Rental:Shaky but moving forward

Tenants, in the residential rental, seem to be regular late payers. How they live this way, is beyond me. I would go crazy paying my bills late.

Not only that, they are paying me late fees. Late fees that could cover their electric bill in size. They will never get ahead, if they don't rectify this soon. Paying extra is just putting another block in front of them towards success.

On a good note, I am receiving the rents. My financials say this will be the most profitable year since I acquired this property. As of today, I have 1 month in advance paid on the mortgage and money left in the bank. Plus, I took about $85 from the extra late fees and paid down the mortgage a bit more.

That measly $84.46 saves me 1¢ a day in interest expense.

Add that $84.46 to the $168.09 I prepaid earlier, and I am now saving:

• 4¢ a day
• $1.29 a month
• $15.69 a year

Not much, but when you figure out this is all a bonus to my everyday cash flow, it sure is SWEET!

I'm taking the rest of the extra fees and using them to fund a business savings at ING, if anyone emails me a link. :-) Hoping to build up enough to cover annual bills, without my personal funds and keeping it separate. Too much cash movement is making me crazy.

One perk from tenant late fees

A couple dollars were received in late fees from the tenants. I found myself wonder what to do with this un-budgeted money. I could:

• reimburse myself for cash I pushed into the property in vacant times.
• let it ride as a cushion in the account, which is a money market account, paying nearly nothing anymore.
• or, use it for property taxes due the beginning of the month.

I already have the dollars for taxes in savings at HSBC & ING. I also made it without the cash I plopped into the company so far. And the thought of riding the dough on an almost invisible interest rate makes me crazy.

So, this morning I left the NSF fee in there, making it technically no effect on me. And I used all but $3 dollars to pay extra on the principal of the mortgage. Rounding my loan to even zero's in the tens, ones and cents. With this being a commercial loan at 6.25%, I really feel like I am gaining something for my stress from this.

The payment I made was for $168.09. This saves me 2.9¢ in interest expense every day. SWEET! That $10.59 a year in savings, may not be much, but to me it is a step towards freedom. Without a pinch on the pocketbook. Since, my loans and bills were covered and their late fees amounted to extra income for the company.

So where was I?

Okay, I probably took a tiny dip in my credit score, by closing 2 accounts. Not that I was worrying much, no plans for taking on a new mortgage, at the time. And besides, my score is on the high side, so no worries.

Then I scheduled to meet with a realtor, to rid myself of the residential rental. Can you say emotional freedom? This is my most satisfying step.

Followed by the finding of a home that could be our final home. Who can say why things happen at certain times. Sometimes you just have to roll with the punches. Or as my baby would say "This is how we roll!"

We arrive home from the viewing of our future home. The wheels are turning, faster then a hamster in a cage. I took pictures, for reference while there. So, DH was learning how to get them on the laptop. While I went and did what I do best, cook, bake and create. I made that Chantilly Salad and attemted to make my own corn dogs that Becoming & Staying Debt Free talked about. They were both fabulous.

Of course, every single one of our kids was gone last night. What in the world was I going to do with these corn dogs. Didn't want to waste them.

Well, I loaded them up and headed to one of my neighbors. I needed a break from dreaming and scheme-ing to get my new home.

Funny thing is though. This particular neighbor just had another baby. Their family is growing. I have often shared with them that we will be downsizing our home. And it is no secret that they love our home. So, it wasn't a total surprise when they asked if we would be interested in selling to them.

Well, if that isn't God working for us, what the heck is?

Which prompted a good sized conversation and I feel promise in the air. How cool would it be to sell another home, without a realtor sucking the profits away. Could I get that lucky - twice?

They actually have someone interested in their house, so this could be something. We could both win selling with out Realtors. Of course, I would share my dollars saved with them. Plus, I have offered to help assist them with some creative structuring.

