Tuesday, January 17, 2017

Is it worth investing in a MacBook Pro?

9:10 AM Posted by Unknown , , No comments
If you’re planning to use the Macbook Pro professionally and produce work with it, I think it’s definitely worth the investment. I bought mine back in early 2012, and the performance (it’s running the latest version of Mac OS, El Capitan — despite its hardware age) has been nothing short of spectacular. Chances are, you wouldn’t know that a macbook is amazing, because if you’ve been using a macbook exclusively there will be no benchmark of comparison and everything that seem intuitive and effortless in how a macbook operate may immediately be perceived as the norm. I’ve used many PCs in the past, and I occasionally still have to use one.
On a macbook, every application and software update is a breeze and completely natural. Very few repairs, if ever. On the rare occasions of a repair, you’ll find comfort in the service of their support reps.
If you’re from Linux and use the shell commands for most of your work, you’ll find joy in the fact that Mac OS ships with bash being the default terminal shell, making the command line experience familiar with no switching (learning) cost.
Couple its longevity with its usually long battery life, commendable engineering, and the signature user experience Apple is famous for, you would save money (no switching computers every couple years), precious time (updating apps, boot-up speed, processing power), and probably also enjoy the work you do a little more. There are few things in life I pay a premium for — yes, the macbook do cost more, and depending on your perspective on value / price, it may also be a high premium — but the macbook is a really easy investment in my book.

If you buy an Apple product, it’s important to realise you’re not paying for the raw hardware. You’re paying for the proper engineering (and a bit for the name, of course).
It’s best to compare this with a typical supermarket computer. They will offer better raw specs than a Macbook Pro, but they will usually have one or more of the following issues very soon:
  • heating to the extent that you can burn yourself while typing
  • keys coming loose
  • touchpad coming loose
  • hardware not going well together
  • hardware and software not going well together
A good computer is more than some random hardware thrown together. That’s exactly where a Macbook Pro comes in; it works and it keeps working. It doesn’t heat up, the keys are not coming loose, the touchpad is still where it belongs, and it’s still going strong. If I cleaned mine a little, you’d think it comes right out of the store, even though I’ve had it since 2009.
They only things I’ve done in those years is replace the HDD with an SSD and replace the 4GB of RAM with 8GB of RAM (extremely easy to do this yourself, by the way). That cost me about 200 euros in parts. Taken all together, I paid about €250/year for a decent, reliable computer so far. That seems fair to me.
For someone who uses their computer professionally, it is most definitely worth the investment. It’s a relatively small investment to make compared to the hassle that you have with traditional laptops. On top of that, you get all the perks of UNIX with a very nice and clean UI. So yes, a Macbook Pro is worth investing in.
When I discovered Mac, it was like discovering an Ali Baba cave filled with gold. Let me summarize why it worth the money:
1- Easy to use, yet powerful Operating System, the Mac OS X. (It is for both pros and newbies ). I learned using Mac in just 3 days.
2- Stable and secure (almost no viruses or malware). Aside from rarely occasional crashes of Microsoft Office products, everything else almost never crashes.
3- The quality of the material that a Mac is built with (Aluminum) is way better than than the cheap plastic of other laptops. It is strong, lightweight, and loses heat faster than plastic.
4- The compatibility of the Mac with iPhones, iPads and iCloud is comfortable and trustworthy to use.
5- The Eco-system that Apple has built over years, is really paying off now, I am referring to the Apple store and other services that are Mac-specific.
6-Long Battery life. With an amazingly 7 to 10 hours of battery life depending on your usage. The Mac is totally killing it in this point.
And it worths mentioning, that I don't turn off my Mac, I do restart it like once every 3 months or so.

Is Apple MacBook Pro worth buying?

9:02 AM Posted by Unknown , , 3 comments
Firstly as you anyway need a laptop, the Mac would be the superior option as you may need to move constantly, as sitting in one place is very boring and you generally have to move about from one place to another.

