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What will Happen to Home Equity Rates in 2019? - Home value credit borrowers ought to expect a greater bill after the Federal Reserve raised loan costs a quarter-point on Dec. 19. This was the fourth rate climb this year, lifting the government subsidizes rate to a scope of 2.25 to 2.5 percent.

"A quarter-point rate climb will convert into a quarter-point increment in a borrower's HELOC rate, and it will ordinarily appear inside a couple of articulation cycles," says Greg McBride, CFA, Bankrate's boss budgetary investigator.

The expense of getting

The prime rate is the benchmark used to set HELOC and charge card rates, and it's pegged to the government finances rate. Along these lines, borrowers with this sort of obligation should begin arranging now. 

Home Equity Rates, 2019, Home Loans, Mortgage, Planning, Card Obligation

The prime rate was at 5.25 percent before the most recent increment, so the Fed rate climb implies the prime rate will achieve 5.5 percent. Since most HELOCs are variable-rate advances, the intrigue will rise and fall with the prime rate.

The measure of intrigue you pay on a HELOC relies upon your financial soundness, so borrowers with as well as can be expected get the prime rate or even beneath prime rate. Those with flimsier credit will pay more in intrigue, which will be over the prime rate. You can check your credit report and score for nothing on Bankrate.

Planning for rate climbs

On the off chance that you as of now have a HELOC and you need to abstain from paying higher loan fees, one choice is to request that your bank settle the enthusiasm on the exceptional parity.

"Any extra acquiring would happen at a higher winning rate, yet in any event your current parity can profit by a settled loan cost," McBride says.

A few property holders took out HELOCs before so they could tap their value without changing the financing cost on their first home loan, says Michael Becker, advance originator with Sierra Pacific Mortgage.

For these people, renegotiating their present first home loan and the home value credit extension into one new first home loan is an alternative — if the math looks at. Since numerous property holders have low rates on their first home loan, it's vital to ensure that renegotiating would bring about paying less intrigue. Nonetheless, as HELOCs get progressively costly it's advantageous to do the math and see what bodes well for your circumstance.

"In the event that they have a little equalization on their first home loan and a vast parity on the HELOC, at that point there is a decent shot it bodes well to renegotiate. I like use what is known as the mixed rate to check whether a renegotiate bodes well," Becker says.

He gives the case of a property holder owing $100,000 on a first home loan with a 4 percent financing cost and $200,000 on a HELOC with a 6 percent rate. The mixed rate of the two home loans is 5.3 percent. In the event that the borrower renegotiates at 4.9 percent, it may bode well to secure that rate and maintain a strategic distance from future climbs, particularly in a rising rate condition.

Different choices incorporate renegotiating into a settled rate home value credit, or renegotiating into a HELOC with a low basic rate that will get you some additional time, and forcefully squaring away the parity, McBride says.

Charge card obligation and HELOCs

Not exclusively will HELOC rates rise however Mastercard financing costs will likewise get a knock after the Fed meeting, if all goes not surprisingly. For those with charge card obligation and a low first home loan financing cost, motivating a HELOC to satisfy your Mastercards may be a practical choice.

Be that as it may, it's essential to take note of that HELOCs are as yet presented to rising rates, so borrowers need to think cautiously before picking this choice.

"Combining Mastercard obligation onto a home value credit extension will lessen the loan cost on your obligation, however it doesn't diminish the measure of obligation and it doesn't protect you from rising financing costs as you're moving starting with one variable-rate item then onto the next," McBride says.

More increments in 2019

Progressively Federal Reserve rate climbs are likely in store for one year from now — however not the same number of as once foreseen.

Most individuals from the Federal Open Market Committee expect there will be two rate climbs in 2019, as opposed to the three anticipated in September.

Staying away from The Traps Of Home Value Credits  -  On the off chance that you haven't been focusing, Congress as of late changed the duty laws with respect to the deductibility of home advance intrigue. The tenets are not the equivalent for 1988 as they were for 1987. Presently you will have the capacity to deduct just the enthusiasm on a home loan acquired to purchase or enhance your home. Moreover, for 1988 you can deduct the enthusiasm on up to $100,000 of a home value advance paying little mind to how you spend the cash.

In the event that you are thinking about acquiring a home value credit, Robert Minton's phenomenal book, subtitled ''A shopper's manual for home value advances,'' will be productive perusing on the off chance that you need to maintain a strategic distance from the traps.

Home Value Credits, Home Equity Loans

Home value advances are particularly very much loved by banks and S&Ls, in light of the fact that the dispossession default rate is low. To demonstrate how safe these credits are, a year ago I renegotiated my home advance with another loan specialist. After I made only four installments on time, my new moneylender called to inquire as to whether I might want to get more cash on a home value advance.

The loan specialist guaranteed to give me a spinning credit line up to $100,000 and, he stressed, it wouldn't cost me anything until the point when I utilized the cash. I acknowledged the advance and, subsequent to perusing Minton's book, feel I got a decent arrangement.

In the event that you are thinking about getting a home value credit line, read Minton's book first. It will enable you to recognize the great and awful credits. For instance, in my general vicinity one moneylender is promoting home value credits up to 85 percent of the home's reasonable worth.

That is high. Most banks advance just up to 75 or 80 percent of evaluated esteem. Be that as it may, upon examination I discovered this moneylender is charging 13 percent premium, while the going rate on home value advances is 10 to 11 percent.

Points talked about in Minton's book incorporate the diverse kinds of home value advances, how these advances grew, how to begin acquiring without paying excessively, deciding financial soundness, employments of home-anchored advances, the banks, the advance items, the turn around home value contract for senior natives, deceitful moneylenders, systems for home value borrowers and getting a credit from an agent.

This simple perusing book is elegantly composed and reported. It is loaded up with instances of what to do and what not to do, just as preservationist guidance for mortgage holders who are uncertain about whether they should exploit the inactive value in their homes.

HSBC to Pay $1 Million to Wash. State Property Holders For Home Loan Manhandles  -  Washington property holders will recuperate $1 million, as a feature of a $470 million understanding anchored for mortgage holders across the nation through a state-government legitimate activity against home loan bank HSBC.

The understanding gives $59.3 million in installments to 75,000 purchasers across the country for past abandonment manhandles.

A lot of about $1 million will be accessible for 1,300 borrowers, Washington Lawyer General Sway Ferguson said Friday. The sum every borrower gets relies upon what number of present a case. It's assessed to be $800-$1,400 each.

Home Loan, HSBC, Home loan Settlement

HSBC will likewise pay $40.5 million to the central government.

Furthermore, the assention gives $370 million in across the nation advance changes and other help for borrowers, forces new home loan adjusting norms, and awards oversight expert to an autonomous screen.

"HSBC occupied with unsuitable, damaging practices that hurt Washington property holders," Ferguson said. "This activity considers HSBC responsible to repay Washington families who lost their homes, help those in threat of abandonment, and maintain extreme new serving measures."


HSBC occupied with practices that hurt shoppers, as per a claim documented in government court, including:
  • Neglecting to precisely apply installments made by borrowers and neglecting to keep up exact record explanations.
  • Charging unapproved expenses for default-related administrations.
  • Neglecting to give exact data to borrowers who requested data about misfortune moderation administrations, including credit adjustments.
  • Inappropriately denying advance change help to qualified borrowers.
  • Giving false motivations to disavowal of advance adjustments.
  • "Robo-marking" oaths in dispossession procedures, where a representative marked a huge number of records and testimonies without checking the data.

