome, says Neal Hudson, founder of the consultancy Residential Analysts and a visiting fellow at the Henley Business School.

“The financial markets are paying attention to UK data at the moment and it is proving disappointing,” he says.

Millions are facing soaring mortgage rates. How did we leave them so vulnerable? | Will HuttonRead more

Official figures on Wednesday are expected to show only a modest fall in inflation in May, making the Bank of England look set to raise interest rates for a 13th consecutive time to 4.75% when its policymakers meet on Thursday.

However, fixed-rate mortgages are tied to the market in government debt. The interest rate on government debt, known as the yield, soared last year in the wake of Kwasi Kwarteng’s ill-fated budget and has returned to high levels in recent weeks.

Financial markets have judged that the UK’s recovery from the pandemic and inflation crisis will take longer than many other countries, leading analysts to believe that mortgage rates will stay at current levels well into 2024.

France and the rest of the 20 countries inside the eurozone face rising borrowing costs after a series of rate rises by the European Central Bank, but the stability of the currency zone means that the interest rate on government debt remains below the UK’s.

Portugal is an outlier. It has the highest effective mortgage interest rates, which is a measure of all mortgages and the interest bill paid, mainly because the majority of homebuyers buy variable-rate products.

Ray Boulger, a mortgage adviser at the broker John Charcol, says niche lender Kensington Mortgages plans to launch a 30-year fixed-rate mortgage in the UK at 5.65% later this year. Like its French counterparts, it will not make early redemption charges for moving house. It hopes it will catch on.

“About 40% of mortgage buyers opted for variable rate mortgages in the fourth quarter of 2022. They will be having a tough time,” he says.

Topics

Mortgages

Mortgage rates
UK cost of living crisis
Banks and building societies
Property
Europe
features

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Source: theguardian.com

Apache is functioning normally

June 20, 2023 by Brett Tams

Last Updated: May 27, 2023 BY Michelle Schroeder-Gardner – 58 Comments

Disclosure: This post may contain affiliate links, meaning I get a commission if you decide to make a purchase through my links, at no cost to you. Please read my disclosure for more info.

Recently, I published the article Reasons You’re Still in Debt. Like I said in that article, I think the first step in eliminating debt is to realize why you are in debt in the first place.

I believe that if you don’t know what your problem with debt to begin with is, then it would be hard to make a positive change.

Yes, it is great to just start attacking your debt, but you also don’t want to fall into the same cycle of going into debt over and over again.

After you realize why you are in debt (or why you keep going back into debt), the next step is to figure out how you will eliminate your debt. There are many different ways for you to attack your debt, and I prefer a mixture of everything.

Below are different ways to get rid of your debt.

1. Stop adding to your debt.

This sounds obvious, right? Like I said earlier, if you don’t know why you are in debt, then it would be hard to stop adding to your debt.

Also, if you’re eliminating debt but also adding to it at the same time then you won’t get anywhere fast.

Different ways that you could prevent yourself to stop adding more debt include:

Canceling your credit card.
Freezing your credit card.
Asking for your credit card limit to be lowered.
Don’t take out extra student loans that you don’t need.
Think it over before you buy something.
Avoid places like the mall altogether.

2. Create a budget.

Of course this is on my list. Why wouldn’t it be? If you don’t believe in a budget but you have a lot of debt, then you better start believing.

You should create a realistic budget so that you truly know how much you are spending. Then total how much you actually bring in each month. If you are bringing in less than you are spending then a change definitely needs to be made.

A budget can also help you see where your money is going so that you know what areas you need to work on. Maybe you never realized how much you spend on food each month, how much you spend on clothing or something else.

A budget really puts that in front of you so that you know what you can cut out of your spending (or at least lower your spending in that area).

3. Cut your expenses.

To continue with what I was saying above, you may have to cut your expenses in order to have a realistic budget so that you can pay off your debt.

If you have $100,000 in credit card debt, should you really still be spending $500 a month on clothing?

Probably not.

Depending on how quickly you want to get rid of your debt, there are different things that you may want to cut out. You could cut out Starbucks (I know, I know), lower your restaurant spending, find a cheaper way to workout, sell your car for something cheaper/more affordable, cook from scratch and so on.

There are many ways to cut down your spending. Below is a quick list for you to start with:

Lower your cell phone bill. Instead of paying the $150 or more that you spend on your cell phone bill each month, there are companies out there like Republic Wireless that offer cell phone service starting at $5. YES, I SAID $5! If you use my Republic Wireless affiliate link, you can change your life and start saving thousands of dollars a year on your cell phone service. I created a full review on Republic Wireless if you are interested in hearing more. I’ve been using them for over a year and they are great.
Sign up for a website like Ebates where you can earn FREE cash back for spending like how you normally would online. When you sign up through my link, you also receive a free $10 gift card bonus to Macys, Walmart, Target, or Kohls!
Save money on food. I recently joined $5 Meal Plan in order to help me eat at home more and cut my food spending. It’s only $5 a month (the first four weeks are free too) and you get meal plans sent straight to you along with the exact shopping list you need in order to create the meals. Each meal costs around $2 per person or less. This allows you to save time because you won’t have to meal plan anymore, and it will save you money as well!
Check out my recommendations page for a full list on money-saving websites.