Here is a really fabulous point. When and if these moves took place, we would be completely mortgage free. Not that we wouldn't have a mortgage. If they opt to have us hold paper on the property, we would have enough in receivables to cover our current mortgages and the new house mortgage, just from the 2 paper mortgages. Plus, a steady income stream of free cash.

Even if they do NOT use us for a mortgage company, we will pay off both our current mortgages, have a decent down payment on the next house and the 1 paper mortgage we hold would be valued higher then our mortgage - plus would pay for it 100% each month. Not only that leaving us extra cash flow. Where currently we pay about $422 or so after the payment is received.

Not holding my breath, but optimistic about the possibilities.

A high better then drugs!

Yesterday was my first payment on the residential rental, since I completed the rate adjustment for the mortgages at our bank. The new rate at just a measly .75% less, is making a huge difference here. Of course, that means the mortgage is threw the roof. :-)

I've already saved enough in interest, the first week to cover 1/2 of the fee to adjust this loan. SWEET!

I did NOT adjust this payment to the new smaller one. I had already budgeted, so to speak, the old payment amount and I like love the high I got from seeing my principal balance get slammed!

I will probably not keep this larger payment up, unless I rent the other side of the building. Why prepay, when I personally am footing the bill? Just doesn't work for me.

I'm sure I will enjoy the new payment on the commercial property as well. It just won't have as much sparkle as this one. The decrease, although a larger one percent wise, is for a smaller amount of loan value. I also, will most like NOT prepay the extra from the payment adjustment on this loan.

Instead, with my Paper set to mature on my last home in 2010, I will use these dollars to prepay that loan. My goal here is to shrink this balance enough, to avoid a refinance on my part, if the mortgagee would like to re-up for another 5 years. Which I am hoping they will. If not, it doesn't really matter. :-)

I'm Impatient!!

Yesterday, we met with our banker and signed the documents for the rate adjustments. Due to the size of the 2 loans, this is quite a sum to be saved monthly. After re-couping our $100 modification costs, I can't wait to see our balances go down faster then ever!!!

Although, it will only be a quicker a payoff on the oldest note, it will mean substantial savings on the newer one for years to come.

I have logged into my online banking, like a zillion times (slight exaggeration). I wish the changes showed automatically. Although, they will be effective from yesterday, I still would like to see them with my own eyes.

I guess bankers are like turtles.

Spending $200 Today

All the paperwork is completed and I am heading to the bank today to sign our loan adjustments. Before the next month's accrual of interest is over, our rate reduction will make this a no cost adjustment.

The commercial loan, will see the smallest reduction, since the loan is dropping below 6 figures with the June Payment (which is actually July - I pay everything a month in advance). This is going to be a huge mile stone for us.

By adjusting these loans there will be no maturity date change, automatically. Yet, if things maintain as they are, I will maintain my prior payment amount. Making our monthly principal payments more. :-) Without this we have 106 payments to go.

Extra payments will be determined by funds available after college. I would hate to finance more at higher rates. Seems foolish.

The other mortgage adjusted is for the residential rental. With the way it is going, I may enjoy the smaller payments - we will see.

5.875% on a 30 Year Fixed

There is a bank locally (well not locally, but close) in DeKalb, Illinois - Castle Bank. I see their new shiny banks everywhere. Evidently, they are making money. I can think of 3 locations in the DeKalb area without a sweat.

For my jollies, and hopes of locking in an even cheaper mortgage rate - I like to snoop the local banks and see what they have available. I hate when I try to do this and they have nothing online - I do not want to call the banks. I'm all for easy and fast.

I can, hopefully if my brain triggers correctly, calculate my own time to re-finance.

I was surprised to see the 30 year dip below 6% again. Not that the 5.875% is all that great, especially when you glance to the right and see they are looking for points.

Maybe the only silver lining to this whole situation, will come for the folks who have held it together and lock in an even cheaper mortgage rate.

Time will tell.

Points Are a No Brainer

Or at least I thought so. Am I missing something? Why would anyone pay points on their mortgage?

