Category: Financial Planning

4 Smart Home Equity Moves

by Vince LiuzziHome equity-160616
Executive Vice President and Chief Banking Officer, DNB First

If you’re a homeowner, your mailbox is probably piled high with offers to “get the cash you need fast” with a home equity line or loan. It’s easy to understand why; with attractive rates, borrowing flexibility, and tax benefits, home equity borrowing can truly be a smart way to get the affordable money you need to finance life’s expenses.

Yet, even with all those benefits, home equity borrowing may not be the right decision for everyone. The housing recession several years ago was proof of that, as homeowners took out home equity loans only to see the values of their home decline, leaving them underwater and drowning in debt.

If, however, you have equity in your home and you use it wisely, you might be able to use a home equity line or loan to strengthen your financial situation. Here are four smart ways to do this:

Home renovations. The wisest use of home equity credit for home improvements involves renovations that add to the value of your home, such as a kitchen remodel or the addition of a bathroom. It’s important to note, however, that there’s a limit to the value they add, so you want to be conservative in your remodeling efforts. Home improvements that are cosmetic only, such as landscaping or adding a swimming pool, may not increase your home’s value.

Debt consolidation. Are you carrying extra debt, such as high-interest credit card debt?  Consider consolidating your balances with a home equity line or loan, which might allow you to lower your monthly payments and the interest you’ll pay over the life of your debt. If you do this, be careful not to run up new debt with your credit cards.  Otherwise, you could worsen your financial situation and end up putting your home at risk.

Emergency expenses. Life is unpredictable and there may be times when you get hit with unexpected expenses, such as medical bills or costly car repairs. In these situations, having a home equity line of credit can be a smart and more affordable way to handle these expenses.

College financing. With the lower interest rates and potential tax savings, home equity borrowing may also be a more affordable alternative to parent and student loans for financing your child’s education. Keep in mind, however, that you shouldn’t tap the equity in your home for your child’s education if it will put you at greater financial risk later on in life.

Depending on the situation, there may be other smart uses of home equity, such as starting a business or investing in a second home or property. The important thing to remember about home equity is that you should always use it wisely, and not for frivolous purchases of things you don’t really need or can’t afford. Otherwise, your debt could pile up faster than those offers in your mailbox!

7 Easy Ways to Put Yourself in a Better Home Buying Position

by Vince Liuzzi
Executive Vice President and Chief Banking Officer, DNB First

House for sale-160418

Spring isn’t just the start of baseball season; it’s also the beginning of another big season – the spring home buying season. And just like baseball, the home buying season can be highly competitive, as multiple buyers often compete for the same home.

What can you do to put yourself in better position to get the home you want – and get a leg up on your competition? Here are seven smart moves you can make:

  1. Tend to your credit. Good credit is key to obtaining a mortgage and the best possible rate, yet many borrowers don’t deal with their credit until they apply for a mortgage. Before you begin shopping for a home, get a copy of your credit report to ensure it’s accurate and to rectify any problems.
  2. Get pre-approved. One of the most important steps you can take to improve your negotiating power with a seller is to get a pre-approval from a lender. A pre-approval is a conditional approval from a lender that demonstrates that you’re a qualified buyer, giving you an advantage with sellers over your non-pre-approved competition.
  3. Set a budget. Determine how much you can afford before you start shopping for a home. You may be pre-approved for a higher mortgage amount, but you may not feel comfortable making higher payments. Review your debt payments and the amount you will put up for a down payment.
  4. Treat your home as an investment. Your home may very well be the largest investment you make in your lifetime. As such, you’ll want to make sure that you’re investing your money wisely. You wouldn’t want to overpay for a home that’s in need of significant repairs. That’s why it’s important to do your homework to determine how much the home is really worth.
  5. Connect with the seller. Many sellers are passionate about their homes and want to know that the new buyers will take good care of the home. One way to forge a personal connection with the sellers is to include a letter with your offer to tell them about yourself and why you love the home.
  6. Get a buyer’s agent. An agent can help you with the paperwork and give you valuable advice on how to make the best offer for your situation.
  7. Prioritize home features. Most of us would love to find a home that meets all of our qualifications, but those who have gone through the process know that you sometimes have to make concessions. Determine the features you absolutely require in a home and prioritize them.

By taking these simple steps, you just might gain a negotiating advantage and score that perfect house.

Go Beyond the Annuity Myths

by Vince Liuzzi
Executive Vice President and Chief Banking Officer, DNB First

 

“They’re too complicated.”Annuities

“They’re only for old people.”

“The fees are outrageous.”

“Any extra money you have goes to the insurance company when you pass away.”

Annuities are among the least known of financial vehicles, but often drive the most intense feelings from those who do know about them. They seem to be shrouded in mystery, myth, and even misunderstanding.

So what exactly is an annuity? And are the myths and misconceptions true?

An annuity is a financial product offered by an insurance company that provides a steady stream of income for a person over a set period of time, or for life. Because of the benefit of providing a steady stream of income, annuities are commonly used for retirement.

Despite the misconception, annuities aren’t really all that complicated. You can make a lump sum investment or multiple investments and then, after a specific timeframe, or immediately, if desired, you receive a stream of income for a set period of time, or for life, depending on the annuity.

A popular alternative in today’s financial climate.