Accordingly, HSBC abused property holders' rights and securities, occupied with untimely and unapproved abandonments, and charged shoppers inappropriate expenses and charges, Ferguson said.

Comparable terms to 2012 National Home loan Settlement

The understanding's home loan overhauling terms to a great extent reflect the 2012 National Home loan Settlement came to in February 2012 between the government, 49 state lawyers general – including Washington – and the five biggest national home loan servicers: Partner/GMAC, Bank of America, Citi, JPMorgan Pursue, and Wells Fargo.

That assention has given shoppers across the country more than $50 billion in direct alleviation, made new adjusting guidelines, and gave oversight.

Extra state-government concurrences with Ocwen Money related Corp. for more than $2 billion and with SunTrust Home loan Inc. worth about $1 billion were declared in December 2013 and June 2014.

Installments to borrowers

Washington borrowers whose credits were adjusted by HSBC and who lost their home to dispossession from Jan. 1, 2008 through Dec. 31, 2012 and experienced overhauling misuse can record a case for reimbursement from the national $59.3 million store.

Qualified borrowers will be sent a postcard from the Washington State Lawyer General's Office with data on the most proficient method to fit the bill for installments.

Credit alterations

The HSBC understanding requires the organization to furnish borrowers with advance changes or other alleviation. The adjustments incorporate foremost decreases and renegotiating for submerged home loans.

New home loan overhauling measures

The assention additionally requires HSBC to change how it administrations contract credits, handles dispossessions, and guarantees the precision of data gave in government chapter 11 court.

Autonomous screen

The National Home loan Settlement's autonomous screen, Joseph A. Smith Jr., will regulate HSBC understanding consistence for one year.

State and government activity

The assention incorporates Washington and 48 different states, the Locale of Columbia, U.S. Branch of Equity, U.S. Branch of Lodging and Urban Improvement, and Buyer Money related Security Agency.

Second Charge Home loans - An anchored individual advance, otherwise called a second charge contract, enables you to get a singular amount of cash which is anchored against a property.

The property is anchored by the loan specialist by method for a 'second charge', which positions behind your principle contract (which is hung on a 'first charge' premise). This is a lawful game plan and is enrolled with the Land Library.

You can utilize the cash for anything you desire (gave it's not illicit or to business gain), but rather second charge contracts are normally used to support home upgrades or expansive buys, (for example, purchasing another vehicle), or to unite existing obligations. 

Second Charge Home loans, guide

Ordinary month to month reimbursements must be made all through the term of the advance, which can for the most part be somewhere in the range of five and 25 years.

The moving and organization of first charge credits has been managed by the Money related Direct Specialist (FCA) for quite a while. Second charge credits are currently likewise directed by the FCA and are liable to the very same principles as customary home loans. This implies you should have the capacity to show that you can stand to reimburse both the first and second home loans, with space to save.

Who is an anchored second charge contract appropriate for?

Anchored advances are for those with a current home loan who need to get bigger measures of cash than standard individual advances can offer, more often than not up to £250,000. Borrowers will in general have developed value in their homes that they can use as security against the credit.

What would it be advisable for me to search for when taking out a second charge contract?

There are various gets and things you have to comprehend before you subscribe to this kind of anchored advance, including:
  • The 'second charge' on your property implies that in the event that you default on an anchored advance, the moneylender can at last prosecute you and request a house repossession. The primary charge loan specialist gets paid back first, and the second charge moneylender gets what's left, up to the estimation of the extraordinary obligation.
  • Second charge contract loan fees are generally factor, which implies it's hard to spending plan as the rate could go all over. On the off chance that you've additionally got a variable rate contract, you may get hit twice if rates go up, so ensure you can bear the cost of it.
  • Combining obligation is normally observed if all else fails for mortgage holders, however it tends to be a decent method to get you out of an opening for the time being. Keep in mind, in the event that you bring down your month to month reimbursements as a byproduct of a more drawn out credit period, you'll end up paying more in the long haul.
  • Contrast anchored credits from £3000 with £100,000 with our accomplice Advances Distribution center

On the off chance that an anchored individual advance isn't for you, look at the best unbound individual credits available utilizing our advance adding machine. Keep in mind that most unbound individual advances have a greatest obtaining measure of £25,000.

Two Homes with VA Loan? - you can use something called 2nd tier entitlement to buy a 2nd house with a VA loan with PCS orders.  Call Navy fed or USAA and ask them to caculate how much you  have left to spend.  the amount you have left will depend on the zip code of the new house and say you have 140,000 left we you can still buy a house over that amount but will have to pay a small percent of the overage, I forget what she said but it's not the full amount.  I also talked to my broker a few weeks ago and she said that the VA funding fee is going down a bit after the first of the year. 

I plan to buy a new house at our next duty station and still keep the house I have now.  I used 285,000 and the broker told me I still have 140,000 left to use but to wait till after the first cause the fee is going down. 

Just google 2nd tier va entitlement and you will see.  Happy house hunting!

VA Loan Calculator usaa

Federal Home Loan Bank System (FHLB) - FHL banks offer loans to their members, which are other banks, credit unions, community development financial institutions and insurance companies. The members have to provide collateral for their loans, and that collateral is typically mortgage loans and other assets. Each FHLB is required to develop a community lending plan that explains how the bank will address the needs of the community it serves.

There are a dozen FHLBs. They are headquartered in Atlanta, Boston, Chicago, Cincinnati, Dallas, Des Moines, Indianapolis, New York, Pittsburgh, San Francisco, Seattle, and Topeka.

Federal, Home Loan, Bank, System, (FHLB), Atlanta, Boston, Chicago, Cincinnati, Dallas, Des Moines, Indianapolis, New York, Pittsburgh, San Francisco, Seattle, Topeka, Affordable Housing Program, FHL

Through its Affordable Housing Program, FHL banks grant money to local banks involved in the purchase, construction or rehabilitation of affordable housing. Banks then partner with local developers and community organizations to build or renovate housing. The program provides a source of funding for the construction of affordable housing in the United States.

The Community Investment Program offers below-market-rate loans to members for long-term financing for housing and economic development aimed at low- and moderate-income families and neighborhoods. Those projects may include roads, retail development, and other infrastructure, in addition to business loans.

FHL banks also offer programs such as the New Market Tax Credit Initiative, Economic Development Grants, Urban Development Advances, Rural Development Advances, and Letters of Credit.

To join an FHL bank, financial institutions typically buy stock in the bank. Each FHL bank has its own board of directors and is regionally focused. The Federal Housing Finance Agency regulates FHL banks

Bank of America Transforms Homebuying With New Digital Mortgage Experience - Bank of America’s Digital Mortgage Experience™, launched this week, seamlessly guides clients through the mortgage process via the bank’s award-winning mobile banking and online platforms. With advanced application prefill capabilities, clients can apply for a mortgage through the mobile banking app or online at bankofamerica.com and immediately have many aspects of their mortgage application auto-populated, significantly reducing time and effort (see how it works here). In many cases, clients will receive a conditional approval that very same day.

This press release features multimedia. View the full release here: https://www.businesswire.com/news/home/20180411005448/en/

“Everything we do starts and ends with clients, and the Digital Mortgage Experience is designed to make their lives simpler,” said D. Steve Boland, head of consumer lending at Bank of America. “Our new end-to-end experience empowers clients with complete convenience and control, while also offering unique access to lending experts every step of the way.”

