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What Your Advisor Hasn’t Told You About Income Investing, A Q & A

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One of the biggest mistakes investors make is to ignore the “income purpose” portion of their investment portfolios… many don’t even realize that there should be such a thing. The second biggest mistake is to examine the performance of income securities in the same manner as they do “growth purpose” securities (equities).

The following Q & A assumes that portfolios are built around these four great financial risk minimizers: All securities meet high quality standards, produce some form of income, are “classically” diversified, and are sold when “reasonable” target profits are achieved.

1. Why should a person invest for income; aren’t equities much better growth mechanisms?

Yes, the purpose of equity investments is the production of “growth”, but most people think of growth as the increase in market value of the securities they own. I think of growth in terms of the amount of new “capital” that is created by the realization of profits, and the compounding of the earnings when that new capital is reinvested using “cost based” asset allocation.

Most advisors don’t view profits with the same warm and fuzzy feeling that I do… maybe it’s a tax code that treats losses more favorably than gains, or a legal system that allows people to sue advisors if hindsight suggests that a wrong turn may have been taken. Truth be told, there’s no such thing as a bad profit.

Most people wouldn’t believe that, over the last 20 years, a 100% income portfolio would have “outperformed” all three of the major stock market averages in “total return”… using as conservative an annual distribution number as 4%: The per year percentage gains:

NASDAQ = 1.93%; S & P 500 = 4.30%; DJIA = 5.7%; 4% Closed End Fund (CEF) portfolio = 6.1%

  • *NOTE: during the past 20 years, taxable CEFs have actually yielded around 8%, tax frees, just under 6%… and then there were all the capital gains opportunities from 2009 through 2012.

Try looking at it this way. If your portfolio is generating less income than you are withdrawing, something must be sold to provide the spending money. Most financial advisors would agree that no less than 4% (payable in monthly increments) is needed in retirement… without considering travel, grandkids’ educations and emergencies. This year alone, most of that money had to come from your principal.

  • Similar to the basic fixed annuity program, most retirement plans assume an annual reduction of principal. A “retirement ready” income program, on the other hand, leaves the principal for the heirs while growing the annual spending money for the retirees.

2. How much of an investment portfolio should be income focused?

At least 30% for anyone under 50, then a growing allocation as retirement looms larger… portfolio size and spending money requirements should dictate how much of the portfolio can be at risk in the stock market. Typically, no more than 30% in equities for retirees. Very large portfolios could be more aggressive, but isn’t true wealth the knowledge that you no longer have to take significant financial risks?

As an extra added safety measure, all equity investments should be in Investment Grade Value Stocks and a diversified group of equity CEFs, thus assuring cash flow from the entire portfolio, all of the time. But the key from day one is to make all asset allocation calculations using position cost basis instead of market value.

  • NOTE: When equity prices are very high, equity CEFs provide significant income and excellent diversification in a managed program that allows stock market participation with less risk than individual stocks and significantly more income than even income mutual funds and income ETFs.

Using total “working capital” instead of current or periodic market values, allows the investor to know precisely where new portfolio additions (dividends, interest, deposits and trading proceeds) should be invested. This simple step will guarantee that total portfolio income increases year over year, and accelerates significantly toward retirement, as the asset allocation itself becomes more conservative.

  • Asset allocation should not change based on market or interest rate prognostications; projected income needs and retirement ready financial risk minimization are the primary issues.

3. How many different types of income securities are there, and

There are a few basic types, but the variations are many. To keep it simple, and in ascending order of risk, there are US Government and Agency Debt Instruments, State and Local Government Securities, Corporate Bonds, Loans and Preferred Stock. These are the most common varietals, and they generally provide a fixed level of income payable either semi-annually or quarterly. (CDs and Money Market Funds are not investments, their only risk being the “opportunity” variety.)

Variable income securities include Mortgage Products, REITs, Unit Trusts, Limited Partnerships, etc. And then there are a myriad of incomprehensible Wall Street created speculations with “traunches”, “hedges”, and other strategies that are much too complicated to understand… to the extent necessary for prudent investing.

Generally speaking, higher yields reflect higher risk in individual income securities; complicated maneuverings and adjustments increase the risk exponentially. Current yields vary by type of security, fundamental quality of the issuer, length of time until maturity, and in some cases, conditions in a particular industry… and, of course IRE.