4. Find a way to make extra money.

Making extra income is the main thing that helped me pay off my student loans so quickly. I worked like crazy in my spare time because I knew that I could make more money than I could cut out of my budget(don’t worry, I did do both).

There is a limit to how much you can cut, but you can always find different ways to make more money.

You could find a part-time job at a restaurant, retail store, and so on. You could freelance on the side. You could babysit, dog walk, sell your crafts and so on. The list is really endless for what you could possibly do.

Miscellaneous other things you should do:

Pay more than the minimum.
Put little amounts toward your debt. For example, whenever you get an extra $25 (such as by selling something), then you should just throw that extra money that you won’t miss towards debt.
Automate your payments if you can’t force yourself to make payments.
Put money towards debt right when you get paid so that you are “paying yourself” first.

How are you eliminating your debt? When do you think you will be debt free?

Apache is functioning normally

June 20, 2023 by Brett Tams

American Airlines is adding four new lines to its domestic route map.

Later this year, the Fort Worth-based carrier will start flying the following four routes, as first seen in Cirium schedules and later confirmed by the carrier.

Ronald Reagan Washington National Airport (DCA) — Fort Lauderdale-Hollywood International Airport (FLL).
DCA — Milwaukee Mitchell International Airport (MKE).
Dallas Fort Worth International Airport (DFW) — Albany International Airport (ALB).
Miami International Airport (MIA) — Portland International Airport (PDX).

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All of the new routes are interesting, but perhaps the most intriguing is the new service between Miami and Portland, Oregon.

CIRIUM

Miami has historically been a fortress hub for American, acting as its key gateway to the Caribbean and Latin America with plenty of domestic feed for both the local and connecting markets.

So, despite the new route being one of the longest coast-to-coast flights in the American network, it may not necessarily be surprising to see the airline adding a new 2,700-mile service from Miami to Portland.

The airline shared in a statement that “American Airlines is pleased to announce new nonstop service from Miami (MIA) to Portland, Oregon (PDX) starting this November. The new nonstop service will complement American’s network of more than 140 destinations from MIA and opens convenient, one-stop access to the largest network of destinations in the Caribbean and Latin America from the United States.”

However, keen aviation observers will remember that it was just days ago when Alaska Airlines, which operates a hub in Portland, announced plans to commence flights to Miami later this year.

While American’s new route announcement could purely be a coincidence, the timing of when the service starts makes it pretty clear that this move is targeted at Alaska. American’s new Miami-to-Portland flight starts on Nov. 5, and Alaska’s will commence less than two weeks later.

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To recap, Miami is going from having no flights to Portland to having two daily flights in just a matter of days.

Though American and Alaska are Oneworld alliance partners and share a West Coast International Alliance, American’s competitive response is seemingly starting a turf war between the airlines.

More flight options are certainly better for travelers, especially since airlines like to match each other’s fares. While Alaska must now fend off a new competitor in Miami, the airline is no stranger to a turf war.

The Seattle-based carrier had a strong relationship with Delta Air Lines in the early 2010s that included a robust codeshare and frequent flyer alliance. By the middle of the decade, however, the partnership frayed as Delta moved instead to build its own hub in Seattle, ultimately competing head-to-head with Alaska on many of its most lucrative routes.

The partnership ultimately ended in 2017 amid an escalating turf battle for Seattle. Since then, Alaska’s been in growth mode — boosting the Seattle hub with new routes and elevating many elements of the travel experience, including new and expanded airport lounges.

ZACH GRIFF/THE POINTS GUY

Meanwhile, in San Diego, Alaska recently announced new service to Dulles International Airport (IAD), a key hub for United. A few days later, United retaliated by upgauging its route with the airline’s twin-aisle Boeing 777.

Since then, Alaska has been “trolling” United by switching its flight number to “AS 777” and offering select flyers 777 bonus miles for taking the new route.

American’s three other new routes are quite interesting as well. The flight from Washington, D.C., to Fort Lauderdale will go up against JetBlue’s flights in the same market.

While the Northeast Alliance between American and JetBlue may not be around for much longer, the two carriers are seemingly battling at DCA.

Meanwhile, the flight from Dallas to Albany will become American’s longest from the New York capital. The new route to Milwaukee will go head-to-head with Southwest Airlines.

“American is excited to offer more service to Reagan National Airport (DCA) with the additions of Fort Lauderdale and Milwaukee,” said Brian Znotins, American’s senior vice president of network planning. “These new markets join our robust DCA network of more than 85 destinations. We’re proud to serve these new in-perimeter markets without adding more congestion to the most heavily-utilized runway in the nation.”