Having to buy mortgage points

8:56 AM Posted by Unknown , , No comments
“Points” are not something you buy, they’re something you pay. There are two types of points: origination points and discount points.
Origination points are a fee that the lender requires to “originate” a mortgage. This presumably represents costs that the lender incurs simply to process the mortgage. While they could in principle cover this just by increasing the interest rate a little bit, they would lose out if the borrower paid off or refinanced the loan early.
Discount points are additional points paid to “buy down” the interest rate.
Hence the confusion: if you’re talking about origination points, that’s a mandatory fee that virtually all lenders impose, but 1.5 points is on the high side. And if you’re “buying” a reduced interest rate, then that should be optional.
I’m wondering whether you’re dealing with a lender or a loan broker. If you’re dealing with a lender that has an origination fee of 1.5 points, then you should look for a lender with a lower origination fee. If you’re dealing with a loan broker, it could be that he’s padding the origination fee simply to increase his take. Dump his butt and go find a lender on your own.
What follows is my original response, based on the statement that the _seller_ was requiring that 1.5 discount points be paid:
This sounds like a provision of the mortage contingency clause.
The mortgage contingency specifies the”worst” terms of the mortgage that you’re willing to accept. So you might have said that you needed a 4% rate, the seller “countered” by saying you should be willing to pay discount points to get that rate (presumably on top of the standard “origination fee” points).
Your options would be to simply ignore the mortgage contingency (so if you can’t get a mortgage, then you’ll forfeit your deposit) or you could go back to the seller and propose a contingency at a higher rate but without the buydown point requirement.
However, I really think there’s confusion here. It sounds like the seller is saying that, in order to exercise the mortgage contingency, you must agree to accept a mortgage with up to 1.5% in origination points. If the seller is really unhappy with the interest rate you’re asking for, you should just specify a higher interest rate.
The contingency should also indicate how much the mortgage is for. Typically, mortgages on investment properties will require at least a 20% down payment.

Most likely, it is a pricing cap issue.
Conventional loans are sold to Fannie Mae or Freddie Mac, who each use a risk-based pricing model to price loans. Pricing adjustments are tabulated for various risk items, the biggest being for investment properties (occupancy), then LTV’s, FICO’s, etc.
Fannie/Freddie or the investor buy loans and pay the lender a margin called a premium. This is how the mortgage bank is paid, predominantly, gain on sale of the loan. But this premium has a cap.
Often, on deals with a lot of pricing adjustments, such as investment properties, there is not enough premium to go around… to pay the lender, and internal commissions. This shortage ultimately means that the lender MUST charge the borrower points to close the deal. There just isn’t enough left to do it at no points.
They simply cannot increase the rate any further, as they’ve hit the pricing cap. A higher rate would not yield more premium.

Is there any reason to avoid 'no-name' lenders when shopping for a home mortgage refinance?

12:29 AM Posted by Unknown , , No comments
ANY company can join the BBB.  And each state's regulator might be called something different. Instead, check the company AND ALSO the loan originator out on the Nationwide Mortgage Licensing System.  Here is the free consumer access site:

http://www.nmlsconsumeraccess.org

The Nationwide Mortgage Licensing system was created as part of the SAFE Mortgage Licensing Act of 2008 and gives all state and federal regulators a way to track loan originators, no matter where they work: Bank, mortgage broker, consumer finance company, credit union, non-bank lenders, etc. 

For example, do a search on a company that does a lot of TV or radio advertising like Quicken.  You'll see "too many records" and the database will ask you to narrow it down. Just put in any name like "John." Then you'll see all the Johns that work at Quicken in all 50 states. Click on a John. Any John. Now find the little + plus sign that allows you to expand John's employment history.

Chances are you'll find that John use to work at Pizza Hut.  Or XYZ Used Car Dealership, Taco Time, Subprime Lender ABC, Subprime Lender DEF, Subprime Lender GHI or maybe you'll get one with former work experience reported as "None."  Companies like this recruit ppl who have no clients...because these ppl don't want to work. They want to sit in a cubicle, answer the phone and close you. ABC. Always Be Closing. Get Them To Sign On The Line That is Dotted. 

Sites like Bankrate are just lead generation machines, like Lending Tree, and any and all google generated ads on the right-hand side of the search results page.   That's why you don't recognize the company names....They aren't located in your town.  And they pay a fee to Bankrate or Lending Tree to buy your lead.  You are just an object.  A sucker.  A fish to be hooked. Avoid all lead generation companies.

