Monday, August 20, 2007

What Should I do?

I got this question in today and thought I would share it with you.

Q: I recently within the last two year purchased a home but I would like to refi ASAP any lenders that you recommend to refi with also.
I have invested a little bit of money in a timeshare that I have purchase in Las Vegas. (Was this a good investment?)
I also have never invested in the market what would you suggest a good starting point would be to find out which stocks to purchases.
Thank you for your time and assistance.

A: Good news you’re doing something proactive to make a future for yourself and your family financially this is more than most people accomplish if ever. Many times people start late in life and this will undoubtedly cause financial hardships. You are doing the right thing by thinking about and taking action now.

First the house thing, I think you will be okay to wait on your refinance till closer to the end of the year. If you play your cards right you will see some appreciation or stabilization of home prices in your area. This will make financing your home easier. Also you have some time to make sure you have a really strong debt to income ration, so any unneeded expenses work to bring those down and your fico score will go up allowing you to get the best possible interest rate. Don’t forget you can buy your home interest rate down by asking to pay extra points at closing to buy the rate down. Sometimes buying the rate down is a better option if you plan to stay in your home longer than three years. I would look for a 30 year fixed loan and use the extra principal payment as a way to pay your loan off early if you so choose.

I do believe with the 3.5 billion today and the some 17 billion the fed injected into our economy over the last week and the fact that they lowered the overnight discount rate we will see them lean towards lower the interest rate in September and maybe more by the end of the year, there is speculation out there that there could in-fact be as much as a full basis point reduction. If this is the case which I do believe you will see lower rates by years end in which to refinance your existing home loan.

As for lenders the major banks will probably see the cash from the fed reserve before anyone else, Bank of America may be a good choice.

On your time share, I am in central Florida and we certainly have our share of time shares. Some are good and some are bad I personally don’t have one my sister does. She loves hers. You have to look at what your monthly fees are in addition to your payment etc or cost of using your money. Some sites hit you for pretty stiff increases in your fees and these need to be taken into account. The bottom line comes down to how much cash have you outlaid and what is your return on that cash that will determine if it is a good investment or not.

That is one reason I say pay off your high interest rate credit cards first if you have any because you don’t want to be paying 18-20% on your credit cards and getting less on cash you have. The only thing you have to remember is can you make more return on your cash than you can borrow. If you have 20k sitting in a CD at 2% and you owe 20k on your mortgage at say 8% then you should pay off your loan, if you were making 18% on your cash in mutual funds then you are technically borrowing the banks money at 8% and netting 10-12% profit on the spread. Invest wisely.

Finally on Investing for new comers to the market place start out learning Mutual funds, they provide a better avenue for diversification than just buying stocks, My personal 401k was up over 17.88% this year, all mutual funds.

I will send you a copy of my software PremiereTrade Ai this will give you a chance to utilize all the tools and see for your self how easy it is to start trading mutual funds etc.

Happy Investing!

James Dicks

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