Related reading:

Source: thepointsguy.com

Apache is functioning normally

June 20, 2023 by Brett Tams

How would you like $4,290,387? It’s easy! Just go back to 1972 and invest $100,000 into a well-diversified portfolio. Not enough money for you? Well, then, here’s how you can add $334,124 to that tidy sum: Simply rebalance this well-diversified portfolio annually.

Okay, despite my fondness for Marty McFly, there’s no way to travel back 38 years and open a brokerage account. But the past few decades may provide clues about the next few, especially regarding portfolio behavior and the value of rebalancing. Below, we’ll look at three common beliefs about rebalancing and explain whether they’re true or false — and why.

Reduce, Reuse … Rebalance?
In case you’re new to the concept, rebalancing is the process of returning a portfolio to an investor’s predetermined appropriate allocation (for example, 65% stocks and 35% bonds). A balanced portfolio is key to ensuring steady, growing returns, but the movement of various investments over time can cause that initial, balanced allocation to change; assets that have done well become a bigger piece of the pie, while the laggards shrink to a smaller portion.

Historically, broad asset classes tend to (but don’t always) revert to the mean, which is a fancy way of saying that the best investments over the past several years will often be among the worst over the next several years, and vice-versa. By rebalancing a portfolio, you’re aiming to sell hot investments before they turn cold, then use the proceeds to buy investments that are warming up. Doing this ensures that every asset remains represented at the level you find appropriate.

Let’s examine the behavior of stocks since 1972, a period during which the market had its share of hard times. The decline of the “Nifty Fifty” stocks during the market crash of 1973 and ’74 was at the time the biggest drop since the Depression, and during the “lost decade” we’ve just experienced, U.S. stocks posted their worst 10-year return ever, including the Depression.

Would rebalancing have helped during that time? Let’s find out. Join me in the plutonium-powered DeLorean and travel back to the year Al Pacino’s horse head beat out Jon Voight’s pretty mouth for the Best Picture Oscar.

The Asset Allocation Under Inspection
The investment portfolio we’re studying has the following assets:

U.S. large-cap stocks: 25%
U.S. small-cap stocks: 15%
International stocks: 15%
Real estate investment trusts: 10%
Intermediate-term government bonds: 35%

We’ll examine how this portfolio performed from 1972 (the first year with reliable numbers for each asset class) through the end of 2009, and compare the returns under two scenarios: one in which it is never rebalanced, and one in which it is rebalanced annually. We’ll then compare our back-tested portfolios to the S&P 500, since the typical American portfolio is dominated by S&P 500 stocks.

But first, let’s put our guinea-pig portfolio under the microscope to see what history has to say.

1972-2009	No Rebalancing	Annual Rebalancing	S&P 500
Annualized Return	10.4%	10.6%	9.9%
$100,000 Turned Into …	$4,290,387	$4,624,511	$3,622,187
Number of Calendar-Year Declines	7	5	9
Worst Calendar-Year Declines	(32.6%), (12.4%), (11.9%)	(20.4%), (13.1%), (10.4%)	(37.0%), (26.5%), (22.1%)
Source: My calculations using data from Ibbotson, MSCI EAFE, and NAREIT

Armed with these numbers, we can prove or disprove our three basic principles.

True or False: Rebalancing Always Significantly Improves Returns?
At first glance, the extra return gained from rebalancing our case-study portfolio doesn’t appear extraordinary: a mere 0.2% a year. However, the rebalanced portfolio is worth $334,124 more than its counterpart — an amount that is more than three times the original investment. And who wouldn’t want an extra $330,000 for about an hour of work a year?

It just goes to show how earning a tiny bit more, compounded over decades, can really pay off. We see this even more when comparing the annually rebalanced portfolio to the S&P 500, which earned 0.7% less a year but grew to “just” $3,622,187. The diversified, rebalanced portfolio was worth $1,002,324 more — that’s a 27.7% increase. Shazam!

That said, if you rebalance out of an asset that’s on an upward trend, you can actually earn less. Let’s break down the returns from our non-rebalanced and annually rebalanced portfolios by decade:

Annualized Returns by Decade	1970s*	1980s	1990s	2000s
No Rebalancing	8.6%	16.8%	12.3%	3.9%
Annual Rebalancing	9.0%	17.5%	11.8%	5.2%
*1972-1979

The benefit of rebalancing during the ’70s, ’80s, and 2000s was higher than the 0.2% annual increased return observed over the entire 38 years. But the 1990s were a different story; during that time, rebalancing actually reduced returns. That’s because U.S. stocks, particularly large caps, were on a tear through most of the decade. Rebalancing in those years would have required investors to sell those asset classes before they had run out of gas, then buy lower-performing assets like international stocks and Treasuries — which posted less than half the return of U.S. stocks during the 1990s.

However, U.S. stocks got their comeuppance (actually, come-down-ance) in the 2000s. One reason the benefit of rebalancing has been greater over the past decade (1.3% per year, on average) is that the rebalanced portfolio entered the 2000s with lower exposure to U.S. large caps, meaning it was more protected when they reverted with a vengeance.

