Wisdom of Rich Dad

It is possible to get a HELOC that doesn’t charge any application or closing fees because HELOCs were primarily designed to work more like credit cards, except of course, that you would need to put up your home equity as collateral.

First, there are the application and closing costs, then there’s the interest on the amount you draw from the line, plus other expenses down the line. Here are the most common fees tied to a home equity line of credit:

1. Application Fee. This is a standard fee that lenders charge, often just to pick out the serious buyers from those who are merely shopping around. It is also therefore not uncommon for banks or creditors to refund this fee upon closing of the loan.
2. Appraisal Fee. It is important for lenders to appraise the value of a property to determine the loan amount a potential borrower is entitled to. However, many lenders are willing to absorb the cost of having your home appraised, or utilize the automated valuation model (AVM) which is a computerized estimate of a property’s value.
3. Closing Costs. Closing fees include title, escrow, notary, recording and payoff fees. As with other charges levied on a borrower, the bank can choose to waive these costs altogether, or charge a fixed, lower amount.
4. Annual Maintenance Fee. Just like a regular credit card, maintenance fees for a HELOC are charged every year, regardless of whether the line has been used or not. The usual cost is about $50 to $100 per annum.
5. Account Maintenance or Check Writing Fees. For homeowners who are assigned a checking account to which loan proceeds are credited when withdrawals are made, it’s important to be aware of any fees that come with the account or with check issuances. Some banks do charge these but there are also those that don’t.
6. Non-Usage Charges. While HELOCs can be a practical “reserve” cash source used only when an emergency or dire need arises, this could also cost even if unused. Some lenders charge borrowers who don’t utilize their available HELOC.
7. Penalty for Early Payment. You never get charged if you pay your credit card in full, do you? The same should be true if you choose to fully settle your HELOC balance even before the repayment period is up.
8. Interest. The interest on a HELOC is by far, the biggest expense associated with the home equity credit loan. Still, while paying interest is necessary, there are certain terms that you can negotiate with your financial institution that can save you more than a few dollars over the duration of your HELOC:

• • Lower APR. The effective interest rate should not be that far off from the prime rate on which the HELOC interests are based on. Choose a bank that offers lower add-on margins. It’s possible for those who have excellent credit to be given APRs equal to prime rates, or with 0% margin.
  • Less frequent interest repricing. You can better manage your payments if the interest rate changes are less frequent. Look for a creditor that is able to offer quarterly, not monthly, rate changes.
  • Lifetime cap on interest rates. Because HELOC rates are usually variable unlike the fixed rate of a conventional home equity loan, there is always the risk that your rate could suddenly jack up to such high levels. Shop for a HELOC that clearly states a worse case scenario. That way, you would always have an idea of the maximum rate you would need to pay.
  • Lower Introductory Rate. Also called “teaser” rates, most banks offer an introductory rate that’s significantly lower than the usual APR. While going for the lowest possible rate would be the most obvious option, consider also the interest rate that will be applicable once the introductory period is up.

As you can see, the list of possible costs that could come with a HELOC is lengthy. But you don’t have to be burdened with all these fees. What you need is a good idea of which costs are necessary, and which can be avoided. Do your research in advance and carefully evaluate all the risks and the costs involved before making your decision.

Every day, tens of thousands of individuals up to their necks in debt emotionally make the wrong decision. In pure desperation, they feel as though they can’t take another month of the debt. Throwing away their biggest ally (brutal rationality), they decide to “just do something.”

“Just do something” is the worst financial advice you can take. Every step of your financial journey should be founded on cautious, rational analysis. The situation won’t change regardless of how we feel about it. Emotions don’t change reality.

Listed below are a collection of actions that many seemingly overwhelmed individuals take. Make sure to tread carefully — a slip up can literally set you back years.  Below are some of the top “debt reduction” mistakes often made:

1. Getting “Debt Consolidation” Loans.

Debt consolidation is extremely popular in a lot of circles for a reason: most people who encourage you to “consolidate” your debt will make money if you do. Basically, a debt consolidation is when someone agrees to “consolidate” all of your debt into a new debt with lower interest rates. The only catch is that they’ll force you to stay in debt longer, and you’ll pay more money in the long run. So much for helpful advice.

The only time a debt consolidation is a “good” choice is if you simply cannot pay current interest rates. This is rarely, rarely, rarely ever true. Chances are, there’s a better way to pay the payments than a consolidation.

Getting a debt consolidation is basically a level of surrender, meaning you’ll be paying more money over a longer period of time. Remember, debt consolidation is also a type of loan — in other words, you’re literally fighting fire with gasoline. Not a good idea.

2. Trying “Debt Elimination” Scams.

If someone offers to “eliminate” your debt without analyzing your situation, just run away. It’s a scam, and they are literally out to get you. There really isn’t anything more to say. The hard truth is that there’s no way to “eliminate” your debt without finding ways to make more or save more money.

3. Closing Credit Card Accounts.

One of the biggest mistakes sounds like it makes sense. Closing a credit account sounds like one is taking control, telling the debtors “no more debt” and is taking a step in the right direction. Unfortunately, it can hurt your credit rating.