4. How much do they pay?

Short term interest rate expectations (IRE, appropriately), stir the current yield pot and keep things interesting as yields on existing securities change with “inversely proportional” price movements. Yields vary considerably between type, and right now are between below 1% for “no risk” money market funds to 10% for oil & gas MLPs and some REITs.

Corporate Bonds are around 3%, preferred stocks around 5%, while most taxable CEFs are generating close to 8%. Tax free CEFs yield an average of about 5.5%.

  • Quite a spread of income possibilities, and there are investment products for every investment type, quality level, and investment duration imaginable… not to mention global and index opportunities. But without exception, closed end funds pay significantly more income than either ETFs or Mutual Funds… it’s not even close.

All types of individual bonds are expensive to buy and to sell (mark ups on bonds and new issue preferreds do not have to be disclosed), particularly in small quantities, and it is virtually impossible to add to bonds when prices fall. Preferred stocks and CEFs behave like equities, and are easy to trade as prices move in either direction (i.e., it’s easy to sell for profits, or buy more to reduce cost basis and increase yield).

  • During the “financial crisis”, CEF yields (tax free and taxable) almost doubled… nearly all could have been sold more than once, at “one-year’s-interest-in-advance” profits, before their regained normal levels in 2012.

5. How do CEFs produce these higher income levels?

There are several reasons for this great differential in yields to investors.

  • CEFs are not mutual funds. They are separate investment companies that manage a portfolio of securities. Unlike mutual funds, investors buy shares of stock in the company itself, and there is a finite number of shares. Mutual funds issue unlimited numbers of shares whose price is always equal to the Net Asset Value (NAV) of the fund.
  • The price of a CEF is determined by market forces and can be either above or below the NAV… thus, they can, at times, be purchased at a discount.
  • Income mutual funds focus on total return; CEF investment managers focus on producing spending money.
  • The CEF raises cash through an IPO, and invests the proceeds in a portfolio of securities, most of the income from which will be paid in the form of dividends to shareholders.
  • The investment company may also issue preferred shares at a guaranteed dividend rate well below what they know they can obtain in the market. (e.g., they could sell a callable, 3% preferred stock issue, and invest in bonds that are paying 4.5%.)
  • Finally, they negotiate very short term bank loans and use the proceeds to buy longer term securities that are paying a greater rate of interest. In most market scenarios, short term rates are much lower than long term, and the duration of the loans is as short as the IRE scenario will permit…
  • This “leverage borrowing” has nothing to do with the portfolio itself, and, In crisis conditions, managers can stop the short term borrowing until a more stable interest rate environment returns.

Consequently, the actual investment portfolio contains significantly more income producing capital than that provided by the IPO proceeds. Shareholders receive the dividends from the entire portfolio. For more, read my “Investing Under The Dome” article.

6. What about Annuities, Stable Value Funds, Private REITs, Income ETFs, & Retirement Income Mutual Funds

Annuities have several unique features, none of which make them good “investments”. They are excellent security blankets if you don’t have enough capital to produce adequate income on your own. The “variable” variety adds market risk to the equation (at some additional cost), bastardizing original fixed amount annuity principles.

  • They are “the mother of all commissions”.
  • They charge penalties that, in effect, lock up your money for up to ten years, dependent on the size of the commission.
  • They guarantee a minimal interest rate that you receive as they give you back your own money over your “actuarial life expectancy” or actual lifetime, if it is longer. If you get hit by a truck, the payments stop.
  • You can pay extra (i.e., reduce your payments) to either benefit others or to assure that your heirs get something when you die; otherwise, the insurance company gets the entire remainder regardless of when you check out of the program.

Stable Value Funds assure you of the lowest possible yield you can obtain in the fixed income market:

  • They include the shortest duration bonds to limit price volatility, so in some scenarios, they could actually yield less than Money Market Funds. Those that have slightly higher yielding paper include an insurance “wrapper” that assures price stability, at additional cost to the annuitant.
  • They are built to reinforce the misguided Wall Street emphasis on market value volatility, the harmless and natural personality of interest rate sensitive securities.
  • If money market rates ever return to “normal”, these bad joke products will likely disappear.

Private REITs are “the father of all commissions”, illiquid, mystery portfolios, far inferior to the publicly traded variety in a number of ways. Take the time to read this Forbes article: “An Investment Choice To Avoid: The Private REIT” by Larry Light.