Home Loan Bank of America, Mortgage

The new experience responds to the growing demand and increasing comfort consumers have with using digital tools in every aspect of their lives – from managing finances to dating. In fact, a recent survey by Bank of America shows that consumers are actually more comfortable applying for a mortgage digitally than dating online.

The introduction of the Digital Mortgage Experience is the latest of the bank’s digital lending offerings, which include the recent broad availability of its mobile car shopping tool that enables clients to search 1 million cars in inventory from more than 2,400 auto dealers nationwide. In addition, Bank of America small business clients can apply for a Business Advantage Term Loan or Business Advantage Credit Line from the Bank of America mobile banking app and bankofamerica.com, which offer a loan product tool that helps small business clients find the right loan for their needs, and a monthly loan payment calculator. To complement these high-tech capabilities, clients can receive guidance and advice about their lending needs from the bank’s approximately 5,200 home, auto, personal and business loan officers.

“The new Digital Mortgage Experience is about making things easy, intuitive, simple and fast,” said Michelle Moore, head of digital banking at Bank of America. “It’s the latest example of our high-tech, high-touch approach to serving clients – we designed the Digital Mortgage Experience by listening to our customers, understanding their needs, and delivering the full experience to them right in our award-winning mobile app.”

Inside the experienceBeyond the flexibility to apply for a mortgage whenever, wherever and however consumers want, the Digital Mortgage Experience provides full customization throughout the process to best fit users’ unique needs, including:

Access to lending specialists – With just one click or a phone call, clients can consult a professional lending specialist every step of the way. Lending specialists can even pick up an in-progress application and assist the client in completing it.

Personalized loan terms – Users can consider a variety of loan options and combinations and select the features that matter most to them, including flexible monthly payments, closing costs and loan terms.

Ability to lock interest rates – Users can lock their rate or leave it open to lock later.

Flexible application process – Clients have the ability to save an in-progress application and return to it at a later time.

Seamless integration with Home Loan Navigator® – Once submitted, users integrate with Home Loan Navigator to track their loan, view action items, upload documents, and review and acknowledge disclosures, all from their mobile device.

NextGen homebuyingThe new Bank of America Homebuyer Insights Report shows consumers have been longing for more digital solutions in the mortgage space, as more Americans would be comfortable applying for a mortgage digitally (32 percent) than dating online (20 percent). Furthermore, 52 percent of respondents would apply or have already applied for a mortgage via mobile or online.

In its third year, the report finds technology and homebuying are becoming inseparable. Nearly all first-time buyers feel technology will play a role during every stage of homebuying, including researching (98 percent), getting a mortgage (94 percent), and negotiating and buying (92 percent). Perhaps this is because Americans are most likely to seek a homebuying experience that is efficient (64 percent), simple (59 percent) and personalized (51 percent).

The adoption of these technologies appears to be a thing of today, not tomorrow. Many consumers report they are already comfortable using emerging technologies throughout the homebuying process, specifically using a real estate app (78 percent), taking a video tour of a home (48 percent) and attending an open house using virtual reality (36 percent). Looking ahead to the next 10 years, Americans believe:
  • Smart home and energy-efficient features will be standard in new construction (67 percent).
  • Mortgage applications will be entirely paperless (55 percent).
  • Open houses will only be through virtual reality (24 percent).
  • All appraisals will be done via drones (6 percent).

To learn more about the Digital Mortgage Experience and download multimedia, visit bankofamerica.com. For additional information about the Bank of America Homebuyer Insights Report, click here.

Story continues

Bank of America’s Digital Banking LeadershipBank of America’s digital banking platform is an evolving source of increased client engagement and satisfaction serving nearly 35 million digital clients, including more than 24 million active mobile users. Its award-winning mobile app was the first to receive J.D. Power’s certification for “An Outstanding Mobile Banking Customer Experience.” During 2017, mobile banking clients logged into their accounts 4.6 billion times, or approximately 190 times per user, and deposited 123 million checks via mobile.

About the Bank of America Homebuyers Insights ReportConvergys Analytics conducted an online survey on behalf of Bank of America between January 16 and February 2, 2018. Convergys surveyed a national sample of 2,000 adults age 18+ who currently own a home or plan to in the future. In addition, an augment was conducted to reach 300 adults in seven local markets: Austin, Boston, Charlotte, Dallas, Nashville, Phoenix, and San Francisco. The margin of error for the national quota is +/- 2.6 percent, and the margin of error for the oversampled markets is approximately +/- 5.8 percent, with each reported at a 95 percent confidence level.

Bank of AmericaBank of America is one of the world's leading financial institutions, serving individual consumers, small and middle-market businesses and large corporations with a full range of banking, investing, asset management and other financial and risk management products and services. The company provides unmatched convenience in the United States, serving approximately 47 million consumer and small business relationships with approximately 4,500 retail financial centers, approximately 16,000 ATMs, and award-winning digital banking with approximately 35 million active users, including approximately 24 million mobile users. Bank of America is a global leader in wealth management, corporate and investment banking and trading across a broad range of asset classes, serving corporations, governments, institutions and individuals around the world. Bank of America offers industry-leading support to approximately 3 million small business owners through a suite of innovative, easy-to-use online products and services. The company serves clients through operations in all 50 states, the District of Columbia and more than 35 countries. Bank of America Corporation stock (BAC) is listed on the New York Stock Exchange.

For more Bank of America news, including dividend announcements and other important information, visit the Bank of America newsroom. Click here to register for news email alerts.


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ATLANTA, Oct. 15, 2018 (GLOBE NEWSWIRE) -- Federal Home Loan Bank of Atlanta (FHLBank Atlanta) announced the results of the 2018 director election for three member directors and one independent director. Each of the directors-elect will begin a four-year term commencing on January 1, 2019.

FHLBank Atlanta institutions re-elected Jonathan I. Kislak to serve as an independent director. Mr. Kislak has been a director of FHLBank Atlanta since 2008 and is currently vice chair of the Finance Committee. Mr. Kislak has also served on the Audit Committee, the Enterprise Risk and Operations Committee, the Housing and Community Investment Committee, the Executive Committee, the Governance and Compensation Committee, and the Credit and Member Services Committee. Mr. Kislak is principal and chairman of the board of Antares Capital Corporation, a venture capital firm investing equity capital in expansion stage companies and management buyout opportunities. From 1993 to 2005, Mr. Kislak served as president and chairman of the board of Kislak Financial Corporation, a community bank holding company in Miami, Florida. From 2013-2016, Mr. Kislak served on the board of directors and chair of the audit committee of Cherry Hill Mortgage Investment Corp. Mr. Kislak has expertise in economics and finance.

Federal Home Loan Bank of Atlanta Announces Results of 2018 Board of Directors’ Election

FHLBank Atlanta member institutions in Florida elected Garrett S. Richter to serve as director representing that state. Mr. Richter serves as president, chief executive officer, and director of First Florida Integrity Bank. Mr. Richter has also served as president and director for TGR Financial, Inc. since its formation in 2012. Mr. Richter was a founder and former president and chief executive officer of First National Bank of Florida, which was acquired by Fifth Third Bancorp in 2005. He was a founding director and organizer of First National Bank of Naples, where he served as president and chief executive officer prior to its affiliation with F.N.B. Corporation in 1997. Mr. Richter served as the President Pro Tempore of the Florida Senate from 2012 to 2016, completing his final term as a state senator in November 2016. He was recently appointed by Governor Scott to the Florida Commission on Ethics. He serves on the Forum Club board in Southwest Florida, and is a board member of the Greater Naples Chamber of Commerce. Mr. Richter began his banking career in 1969 with Mellon Bank and is a veteran of the U.S. Army.