A couple days ago, a friend asked me to fax some papers for her. She is divorced and finally refinancing into a mortgage of her own. The house is hers and this is only right. She has been making the payments since the divorce alone.

These pages were to lock in a rate. Typical, I think this is standard for most of us. She asked me to take a peek and make sure everything was up to snuff. I didn't like it, I hate looking into friends stuff. I always feel like I'm invading a privacy.

But of course I peeked - she asked.

Two numbers jumped out at me the rate and the points. I know for a fact her credit is awesome - do to other discussions and prior interactions. I'm not 100% on the score, but I would guess high 6's to mid-7's.

While she was at my side, I asked if we could quickly jump online and check some interest rates.

She is refinancing $170k for 30 years. Her current mortgage is a variable and this is a good move for her. She would not be able to manage a 15 year mortgage with her current financial position.

The rate on the documents is 6.25%. I was thinking a bit high and a quick jump on to the local bank sites says it was close, but could be better. The rates locally are 6% for a 30 year fixed, with a 680 credit score.

Then I see that they are charging her 1/2 point at closing. Why? She says they are "giving her a rate reduction of .125%" for this one time fee.

I explained to her, because I know her intentions are to be moved into a smaller more affordable home in the next year or so - that this was not a good deal. Of course, I would never pay points - under any circumstances.

I showed her on paper that she will be paying $850 on closing - increasing her costs.

She said the mortgage guy, says she will save $30 a month with this.

I don't think so - I've never seen someone recover points in under 2 years. Has anyone else? Besides, his rates are higher, then other banks in the area - even if only by .125%

Anyway, when I left her I gave her some questions to ask. Okay, I pretty much asked her to question every line on her closing doc's. This refi is going to cost her thousands. Which is strange to me too. I think the most I have ever paid was between $1k and $1.5k.

Well, she did call him. And I think he confused her. When she told me the story, I saw her frustration. She said "I don't care - whatever, as long as it is done."

Oh my, I can't believe the words. She is so being ripped off.

Show Me The Money

I saw that title and I clicked without hesitation. Those words strum up all kinds of memories. Jerry McGuire made them famous. Along with the word "you had me at hello".

When I read, see or hear the word "Show Me The Money" they got me at hello.

Those words led me to a site from Canada that helps with what they call - fast, free mortgage quotes. I thought I would just mention them here in case you were contemplating a Remortgage or refinance (in our terms) with the current state of the economy.

Since these folks don't check credit for a snoop, it can't hurt to see if a better deal awaits.

Next week, one of my to do's is to contact my banker and see if it would be beneficial to refinance any of our mortgages.

Of course, if the rates are low enough, I want no or low fees. And if a cost is involved, I want it to zero out in 1/2 to 3/4 of a year. So, I reap immediate benefits in the current year.

I just don't want to leave any money on the table.

One issue off my back

I logged into my bank account this morning and was delighted to see that CitiMortgage did draft my account for my mortgage. Thank goodness. I have been worried sick about my mortgage being paid. This is my most important bill, as I believe it should be for everyone.

Funny how I worry crazy about my mortgage and yet there are folks I know, who shall remain nameless, that will forget the mortgage payment when money gets tight. Their logic is to pay multiple bills and have only one collection call - nuts in my view.

Home, health, food, utilities (not cable or Internet) and then work outwards from there. It seems so simple - so why doesn't everyone see it?

Rounding The Principal Down

My main focus is to pay off our line of credit, because it is the highest interest rate. Yet, I can't stop myself from doing little things to help us in the long run. Little things that can't be reversed and once they are done, they are done. I guess our change in income, just makes me feel like I can accomplish more. I have reverted to an old habit of mine. I like to call it rounding to make even numbers.

It's a rather simple idea and even when money is tight, it has shown to be manageable. Back in the day of only having a mortgage I would make my monthly payment and see my new principal balance, then I would initiate a principal only payment to round the balance down to the next $100 level.