True or false? False. The boost rebalancing gives to returns is inconsistent — sometimes big, sometimes small, sometimes nonexistent, depending on market conditions. However, in the long term, you can expect it to add a smidge to your returns, which could add a not-insignificant amount to the portfolio’s final dollar value.

True or False: Rebalancing Is About Managing Risk?
Look back at the table of our back-tested results, and you’ll see that the rebalanced portfolio was less risky. It had fewer “down” years — and the declines it did have weren’t as bad. A non-rebalanced portfolio is subject to “asset drift,” when winners grow to take up a bigger proportion of a portfolio. We can illustrate this by reviewing the allocations of our non-rebalanced portfolio at three points: (1) at the start of our study, (2) right before the dot-com bust that began in 2000, and (3) right before the “Great Recession” crash of 2008.

Time	Large Caps	Small Caps	International Stocks	REITs	Treasuries
Beginning of 1972	25%	15%	15%	10%	35%
End of 1999	34%	28%	8%	18%	11%
End of 2007	22%	36%	16%	16%	11%

In each case, the portfolio became considerably more aggressive, eventually coming to hold less than a third of its targeted allocation to bonds — right before two major stock-market corrections. Mazahs! (That’s the opposite of “Shazam!”) By the end of 1999, the portfolio’s largest holding by far was U.S. large caps — on the eve of their worst decade ever. And by the end of 2007, more than a third of the portfolio was in U.S. small caps, the most volatile asset class in our study.

A study by fund company Vanguard shows an extreme example of what can happen to a non-rebalanced portfolio. The researchers found that a portfolio created in 1926 with 60% stocks and 40% bonds would have ended 2009 with 97% of its assets in stocks. This is the opposite of the approach most investors should take; in general, your portfolio should get more conservative as you approach and enter retirement. By determining a proper asset allocation and regularly rebalancing, the investor — not the market — determines the level of risk in the portfolio.

True or false? True … usually. Rebalancing can move you out of highfliers poised for a fall. The degree to which that reduces your risk depends on what you’re rebalancing your portfolio into. Which brings us to our next point …

True or False: The Stock-Bond Split Is Key?
If the investments in your portfolio tend to move together in the same direction and to similar degrees, rebalancing is less useful. Conversely, when those holdings don’t move in lockstep, rebalancing does a better job at managing risk.

In the investment world, that lockstep is known as correlation — the degree to which assets perform similarly in any given year. Broad categories of stocks — e.g., large caps and small caps, or U.S. stocks and European stocks — are at least somewhat correlated, often highly so. Stocks and bonds, on the other hand, are only mildly correlated, and most importantly, bonds tend to smell rosy when stocks stink. Thus, if the biggest reason to rebalance is to control risk (which is usually done by investing in bonds), then the most important allocation to monitor and rebalance is your stock-bond split.

Let’s return to our example portfolio but remove the bonds, instead adding 10% to large caps, small caps, and international stocks, and 5% to REITs. The results: The non-rebalanced portfolio posts an annualized return of 11.3% (turning $100,000 into $5,785,943), whereas the rebalanced portfolio returns an annualized 11.5% (ending with $6,328,103). Once again, we see a rebalancing bonus of 0.2% a year.

However, on the risk-reduction front, rebalancing added nada. Both portfolios experienced seven years of declines of similar degrees. The three worst calendar-year declines for the non-rebalanced portfolio were 38.1%, 23.2%, and 18.2%, and the three worst for the rebalanced portfolio were 38.6%, 23.0%, and 18.7%. The rebalanced portfolio earned higher returns in the 1970s, 1980s, and — interestingly — the 1990s. However, the bond-free rebalanced portfolio slightly trailed the bond-free non-rebalanced portfolio in the 2000s — the decade when risk reduction was needed most.

True or false? In general, true. Ensuring the right split between stocks and bonds can lower your risk of sharp declines — and of running out of money in the future.

Tips for Rebalancing
Enough theory! Here are some practical considerations when it comes to rearranging your portfolio.

- Account for taxes and other costs. If rebalancing results in big commissions or tax bills, the potential boost to returns could easily disappear. Whenever possible, rebalance in tax-advantaged accounts — such as IRAs or 401(k)s — and keep costs low by limiting transactions to no-load funds and discount brokerages. That said, don’t let the tax tail wag the investment dog. Plenty of people held onto stocks in the 1990s just because they didn’t want to pay the capital gains taxes. The market took care of that for them — by significantly reducing or eliminating the gains.

- Rebalance with contributions and withdrawals. You can gradually rebalance your portfolio with strategic inflows and outflows. If you’re still working, use savings to buy more of underweighted assets (those that take up less of your portfolio than current market conditions warrant); retirees, on the other hand, should sell what’s become overweighted. An analysis by asset manager and author Phil DeMuth found that selling what has performed the best over the past year could prolong the life of a portfolio.

