March 31, 2010

ARM Investigation

Filed under: money — by elysianconfusion @ 1:53 pm
Tags: , , ,

Well, I got my letter today with the new ARM rate for the next year.

And…. I was right! The value of the index was .39% plus 2.75% (my margin)… well, I think that equals 3.14. According to this letter, the new interest rate is 3.125%, so this time it has rounded down.

Last time it was .7+2.75=3.45, so my rate rounded up to 3.5.  That’s the nearest .125%

Anyway, this drops my mortgage payment by $38.65. I think I’ll just keep my regular payment :-).


March 19, 2010

What’s in an ARM?

I’ve heard lots of bashing of the adjustable rate mortgage (ARM) and honestly, I do get it… mostly. Except I feel like we got the best rate ever — in 2004, we got a 5/1 ARM at 3.875%. Now that’s a mighty sweet rate! I was totally freaked last year though, when the five-year fixed rate was coming to an end… what next? What would it be? Should we refinance? Could we refinance?

I’ve mentioned before that we’ve put a lot into our house. It’s the source of a good amount of our debt… our mortgage is only 17% of our gross monthly income, and 23.2% of our net. If you add in our home equity loans it’s more like 24.7% of gross and 33.5% of net. I guess the rule of thumb is not more than 28% of gross. So, shockingly I think we’re better off there than we should be. In *my* opinion our debt is insane.

Anyway. The time is approaching for our next adjustment (last year we got the letter with the new rate on March 25, and the rate went down! I was shocked, it actually went to 3.5%). So, today I was trying to figure out how they got the rate last time and what it might be this time.

Basically, ARMs are tied to an index, and you have to read your loan documents to figure out which index it is. According to mine, “The ‘Index’ is the weekly average yield on United States Treasury securities adjusted to a constant maturity of 1 year, as made available by the Federal Reserve Board.” Then they add 2.75% to the current index. (It’s the index 45 days before the rate change (5/1/10), I think that’s 3/17/10.) I googled that, and I think I found it at http://www.federalreserve.gov/Releases/H15/Update/.  I think it’s the treasury constant maturities 1-year. I selected Business day — sounds like it’s the average? Or maybe it’s the weekly? Last year the weekly for 3/13 was .70, and that’s what they used in the letter last year… 2.75+.7=3.45, not 3.5 . It says they round up to the nearest 1/8 of one percentage point (0.125%).

This year the weekly for 3/12 is .39, so .39+2.75=3.14 — I have no idea how they’re planning on rounding that. I may have to ask.  If only I could fix 3.14% we’d save $5,485 over the life of the loan (that’s in my version, not the 24 years remaining on the loan).  Of course I can’t fix this rate. My credit union is nice, but not that nice! But I have to say, getting an ARM seems to have been a reasonable decision for us. An ARM at 3.875 means that our rate can’t go up (or down) more than 2% per year, or more than 5% ever, so it could never go higher than 8.875%, and as I’m searching for the national average contract mortgage rate (1963-2009) it looks like it started pretty low in 1963, at about 6%, peaked in the early 80s near 15%, and is down to about 5% right now. Overall, our max rate looks to me to be under the curve, so I’m not going to worry (for now) about refinancing and all the costs that brings. (Plus the stress of worry whether we’d qualify — this housing market is awful.)

It will be fun to get the letter and see if I’m right!

March 12, 2010

State Update!

What’s the state of our current finances? I like to check in every month… so in April last year we had $403,438.14 total in debt. In February, $372,062.35.

Today it looks like $369, 479.51. We paid down $2,582.84 since last month. And since last April, $33,958.63. That’s great, but I did like February better. We dropped over 9k last month, so it’s a little bit of a letdown. But that’s what happens when you throw your tax refund and annual bonus at debt. Sadly, we don’t get those every month! So, what else can we do to increase our cash flow and drive that debt down?

I would love ideas. Surveys pay little and slowly (although I still like mysurvey.com, it can really only be a snowflake). I also do swagbucks, which is kinda fun, and I do search anyway — I trade swagbucks in for Amazon gift cards and deduct that from purchases I make and move that money to a snowflake account. These things are tiny though, they make no difference.

I also have books and movies on half.com, but most of my good stuff is sold and the rest is hanging out there at ridiculously low prices.

So, my big thought is a purge. We have Stuff.  (But I can find my vacuum and have never bought new stuff like that because I couldn’t find what I had — and I don’t have piles of laundry like ChildWild refers to.) Still, I can purge.

1.) We have lots of leftover butcherblock from doing our kitchen counters. Maybe I could sell them as cutting boards? They’re gorgeous and thick.

2.) We have lots of outgrown and unused clothing. I could try to sell by consignment or donate and get a receipt! I often donate clothing but haven’t done as well about getting receipts and itemizing what was donated.

3.) We have tons of CDs we don’t listen to. Maybe we can add them to half.com, same with our books. (Although some of the books I like to list with PaperBackSwap, which gives me new books to read for the cost of postage.)

4.) We just made maple syrup, perhaps we could sell that? It’s delish!

5.) Our garage attic is full of Stuff. Some stuff that we definitely will need (like summer furniture), but plenty of things we should just release for someone else to enjoy. If we can’t sell it, perhaps we can donate it.

Well, those are a few ideas but I’m not convinced any of them will give me the hit I want. Ideas, anyone?