Income ETFs & Retirement Income Mutual Funds are the second and third best ways to participate in the fixed income market:

  • They provide (or track the prices of) diversified portfolios of individual securities (or mutual funds).
  • ETFs are better because they look and feel like stocks and can be bought and sold at any time; the obvious downside of most is that they are built to track indices and not to produce income. A few that seem to produce above a meager 4% (merely for information and absolutely not a recommendation) are: BAB, BLV, PFF, PSK, and VCLT.
  • As for Retirement Income Mutual Funds, the most popular of all (the Vanguard VTINX) has a 30% equity component and yields less than 2% in actual spending money.
  • There are at least one hundred “experienced” tax free and taxable income CEFs, and forty or more equity and/or balanced CEFs that pay more than any income ETF or Mutual Fund.

More questions and answers in Part II of this article…

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Mortgage Post Closing Services: Describing What They Entail

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Could you be interested in mortgage post closing services? They entail strict reviews and audits to ensure compliance and completeness of documents. It is only after total confirmation of documents that the lender can fund the loan. The service provider selected by your company must be very experienced and good at their work. They must know how to correct documents from various origination stages and review them. The only documents that providers of mortgage post closing services could correct are those that have been signed and funded. The work of hired professionals also is to review legal, loan processing and other documentation for regulatory conformity.

They follow origination and underwriting rules to the letter, making sure missing information, if any, is retrieved. Mortgage closing services also entails data integrity checks so as to generate quality control reports. While doing integrity checks on loan information, service providers also state any possible exceptions. Basically their major activities entail the following. Tracking all documents (trailing document retrieval) associated with the mortgage post-closing is the first critical step. The documents that need to be trailed include assignments, assumption agreements, judgments, tax records, trust deeds, modifications, and UCC (Uniform commercial code) among others.

After the completion of this, issuance of final title policy, lien and assignment take place. The second activity offered during delivery of Mortgage closing services is the assembly of post closing loan package. What this entails is compilation of all loan documents that are usually submitted during the whole origination process. It means therefore that the provider of mortgage post closing services will work together with underwriters, loan officers, loan processors, mortgage brokers, home appraisers, property sellers and any other involved parties. The assembling work is rather tiresome and lengthy and that is why you want it to be done by a big company with many employees.

Another activity includes post closing data integrity audit as aforementioned. The main reason why this audit is done is to tackle possible home loan deficiencies. They verify and address red flags that were raised during the underwriting process. After this, all loans that have been fully approved are registered with a given mortgagee system. This whole process of registering approved loans prevents future assignments on loans. It also saves lenders from incurring future correction and tracking costs or facing document penalties among others. This step of mortgage post closing services also ensures faster execution of loans, zero errors on documentation and an easy closing process.

Mortgage quality control audit is also part of mortgage post closing services. There are automated audit systems used for this task. The service you will be offered in this step include pre-funding, post-closing, servicing, compliance, foreclosure loans, fraud investigation, preparation of the QC plan, cancel or reject, and commercial loans audit among others. It is imperative to make sure that the provider of the post closing service can audit and review the loans you normally process. Many outsourced companies deal with FHA, VA, Fannie Mae, and Freddie Mac among other home loans. Their basic auditing process entails file document review, evaluation of underwriting process, credit risk analysis and third party verification.

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All You Want To Know About Mortgage

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A mortgage is a kind of agreement. This allows the lender to take away the property if the person fails to pay the cash. Generally, a house or such a costly property is given out in exchange for a loan. The home is the security which is signed for a contract. The borrower is bound to give away the mortgaged item if he fails to make the repayments of the loan. By taking your property the lender will sell it to someone and collect the cash or whatever was due to be paid.

There are several types of mortgages. Some of them are discussed here for you –

Fixed-rate mortgages- These are actually the most simple type of loan. The payments of the loan will be exactly the same for the whole term. This helps to clear the debt fast as the borrowers are made to pay more than they should. Such a loan lasts for a minimum of 15 years to a maximum of 30 years.

Adjustable rate mortgages- This type of loan is quite similar to the earlier one. The only point of difference is that the interest rates might change after a certain period of time. Thus, the monthly payment of the debtor also changes. These kinds of loans are very risky and you will not be sure that how much the rate fluctuation shall be and how the payments might change in the coming years.

Second mortgages- These kinds of mortgage allows you to add another property as a mortgage to borrow some more money. The lender of the second mortgage, in this case, gets paid if there is any money left after repaying the first lender. These kinds of loans are taken for home improvements, higher education, and other such things.