Rebalance annually — at most. Rebalancing more than once a year (e.g., monthly or quarterly) is more trouble than it’s worth. You’ll spend more in time, costs, and taxes to get a lower return. In technical terms, such behavior is known as “silly.” In fact, you’ll likely realize slightly higher returns and lower transaction costs if you rebalance even less frequently than annually — perhaps every two to three years. For example, you could rebalance once an asset class reaches a certain level — such as being 20% below your target allocation, or 20% beyond it. Thus, if your goal is that a certain asset make up 10% of your portfolio, you’d rebalance once that asset declined to less than 8% or grew beyond 12%.

In the end, it’s most important that you choose the strategy you’ll really do. For ease of implementation, it’s hard to beat annual rebalancing. As asset manager Rick Ferri wrote in All About Asset Allocation:

What is best for you is [a plan] you will actually maintain without procrastination. Annual rebalancing is simple and cost-effective, and it takes only a little time each year to implement, which means that you are more likely to get it done.

J.D.’s note: I had intended to tackle re-balancing myself next week, but Robert beat me to it. That’s okay. He knows more about it anyhow. Instead, I’ll chronicle the process as I try to rebalance my own portfolio.

Source: getrichslowly.org

Apache is functioning normally

June 20, 2023 by Brett Tams

Truist Financial is promoting David Smith to head up its mortgage business, replacing Todd Chamberlain who will be retiring effective July 31.

Smith joined the Charlotte, North Carolina bank as deputy head of mortgage in January, following a near two-year stint as the president of Keller Home Financial Service, an affiliate of real estate franchisor Keller Williams, according to his LinkedIn profile.

For over 13 years, Smith worked at Citi, and spent the last two as head of its U.S. mortgage division. He also has experience with servicing, not just at Citi (including as head of default specialty servicing), but also with prior positions at Aurora Loan Services and Select Portfolio Servicing.

David Smith named Head of Truist Mortgage.

Hand-out/Truist Financial Corporation

In his new role, Smith will report to Truist Chief Retail and Small Business Banking Officer Dontá Wilson and lead all areas of mortgage, including originations, fulfillment, warehouse lending and servicing.

Smith is taking the top slot after company CEO Bill Rogers said on Truist’s first quarter earnings call that further cutbacks in the mortgage business were possible.

“David’s experience and accomplishments as a leader in the mortgage industry position Truist to reimagine the future of Truist Mortgage for our clients,” Wilson said in a press release. “As we mark David’s installment as leader, I want to also express my gratitude for Todd Chamberlain’s leadership to help make the American dream of homeownership come true for millions of clients — truly building better lives and communities.”

Chamberlain joined SunTrust in February 2018 as executive vice president, head of mortgage banking, moving to head of consumer lending solutions in January 2019.

Later that year, SunTrust agreed to merge with BB&T and following the completion of the deal was rebranded as Truist. Chamberlain stayed on board as EVP, head of mortgage banking.

Before joining SunTrust, and between two stints at Regions Bank, Chamberlain had replaced Sy Naqvi as the CEO of PNC Mortgage.

Source: nationalmortgagenews.com

Apache is functioning normally

June 20, 2023 by Brett Tams

The USDA’s zero down loan program is slated to make a comeback, thanks to legislation making its way to President Obama’s desk.

The measure was part of H.R. 4899, otherwise known as “The Emergency Supplemental Appropriations Act,” which the Senate passed last week.

It increases the Rural Housing Service (RHS) commitment authority allowing guaranteed loans and making the program completely self-sufficient; previously, the RHS provided conditional commitments.

However, it increases the guarantee fee for borrowers to 3.5 percent, though that too can be rolled into the loan.

“This is going to be a great lift for thousands of rural home buyers who need to close on their home purchases before Sept. 30 to take advantage of the home buyer tax credit,” said NAR President Vicki Cox Golder, in a statement.

“Many rural families would have been left out in the cold without these guaranteed loans. Increasing the commitment authority will help rural families, support local housing markets, create jobs and generate new tax revenues,” she added.

New guidelines are expected to be released after the President signs the bill.

Currently, the USDA home loan program is reserved for families in rural areas with incomes of up to 115 percent of the median income, who are without adequate housing, but able to afford mortgage payments.

Source: thetruthaboutmortgage.com

Apache is functioning normally

June 20, 2023 by Brett Tams

More than a third (36%) of respondents believe “walking away” from the mortgage is acceptable, according to a Pew Research Center survey released today.

Two-in-ten (19%) said it was outright acceptable, while an additional 17 percent “volunteered” that it depends on the circumstances.

In other words, they said it was acceptable but threw out the “it depends” comment to validate their response, despite it not being an option in the survey.

“Nearly half (48%) of all homeowners say the value of their home declined during the recession, and as a group they are more likely than those whose home did not lose value to say it’s acceptable to renege on a mortgage (20% vs. 14%),” the survey said.