Yesterday, marked my 3 month return to this plan. The only difference is, I am not doing this to my main mortgage - because of the super low interest rate of 5.625%. This loan will ride until the others are down.

My first victim (mortgage loan) is the 2nd I have that is really from my first home. It has an interest rate of 6.25% until February 2010. Although, I would love to see this loan disappear for the moral boost that would come, I'm actually hoping it doesn't. See, if it disappears, that means the paper mortgage I am holding has disappeared and this is easy money and huge help on our bottom line. Just looking at principle paid to me on this note, this month of $282.36 - I have turned around and paid down my personal mortgages by $521.67. So each and every month I am getting closer to a ZERO Mortgage. The longer they finance through me, the faster this will be acheived.

Anyway, I have made 3 extra "rounding out payments" to the above loan in the last 3 months.

1. $42.33
2. $88.12
3. $74.82

With this system, I am never paying over $100 :)

With a total of $205.27 paid extra, this will lower my balance due on 2/2010 by $240.94. Okay, it is only earning me an extra $36.93 for these last 2 1/2 years or so, but that is a guaranteed $36.93. Growing at 6.25%, unlike the 5.05% at HSBC or the 4.5% at ING, it is moving faster. That earned money will not be taxed, unlike the HSBC and ING dollars.

You could say "your losing the tax deduction." I would respond "I don't care. Tax deductions only come when you spend money - I don't want to spend."

Anyone else rounding?

*spelling corrections - thanks anonymous

Just what is my mortgage?

When we first ventured into purchasing our foreclosed home and selling my first home carrying back the mortgage, it was a little nerve racking. I mean, a home is your was my largest asset. Most roll their hard earned equity into the next house. Not me though, I had bigger ideas for how my equity should work for me and where an extra income stream could come from it.

On the day we rolled everything into action, meaning wake up owning 2 house with 2 mortgages and 1 equity line and end the day with 1 house, 2 mortgages, 1 equity line (didn't make them go away), and one paper mortgage receivable-- we had a "clear everything out" mortgage of $95,965.41.

To me the CLEAR EVERYTHING OUT mortgage is:

• The mortgagee's pay off their mortgage with us, by refinancing with a brick or mortar.
• We take the dollars from the payoff and then paydown our mortgages: 1st - equity line, 2nd - sold home loan, 3rd our current home mortgage

Creating a balance due or our actual Outstanding Mortgage Balance.

So, how has our mortgage moved:

On signing day 3/2005 - $95,965.41

12/31/05 - $87,101.03

12/31/06 - $76,089.86

6/21/07 - $75,258.39

If we can pay off and eliminate the line by year end and remain moving forward on the other loans, we could end this year with a mortgage balance of $58,678.47. I'm pretty sure, barring any major disasters that all mortgages will move as planned - the variable is the line.

I hate variables. This pain in my side, must be eliminated by 12/31/07. Need a plan to execute.

Where our money has gone so far

I love Quicken, just wish I knew how to copy some of the graphs and reports on to blogger. I have tried, pretty much everything in my knowledge base and have crashed and burned each and every time. Too bad, cause my Quicken is pretty extensive and detailed. I have been using Quicken products for my personal use since 1996.

Anyway, today I thought I would give you a tiny glimpse (manually) of where our dollars go.

So far, year to date, this is where our money goes:

• Mortgage Interest 30.86%
• Tax 13.09%
• Education 11.18%
• Medical 8.127%
• Utilities 6.596%
• Legal Fees 6.087%
• Tax Spouse(Me) 5.696%
• Dues & Subscriptions 5.097%
• Insurance 4.722%
• Charity 4.383%

The rest are minuscule in comparison. I don't know if you noticed or not, but groceries doesn't even make the top ranks, which amazes me cause I spend big amounts to feed us all.

Dues and Subscriptions will move out of the top ranks as the year goes on. This is only up there due to when we pay our HOA dues (home owners association). In the next two months, this account will drop off as all others move upward. Property taxes will also come up to the top.

