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Private mortgage insurance (PMI) is a reality that is hard to avoid, espcially for first-time home buyers. PMI does not give the borrower any type of homeowners’ insurance coverage but instead protects the lender against loss if the borrower defaults on the loan. The benefit to the borrower is that it enables someone with less cash available for a large downpayment to have greater access to homeownership. The cost is based on the type of mortgage product you secure, the amount you borrow for your house and the amount of your down payment, and is added to your monthly payments. On average the cost runs about 5% annually of your total mortgage amount. Removing PMI Private mortgage insurance should never be permanent. Prior to agreeing to and signing the mortgage loan, ask for a written disclosure from your lender stating when the PMI payments can be removed from the monthly mortgage payments. Once you have paid at least 20% of your loan, it is up to you to contact your lender and ask to have the PMI payments terminated. It is a good idea to make this request by phone and in writing. They most likely will agree to do this if you have made your mortgage payments in a timely manner. To avoid PMI, consider asking your mortgage broker if they will waive private mortgage insurance requirements if you accept a higher interest rate on the mortgage loan. If they do, you may see on average an increase of .75% to 1%, depending on the down payment. Your homeowners coverage should change throughout the years as your income and assets change. Here are some things to consider before you purchase or renew your homeowner’s coverage. The majority of property claims result from partial damage to a home. However, in the event of a total loss you will need to decide whether you would rebuild, or is the ares so depressed that it is not worth rebuilding in that location. In most cases you are far better off rebuilding whether you are going to stay in the new home, or sell it. If you chose to rebuild, would you have enough coverage to rebuild? If you choose to skip rebuilding the home, do you have enough money to pay off any liens as well as pay for removing the debris before you sell the land or put it to other use? Homeowner’s policies limit personal property coverage and have special limits on many types of high value personal property. If you have valuable guns, jewelry, watercraft and trailers, or computers, consider purchasing additional coverage. Does your policy provide replacement cost coverage? Personal property is valued on either a replacement cost or at actual cash value basis. Replacement cost replaces your old damaged or stolen items with new at no extra cost to you. Actual cash value considers the age and condition of the item. Replacement cost coverage doesn’t increase your premiums by much but provides far better coverage. Are my children’s possessions covered while they are away at college? Your homeowner’s policy may provide limited coverage for your college student while he or she is living on campus; however, once your child rents an apartment in his or her own name, consider purchasing a tenant homeowner’s policy. Do you work at home? Your policy may only provide limited coverage for equipment provided by your employer so you can work at home. Additionally, if customers or business associates come to your home on business, you may want additional coverage for this. Is my boat covered? It depends. A small boat like a kayak should be covered under your policy, but for a larger boat you may need extra property and liability coverage through a boat policy. Each company’s coverage differs slightly so it’s important you consult an insurance professional to be sure you get just the right policy for your own circumstances. Many people who formerly owned or rented are moving in with relatives to save costs in this troubled economy. A historicly high percentage of rental properties and single-family homes are ow sitting vacant and awaiting sale or foreclosure. If you own a property that is vacant, you could be have hundreds of thousands of dollars at risk. Vacant houses have higher risks of vandalism, arson, pipes freezing during the winter, and other losses; if a property is unoccupied for a certain length of time, usually 30 to 60 days, your insurance coverage may cease or offer only limited coverage in the event of a loss. To determine if you should update your insurance information with your agent, ask yourself these questions: ?Do you own a rental property that you can’t keep occupied? If you answered “yes” to any of these questions and haven’t updated your status recently, it may be time to do so. Should you suffer a loss, the status of your property when you completed your insurance application greatly affects your coverage. For example, if your home was occupied when you purchased your coverage, your insurance carrier will assume that it is still occupied. If, after a loss, an adjuster determines the house was unoccupied, your claim may be denied or significant portions of coverage may be declined. Why run the risk? Contact your insurance professional and correct outdated information. Before you embark on your home search, your first consideration should be how much you can afford to pay. You need to establish what your monthly payments should be and that means understanding how your usable income is calculated. The starting point of any income calculation begins with gross, or before-tax, income. Regardless of what you take home each month, your lender will always want to know your salary before any withholdings. Debt-to-Income Ratio After your gross income is calculated, monthly debt is subtracted. This debt includes rent or mortgage payments, car payments, credit card debt, student loans and other kinds of loans. Many people ask if debt includes other monthly expenses such as utility bills or gas for the car, and the answer is no – these are not included in your ratios. While your mortgage professional will give you the exact numbers you will use to qualify, a good rule of thumb is to keep your payments between 40% and 45% of your gross income, less expenses. For example, if your gross income is $3,000 a month and you have car payments and credit card balances for a total debt of $500 a month, your usable income is $3,000 minus $500, or $2,500 a month. Taking $2,500 x 40% and 45%, you arrive at a total mortgage payment between $1,000 and $1,125 per month. If you keep these figures front and center during your home search, you won’t fall for a home that’s beyond your means. If you have to go in the ice and snow, remember that caution is key. Allow at least double or triple the normal travel time, and leave a lot of room between yourself and the car in front of you. Maximize visibility so you can see and be seen! Clear off your windows and also be sure to clear off your lights and reflectors so others can see you. Be aware that if your car has not warmed up before driving, an open hot coffee, or a stampede of heavy breathing sledders can create a lot of moisture in the air in the interior which can fog up, or freeze to the interior of the windows. If you are stuck in the snow the use of traction mats, sand, cat litter, salt or another abrasive material may assist with traction. Try to start out with you wheels pointed straight to reduce rolling resistance and use as little power as possible to keep the wheels from spinning. Spinning wheels tend to did deeper ruts into the snow. Normal following distance on dry pavement is recommended to be three to four seconds. In Ice and Snow, you should increase this to eight to ten seconds or more depending on how slippery conditions are and the amount of speed. On multiple lane roads, stay in the lane that has been most recently cleared and keep lane changes to a minimum as surface changes increase the chance of traction loss. If your wheels start to spin, let up lightly on the accelerator until traction returns. For more information, contact us for a How to Drive on Ice and Snow pamphlet. Have you seen the ads for an online insurance quote that makes your life simple? Ads that tout “Apply once and recieve quotes from all the major carriers” and once you hit the submit button your phone is ringing off the hook while your email box fills with messages. Annoying right!? Suddenly you are passing your information out to 12 different unknown individuals who want the whole run down on the drivers, cars, home factors as well as your social security number and drivers license information. And why are you shopping for a new insurance company anyway? Probably because your insurance rates have skyrocketed. Whether its your Business owners policy (BOP), commercial liability, commercial auto, workmans comp, auto, home, renters, condo… you name it. Insurance carriers have a habit of lowering and then raising rates over a few years as they balance out their target markets. This cycling of rates means that every few years you’ll probably find rates cheaper somewhere else. That is where the insurance broker model comes into play. An insurance broker has access to a number of carriers and can help shop your insurance to find you the right coverage at the fair price. When rates go up at one carrier, you can easily move to another one that is targeting your profile. Shopping carriers, without having to shop your information around is a much safer way to buy! The health insurance industry is going through big changes and carriers are adapting as fast as they can. One major change is the cost of employer provided health insurance. As costs rise, many individuals are turning to individual insurance plans in order to find coverage that fits the budget. When searching for an individual health insurance plan you will find three main options.