“But homeowners who say their homes are worth less than what they owe are not more tolerant of the practice than those who would break even or make money on a sale (18% vs.17%).”

Renters were even more likely to say it was okay to stop making mortgage payments, with 25 percent saying it’s acceptable to walk away.

And 24 percent who said they are just able to pay their monthly bills or can’t meet expenses said it’s okay to stop paying the mortgage, compared with 14 percent of those who say they “live comfortably.”

Meanwhile, nearly six-in-ten (59%) said they felt it is wrong for homeowners to deliberately stop paying their mortgages and give up their homes to the mortgage lender.

More than one-in-five homeowners surveyed said they owed more on their mortgage than their home is currently worth (negative equity).

Source: thetruthaboutmortgage.com

Apache is functioning normally

June 20, 2023 by Brett Tams

While we’ve come a long way since housing bottomed, the memories of how we got there still don’t feel very distant.

A lot of things contributed to the complete breakdown of the real estate market, with exotic financing being one of them.

So it’s no surprise that the new hot trend of “1% down mortgages” is now coming under the microscope.

Update: UWM has re-launched the 1% down payment mortgage.

Freddie Mac Is Changing the Rules Pertaining to 1% Down Mortgages

While 1% down mortgages have been all the rage lately
Freddie Mac is cracking down on the higher-risk home loans
Requiring a minimum 3% borrower contribution
That can’t come via the transaction itself via lender credits, points, etc.

Over the past couple years, many large lenders have introduced home loan programs that require just 1% down from the borrower, including big names like Quicken, Guaranteed Rate, Guild Mortgage, and even wholesaler United Wholesale Mortgage.

In fact, just this week another lender joined the party, Garden State Home Loans, giving home buyers in Connecticut, Florida, New Jersey, and Pennsylvania the chance to achieve the American Dream with just a 1% down payment.

As far as I can tell, most if not all of these programs rely upon Freddie Mac’s Home Possible Mortgage program, which is its 97% LTV offering.

However, it turns out that some lenders may have taken it a little too far because Freddie Mac doesn’t seem comfortable with their interpretation of the program.

Last week, Freddie Mac released a bulletin pertaining to lender gifts and grants on Home Possible Mortgages (their 3% down program) that is effective November 1st, 2017.

Basically, they’re revising their guidelines for Home Possible Mortgages to require a 3% borrower contribution that isn’t funded through the mortgage transaction.

Specifically, Freddie notes that the down payment money can’t come from “differential pricing in rate, discount points, or fees.”

So it sounds like some of these programs offered the 1% down option in exchange for a higher mortgage rate, kind of like how a lender credit allows borrowers to pay nothing out of pocket in the way of closing costs.

A borrower may be able to put less down, but they could wind up with a higher mortgage rate as a result.

Some may say there’s nothing wrong with that – heck, you see it on mortgages where borrowers put less than 20% down too.

But Freddie seems to think this practice is skirting the rules, or perhaps taking advantage of a loophole, and thus they’re closing it in the coming months.

That could mean that some (or all) of these 1% down mortgage programs will fall by the wayside, but that remains to be seen.

In any case, Freddie will still allow gifts or grants from the seller as the originating lender, but only after a minimum contribution of 3% of the value (lesser of the appraised value or the purchase price) is made by the borrower.

What This Means for You

While 1% down home loans may still be available via other avenues
It does mean it’ll get more difficult to obtain one going forward
This means having down payment funds at the ready is imperative
Especially in today’s competitive housing market where multiple buyers bid for the same property

These 1% down programs may not be done entirely, but the lenders offering them could have to figure out a new way to offer such financing. Or do it without Freddie Mac.

In the meantime, it might be advisable to set aside enough money to cover a 3% down payment, which is still a pretty small amount to put down on a home.

It’s a slightly smaller requirement than what the FHA calls for (3.5%), making it one of the most flexible loan programs around, even without the gift/grant money.

Furthermore, you pay for the privilege of putting down so little, often in the form of a higher mortgage rate and/or mortgage insurance, so consider that when deciding on an appropriate down payment.

It could make financial sense to put down more on a home if you have the means, and it could also help you secure a winning bid with all the competition in today’s housing market.

Read more: 3 ways a low down payment raises your mortgage payment

Source: thetruthaboutmortgage.com

Apache is functioning normally

June 20, 2023 by Brett Tams

When you refinance student loans, you pay off your existing loans with a new loan with new terms from a private lender. The primary benefit of refinancing is that you can save money over the life of the loan if you’re able to lower your interest rate.

While certain lenders will refinance federal and private loans together, you’ll lose access to federal benefits and protections if you refinance a federal loan, so it only makes sense if you don’t plan to use any federal programs.

So can you refinance student loans? Here’s what to know about who is eligible for refinancing, types of student loans that can be refinanced, and more.

Who Is Eligible for Student Loan Refinancing?