Reverse mortgages- This one is quite interesting. It provides income to the people who are generally over 62 years of age and are having enough equity in their home. The retired people sometimes make use of this kind of loan or mortgage to generate income out of it. They are paid back huge amounts of the money they have spent on the homes years back.

Thus, we hope that you are able to understand the different kinds of mortgages that this article deals with. The idea of mortgage is quite simple- one has to keep something valuable as security to the money lender in exchange for getting or building some valuable thing.

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What Insurances Can I Have With My Mortgage?

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Life Cover

Life Cover provides a lump sum if you die during the policy term. This can be used to pay off your mortgage so your family do not have to worry about making any further repayments.

Critical Illness Cover

Critical Illness Cover is designed to insure against critical illnesses which could have a severe impact on your ability to earn a living. It should pay out if you are diagnosed with one of the critical illnesses or disabilities listed on the policy. You could then use the lump sum to repay your mortgage or help pay expensive medical costs. Some policies pay out on death during the period of cover if you are eligible to claim.

Accident, Sickness & Unemployment Cover

Accident, Sickness & Unemployment Cover is a short-term income-protection policy. It pays you a tax-free monthly sum for up to 12 months if you are unable to work due to an accident or sickness or if you become unemployed through no fault of your own. Policies are available that protect you against all of these events or just cover you for accident and sickness only, or unemployment only.

This type of insurance is expensive so to reduce the cost you can choose to have a ‘deferred period’. Then, in the event of a claim, you will not receive any benefit for a period of time at the beginning. This deferment could be for 30, 60 or 90 days for all three types of claims. You can also have a longer deferred period of 180 days for accident and sickness cover. To help you decide which deferred period is best you should take into consideration such things as any savings you may have and any sick pay you get from your employer.

You can choose the amount of monthly benefit you wish to receive up to 65% of your gross monthly income. Gross income is your wages before deductions have been taken such as income tax and National Insurance contributions. Of course the higher the benefit you require the higher the cost of the insurance. Cover provided by some companies may be limited due to individual circumstances.

Just as an example, Accident, Sickness and Unemployment Cover typically costs £4.71 a month for every £100 of monthly benefit. This is based on a 36-year-old customer choosing £850 of accident, sickness and unemployment monthly benefit with claims paid after a 30-day deferred period.

The cost of this insurance depends on a number of factors including your age, your occupation and where you live.

A number of companies offer short-term income protection and other products designed to protect you against loss of income.

Buildings Insurance

This covers the structure of the home such as the roof, walls, windows and permanent fittings.

Contents Insurance

This covers household goods, personal possessions and valuables within the home.

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Tips to Choosing a Mortgage Broker

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When you’re searching for a new home, you go through a number of properties to find that perfect match for you and your family. Once the excitement settles, it’s time to secure your financing.

You have two choices, you can approach your bank and hope that they are offering loans right now or you can approach a mortgage broker, someone who specializes in property financing and works with a host of leading banks, financial institutions and credit unions to secure you the best deal available to meet your budget.

When you first start looking for someone to help you secure the financing you need, it’s advisable to speak to family and friends that have recently purchased property in the area. They may be able to recommend an experienced broker that they dealt with, who secured them their financing. Word of mouth is usually the best way to find the best of the best.

Another option is to search online. You will be welcomed by hundreds of mortgage brokers who all want to assist you in getting the finance you need to secure your new home. If you choose online, there is some additional research you will have to do to ensure you will be working with someone who has experience and knowledge in the industry and has a good reputation with their customers.

There are a number of different brokers out there, some will be tied to certain estate agencies, some will work independently and some will work for large lending centers that are working closely with a number of the leading lenders in the country. Try and steer clear of the first two, rather go with the one that can work alongside a large number of banks and financial institutions to find you the money you need in the shortest period of time.

The mortgage broker should be focused on finding you the best possible deal. They may present you with a number of offers, enabling you to choose the one you feel meets your specific requirements.

One of the most important considerations is that they have extensive industry experience and an excellent reputation. You want your mortgage broker to work for you, they should provide you with all the information and advice you need, also providing you with outstanding customer service. This is so important as a first time buyer when you are unsure about the processes that lie ahead.

Determine if they charge any upfront fees. Some mortgage brokers will charge fees for their efforts. Ensure you are aware of the percentage they charge and how the payment is to be made. Is it upfront? Do you have to pay it straight away? This may reduce your down payment slightly, so take this into consideration.