Traditional CoPay Plans. The traditional copay plan is the plan that most people are familiar with as the coverage they have received through their employer. You pay a higher premium, but in return you have coverage for routine health expenses such as doctor visits, preventative care, and prescriptions. There are co-pays and co-insurance expenses. For example you may pay $35 for a office visit to your family doctor as a co-pay. With co-insurance, you can choose a percentage of the bill that you are willing to pay for items such as hospital bills or outpatient testing. A plan with 20/80 coverage means you pay 20% of the bill and the insurance company pays 80% of the bill. High Deductible Plans High deductible health insurance programs are for the person who is willing to take care of their own routine health care expenses but still wants coverage in case a major medical issue occurs. In return, the high deductible offers a lower premium. You choose your deductible level which might range from $1500 to $10,000 and then you will be responsible for all medical expenses up to that deductible level. Once you have reached that deductible level, then the insurance will start kicking in to pay the rest of your medical bills, up to the policy maximum. With any expenses you do incur below the deductible, you are still getting the benefit of being charged by the provider at the insurance companies negotiated rates. This is geared toward the healthy client who hopes to never use the insurance and plans to always stay below the deductible amount. However, if disaster ever strikes, there is coverage available to meet major medical expenses. Health Savings Account Plans Health Savings Account Plans combine the low cost of the high deductible plan with the tax advantages of a health savings account. You choose a deductible just like in the high deductible plan, and then place additional money in the health savings account which may pay interest and grows tax free year after year until you need it. You use this money in the HSA (Health Savings Account) to pay for your out of pocket medical expenses. You probably already know what type of vehicle fits your needs, now you need to decide which vehicle fits your budget. Most drivers think of the basics such as purchase price, taxes and registration fees when purchasing a new vehicle, but don’t forget that other monthly expense: insurance. The expense of insurance has a huge impact on the affordability of the vehicle you are buying. Variables such as the cost of the vehicle, safety rating, horsepower to weight ratio, top speed, reliability, repair costs, and liklihood of theft all come into play when creating insurance premiums. An insurance premium of $50 per month would affect the budget a whole lot better than a $250 per month premium. Know before you buy. Research the vehicle safety reviews, crash test and accident data. You can find a ton of information online at the Insurance Institute for Highway Safety at http://www.iihs.org/ . Also, consider the environment where you will be driving. In St. Louis we have weather that reaches over 100 degrees in the summer and below zero with plenty of snowfall in the winter. St. Louis also receives an average of 38 inches of rain per year. Once you have the vehicle narrowed down to a few models, call your insurance agent. The agent can easily plug in the vehicle to give you price ranges for your selected coverage. The model trim option can have a significant impact on the insurance cost. Important questions to ask include: which safety features provide discounts, are there anti-theft discounts, do you cover custom equipment and aftermarket add-ons? If your agent is unwilling or unable to help with these questions, it’s time to find a new agent. You need an agent that is willing to take the time to help you find the combination of coverage, service and price that fits your individual needs. Make sure you are getting the best value for your hard earned money. Saint Louis has an excellent infrastructure and we are fortunate to have relatively good traffic flow. There are backups during the morning and evening rush hours, but we certainly don’t see month long traffic jams like those recently reported in China. To keep informed on Saint Louis traffic conditions, within St. Louis City or County, St. Charles, Jefferson, or Franklin counties, you can dial 511 to reach the Missouri Department of Transportation (MoDOT) information system for interstates and major travel routes. 511 is a free voice activated phone service for travelers in the St. Louis region that also works with MoDOT’s Gateway Guide, traffic.com, and wireless telecommunication companies serving the Saint Louis area. You can even set up personalized email or text messages with information on your commute routes. 511 provides a Jam Factor, a rating of 1 (low) to 10 (road closed) on how congested the road is at the call time. A Jam factor of 7 indicated the road is traveling at half the normal speed. You can also obtain information on traffic slowing incidents, estimated drive times, and delays. If you are having trouble connecting to 511, or are outside the service area, you can also call 877-478-5511. If you are at your computer, you can go online for a list of roads that are monitored by 511. |
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