FHLBank Atlanta member institutions in Georgia re-elected Richard A. Whaley to serve as director representing that state. Mr. Whaley has been a director of FHLBank Atlanta since 2013 and is currently vice chair of the Bank’s board of directors. Mr. Whaley has served as president, chief executive officer, and director of Citizens Bank of Americus in Americus, Georgia, since 2001. From 1989 to 2001, he served as market manager and commercial lender for Wachovia Bank. Mr. Whaley served as chairman of the South Georgia Technical College Foundation from 2008 to 2010, and as chairman of the Georgia Bankers Association from October 2010 to June 2012. He was recently elected to serve as chair of the Georgia Bankers Association Insurance Trust, Inc., where he has served as a director since June 2013, and he is a veteran of the U.S. Army. He currently serves as vice chairman of the Executive Committee and ex officio member of the other committees of the Bank’s board.

FHLBank Atlanta member institutions in Maryland re-elected Kim C. Liddell to serve as director representing that state. Mr. Liddell has been a director of FHLBank Atlanta since 2015 and is currently chair of the Credit and Member Services Committee. Mr. Liddell has served as president and chief executive officer of 1880 Bank, formerly known as the National Bank of Cambridge, in Cambridge, Maryland, since 2010. He was elected chairman of the board of directors in April 2011. From 2004 to 2009, Mr. Liddell served as chief operating officer and executive vice president of Cardinal Financial Corporation (CFNL) and Cardinal Bank. Mr. Liddell has served as a board member of the Virginia Bankers Association’s Member Services, Inc., Junior Achievement of the National Capital Area, Business in Education Partnership with the Falls Church City Public Schools, Arlington County Chamber of Commerce, Celebrate Fairfax, and Leadership Fairfax. Mr. Liddell currently serves on the boards of the Maryland Bankers Association and Dorchester General Hospital Foundation. He previously served on the board of the Dorchester County Chamber of Commerce.

Mortgage rates continue five-week slide, plunging to levels not seen in more than four months

For more than a month, mortgage rates have been in a free fall. Stock market volatility, global trade worries and the government shutdown are pushing rates down to their lowest levels since August.

According to data released Thursday by Freddie Mac, the 30-year fixed-rate average dropped to 4.51 percent with an average 0.5 point. (Points are fees paid to a lender equal to 1 percent of the loan amount.) It was 4.55 percent a week ago and 3.95 percent a year ago. The 30-year fixed rate has gone down 43 basis points in less than two months. (A basis point is 0.01 percentage point.)

Refinance Mortgage

The 15-year fixed-rate average slipped to 3.99 percent with an average 0.4 point. It was 4.01 percent a week ago and 3.38 percent a year ago. The 15-year fixed rate fell below 4 percent for the first time since early September. The five-year adjustable-rate average slid to 3.98 percent with an average 0.2 point. It was 4 percent a week ago and 3.45 percent a year ago.

“Low mortgage rates combined with decelerating home price growth should get home buyers excited to buy,” Sam Khater, Freddie Mac’s chief economist, said in a statement. “However, it will be interesting to see how the recent turmoil in the stock market will affect home-buying activity in the coming months.”

The yield on the 10-year Treasury sank to an 11-month low Wednesday, drifting down to 2.66 percent. Investors' worries about global growth and the government shutdown are moving their money into safer assets such as bonds, which is driving bond prices higher and causing yields to fall. The yield on the 10-year Treasury has plummeted from a high of 3.24 percent in less than two months.

The movement of long-term bonds, particularly the 10-year Treasury, is one of the best indicators of where mortgage rates are headed. When yields fall, rates tend to follow.

Earlier this week, LendingTree released its Mortgage Comparison Shopping Report, which found that 70.3 percent of purchase borrowers received mortgage rates under 5 percent last week.

But Friday’s employment report could cause rates to reverse course, especially if it comes in better than expected.

“Strong jobs and wage growth data could easily slow the lower movement in rates and provide optimism that the economy is still on strong footing,” said Aaron Terrazas, senior economist at Zillow.

Bankrate.com, which puts out a weekly mortgage rate trend index, found that half of the experts it surveyed say rates will go down in the coming week. Michael Becker, branch manager at Sierra Pacific Mortgage, is one who predicts rates will fall.

“I am surprised at the persistence of this rally in rates,” he said. “I wasn’t sure that rates could keep improving. But now I am a believer and think that markets are now focused on a slowing U.S. and global economy and that rates can continue to rally.”

Not unexpectedly, mortgage applications were down during the holidays despite falling rates. According to the latest data from the Mortgage Bankers Association, the market composite index — a measure of total loan application volume — decreased 9.8 percent from two weeks earlier. (The MBA did not release data on loan application volume last week.) The refinance index fell 12 percent, while the purchase index dropped 8 percent.

The refinance share of mortgage activity accounted for 42.7 percent of all applications.

“Even with lower borrowing costs, both purchase and refinance applications decreased over the two-week holiday period, as both conventional and government applications dropped,” Joel Kan, an MBA economist, said in a statement. “Part of the decline in mortgage applications was possibly because of the government shutdown, as concerns over delays in FHA application processing times likely contributed to the weakness in activity.”

Kathy Orton

Another Dim Outlook for Refinancing - Refinancing activity has probably held up better than expected as interest rates have risen.  Refinance applications accounted for more than 40 percent of the total in each of the Mortgage Bankers Association's weekly application volume summaries in December, aided by an unexpected dip in rates.  But CoreLogic's chief economic Frank Nothaft is predicting a dim future for that part of the business.
In his Economic Outlook for January, Nothaft says he expects mortgage rates to reach their highest levels in a decade this year, affecting home buyers' monthly payments and lessening the impact of new conforming loan limits.  But the larger effect will be on refinancing.  Millions of homeowners have already refinanced into the record low rates over the last few years, and they, as well as those who have purchased during the same period, are unlikely to refinance unless they need to cash out some of their home equity.

Home Buyer, Refinancing Mortgage
He used CoreLogic data to calculate the distribution of outstanding single-family mortgage debt by interest rate and found only 3 percent of the total in mortgages with a rate of 6 percent or more, a total outstanding debt of about $300 billion. He speculates that these homeowners have not refinanced because of insufficient equity, credit problems, or small balances; the average loan size was about $100,000.
There are indeed reasons other than rates for homeowners to refinance. Nothaft says some 500,000 FHA-backed mortgages were refinanced into conventional mortgages in the two years ended last September.  These refinances allow homeowners with good credit and 20 percent equity or more to eliminate FHA insurance premiums which otherwise continue through the life of the loan.  Extracting equity after the strong run-up in home prices over the last few years will probably prompt a certain amount of cash-out refinancing as well.  In fact, CoreLogic data shows that those refinances exceeded 40 percent in the third quarter of last year and Nothaft says he expects that number to increase.

Despite these types kinds of incentives, he is forecasting that the refinance share of originations will decline to about 25 percent of lending dollar volume this year.  That will be the lowest four-quarter share since mid-1994 to mid-1995 when refinancing accounted for 23 percent of originations.  Still, he expects that increases in purchase lending will fill the gap, leaving the dollar volume of originations in 2019 at about the same level as last year

Capital One Exits Mortgage Loans Business, Cuts 1,100 Jobs - The McLean, Virginia-based lender said on Wednesday it would continue to service its existing home loans portfolio, as it evaluates options for its home loans servicing business.