I guess what this shows is that the mortgage owners love me and my money. 30.86% just on the interest. Ouch!

Better rate on an interest only mortgage?

You know, I have no idea why anyone would want an interest only mortgage. I know many people like the flexibility they can give. But to me, this type of financing is just a tiny step above renting. If the market doesn't go up, and why would anyone want to wager this, you are gaining nothing.

There is only 1 way I would ever obtain an interest only mortgage and that would be if the interest rate was lower than other options. Although, I would still not sign until I knew that I would be free, without penalty, to pay down the balance early. If I would be free of any kind of surprises, that means I would also need an attorney for the financing - to catch what I miss.

If all was well, and there were no hidden catches, I would sign on to save interest. Of course, I would then calculate what my payment would be on a traditional 30 year or 15 year fixed mortgage and I would pay the difference in additional principle monthly. (Fixed Mortgage Payment - Interest Only Payment = Extra Principle Monthly Payment).

I don't care what the so called experts say. I don't care to wait for my equity to grow or be devoured by the market. I may be a control freak, but I determine where my money is going. I determine how I build my growth. I decide how much interest, if any, I pay to whom. Locking in an interest payment is just wrong to me.

Maybe only interesting to me?

I have a report, that I created and save in Quicken. I would love to clip a copy here, but again, I have no idea how. :-(

This is a "user" specific report and may only be good for me, but it is what I affectionately call my "Motivational Report". You see when you live without a budget and only on the money in, send it all back out life style you end up feeling deprived. So one way I try to curb the deprivation feelings is by looking at the numbers. Seeing my progress and patting myself on the back.

This Motivational Report is called Home Sale/Mortgage in my system. It is a compilation of all loans on my residence for my current home and sold home. Including the Contract Sale balance from my old home. Resulting in the bottom line a value, the amount I would owe on my mortgage should the buyers of my old home pay off their loan today.

When the sale took place I had an effective mortgage amount of $95,965.41. This was about $20k more than my last homes loan outstanding on that date. Which wasn't terrible. The new home is valued about 90k more and the extra dollars came from rehabbing this foreclosed property. So, I was winning out on day one in my eyes and any ones with a calculator.

By the year end of 2005, we were still with big balance line of credit. Since this was where the rehab dollars came from. So, our mortgage slid only $8864.38 or about $738 a month. This is not terrible, but don't we always dream to be mortgage free?

Last year, we increased the pay down, but not by our efforts, by the effects of a mortgage decline. Creating a bit more dollars moving to principle than interest. The year end pay down amount was $9011.17 or about $750 a month.

Now, the above is not new or special, just a debtor paying on debts. No fancy steps, outside of the fact we sold our home on contract. Which is an excellent decision, in my opinion. As long as you find a good buyer. I have had no hassles in the 2 years of sale so far.

So, I go to view my report, as usual, it is an addiction. I adjust the dates to 3/31/07, for I have dollars being transferred from the line to pay bills before month end and I want the numbers accurate. And wow!!! We are making a bit of progress so far this year. Our current mortgage is $65,896.21, that is a $10,193.65 difference or $3397.88 per month.

I know with the spending season ahead of us, this will not be the case for year end. The numbers will start to balance out between May and September. When we will pay property taxes, pay 2 colleges, purchase 4 new tires for the Diva's upcoming car purchase (we do for all kids), pay summer insurance payments and enroll 3 kids in high school.

I do still feel optimistic that the line will be squashed this year and a savings will be started. Making any future line use, temporary at worse. If we are surprise free till the end of the month our new line balance will be securely under the $10k mark at $5,384.08. I'm going to keep my fingers and toes crossed. I hope never to cross the $10k mark again. Unless I purchase another property - for rehab....no more rentals.

37 Months To Get My Mortgages To The Zero

No, I don't mean that I will make my last payment to my home mortgage. The loan may very well still be there, but on paper I can effectively be mortgage free. Not as good as mortgage free, but still better than most. Not saying to brag, just appreciating the possibilities that hard work and wise decisions have blessed me with.