INSTEAD I highly recommend interviewing a loan originator who is located in YOUR hometown, where reputation is important. The mortgage lending and real estate industry is very small. We ALL know each other.  

Just ask Mister Google for some help.  Chances are a few interesting prospects will come up.  Ask your favorite people for a referral to a competent, ethical, experienced loan originator.  Do some research on them before you call them. Run their names through the NMLS....Ask a Realtor you trust who he/she recommends.  But don't stop there. Do your due diligence. 

Interview:  

1) a loan originator at a depository bank where you have your own account.
1a) If you like credit unions, that is also an option.
2) a loan originator who works for a mortgage broker. In many states, these LOs now owe you a higher duty of care v. a bank LO due to the many problems we had with mortgage brokers during the real estate bubble.  There are fewer mortgage broker LOs around and the ones that are around now tend to be very good.
3) a loan originator who works for a non-depository lender.  Also known as a non-bank lender.  This is a company that lends money but does not offer checking and savings.

Now you have some LO names, you've checked them out online....you've run his/her name through the NMLS...look at their facebook page, their twitter feed, their linked in page...Dude, you're on Quora. You want an LO that doesn't even have a google plus account....or whatever social media tool will be popular next week?  Go see what he/she is like as a person on social media. 

Personally I will want to know in advance if the loan originator with whom I'm sharing the intimate financial details of my life is a bigot, misogynist, right-wing republican wacko who will sign all his emails with "god bless you" so I can make sure to cross him off my list.    

And if anybody tells you they can't give you a Good Faith Estimate, tell them they are full of shit and find another loan originator.

If you give your loan originator these five pieces of info, by FEDERAL LAW and that law is called RESPA, the LO owes you a Good Faith Estimate and Truth In Lending Disclosure within 3 days:

Name
income
Social Security Number
Property Address
Estimated Value of the Property 
Loan Amount.

If you're shopping for a refinance you have the property address.  If you have not yet picked out a home to buy and you're shopping or a purchase money loan, they owe you the GFE once you select the property. 

They might try to lie to you and tell you that they will give you a "fees worksheet."  If this happens, tell them to fuck off and find a loan originator who is honest.  If the loan originator lies at the beginning of the deal, he/she will lie to you throughout the transaction. Or will he/she?  Gee it's hard know. 

Now get out there and grab the world by the tail and go get yourself a mortgage.

 Morever,  there is no reason to avoid a "no-name" lender. Just make sure you're working with someone knowledgeable who will take the time to learn your situation and explore different options with you. But "no-name" is not a deal breaker for me. There are over 7,000 mortgage lenders in the U.S. and most of them are not very well known by consumers. Another point to consider is that most mortgage lenders out there are going to fund your loan at closing and then sell your loan in the secondary market, so these are probably not the same folks who will be servicing your loan.

What you do want to keep in mind when choosing a lender is what their expertise is. Mortgage lenders can be very specialized in certain areas of home financing, so choose one that fits your situation. For example, if your home is a condo, there are lenders out there that are better than others at underwriting condo loans.

This is why it is many times preferable to work through a mortgage broker, rather than directly through a lender. Mortgage brokers have relationships with multiple lenders and they know the quirks and specializations of each lender.

Full disclosure, my company, MortgageHippo is a tech-enabled, fully licensed mortgage brokerage firm that guides borrowers through every step of the mortgage process and hires some of the most professional mortgage experts in the field.