“The challenging rate environment and marketplace ... do not allow us to be both competitive and profitable for the foreseeable future,” Sanjiv Yajnik, the president of financial services at Capital One, said in an internal memo on Tuesday.
Home Loans UK Jobs, Mortgage Loans Business

Several regional lenders in the U.S. have struggled to boost loan growth as interest rates come off historic lows and increase the cost of borrowing for consumers. The U.S. Federal Reserve has raised rates three times since the second quarter of 2016, with the latest hike coming this June.
Cleveland-based KeyCorp (KEY.N), for instance, trimmed its 2017 expectations for total loans last month, after reporting a lower-than-expected profit for the third quarter.

Capital One’s job cuts will affect about 950 employees in Texas, and 155 workers in Minnesota and New York. The company had about 50,400 employees at the end of September.

Its stock was down 1.1 percent at $89.12 on the New York Stock Exchange in afternoon trading.

(This version of the story corrects sixth paragraph to remove reference to job cuts being mainly at the company’s customer contact center in Texas)

Reporting By Aparajita Saxena in Bengaluru; Editing by Sai Sachin Ravikumar

Jobs Created at Newcastle Tech Firm With £50k Small Loan Fund Investment - Newcastle-headquartered tech firm ION is taking on new staff after securing a £50k investment to fuel its expansion.
The company will use five-figure funding from the new North East Small Loan Fund, supported by the European Regional Development Fund, to scale up and double its staff count.
ION works to help clients improve sales performance using advanced enterprise cloud technologies and bespoke business transformation services.
It focuses on the manufacturing, engineering, energy, pharmaceutical and fast-growth SME markets, with current clients including Gateshead College, Baltic Mill, the Greggs Foundation and Elton John

AIDS Foundation.
As a result of the Small Loan Fund backing, ION will create up to 16 jobs over the coming 12 months, which will enable it to serve more and larger contracts.
The company worked with NEL Fund Managers to secure the investment.
Managing director Rob Mathieson, who founded ION in 2016, said: “The range of business technologies available is growing at an exponential rate, and having the right systems in place can make a crucial difference to commercial performance.

Home Loans UK Jobs, Loan Investment
“The solutions we provide help clients find more new business development opportunities, improve their relationships with existing customers and reduce customer churn.”
He continued: “We’ve established an impressive range of services and a strong client base over the last two years, and believe we can now make significant further progress through scaling up our own operations.”
NEL Fund Managers investment executive Jane Siddle commented: “The quality of the ION team’s insight into how advanced technologies can be used to improve clients’ business performance has been clearly demonstrated over the last two years.
“Our investments are designed to make a visible impact on investees’ performance, and we’re looking forward to now seeing ION grow even more quickly in the near future.”
The £9m North East Small Loan Fund is part of the wider £120m North East Fund and typically invests between £10k and £50k in companies across Tyne & Wear, Durham and Northumberland.

It is designed to help create more than 1,200 new jobs at over 320 SMEs in the region during its lifetime.

Cash-out Mortgage Refinancing: Here’s Where Homeowners are Using it Most - Homeowners who snagged a low-interest rate mortgage in recent years have a big incentive to avoid refinancing the loan because interest rates are higher now. When they need a large amount of cash, though, some homeowners are turning to cash-out refinancing — even if it means giving up a lower rate in the process.

In the past five years, the cash-out share of refinance transactions has jumped from 13.9 percent in 2013 to 41.5 percent by September 2018, according to data from CoreLogic. The trend follows the increase in home values and tappable equity, which is the amount homeowners with a mortgage can borrow before reaching the maximum 80 percent loan-to-value ratio.

Cash-out Mortgage Refinancing, Homeowners

By the end of October 2018, homeowners with mortgages had access to $5.9 trillion in tappable home equity, down $140 billion in the third quarter from the previous quarter, according to data from Black Knight.

To find out where the most Americans are using cash-out refinancing, we asked CoreLogic to look at data for the past decade. Here’s a snapshot of the top 10 housing markets where the cash-out share of refinancing has expanded most in recent years.

For some, cash-out refinancing has acceptable tradeoffs
Sacrificing a lower interest rate for a higher one to get cash is a price some homeowners are willing to pay to access their home’s equity — even if it means paying more interest in the long run.

Mortgage broker Jovan Vaughn says clients in his Laguna Hills, California, market want to get the most out of their equity while they can to improve their financial footing.
“People used to want to know the max amount they could pull out and how quickly they could get it,” Vaughn says. “Now, they come in wanting a certain amount for a certain purpose.”

Cash-out refinancing for home improvements will see a modest boost in activity in the year ahead, especially with rising home prices and mortgage rates in the forecast, says Len Kiefer, deputy chief economist with Freddie Mac.

Other factors, like paying down high-interest debt and economic uncertainty, could play a role in cash-out refinancing. Forecasts for slower economic growth this year, along with recent stock volatility, may further rattle consumers.
“People are more worried about paying off things before a recession hits and they lose a job,” Vaughn says.

Cash-out refinancing could lose favor
Homeowners in some states — with California leading the pack — are seeing their tappable equity dwindle as home-price growth contracts. Add in higher mortgage rates that are forecast for 2019, and cash-out refinancing becomes less attractive.

Tapping home equity, compared to other types of borrowing, can be the least-expensive way for someone to pay for a home improvement, pay off other debt, or invest in a business, says Mike Fratantoni, chief economist with the Mortgage Bankers Association.
Although the share of cash-out refinancing is on the upswing, the amount of tappable equity people are actually pulling out continues to drop. In Q3 2018, just $64 billion in equity was withdrawn through home equity line of credits or cash-out refinancing, Black Knight reported. That’s down 8 percent from the second quarter and 10 percent lower than a year ago.

Homeowners might be holding back because of the role home equity lending played in the housing crisis a decade ago. Another reason: more workers are saving a bigger chunk of their income in proportion to income spent, Fratantoni says. Before the housing crisis, the proportion of income saved to income spent was “hovering around zero,” Fratantoni says. Today, it averages about 6 percent, he says.
“Certainly people are borrowing, but they’re also saving in a way they weren’t previously,” Fratantoni says.

Alternatives to cash-out refinancing
Doing a cash-out refinance is one way to turn your home equity into cash. Other ways of converting equity into cash are:
  • Home equity line of credit, or HELOC
  • Home equity loan
  • Reverse mortgage
A home equity line of credit works like a credit card, with your house as collateral. You have a credit limit, just as you do with a credit card, and you can spend up to that limit. The interest rate moves up and down with the prime rate.

A home equity loan is a lump-sum loan with a fixed interest rate.
A reverse mortgage allows homeowners age 62 and up to draw cash from their homes in various ways. The balance doesn’t have to be repaid as long as the borrower lives in the home and stays on top of homeowner’s insurance and property tax payments.

Ideally, you want to save up for large, unexpected expenses in an emergency fund rather than treating your home as a piggy bank. Home equity is one of many tools to help you meet your financial goals, but it should be used thoughtfully and with discipline.

Before considering a cash-out refinance, ask your mortgage lender to help you figure out how the change in interest rate and borrowing costs stacks up against what financial benefit you’ll gain from the cash withdrawal. Set a clear strategy for how a cash-out can help improve your overall financial picture.