March 11, 2010

Cutting Costs

Filed under: debt,money — by elysianconfusion @ 12:09 pm
Tags: , ,

I worked really hard last year to cut our costs when I started this quest to be debt free. I actually did pretty well. We cancelled cable. We cancelled house cleaners. We got rid of a car. We reduced our insurance. We created a budget that we follow fairly well.

Still, there has to be more to cut, right? Well, there was. We decided that two cell phones and a home phone was too much, so we cancelled Vonage. Savings? About $33 per month. I also called my internet company. Cutting internet isn’t an option, it’s required for my job and they reimburse me for it. You’d think this might make me less motivated to reduce my bill. In fact, no! I still want a lower bill. We were paying $73.25, which seemed insanely high to me. Part of the reason this bill is high is that we’re not bundling any other services with it. Standalone services just cost more these days.  There’s also no competition in town, so it’s hard to pit companies against each other.  I wasn’t too confident, but I called anyway and was pleasantly surprised. I told them I wanted to reduce my bill, and they were able to cut it to about $42.94 per month, saving me about $30 month. Total time on the phone for both, about 30 minutes. Total savings, about $63 per month, or $756 per year. Want to try it yourself? Here are some tips from ehow: http://www.ehow.com/how_5944537_lower-cable_-cell-internet-bills.html.

So perhaps I was feeling a little empowered. I logged into my local credit union, and they’d reduced my APR from 8.5% to 7.25%. My balance is actually zero there, but still, what a delightful surprise! So naturally I called my UPromise account with Bank of America to ask them to reduce their rate (11.15%). They put me on hold and came back with a 9.9% (ok, only 1.25% but still!) and that brings all our rates below 10%. They also suggested that my account would go under review in April, and thought my rate might go down again. So I was advised to watch my April bill and if the rate *didn’t* go down, I should call and ask about it again.

So far I’ve avoided transferring balances hither and yon because I find it stressful, and it’s been hard to find an account that had enough room to transfer a balance to get a better rate. However, with my credit union balance at zero and the lowest APR there, I may well try to work this angle next.

I’m delighted at how much I’ve saved with just a few phone calls — has this worked for you?

Using the Emergency Fund

Filed under: budgets,debt,money,Toyota — by elysianconfusion @ 11:51 am
Tags: , ,

I so didn’t want to use my emergency fund, but man, we had a bad week. Sunday we took our Sienna in to check the brakes, and instead of just needing new pads, it needed new rotors. $555 dollars later, we have a safe car that stops great. I have a targeted account for car repairs, but didn’t have enough for the whole bill in there (I’ll have to adjust the amount that goes in there monthly).

Monday, oh joy! I tried to wash my hands and there was no water. NO WATER. Did I pay the bill, you might ask? No, because I have a well. I tried flipper the breakers, nothing. Called my husband. He came home, couldn’t figure it out, called a well professional. That guy was great — he came out, pulled up hundreds of feet of wire, and found a broken connection. He fixed it, wrapped it all up again. $268 later, we have running water (with lots of sediment and sand that we’re still dealing with). Can you say “Ouch!” Well repair, surprisingly, isn’t in my budget at all.

So I paid cash for both repairs — this is really amazing. I could not have done that a year ago.  And I got paid today and our EF is back to previous emergency state, I just have to save a little less for summer camp this month. I’ll need to make that up next month. Still, this is pretty empowering.

March 5, 2010

Toyota: I feel deceived!

Filed under: Toyota — by elysianconfusion @ 11:51 am
Tags: , , , , , , , ,

We have Toyotas. Two of them, in fact.  A 2006 Sienna (bought with 6,000 miles on it, which saved us a lot actually) and a 2009 Corolla we bought new in 2008. We tried and couldn’t find a used Corolla that was worth buying — the new one was literally $100-$200 more than the used one, and the new one gave us 2.9% financing. Anyway, we bought both cars before we read Dave Ramsey’s The Total Money Makeover (which we took out from the library, a good start for a book addict like me). So yes, if I had it to do over again, even before this Toyota safety debacle, I probably wouldn’t do  it again.

It turns out that our particular 2009 Corolla isn’t part of the recall (the VIN # starts with a J). I wish I could say this made me feel better, but the long history that’s coming out of the gas pedal sticking with no resolution upsets me. In addition, the two stories I heard about Lexus drivers losing control of their cars (here’s one http://consumerist.com/2010/02/video-one-toyota-drivers-horror-story.html) are totally terrifying. That’s no sticking gas pedal. That’s a computer issue, and I’m not convinced that my car and other Toyotas don’t have it (and how *will* they prove that to me?). It seems kind of sick to hope that it’s limited to Lexus. I don’t want anybody to experience this.

And now, new purchasers get incentives according to this article I read on BankRate.com:  http://www.bankrate.com/finance/auto/toyota-offers-incentives-to-entice-buyers.aspx. Great. Glad they’re giving out incentives. But how are they going to regain the trust of people like me?

I don’t know that Toyota can regain my trust. I’m stuck with my cars for now, but believe me, when I get a choice again I’ll think long and hard about the car company. At least next time if we end up with a crappy car, we won’t pay as much good money for it (I hear Hyundai sales are up 11%, and no wonder). Or maybe we can get a Volvo…

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