Refinancing your mortgage

12:26 AM Posted by Unknown , , No comments
"Refinancing" a mortgage is the act of acquiring a new primary mortgage on your property, the proceeds of which are used to pay off the first mortgage in it's entirety.
There are a couple of different ways refinances can work:
1.  A "Straight" refinance just writes a new first mortgage against the property in the amount of the current outstanding mortgage on the property (plus any closing costs, minus any down payment being made).  This is commonly done in order to take advantage of a lower currently available interest rate on the loan, or to escape PMI payments (if the property now has a high enough equity to avoid PMI), or to shorten a loan term (or, rarely, to extend it).
The old mortgage gets paid off and that lien removed from the home.  The new mortgage takes effect, a new lien is put on the property and a new payment term begins.
2.  A "Cash Out" refinance not only does what is done in case 1 above, but also allows the homeowner to receive an additional amount of money over and above what is necessary to retire the first mortgage.  This money can be used for home improvements, debt consolidation, or any other purpose the homeowner wishes.  In this case, equity in the home is reduced by the additonal amount taken.  The benefits of changed loan term and lower interest rate generally still apply as well.  Cash Out refinances do not (generally) allow more than 90% of the home's appraised value to be financed, so available equity is only what the difference between the current mortgage and that amount may be (some homeowners with exceptional credit files may get 95% or even in some VERY rare cases 100%).
Additionally, It means that you are going to replace your existing mortgage with an entirely new one. The best reasons to do this are you can get a lower interest rate, you can reduce the term of your mortgage from its original 30 years to a 15 or 20 year mortgage and own your home mortgage free years earlier. It is NEVER a good idea to refinance your current mortgage simply to take the equity in your home and get that cash in hand, i.e. you may have purchased your home with a 30 year mortgage for $250,000 a ten years ago and now it's worth $350,000 and you owe $225,000 of the original mortgage. By refinancing for a (cash-out) you would essentially take out a new mortgage for $350,000, with a 100% mortgage loan or about $338,000 with a new FHA mortgage. You pay off the existing $225,000 mortgage and you get either $125,000 or $112,500 cash in your pocket. Which most, but not all, people will promptly spend foolishly on things they want but don't need, and within 12 to 18 months it will all be gone. They will still have a brand new 30 years mortgage, at the same or higher monthly payment depending on the interest rate, when if they would have just done nothing they would have less than 20 years remaining on the mortgage.  If you refinance your mortgage it should be only to decrease your monthly payment, or, to reduce the length of the mortgage. The equity in your home is not a piggy bank.

How likely is abolition of the mortgage interest tax deduction?

12:01 AM Posted by Unknown , , No comments
It is unlikely that it will be completely abolished. It's possible that the deduction terms be amended such that it's less regressive, or otherwise more limited. There are many reasons that it won't become completely abolished, mostly political.

  1. Much of the benefits of the deduction are capitalized into the value of property. That means home buyers and sellers are aware of the benefit of the deduction. Therefore, if it were to be completely abolished, home prices would suddenly lose most or all of that value.
  2. Additionally, the deduction itself is very beneficial for homeowners with mortgages. They are unlikely to support abolishing this deduction.
  3. There seems to be a bias towards home ownership (or at least encouraging such). There's some belief that home ownership is "good" for society, beyond what is priced into the market. Abolishing this deduction would run counter to that goal.

All of these reasons boil down to the current establishment's resistance to abolishing the deduction because they benefit somehow, or believe it will. Even though it may cost 100-200 billion dollars annually in lost tax revenues (Property is very inelastic), it would be political suicide for anyone to pursue the elimination of this deduction.

Personally I believe that it is an inefficient deduction, too regressive, and perhaps ineffective at encouraging home ownership (Remember that the benefit is mostly capitalized into the value of homes), but I am not optimistic that the government will address this issue, even amid severe budget crises.

 Morever, The probability is growing more likely as the downward spiral in US real estate values continues unabated.  To wit: "A record 33 percent of existing-home sales were made to cash buyers in February, when an annualized 4.88 million properties changed hands, the National Association of Realtors reported March 21[1]."  

The dynamic is this: What used to serve as a 20% down payment is now very close to an outright purchase price in many areas - especially those cities where price compression has been the greatest, including Las Vegas, Phoenix and multiple areas in both California and Florida.   In these hard hit areas where price compression has wiped out two-thirds or more of the peak value, you may not be able to finance without great difficulty.  

Example: Take a home or condo that was sold at peak for $180,000 and is now listed for $60,000 as a foreclosure.  If a buyer had salted away $36,000 for a down payment based on peak value, why not stretch and just pay cash?  Alternatively, this hypothetical buyer could easily "shrink to fit" his/her requirements to afford a property with fewer features that sold for $120,000 at peak and is now listed for $40,000.

The spectre of a growing number of home buyers opting to pay cash has already had a negative impact on mortgage lenders even without a phase out of the mortgage deduction.  Moreover, taxpayers can deduct the interest paid on first and second mortgages up to $1,000,000 in mortgage debt (the limit is $500,000 if married and filing separately). Any interest paid on first or second mortgages over this amount is not tax deductible.