On January 1st, of 2006 my personal mortgages worked out like this:

• Residence Mortgage $180,116.64
• Paper Mortgage $71,357.57
• LOC $24,258.70
• Total Mortgages Due $275,732.91
• Paper Mortgage Receivable $188,631.88

Should my Paper Mortgage Receivable be paid in full, through the borrowers execution of a refinance or some other stroke of payoff, I would have been left with a mortgage balance of $87,101.03.

With another year gone by I find it motivating to re-evaluate my situation, the large numbers without the calculation can be so discouraging and make me lose site of where I am headed. So as of 12-31-06:

• Residence Mortgage $177,619.04
• Paper Mortgage $68,835.76
• LOC $15,100.00
• Total Mortgages Due $261,554.80
• Paper Mortgage Receivable $185,464.94

Without any extra payments, because we have just been sending everything in back out again. Unless you consider that all extra dollars go to the LOC - anyway.... We realize a 12.6% drop to $76,089.86 mortgage owed.

My goal and perfect world would take this number to ZERO by 2/2010 when the paper comes up for a refinance. So that even if I was to offer them another 5 years, I could do so without refinancing the Paper Mortgage. In order to accomplish this we would need to pay down the balances $2056.48 per month without consideration for interest. Ouch. That may be a little bit too aggressive.

It is probably more realistic to try and bring the Paper mortgage down to a balance that could be covered by our LOC and eliminate one loan and payment. Being that the paper mortgage is a "commercial" type loan as well interest may not be an issue. Although, I will not kill my dream of Mortgage Zero! I am going to try my darndest. But as long as the balance is below $35k, I will be ok.

Now, to see if it works.

Bonus Realized

We took a year end bonus from our construction company. After taxes, it seems so small - Hubby thinks we only took a bonus to help the government. I say that's not far from the truth.

Anyway we ended up with about $6400 extra dollars. Of which, I just paid all our bills that are here and now, but not due to January. I know that most would not take this step, but I feel this way I can have 2 solid months of gain instead of just one. Or at least that is my hope.

Once the bills had been paid, all I have received or my online account shows I have accrued, I moved the balance of the bonus to our LOC. Thus you will see a huge movement here for the month. Since it is our only real movement this year, or at least it feels that way, I'll take it.

The LOC balance is $15,100 today. Of which $1250 is the liability of the laundry and included in business expenses making our balance $13,850. Still a huge amount.

Or that was my thoughts until I scrolled up my Quicken register and saw that my year end balance on the LOC last year was $24,259. This means that we were able to pay all our annual bills that run about $20k, just a couple dollars under, that we float through this account plus an additional $10,400 pay down. Not to mention all the dollars we spent on interest.

Do you know what that means?

It means even cash strapped we still managed some forward movement. It brings a tear to my eye. Funny how when you have no cash, you feel you are getting no where.

Mortgage Rates

It seems like just yesterday we were looking at and assessing interest rates every hour on the hour. Oh, the fun we had looking for the best rates and paying all those refinance fees to grab those perfectly low numbers.

With the housing market slamming on the brakes, it is no wonder no one is sharing the information of the sixth straight week that rates have dropped. I can't even say that I heard this on the news this morning. Makes you wonder if anyone even cares about the mortgage rates. Which are just about at the lowest point for 2006.

Bankrate is posting the following average rates:

• 30 year fixed - 5.58%
• 15 year fixed - 5.34%
• 30 year jumbo - 5.95%
• 5/1 arm - 5.39%
• 5/1 jumbo arm - 5.60%

Amazing, that there is a slowdown in house with such awesome rates. If you could find one reasonably priced home out there, I think rates could warrant a purchase.

That is if you don't mind repairs and maintenance and responsibility. My neighbor came home for lunch and returned my suburban. You could see his face is still riddled with stress from the early morning garage door dilemma. The way I look at it, is this is the way we learn. If we were never challenged how could we progress?