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If you prefer not to make major financial decisions during an election year, you're not alone. However, history shows that stock markets tend to rise slightly following an election, with no long-term difference in performance. Other positive financial news has appeared lately, such as a slowdown in the overall Consumer Price Index (CPI) and an increase in the number of homes for sale. Also, an additional credit scoring method for home loans was recently approved by the FHFA, which is expected to help millions more potential homeowners achieve their dreams.
Home Financing
Build Equity While You Rent
If you aren't ready to commit to buying a home yet, but want to begin building equity in a home, "rentvesting" may be something to consider. It's a simple idea: while you stay in your rental, you buy an affordable property and rent it out. Your tenants' rent helps cover your mortgage payments.
A secondary advantage is that you can buy an investment property in a less expensive area. However, you'll need to research the rental market in your chosen area before you proceed with a purchase. Not only do you want to ensure that your rental income will cover your mortgage payments; you'll want to check out the sort of demand for the type of property you're considering.
Here are other points to keep in mind.
Will I run into problems when I begin renting the property?
Some areas, especially those with a homeowner's association (HOA), may prohibit rental activity. This may also apply to some condominium developments.
Do I have the skills to be a landlord?
While you can hire a property manager, their fees may take a bigger bite out of your rental income than you'd like. This can be up to 25%.
Have I researched all the costs?
In addition to closing the loan, you'll need to determine annual costs such as property taxes and insurance. You'll also need to factor in repair and maintenance, which can be unpredictable.
What if the rental is vacant for more than a few weeks?
Short-term rentals offer perks such as the ability to use the property yourself. However, if you want a longer-term tenant, these may be more difficult to find. You could be paying your rent and the mortgage payment for one or more months, without rental income to supplement your cash flow.
If you're interested in exploring your options, contact your local APM loan advisor here.
Source: cnbc.com
Insurance
How Your Ride Affects Your Insurance Bill
Your auto insurance premiums depend on a variety of factors, including the make and model of your car or truck. Other factors affect your coverage, including a few you may not be aware of.
For example, did you know that heavier, larger vehicles tend to cost more to insure? This is because they have the potential to cause more damage if they're involved in an accident. Research found that insurance losses for smaller SUVs were 8% lower than the average for all passenger vehicles, while larger SUVs' claims were 2% above average. Larger pickup trucks fared worse, racking up damage losses 16% above average.
Whether your car or truck is easy or difficult to steal will also affect your premiums. In some cases, this may make it harder to find insurance. For example, Hyundai and Kia models manufactured from 2015 to 2021 are sometimes difficult to insure, as they lack some theft prevention features. They became popular choices for car thieves after TikTok posters demonstrated how easily they could be stolen.
Buying coverage for an electric vehicle (EV) may be more expensive for two reasons. Insurance companies don't have as much long-term risk assessment data for EVs than for gas-powered vehicles, and repairs tend to be more expensive.
Source: bankrate.com
In the News
Retire Rich or Die Broke?
If you enjoy reading books about money management and retirement, you may have spotted Die with Zero: Getting All You Can from Your Money and Your Life at the local bookstore or online. If you're wondering what it's about, here's a synopsis.
Unlike traditional savings and retirement plans, Die with Zero (DWZ) suggests that we shift gears, spending money more freely while we're younger. The author of the book, energy trader Bill Perkins, suggests that it's better to live rich than to die rich, and not to wait until you've reached retirement age to pursue your "bucket list".
While nobody's expected to aim for an overdraft at the end of their lives—the "Die with Zero" book title is more of an attention-grabber than something to take literally—the author encourages that we find a middle ground between saving for the future and enjoying the present. This means saving to meet future needs and maintain your financial security, instead of hoarding wealth at the expense of current opportunities.
If you don't have children and are more interested in creating memories and seeing the world, the DWZ philosophy may work for you. However, keep in mind that there could be more risk in this approach than you're comfortable with, especially as you may find yourself with a smaller safety net during your retirement years.
Source: lifehacker.com
Credit and Consumer Finance
Items Cheaper Now Than Pre-Pandemic
If you missed out on Amazon Prime Day this month, don't worry—some popular consumer items still offer deals, as they're cheaper now than they were before the Covid-19 pandemic and the arrival of the current inflation trend.
Most of these items fall into the consumer electronics category. These are some of the winners:
- Smart phones, phone accessories and calculators are over 50% cheaper than pre-pandemic prices.
- Television prices have fallen over 30%.
- Computers and home assistants like Alexa are over 7% cheaper.
Some of these price adjustments depend on several factors. For example, the Consumer Price Index (CPI) recognizes that newer smartphones offer consumers more features and higher quality than in years past. These are called "hedonic adjustments" and reflect the rise in value that consumers enjoy for a similar or lower price.
Another reason for these bargain prices, especially for today's smart televisions, is that manufacturers keep cutting prices to stay competitive and get consumers' attention. However, there's another motive: selling more televisions increases manufacturers' revenue streams, as today's smart TV features enable them to capture consumer data (including yours).
Once you've connected your new TV to the internet, your entertainment preferences may be visible to manufacturers and app developers alike. If you don't want to share, this Consumer Reports article offers methods to keep your viewing habits private.
Source: cnbc.com
Did You Know?
Expanded Credit Scoring Acceptance Begins in 2025
The Federal Housing Agency (FHFA) recently announced that mortgage lenders may use VantageScore® 4.0 credit scores when qualifying borrowers. This expanded credit acceptance will begin in 2025. This will open the door to millions more qualified lending applicants without lowering credit risk standards, making it a genuine win-win.
One main difference in the VantageScore and traditional FICO models is that VantageScore includes many potential borrowers who may not be viewed favorably by the FICO algorithm. They include:
- Younger borrowers with credit accounts established less than a year ago.
- Infrequent credit users who have not had any new data added to their credit reports during the past six months.
- Consumers without credit accounts, especially those who only have public records, inquiries and external collections on their credit file.
FHFA Director Sandra Thompson praised the move, saying "The use of these modernized credit score models will enhance risk management while furthering sustainable access to credit for consumers."
Source: vantagescore.com