A borrower generally needs to meet specific credit score, income, and degree requirements to qualify for a student loan refinance. Ideally, a borrower will qualify at better terms than their existing loans, such as at a lower interest rate. As mentioned, the main goal of refinancing is to lower your interest rate so you can save money over the life of the loan.

The process of refinancing student loans involves shopping around for a lower interest rate and then filling out an application for a refinance. Once a refinance is approved, your new lender pays off your old lender. After you receive the new loan, you make payments to your new lender. Here are some of the common requirements to qualify for a student loan refinance.

Credit Score Requirement

Your credit score is a three-digit number that summarizes how well you pay back debt. For refinancing student loans, you’ll typically need to have a credit score in the high 600s to qualify.

You may need to raise your credit score before you apply for student loan refinancing. You may be able to raise your credit score by doing the following:

• Pay your bills on time

• Dispute errors on your credit report

• Keep your credit utilization rate — the amount you use on your revolving accounts such as credit cards — low compared to your total available credit

• Increase your credit limits

• Remove negative entries to your credit report (if old collection accounts show up on your credit report, request that they be removed)

Recommended: How Do Student Loans Affect Your Credit Score?

High Enough Income

Student loan lenders often require you to show proof of a certain level of income in order to qualify for a student loan refinance. They want to make sure you can repay your new loan.

They will want to know how your income compares against the amount of debt you have and they’ll calculate your debt-to-income (DTI) ratio to find out if you qualify. A DTI ratio compares the amount you owe each month to the amount of income you bring in—it’s your total monthly debt payments divided by your gross monthly income. It’s a good idea to shoot for a debt-to-income (DTI) of under 50%, though a lower DTI (such as under 35%) is even better.

Wondering “Can I refinance my student loans if I don’t have a high enough DTI ratio?”
To improve your DTI ratio, consider making more payments toward your debt, avoid taking on more debt, increase your income, and postpone making large purchases so you’re not using as much of your credit.

Degree Requirements

In most cases, you’ll have to have a degree or leave college in order to qualify for a refinance. Some lenders won’t allow a refinance if you attended a school that didn’t allow students to accept federal aid dollars.

What Types of Student Loans Can Be Refinanced?

Can you refinance private student loans? Can you refinance federal student loans? Yes, if you choose a lender that refinances both, but note that you can only refinance with a private lender — you cannot refinance federal loans and private loans into a new federal loan. (When you combine several federal student loans into a single loan through the federal government, that’s federal student loan consolidation, which is different from refinancing and generally doesn’t save you money.)

Private Student Loans

Private student loans are issued by a credit union, bank, or online lender, not the federal government. They typically carry a higher interest rate compared to the interest rate on federal student loans.

You may be able to get a lower interest rate on your existing private student loans if you refinance. You may want to consider prequalifying for a loan, which means that a lender will do a soft credit check. Checking with several lenders can help you compare the interest rates among lenders. It might be a good idea to consider refinancing private student loans if you know you’ll get a lower interest rate. A student loan refinance calculator tool for comparing refinance rates can help.

Federal Student Loans

Federal student loans come directly from the federal government and specifically, from the U.S. Department of Education. Can you refinance federal student loans? Yes, but refinancing your federal student loans turns your student loans into private student loans—and you’ll lose access to federal benefits and protections.

When you refinance federal student loans, you lose access to federal loan programs like income-driven repayment, which sets your payments at an amount based on your family size and income. It could also mean that you might forgo loan forgiveness, which means you don’t have to pay back some or all of your loan. You should consider whether it makes sense for you to give up these federal loan programs before you refinance.

Why You Might Consider Refinancing Your Student Loans

If your main goal is finding a way to pay less on your student loans and you’re able to find a lower interest rate on your student loans, refinancing might make a lot of sense for you.

It can also be a good option if you’re interested in merging your student loans together to simplify your payments. And if you’re sure you won’t need to access federal benefits because you have a reliable income and job security, it may also be a better option than federal student loan consolidation, which usually doesn’t end up saving you money.

Recommended: How Student Loan Refinancing Works

Why You Might Avoid Refinancing Student Loans

Despite the attraction of saving money with a possibly lower interest rate or merging several loans together, you might not want to lose out on federal student loan protections. You could lose out on temporary loan payment relief (deferment or forbearance) or loan forgiveness and discharge.

Losing out on federal student benefits may hurt you later on. Be sure to consider what you’ll do if you lose your job or have trouble making your student loan payments down the road.

Can You Refinance Student Loans While Still in School?

You may not be able to refinance your student loans while you’re still in school. However, your best bet is to ask your lender directly. Refinancing with a co-signer may help you improve your application and secure better terms.

If you decide you want to go for it, you can submit a formal application, which includes the lender looking into details like the ones listed above, like income degree requirements and personal details. At this point, a lender does a hard credit check. Once your old loan is closed, you’ll then make regular payments to your new lender.