Always do your own research as well, don’t rely on what they tell you. Even if you have chosen to use a mortgage broker because they can secure the best deals, approach the banks and find out what they are offering right now. Don’t settle for the first offer that comes you way, by doing some research, you can ensure you find the best mortgage with the best interest and terms to suit your budget.

Never assume your loan is secure. Ensure everything is provided to you in writing. This should be the offer from the lending institution, the mortgage broker’s fees and anything else imperative to your decision.

With everything in writing, you are set to go ahead and place an offer on your new dream home with the confidence that your financing should be approved within the shortest period of time.

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STAR Servicer – Total Achievement and Rewards Program for Mortgage Servicers

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As the fall out continues with the countrywide 50 state investigations, lending servicers who are responsible for bill collection of mortgage payments and other aspects of mortgage servicing for investors, it has come to the attention of the government how badly these companies are run. Fourteen companies have been under review and all of them have been found to violate foreclosure laws. Fannie Mae and other government agencies have been discussing how to best improve our mortgage servicing and lending here in the United States. Fannie Mae has come up with a performance program to help assist mortgage servicers’ to get it right and to stay within the boundaries of the law. This ultimately will help ensure the health of our housing economy and help support the housing recovery.

Not only will servicers be facing no procedures, they will also be facing harsh fines as a group entity. These fees could total over 20 million; however, this is just an estimation of what they could be paying for violating foreclosure laws.

Fannie Mae on Wednesday announced the STAR (Servicer Total Achievement and Rewards); the program is designed to better assist and will help examine how the servicers help homeowners avoid foreclosure. The goal of this new program is to set clear expectations and specific measurements to help Fannie Mae and servicers increase focus on avoiding foreclosure.

As more and more news comes out about how servicers’ have violated foreclosure laws, this program is an ongoing effort to hold servicers accountable. So how will this work? Each servicer will be given a servicer performance scorecard, which in turn will provide feedback on a monthly basis. With this program it should help servicers see where they need improvement and overall performance. Top ranking servicer’s will become eligible to receive monthly incentive awards and recognition. Also, top ranking servicer’s performance will be made public in an annual scorecard. Many believe this program will help gear better customer service to home owners, help with the housing recovery, and keep the servicers on the right track.

This will also help the federal government to set guidelines and regulations in place for the mortgage servicing industry. As the mortgage industry and bank industry is reviewed by the government to find a solution and to prevent another financial crises,it seems many changes are going to happen over the next few months and years. As we wait and see if the HAMP program and other federal programs will stick around, it is good to know servicers will now be regulated better in hopes of making the homeowner ship experience safer for everyone.

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Foreign National Mortgages: Things To Keep In Mind

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A foreign national mortgage refers to a loan for non-us residents. Even the government can issue loans to non-residents of the States. Let’s find out more.

First of all, if you are in the States legally, you can apply for the loan. However, for illegal residents, there are zero chances of success. The reason is that main lenders always require ID before reviewing an applicant. And these requirements include visas, work permits, green cards and social security numbers as well.

Rules for the resident foreigners

Generally, it’s not difficult for non-us residents to look for a mortgage. There are two primary categories that they fall in:

1. Permanent residents: they have green cards and the rights to live in the States with all the long-term residency rights

2. Non-permanent residents: Generally, your residency rights are based on your employment.

Regardless of which category you fall in, you can apply for a mortgage. However, you may need to put in a little more effort if you are not a permanent resident.

Permanent vs non-permanent

If you are a non-permanent resident, you may have to show a proof that you will live in the country for at least another three years. If your visa or work permit has fewer than 12 months of expiry date, your lender can find out how likely you may be to stay.

FHA loans are designed for non-permanent residents. According to the rules, if you have a renewed visa or work permit, you can be a good candidate for approval.

Refugees or those in the asylum

If you have been in the asylum or have the refugee status, we have good news for you. With this status, you have the right to work, and you have greater chances of getting a mortgage approval. So, this is important to keep in mind.

Non-resident foreign buyers

If you have no right to live in the USA, you may still be eligible for the loan. However, you may have credit score problems to face. Actually, lenders have concerns as how they can enforce a debt in case of these non-residents.

So, you can’t get the type of deals a resident or citizen can get. In fact, you may have to make a down payment up to 50% to get this type of loan. Aside from this, the mortgage rate can be quite higher unlike the rate charged to a resident.