By closing a credit account, creditors see that you’re moving away from debt and can’t handle the “temptation” — bad sign. If you feel the need to live without credit, just shred your cards — but keep the accounts open for the sake of your credit score.

4. Making Only Minimum Payments.

Minimum payments are your enemy. The entire reason companies are willing to loan you money is that they’ll be making more. They’re literally selling money for more than it’s worth. The way they make money is through you not paying off your debt as soon as you get it.

There’s also a reason the minimum-payment requirement is so low: the lower it is the longer you’ll be in debt. The longer you’ll be in debt, the more they can charge you. Don’t pay the minimum — make up your own minimum and pay that instead. Shoot for triple the minimum payment, at the very least. Otherwise, you’ll be in debt prison for years longer.

Conclusion

Financial planning is the crux of financial security and freedom. If you want to find a comfortable lifestyle, then it can’t be overstated how much you need to master the basics of financial planning. Without a clear, concise plan for how you are going to manage your money, your chances are slim of ever achieving your goals.

don’t have time to analyze a bunch of properties, I’m just too busy…”. Do you really lack the time or maybe you are just not willing to make time?

How about the money for down payment, repairs, etc. That loser inside of you says “You don’t have enough money!” but have you really tried to manage your money and see where all your money is going? Have you really taken steps to ensure that you are consistently building your financial freedom account (FFA) along with the other “money jars” needed to effectively manage your money?

You want to start to do something worthwhile but then again, that loser inside of you says “Stop… let’s wait until the timing is just right” and all that crap. It’s just like waiting for all the stop lights on the road to turn green before starting to move. Good luck!

That voice of the loser inside may also say “Why should you even bother doing something that’s way out of your comfort zone…” and instead convinces you to just endure a comfortable life which is often synonymous to a tolerable but often meaningless existence. Maybe it’s time you realized that no one became ultra successful by living a comfortable life. If that was true then those millions of people who do nothing but watch TV all day would have become rich and successful by now. Ouch!

Focus on the winner inside of you!
Maybe we should all stop listening to the loser inside of us that never runs out of excuses and holds us back from becoming successful real estate investors! Don’t you think it’s about time that we focused on listening to the voice inside of us who actually says how we can we make things work, the winner inside of us?

It’s that winner inside of us that would realize that one needs to make time instead of complaining that we don’t have enough time for real estate investing. The winner inside of us discerns what things are truly important and worth doing and helps us find the time we need no matter how “busy” we are and then this allows us to consistently look at properties and analyze them as it would really take about a hundred properties before finding that one gem of a deal.

It’s also that winner inside of us that somehow finds creative ways of financing those great real estate deals that we may find even if the loser inside us says we don’t have enough money.

Lastly, that same winner inside of us will also coax  us out of our comfort zones and make things happen to achieve financial freedom in spite of a little discomfort that we may experience along the way.

 No more excuses please!

Robet Kiyosaki (Rich Dad, Poor Dad) is interviewed by NewsMax.tv and explains how investors can protect themselves from inflation.  Silver is a bargain today he mentions.  He reminds us who is really controlling the country too and it isn’t Obama.

What is the first thing that comes to mind when we talk about “Investing”?

I believe to most it simply means money making money! Doesn’t that sounds exciting and attractive.

However, it is time for the reality check, not all investments make money. In fact, many investments lose money.

So, it is quite amazing that since investments lose most of the time, shouldn’t the first thing that comes to mind when mentioning “investing” be losing money.

That is why, the first step before even considering investing is to determine how willing you are to accept loses and still sleep well at night. No point to start investing only to find yourself affecting your physical and mental health when the investment takes a turn for the worse. You will be better off placing your investment in a fixed deposit and look for other more suitable ways to generate wealth.

The next step is the amount you can afford to lose. Set aside an emergency fund for a rainy day, the rule of thumb is about 6 months of your income, this amount must be kept in a liquid asset like cash, do not invest it in illiquid assets like property.

For the remainder you wish to use to invest, determine the amount you intend to lose the use of it for a period suitable of that investment asset. For example, if you have any intention to use it for short term goals (within 3 years) like purchasing a car or your wedding, do not go into stocks/shares and risk having to liquidate at a loss during a bear market when you urgently need the funds.

Instead of the common advice of risk / reward, think more holistically of risk / loss / reward. For example, if you invest $10, it is often advertised only the good side, a probability of 50% to make $5 profit. However, the picture is not complete. You also need to consider the risk of 50% chance to lose $10! Would you still take this investment? Definitely NO! Even the casino gives better odds than this. This is similar to the deal those who invested in the lehman related minibonds got.

To summarize, think of all your potential losses before jumping on the investment bandwagon.

1. Loss of sleep due to losses
2. Loss of use in an emergency
3. Loss of other opportunities it could be used for
4. Loss vs Reward vs Risk

This may be a “wet blanket” article, but it is better to be prepared than to learn it the hard way after you started investing. Focusing on losses and practicing proper money managing techniques like stop losses and good exit strategies, the winnings will subsequently follow.

Happy investing by analyzing the potential losses first.