How to Finance a Fixer-Upper - Your lender isn't going to approve a $300,000 loan to buy a home that's only worth $250,000. And, while homeowners sometimes use home equity loans to remodel, you can't get a home equity loan when you have no equity.
Compare Mortgage Rates, Find a Great Mortgage Rate, Home Loans Appliances Barnsley, Mortgage Shop Rates,

This can be a big obstacle for buyers who don't have extra cash to make needed renovations or repairs before moving in.

But there are two loan programs that can make your dream of rehabbing a fixer-upper a reality: the Federal Housing Administration's 203(k) mortgage and Fannie Mae's HomeStyle Renovation mortgage.

The programs achieve the same goal 
  • providing homeowners with a mortgage and access to money to make necessary improvements 
  • but come with different requirements and best serve different types of buyers.

FHA 203(k) mortgage

This type of financing is ideal for borrowers who either have little money for a down payment or who have an average or slightly below-average credit score, says Bruce Ailion, a broker with RE/MAX Town and Country serving greater Atlanta.

The FHA requires a credit score of at least 580 if you want to make the minimum down payment; if you have 10% down, your score can be as low as 500. Lenders may have higher requirements.

The two different types of 203(k) mortgages got new names in 2015. Formerly called the regular or full 203(k) and the streamline 203(k), they're now called the standard 203(k) and the limited 203(k).

The standard 203(k) loan is for almost any kind of repair or improvement — even the reconstruction of a demolished home, as long as the original foundation remains.

Any home more than 1 year old is eligible for a 203(k) loan.

Repairs must cost at least $5,000, and homeowners must hire a 203(k) consultant, who, for a fee of a few hundred dollars, determines whether the project is financially feasible, inspects the property, prepares or contracts out architectural exhibits and oversees the work.

You can borrow more than the home is worth, as long as the repairs will increase its appraised value.
The most you can borrow is 110% of what an appraiser estimates it will be worth after renovations, or the cost of the home plus the estimated renovation cost, whichever is less, minus your down payment. The minimum down payment on an FHA loan is 3.5%.

The maximum also must fall below the FHA mortgage limit for the area — $314,827 for single-family homes in most parts of the country and up to $726,525 in high-cost areas.

But a couple of rules governing these loans have been relaxed to:
  • Eliminate the cap on how much can be spent to repair or remove in-ground swimming pools. (Adding a pool is still not allowed.)
  • Permit foundation repairs. The old rules required a home's original foundation remain untouched.

Typical costs and fees on a $250,000 loan Item Cost Purchase price $200,000 Rehabilitation $50,000 Mortgage after 3.5% down payment $241,250 Mortgage rate 4%

The limited 203(k) mortgage is for minor remodeling projects that don't require structural modifications such as adding rooms.

You can use one of these loans to repair or replace:
  • Roofs, gutters and downspouts.
  • Decks, patios and porches.
  • Heating and cooling systems.
  • Windows, doors and exterior siding.
  • Plumbing and electrical systems.
  • Flooring.

It can also be used to remodel your kitchen and get new appliances, to finish your basement, to paint your home and to add insulation and weather-stripping, among many other possibilities.
You can borrow the purchase price plus up to $35,000 for repairs, improvements and upgrades. There is no minimum repair amount.

All the usual FHA requirements apply to these loans.
You can find an FHA 203(k) lender by going to the Department of Housing and Urban Development's online search tool and checking the 203(k) box at the bottom of the page.

The main problem with the 203(k) loan is the cost of the mortgage insurance, says Joe Parsons, senior loan officer with PFS Funding in Dublin, California, and author of The Mortgage Insider blog.

You'll pay up-front mortgage insurance of 1.75% of the loan amount and 0.85% annually on the principal balance for the life of the loan.

"The insurance cannot be removed, even when there is more equity in the property," Parsons says.
You can drop private mortgage insurance on a conventional loan when equity in the home reaches 20%.

Fannie Mae HomeStyle Renovation mortgage
This type of financing requires a down payment of just 5% if you're buying a single-family home with a fixed-rate mortgage.

With a down payment of less than 25%, you'll need a credit score of at least 680. If your debt-to-income ratio is higher than 36% but less than or equal to 45%, your credit score needs to be 700 or higher.

You'll have 12 months to complete the work, and there's no minimum amount you must devote to repairs. You can use the money for repairs, remodeling, renovations or energy improvements. The only restriction is that the changes must be permanently affixed to the property and add value.

The lender will oversee the renovations to make sure they get completed. The lender will need copies of your plans and specifications as well as your renovation contract.

Since you can put down as little as 5%, the most you can borrow on the home is 95% of the lesser of:
  • An appraiser’s estimate of the market value after improvements.
  • The purchase price plus renovation costs, or "cost basis" value of the home.

Renovation costs include not just labor and materials but also property inspection, architectural and engineering, and permit and licensing fees, plus an optional 10% contingency reserve.

With a HomeStyle loan, the total cost of the work can be as much as 50% of what the property is expected to appraise for once the work is complete, but the mortgage amount still must fall within the above guidelines.

Suppose you want to purchase a home that costs $190,000.

The appraiser looks at your plans, scope of work and comps, and determines the property's after-renovation value to be $250,000.

Fannie Mae says you can borrow up to 50% of that, or $125,000, for repairs.

The purchase price of $190,000 plus $125,000 for repairs, equals $315,000. Subtract your 5% down payment, and you can theoretically borrow $299,250.
However, in this case, the cost basis of $315,000 is higher than the after-renovation value of $250,000, and you can only borrow based on the lower of the two.

So with 5% down, the most you could borrow would be $237,500. Subtracting the $190,000 purchase price, you'd need to limit your repair costs to $47,500.

HomeStyle loans are also subject to the usual conventional mortgage limits, which are $484,350 for one-unit, single-family homes in most areas, up to $726,525 in high-cost areas in the continental United States and $726,525 in parts of Alaska, Guam, Hawaii and the U.S. Virgin Islands.

With less than 20% down, you'll also have to pay private mortgage insurance or PMI, which is based on the as-completed value, not the purchase price.

One final advantage is that HomeStyle loans are available to investors with a 15% down payment. Investors cannot take out 203(k) mortgages.

Investors will often max out multiple credit cards or take out hard money loans, both with double-digit interest rates, to finance flips. The HomeStyle loan offers a cheaper alternative.

Fannie Mae does not offer a publicly available search tool to find a HomeStyle renovation lender, so you'll have to do a Google search, contact lenders in your area or get a referral from a local real estate agent.

Common features of home renovation loans
Before the appraisal, you'll need to draw up a budget based on contractors' estimates for your proposed scope of work.

The appraiser will use this information to estimate an after-improved value for the home you want to buy, which determines how much you can borrow.
You'll be able to choose your own contractor, but the lender will have to approve it, so pick someone who is qualified, licensed and bonded.

HomeStyle and 203(k) loans allow for the possibility of some DIY work, but you can't borrow money to pay yourself for your labor.

Loan fees, such as the origination fee and the appraisal fee, may be higher since renovation loans are more complex than a typical mortgage. For the same reason, closing may take 60 to 90 days instead of the typical 30 to 45 days.
Interest rates for renovation loans are usually one-eighth to one-quarter of a percentage point higher than they are for a conventional mortgage because these loans are riskier for the lender.

Both loans let you skip up to six monthly payments if you can't occupy the home during renovations, with the interest for those months added to the principal of the loan.

The 5 Financial Products You Can’t do Without - How far does your financial planning go? You may be doing the right things: saving for retirement through your employer, or independently, and paying for basic medical scheme membership. These are the two most accessible financial protections and the ones we understand best and adopt earliest – hopefully, as soon as we start earning an income and well before we own property or assume responsibility for dependants. Having sacrificed a portion of our precious income to cater for almost inconceivable future needs, we feel good about our foresight and discipline.