With the volatility in today’s financial markets, the low deposit rate environment, and the pressure on Baby Boomers facing retirement, many people are taking a second look at annuities. And with these compelling annuity benefits, it’s easy to see why:

  • Unlimited contributions. Unlike an IRA, there is no limit to the amount of money you can contribute to an annuity.
  • Tax-deferred growth. Money invested in an annuity grows tax-deferred until it is withdrawn.*
  • Protection from market volatility. One only has to review recent stock market activity to understand this benefit from a fixed annuity product.
  • Competitive rates. An annuity can provide a greater rate of return than many CDs, particularly in today’s low-rate environment.
  • Guaranteed income. One of the biggest attractions of annuities is that they pay a guaranteed return until the annuitant (the person who gets the income) dies or thereafter depending on the type of annuity.
  • Bypassing of Probate. If you leave funds in an annuity to your beneficiaries, they won’t have to deal with the time and expense of Probate. In addition, funds in annuities generally can’t be accessed by creditors.

Annuities now offer another benefit that made them less attractive to investors in the past – liquidity. Annuity holders can take advantage of flexible riders that allow them to customize their investment to their unique needs and financial situation. DNB First Wealth Management, for example, offers annuities that will let you take advantage of improved market conditions and choose different death benefit options. In addition, we can ensure that any fees never come from the benefit your annuity generates.

Though annuities offer many benefits, it’s important to note that they aren’t for everyone. At DNB First Wealth Management, we’d be happy to review your situation to determine if annuities may be right for you. We’ll do what’s in your best interest. That’s no myth.

* Consult a professional tax advisor regarding your individual tax situation.

The Gift of Life Insurance

Peace of mindby Vince Liuzzi
Executive Vice President and Chief Banking Officer, DNB First

 

Anyone who is a parent can tell you: parenting changes you in many ways.

One of the most obvious is an intense desire to care for and protect our children. We want to be sure we’re always there to provide the things they need during their different stages of life. But when they reach adulthood, we experience a change in thinking:

We want to protect and care for our children when we are no longer here.

Fortunately, there’s a very simple and proven solution that makes that goal possible: a solution that many people don’t fully understand or use to their advantage.

It’s called life insurance.

According to a 2015 study by Life Happens and LIMRA (the Life Insurance Market Research Association), “more than 40% of Americans don’t have life insurance.” What’s more, those who do have it are often underinsured and know they need more.

One of the biggest reasons for underinsurance is the perception that life insurance is “too expensive.” And when people are worried about meeting their monthly bills today and saving for retirement tomorrow, they may view life insurance as an additional expense they don’t need.

What they should understand, according to Rick Weber, Managing Director of DNB First Wealth Management, is that “ life insurance isn’t expensive for what it can offer you, mainly peace of mind. It can help a person preserve and create wealth, particularly in this low interest rate environment.”

An example of the gift of life insurance.

Weber cites one type of program as an outstanding example of the power of life insurance. The program is designed for clients looking to gift funds they don’t need for retirement to their loved ones. It allows participants to make a single premium payment and get up to two and half times that in the form of a death benefit. For example, if they put $100,000 into the policy, their beneficiary could receive upwards of $250,0000 upon their death. (The precise amount of the death benefit depends upon selective criteria such as age, gender, health and tobacco use.) The program also provides the flexibility for the policyholder to cash out the principal amount at any time without penalty. In addition, the death benefit is free from federal taxes, as well as the Pennsylvania inheritance tax.

To learn more about this program and others offered, call DNB First Wealth Management at 484-359-3531.

A Lesson in College Financing

by Vince Liuzzi
Executive Vice President and Chief Banking Officer
DNB First

 

If you’re a parent, you already understand that raising kids is not cheap. You probably also know that with soaring tuition costs, providing your child with a college education may be one of your greatest financial challenges. The truth is, however, that most of us don’t fully understand the shocking impact of educational costs until the first tuition bill arrives.

Or maybe you do. Take out a number two pencil and test your knowledge by answering the following question:

According to the College Board, what was the average cost of tuition and fees during the 2014-2015 school year?

a)  $31,000 at a private institution
b)  $9,131 at a public college for in-state residents
c)  $22,958 at a public college for out-of-state-residents
d)  All of the above

If you answered, “d) all of the above,” you’re correct and probably have had a little education of your own in college costs. Of course, that question is not so challenging compared to the most pressing one of all:

How can you finance your child’s education?

The good news is that there are some good options available, which include:

  • Financial Aid/Grants/Scholarships. Even if you think your child may not qualify for Financial Aid, it’s important to at least apply. You can do so by filling out the Free Application for Federal Student Aid or FAFSA (as it’s commonly known) at https://fafsa.ed.gov. There are also a number of grants and scholarships available, so it pays to research them and have your child apply for as many as they can.
  • 529 Plans. Created by Section 529 of the Internal Revenue Code, these college savings plans provide a tax-advantaged way for you to save for your child’s education. With 529 plans, earnings are not subject to federal taxes when used for qualified educational expenses, such as tuition, books, and room and board. 
  • Home equity credit. If you’re a homeowner with equity in your home, you can obtain a home equity line of credit. A home equity line provides the benefit of potential tax savings (consult your tax advisor) and the ability to borrow and repay funds over time.

Of course, the college financing option that’s right for you depends on your unique financial situation. That’s why it’s important to research all the available options, and practice what you preach to your own children: “Do your homework.”