Welcome to the States

Immigrants were the founders of the States. Therefore, American has always been quite welcoming to immigrants.

Typically, lenders make their lending decisions based on the risk factors, such as the financial resources, down payment size, and creditworthiness of the borrower. As far as determining the best deal is concerned, you can be on the level playing field irrespective of the citizenship status you may have.

Long story short, if you are non-resident in the United States, you can still apply for a mortgage but you need to meet the requirements set by the lender. Hope this helps.

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Tips To Choose a Mortgage Lender

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No matter how rich you are emergency situations can crop up at any time. Thus, you have to consider taking a loan either from an individual or from a financing company or a bank. Most of the people of now like to opt for the latter options rather than going for the first option. This is because the financing companies or banks are more reliable than a person. But the high interests that are charged on the loans are really a burden. So, a better alternative that you can look for is mortgaging your property against the loan you take. This will relief you from being taxed with high charges and you can pay the loan amount at your convenience within the time limit that the company has offered you. To choose a proper loan lender you can follow some of the tips that we have provided in this article.

Prepare a List

While you consider risking your personal property, why plan everything in haste. Some companies would try to persuade you to take quicker decisions by offering attractive rates but let them be as they are and take your time to take your decision. Research well and make a list of the companies that you find.

Check the Terms and Conditions

Not only choosing the company but knowing the terms and conditions through which the loan to be completed are important. Remember that you are risking your property for money and the slightest carelessness in this respect can cause you to lose your money.

How Quickly They Respond

The next thing that should be your determining factor is that how quickly they respond to your queries. Emergency situations don’t give you a lifetime opportunity. A delay can make the problems to increase. So, instead, you should go for the ones that respond quickly to your needs.

Compare and Choose

After you check with several companies you can compare the interest rates and also the time period they are allowing you to make the repayments. You also have to ensure that the company that you are thinking of dealing with should have a good reputation in the market. Check their client reviews and the years the company has been in the market. If you find that the company is a genuine one then you should go ahead with finalizing the deal with the company.

We hope that just by reading this article you have got an idea about choosing the mortgage provider. This will help you in choosing a better lender for your needs.

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Credit Card Processing: How the System Works

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Establishing a merchant account for your business enterprise is the wisest financial decision you will ever make for the growth, expansion and success of your business. Once you’ve set up a merchant account, you can accept credit and debit cards payments from your clients for your products and / or services. You can also arrange to accept online and mobile banking payments for your products and / or services.

A merchant account opens up new avenues for your business; therefore, giving your business many more opportunities to flourish. But, have you ever understood how the credit card processing system works? Have you tried to perceive the complexities of the players involved in the process and the intricacies of the system?

While it is not entirely essential for you to know the inside and outside of the card processing system because your Merchant Service Provider will do the needful for you; it is good for you to acquaint yourself with the system on a general basis.

The Participants Involved in a Card Transaction

A typical credit or debit card transaction involves the following players:

• The customer

• The merchant

• The payment gateway

• The customer’s credit card issuer

• The credit card interchange

• The processor at the acquiring bank

• The merchant’s acquiring bank

The Route the Money Takes from the Customer to the Merchant

Let’s take an example to understand how the card processing system works.

Suppose that a customer walks into a clothing store and she finds a bag that catches her eye. She immediately proceeds to the payment counter and makes a payment of $100 towards her purchase with her cards.

The cashier at the merchant’s store accepts the cards and uses a card swiping machine to set the process into motion.

• The $100 amount makes its first stop at the payment gateway where the payment is first authorized with a minor deduction in the amount.

• Now, $99 travels to the appropriate processor and after a minor deduction is submitted to the card interchange as $98.5.

• Once the transaction gets a clear at the interchange, it moves on to the issuing bank with a further deduction where the issuing bank verifies the availability of funds in the customer’s credit / debit card.

If the transaction is declined, it makes its journey back to the customer from here.

• If the transaction is approved, $98 reaches the processor at the acquiring bank, just one step closer to the merchant account.

• Once authorized, $97.5 gets deposited into the merchant’s account, which is now at the merchant’s disposal.

(The figures and fees involved in card processing are based on the number of players in the process, merchant type, card type and risk factors)

In the present age, quite a number of payments are made electronically, especially with the extensive use of credit and debit cards and online funds transfer. Although typical card processing takes seven participants, the entire transaction amazing takes a maximum of five seconds for approval.