But as we get older, take on financial commitments such as home loans and car loans, set up home with a spouse or partner, and/or have children, the starter pack above becomes hopelessly inadequate. But with limited resources and so many products and providers vying for your attention, what is the bottom line? Which financial products constitute the next tier of a long-term financial plan, providing the foundation for a secure financial future by covering risk, preparing you for a comfortable retirement and establishing a pattern of saving for immediate needs and future goals?

Home Loans Advert, The 5 Financial Products You Can’t do Without
To get back to basics, Personal Finance asked three well-established financial planners to abandon their preferred approach of tailoring their advice to individual circumstances and to generalise, just this once, about the minimum requirements of any and every financial plan – keeping the package to five products. If you are wondering how much you have to do to take the next step up in the hierarchy of financial planning products, this is your guide.

The planners
Barry O’Mahony has the Certified Financial Planner (CFP) accreditation, is the founder of Veritas Wealth Management in Cape Town, and is a former Financial Planner of the Year. He and his colleague, fellow CFP Rick Briers-Danks, personalised their product selection by visualising a hypothetical married couple in their 30s with two children of school-going age. “They both work and live in a home they own jointly with a sizeable bond,” says O’Mahony. “Their joint monthly income meets their living expenses, but they don’t have much room for saving.”  

Given the limits of the couple’s disposal income, Veritas ranks these products as the critical five to have: 
  • Medical scheme membership and gap cover;
  • Income protection;
  • Life cover;
  • Retirement funding; and
  • An emergency fund.
Any extra money should be saved in a tax-free savings account, to supplement retirement savings, and/or invested in unit trusts: “a wonderful invention for a layman investor”. Finally, the couple would be strongly advised to have a will … and to have it drawn up by a trust company or a lawyer, rather than a bank. The reason for this, says O’Mahony, is that banks “typically nominate themselves as executor and are generally not as efficient at winding up estates”.

Sue and Craig Torr are the co-founders/directors of Crue Invest in Cape Town. Sue is an advocate and former head of fund management at one of South Africa’s largest healthcare administrators; Craig is a CFP.

The Torrs managed to restrict their core plan to five essential products:

  • Unit trust retirement annuity (RA) fund;
  • Medical scheme membership;
  • A will;
  • Income protection; and
  • An emergency fund.
We have not dealt with wills in detail in this article, but Sue Torr points out that most South Africans underestimate their importance and die intestate, which burdens the state and often causes enormous problems for dependants and other prospective heirs.

“Having a will is not the privilege of the impossibly wealthy. It is the right of every South African to plan their legacy while they are still alive, and we regard it as a vital part of one’s financial plan,” she says. “If you die intestate, your estate will be distributed in terms of the law of intestate succession and that might mean certain unintended beneficiaries inheriting. The Master of the High Court will appoint a curator to take care of your estate, and any assets left to your minor children will go to the Guardians Fund, where they will be administered by the authorities until your children are old enough to inherit. In addition, the state will appoint a guardian to take care of your children – and it may not necessarily be the person you would have chosen.

“Although anyone can draft a will, it must meet certain legal requirements to be valid, and it is strongly recommended that an estate planning expert drafts your will – regardless of the size of your estate. Simple errors, such as allowing a beneficiary in your will to sign as a witness, can result in him or her being disqualified from inheriting,” says Torr.
CFP professional Melony Jacoby has been in financial services for 28 years, and is the founder and owner of MVest Finance in Durban. She splits financial planning into three categories: risk management planning, retirement planning and investment planning. Her five must-have products fall into the first two categories, with a linked investment product recommended for anyone able to put aside at least R50 a month to start an investment portfolio.

Risk-management: income protection, life cover and dread disease cover; and
Tax-friendly retirement planning: an RA and a tax-free savings account.
For the purposes of this exercise, Jacoby assumes that medical scheme membership and a will are already in place.

If you can invest even a small amount a month, she says a linked-investment services provider, or Lisp, is the way to go, because the investor gains access to unit trust portfolios with other companies. “The benefit of a product like this is the liquidity it provides, and there are no penalties for repurchasing, reducing or even stopping contributions,” says Jacoby.
“You can also invest on behalf of other people. For example, parents can save for their children, as the minimum contribution to a particular unit trust is R50,” she says.

The essential five

1. Medical scheme membership with gap/dread disease cover

“In our view, you simply have to belong to a private medical scheme,” says O’Mahony, who puts healthcare cover at the top of the Veritas list of core financial needs. For the Torrs, medical cover is second only to investing for retirement. Jacoby takes medical scheme membership as a given, but adds dread disease insurance as one of her three risk-management priorities.

Such unequivocal views say a lot about the potential cost of health care and the devastating effect an accident or illness can have on even the most carefully laid financial plans. “Medical aid is expensive, but the financial consequences of being without it can be crippling, and you have no control over life’s catastrophic events,” says O’Mahony.

“You can limit coverage to a hospital plan, with or without the savings element, and add gap cover insurance, which is very affordable and covers the difference between what medical aid pays and what you are charged (the ‘payment gap’).

“If you do not have private medical aid and need care, you could be turned away at the door of a private hospital, which would leave you dependent on state facilities. In some cases, state facilities are adequate, and some people are comfortable with this outcome, but most are not,” says O’Mahony.

The very minimum recommendation of the Torrs would be a “comprehensive hospital plan that covers you and your dependants at 100 percent of the medical scheme tariff. This will ensure that your medical costs are completely covered in line with medical scheme rates from the date of admission to hospital to the date of discharge,” says Sue Torr.

“However, even with a 100-percent hospital plan in place, you would be liable for all out-of-hospital medical costs, such as scans, scopes and procedures that do not require hospital admission. You would also be responsible for the payment gap, so we would always strongly recommend taking out gap cover insurance.” 

Medical scheme membership? Medical insurance? It is important not to confuse them, says Torr. “A medical scheme is regulated by the Medical Schemes Act and is designed to pay out claims in accordance with medical scheme tariffs. Medical schemes are required to provide all members with a set of ‘prescribed minimum benefits’. Medical insurance, on the other hand, is an insurance policy that pays out a predetermined lump sum for a hospital event and is governed by the Financial Services Act,” she says.

Past medical history is no indicator of your future healthcare needs, she points out. “Many people make the mistake of choosing next year’s medical scheme option based on last year’s expenditure. Your healthcare status can change overnight, and it is always advisable to have the most comprehensive medical aid plan you can afford.”

Jacoby recommends dread disease insurance because it covers shortfalls and treatments not covered by medical schemes and may also provide you with the means to access treatment elsewhere in the world. “Most important of all, it continues to cover you if you survive a dread disease,” she says.

According to the Association for Savings & Investment South Africa, 60 percent of dread disease claims in 2016 were from women diagnosed with cancer, she says. “One in three women and one in four men are diagnosed with heart attacks before the age of 60. Cardiovascular diseases are almost a common occurrence. Our toxic environment and lifestyles are reflected in the numbers of people being diagnosed and/or dying from strokes, heart attacks and cancers. In America, a million people die every year from these dreaded diseases. We don’t have accurate stats in South Africa, but, unfortunately, Western culture is having the same effect globally.”