Student Loan Refinancing With SoFi

Looking to lower your monthly student loan payment? Refinancing may be one way to do it — by extending your loan term, getting a lower interest rate than what you currently have, or both. (Please note that refinancing federal loans makes them ineligible for federal forgiveness and protections. Also, lengthening your loan term may mean paying more in interest over the life of the loan.) SoFi student loan refinancing offers flexible terms that fit your budget.

With SoFi, refinancing is fast, easy, and all online. We offer competitive fixed and variable rates.

FAQ

Can you refinance your student loans if you didn’t graduate?

Yes, you can refinance your student loans if you didn’t earn a degree, though it may be more difficult. Ask various lenders the same question: “Can I refinance my student loans?” and learn more about your refinancing options. If you have federal student loans, you can also look into other options to reduce your monthly repayment amount, such as extending your loan term (although you’ll end up paying more in interest over the life of the loan) or explore whether you might qualify for an income-driven repayment program or forgiveness. Contacting your loan servicer is a good place to start.

What credit score do you need to be able to refinance student loans?

Every lender is different and requires different requirements to be able to refinance. Your personal qualifications also matter. However, in general, it’s important to have a credit score in the high 600s in order to qualify for a refinance. Ask lenders for more information before you make a final decision. You may also want to use a calculator tool for comparing refinance rates.

Can both federal and private student loans be refinanced?

You’re asking good questions if you’re wondering, “Can I refinance federal student loans?” or “Can I refinance private student loans?” The quick answer is that yes, both federal and private student loans can be refinanced, but you must refinance both types into a private student loan, and you’ll lose access to federal benefits and protections if you refinance federal student loans.

Photo credit: iStock/Andrii Sedykh

SoFi Student Loan Refinance
If you are looking to refinance federal student loans, please be aware that the White House has announced up to $20,000 of student loan forgiveness for Pell Grant recipients and $10,000 for qualifying borrowers whose student loans are federally held. Additionally, the federal student loan payment pause and interest holiday has been extended beyond December 31, 2022. Please carefully consider these changes before refinancing federally held loans with SoFi, since the amount or portion of your federal student debt that you refinance will no longer qualify for the federal loan payment suspension, interest waiver, or any other current or future benefits applicable to federal loans. If you qualify for federal student loan forgiveness and still wish to refinance, leave unrefinanced the amount you expect to be forgiven to receive your federal benefit.

CLICK HERE for more information.

Notice: SoFi refinance loans are private loans and do not have the same repayment options that the federal loan program offers such as Income-Driven Repayment plans, including Income-Contingent Repayment or PAYE. SoFi always recommends that you consult a qualified financial advisor to discuss what is best for your unique situation.

SoFi Loan Products
SoFi loans are originated by SoFi Bank, N.A., NMLS #696891 (Member FDIC). For additional product-specific legal and licensing information, see SoFi.com/legal. Equal Housing Lender.

Disclaimer: Many factors affect your credit scores and the interest rates you may receive. SoFi is not a Credit Repair Organization as defined under federal or state law, including the Credit Repair Organizations Act. SoFi does not provide “credit repair” services or advice or assistance regarding “rebuilding” or “improving” your credit record, credit history, or credit rating. For details, see the FTC’s website .

Financial Tips & Strategies: The tips provided on this website are of a general nature and do not take into account your specific objectives, financial situation, and needs. You should always consider their appropriateness given your own circumstances.

Checking Your Rates: To check the rates and terms you may qualify for, SoFi conducts a soft credit pull that will not affect your credit score. However, if you choose a product and continue your application, we will request your full credit report from one or more consumer reporting agencies, which is considered a hard credit pull and may affect your credit.

SOSL1221003

Source: sofi.com

Why should you talk to your children about financial hardship?

They’ll learn how finances affect credit scores

They can understand how financial hardship directly affects day-to-day living

They’ll know how financial hardship affects relationships

When should you talk to your children about financial hardship?

How should you talk to your children in age-appropriate ways about financial hardship?

Toddler

Preschooler

School-aged

Preteen

Teenager

Important budgeting tools to help explain financial hardship

Savings tools to include in your explanation of finances

Easy investment tools to explain getting back on track with your finances

Summary

Read more:

Mortgage cost rises: how other countries compare with the UK

1. Stop adding to your debt.

2. Create a budget.

3. Cut your expenses.

4. Find a way to make extra money.

Miscellaneous other things you should do:

How are you eliminating your debt? When do you think you will be debt free?

Related Posts

Freddie Mac Is Changing the Rules Pertaining to 1% Down Mortgages

What This Means for You

Who Is Eligible for Student Loan Refinancing?

Credit Score Requirement

High Enough Income

Degree Requirements

What Types of Student Loans Can Be Refinanced?

Private Student Loans

Federal Student Loans

Why You Might Consider Refinancing Your Student Loans

Why You Might Avoid Refinancing Student Loans

Can You Refinance Student Loans While Still in School?

Student Loan Refinancing With SoFi

FAQ

Can you refinance your student loans if you didn’t graduate?

What credit score do you need to be able to refinance student loans?

Can both federal and private student loans be refinanced?