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5 Tips to Consider When Refinancing Your Mortgage

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Here are 5 tips to consider when refinancing your mortgage.

Is it the right move?

When conditions are right, financially and economically, you might be considering a refinance of your mortgage. Before you jump into what seems like a good idea, it’s best to know exactly what the refinancing process is, and just what it entails. You should know that when you are going to refinance, it involves starting the loan application process right from the start, as if you are buying a new home. Will you be taking the loan with a new lender, setting up a new deal, or should you shop around and see what’s on offer from other loan providers? The best person to lead you through what is now a veritable minefield of lenders, is your mortgage broker. They are far more up to date with what’s on offer than if you spent hours scouring the internet looking for the best deals.

Why Refinance?

What are your reasons for refinancing? There could be a variety of reasons. Lower interest rates on offer? A difference of a point or two in the rate may seem small when you look at it, but that couple of points can save you thousands over the years because your repayments will go on for 15 to 30 years for a typical mortgage.

Another reason some may decide to refinance is to get a shorter term, which also saves thousands of dollars. For example, things have never looked rosier personally, and both you and your partner are working, and your income is higher. So, a change in your financial situation can be used to save money on higher monthly payments. Conversely, you might be after a lower monthly payment or have that fixed rate changed to a variable rate, or vice versa.

Refinancing Costs

There are some obvious things to look at when considering refinancing. One of the first things is the actual cost of refinancing. Look at the fees you will be paying and divide it by the months of your mortgage and see whether there is a saving as a result of the refinancing. Sometimes you are ahead straight away, other times you might have to work out when you will hit the break-even point.

Penalties

Are there any penalties in your mortgage terms and conditions that apply if you pay out the mortgage early? Lenders do NOT like mortgages paid out early. Remember, when you refinance, you are paying off one loan and applying for another completely new loan. Add any penalties to your total costs for refinancing and calculate that break-even point again. Be certain that you are not losing money overall when you refinance.

Your Equity

An important factor in this whole process is to work out the equity you have in your home. A negative equity is when you owe more on the home than what the house is worth. If you have been in your home for a number of years, the annual increase in your home’s value will stand you in good stead. But if this is a refinance taken out after only a short time into your mortgage, price fluctuations may have worked against you. If your lender is offering less than the equity, you will not be able to get the refinance, unless, of course, you have the money to pay the difference. Current markets indicate an overall rise in prices, but there have been some downward movements as well over the year and that may have had a negative effect on your home’s value.

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Get Over from Your Credit! Credit Debt Management

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Credit arises when you spend without paying. And how it is done? Yes, you are right, it’s through credit cards. Here, we are going to discuss how can we control that small plastic card which can make us happy with its service and can lead us to bankruptcy if goes out of control. Credit debt management can suggest us the way to get back that control and maintain it.

Credit card handling tips which you can follow for efficient credit debt management:

o Use your credit cards wisely; this will help you build a good credit history.

o Reviewing of credit card bills helps you pay them on time simultaneously finding errors (if any) in the bill.

o Get your credit report and analyze it. Contact credit rating agencies if there is any mistake in the report regarding credit card or any other debts.

o If you are already having balances on your credit cards, don’t apply for more cards.

o Get your balance transferred to a card with lower interest rate, if you use more than one credit card.

o If you are late on payments to another creditor, your credit card company can raise your

interest rate. So, always pay your bills on time for all your debts.

o Special cards such as gas and petrol cards, departmental store cards or rewards cards carry higher rates as compared to normal cards, so avoid them

o If your credit debts are getting out of hands, contact credit debt management agencies for help.

Along with the measures specified above you can take the help of credit debt management companies. You can search among numerous credit debt management companies available online along with the services they offer. These services include credit counseling, credit card education and credit card debt consolidation services. Under a credit card debt consolidation service, you make a single monthly repayment to these agencies for all your credit card bills. Further, this agency pays your creditors from that amount at negotiated amounts. Yes for getting this service, you will be charged with a certain percentage of the total debt payment for credit cards.

You can enroll for a credit debt management agencies within 15 to 20 minutes. After the enrollment the consultants from these agencies will contact you with the services and credit debt management plan while discussing your credit card spending with you. The services of these agencies will continue till all your debts are in control or you have decided you withdraw voluntarily from this service. A credit debt management besides erasing your debts can also erase your stress due to credit cards.

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