2. Unit trust RA

There’s no better motivation for financial discipline than being on the right side of compound interest and getting a tax break thrown in. The Veritas team sums up the consensus as: “You should be using the tax break offered to you by Treasury to save efficiently for retirement. If you are not saving anything, you need to start immediately, no matter how little you can afford to save every month. Because of the compounding effect, the earlier you start the better.”

Says O’Mahony: “You are entitled to save 27.5 percent of your taxable income in a retirement fund each year (capped at R350 000) and to deduct that amount from your taxable income. Essentially, you are being allowed to invest with pre-tax income. There are other benefits of a retirement fund, too: the investment is protected from creditors and free of estate duty, and the growth in the fund is tax-free – in other words, it is not subject to capital gains tax (CGT) or income tax while in the fund.”

If your employer has a group retirement scheme, you are probably contributing to a provident or pension fund, he says. “In that case, you should consider increasing your contribution to the maximum you can afford. If you do not have access to a group scheme, you will need to set yourself up with an RA, which is essentially a private retirement fund. We suggest using a unit trust-based RA, which is flexible and allows you access to good fund managers.”

Traditionally, RAs were policies sold by life assurance companies, but they became notorious for lack of transparency, poor investment returns, high fees and penalties for termination, explains Craig Torr.

“A unit trust RA is not a policy, but a unit trust portfolio owned by the investor. It is a much more cost-effective and flexible investment structure, generally achieving more favourable investment returns than policy RAs. The investment performance of a unit trust portfolio is tracked, and all the costs involved are completely transparent. With a unit trust RA, you have full disclosure of all fees, including asset management, adviser and administration fees,” says Torr.

“As the owner of unit trusts, you have the freedom to choose which funds to invest in, subject to regulation 28 of the Pension Funds Act, which limits risk exposure in retirement funds. You can increase or decrease monthly contributions with no fear of penalties and can make ad hoc lump-sum contributions at any time. The costs of investing in a unit trust RA are significantly less than a policy RA, and the difference in cost can have a considerable impact on your savings in the long term. The ability to choose and switch underlying funds also plays an important role in the long-term performance of invested assets.”

You can transfer a policy RA to a unit trust portfolio – and you might be well advised to do so – but you need to obtain a quote from the assurer first, to find out what it will cost you to cancel your policy, says Torr. Once you know that, a financial adviser can compare the likely long-term outcome of holding on to your policy versus taking the pain of the cancellation fee to gain access to the lower costs and better performance prospects of a unit trust investment.

If you are in a position to do so, Jacoby recommends making use of all the tax exemptions available for long-term saving by investing in a tax-free savings account. “Contributions are limited to a maximum of R33 000 a year and R500 000 over a lifetime,” she says, “but all growth (interest and dividends) are tax-free and there are no CGT implications when you access the money.”

3. Income protection

If you had an ATM machine in your living room that consistently spat out your net income on the 25th of every month, would you think it was worth insuring the machine for mechanical failure?

That’s the question to ask yourself if you have no income protection, says Briers-Danks, for whom this product ranked a close second to medical scheme membership. It was the top priority for Jacoby (with medical cover assumed to be already in place) and number four on the list of five must-have products provided by Crue Invest.

“Becoming disabled is your greatest financial risk, we believe, as it could mean being without an income for many years,” says Briers-Danks. “Even without dependants, it is critical to protect your income, so you don’t become completely dependent on others. Income protection policies pay out after a waiting period – typically, seven days, a month, three months, and so on – and the longer the waiting period, the lower the premium.” 
It is important to make sure inflation is factored into your income calculation, he says, and to take into account any income protection provided by your employer as part of the company’s group risk benefits, so you don’t over-insure.

Don’t expect income protection to cover 100 percent of your income, however. That might make you better off disabled than able-bodied, explains Jacoby. “The core purpose of income protection is to support your rehabilitation, or to help you find an alternative occupation to provide an income.”

Craig Torr points out that disability is often not the result of a major catastrophic event, as we imagine; a common ailment or relatively minor accident can do just enough damage to disrupt a career – for example, loss of the sight in one eye can be devastating if you need 20:20 vision for your job.

“When taking out an income protection policy, you need to provide proof of your employment and   income and you can nominate the level of income you want to insure – for example, 75 percent,” says Torr. “In general, an income protection benefit will remain in force until you are aged between 60 and 65, depending on the age you choose.”

Income protection applications are complicated, he says. “Insurers need to have a full understanding of your current medical conditions, your employment, any occupational risks, your lifestyle and whether or not you take part in any high-risk recreational activities, such as skydiving. All these factors contribute to the underwriting of your policy, which, in turn, determine the level of insurance, and the exclusions and waiting periods that apply. Bear in mind that it is possible to take out temporary and permanent income protection through a single policy.

“Since it is quite an intricate area of insurance, it is best to take advice from a financial planner who knows these products well, to ensure you are appropriately covered when you make a claim.”

4. Life cover

Life assurance is a “life-stage” product, rather than a universal need: a core requirement for a working couple with a joint-mortgage bond and young dependants, says the Veritas team, but non-essential if you are single and debt-free. For that reason, Crue Invest did not include it in its must-have top five products.

Jacoby emphasises its versatility as an asset that is not part of your estate: for example, if you are self-employed or own shares in a company with other shareholders, she says, “life cover could be the answer to buying the shares from the deceased estate or enabling continuity while the estate is being wound up”. 
If you have a spouse and dependants, life cover can provide immediate financial support until the estate is wound up and/or ensure there is no liquidity shortfall in your estate that would require your spouse or heirs to pay cash into the estate. Jacoby warns that the proceeds of a life assurance product do not attract estate duty when paid to a spouse, but are subject to estate duty when paid to a trust or a cohabiting partner. 

She says cohabitants need to be aware that the exemptions that apply to marital regimes do not apply to cohabitation. “Life cover could be taken out to ensure that, when the partnership dissolves due to a death, all liabilities, estate expenses and ongoing maintenance for the surviving partner are provided for.”

And, of course, life cover can be used for wealth creation for your heirs, says Jacoby. “The proceeds can be paid to a testamentary trust or an existing trust, but you should be aware of the tax implications of this.”

The exact amount of life cover will depend on your personal circumstances and lifestyle, says O’Mahony, so the calculation should be made with the help of a financial planner, who can project all the important costs into the future. It is not advisable to pluck a substantial figure out of the air, because it sounds good, without taking into account the actual sum required and factoring in inflation.

5. Emergency fund

“If the drought in Cape Town has taught us anything, it is the importance of saving up … if not for a rainy day, then for a series of dry ones,” says Sue Torr, neatly summing up life’s unpredictability. “Without access to funds in the event of emergency, one might be forced into the position of taking out a personal loan, which is a notoriously expensive type of loan.

“As with disability and income protection, it is often the relatively small, unforeseeable events that result in the need to access emergency funds,” she says. “For example, a few days in a veterinary hospital for your dog can cost in the region of R15 000; or a seized vehicle engine that is out of motor plan can easily cost R50 000. The death or illness of a close family member or friend could have you scrambling for the price of flights and accommodation at a moment’s notice.”

There is no magic figure for an emergency fund, but the accepted practice is to peg it at between three and six times your monthly income, says Torr. “The most important thing is accessibility, which makes savings accounts and money market accounts good vehicles for this purpose. Even better, an access bond facility attached to your home loan is ideal for storing your fund, because the extra money will lower the interest on your loan by more than any interest you will earn in a savings or money market account.

“Bear mind in that tax-free savings accounts are not ideal for emergency funding or cash investments, because the money you save in them has already been taxed, and the real benefit of these accounts is tha

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