Monday, January 16, 2017

Is the mortgage interest deduction an example of wealth redistribution?

11:56 PM Posted by Unknown , , No comments
The mortgage interest deduction is a stick used by the government to encourage a specific behavior - home ownership.  It may be a velvet covered scented oil laced stick that beats the middle and upper classes to pay more for housing than they should, but it is still a stick.  And like all government actions, has unintended consequences - new home builders are the greatest beneficiary, not really home buyers...

The concept that tax avoidance is somehow wrong... is, well, wrong.  A government is not entitled to any and all income or property that the citizens enjoy.  It is entitled to just enough to perform those minimal functions that will lead to a safe and just environment for the citizens to conduct themselves (most specifically national defense and an honest judiciary and law enforcement).  And if the government chooses to encourage a behavior (home ownership / employer sponsored health insurance / etc.) via the tax code, so be it... so long as the encouragement is reasonable and not discriminatory.

And if wealth redistribution is the real intended end of any tax scheme, in the end that scheme will fail.  The scheme will run out of 'other-people's-money' to redistribute and bankrupt itself trying to deliver on promises made to provide 'free-lunches-for-all.'  See Greece...
 
What differentiates the USA from Greece?  In the USA, right now people actually pay their taxes for the most part.  The USA tax code is convoluted and corrupted, but not by too much yet.  In Greece, if you pay your taxes you are considered a sucker.  When the tax law in the USA is sufficiently corrupted, the citizens will stop paying (all) of their taxes.  More business will be driven to the black market and everyone will accept this outcome as reasonable as it is in Greece.  Unfortunately, just as when the citizens of the USA ignored the Eighteenth Amendment and the Volstead Act (prohibition) it lead to a disrespect for the rule of law, once our tax code is sufficiently corrupted and confiscatory it too will lead to a disrespect for the rule of law and people will begin to ignore it in mass.  Once that happens, the government becomes just another 'gang-of-thugs' looking to collect their tribute.
Additionally,  it seems people are still generally confused and/or have fallen for conventional wisdom. To call Mortgage Interests Deductions a form of "wealth redistribution" implies that a medium is taken from one particular group of people and given to another. That is simply not what is happening, so lets not even call this wealth redistribution. Also this is not a subsidy, because tax deductions cannot be subsidies. Lets call them simply what they are: a deduction or "loophole" as people prefer (although loophole is incorrect as well because that would imply that this law isn't in the book).

Aside from the answers already given, there are plenty of ridiculous claims regarding this tax break. We are told that these tax breaks creates a distortion in the market place. This distortion will effect home prices because it encourages people to buy homes, and for this reason this tax break must be repealed. Except no one ever comes up with a simple answer to this question: How will a tax break effect home prices or the real estate market? The simple answer to that question is that it doesn't.

There is nothing bad or distorting about people spending their own money on things that they love and want, in this case is their homes. All mortgage interest deductions do is make the purchase more inviting as oppose to the higher priced alternatives. If we are really considered about subsidies and wealth redistribution then why don't we get rid of all subsidies and wealth redistribution programs created by the federal government to support home ownership. Starting from Fannie and Freddie and working our way towards the FHA and possibly stopping at HUD.

There are people who believe that renting is only for suckers. In this instance if buying is so much more superior to renting, then the market would reflect this. Eventually, more and more people start buying property to qualify for the tax advantage than they do renting apartments. This happens until rental rates fall until people are generally indifferent about renting or buying (following the laws of supply and demand). In a way, the landlord is offering a tax deduction to his/her tenants in the form of lower rents. Why would we want to hinder this? We can make renting more attractive without the repeal, since the repeal actually means a tax increase on home owners, which would make home ownership less attractive and then we are back at square one again...

Also if people are more worried about single-family homes being purchased more than apartments then simply introduce a deduction for rental apartments. This way, there is no financial advantage towards renting than there is over buying houses. But the fact that no one has ever thought of this just shows that this is is not about the deduction nor is it about the wealthy. It's simply about helping the Government collect more revenue.

The "fairness" argument against tax deductions is the worst kind of utopian, egalitarian nonsense. Deductions shouldn't be repealed. People should work to see that more and more people enjoy them.