Recasting/Re-amortization of Mortgage with Principal Prepayment

I’m getting ready to pay some extra money towards my mortgage loan, and remembered that I have an option to re-amortize my mortgage loan if I make a substantial principal prepayment. This is also known as “recasting” a mortgage. Basically, my monthly payments are lowered slightly over the same remaining term instead of simply accelerating my loan payoff schedule. My interest rate and escrow payments stay the same, and I don’t have to pay any fees or closing costs.

Most loans that are sold off to investors do not allow recasting, as I imagine they don’t want the added complexity. However, some allow either a one-time recast, and other allow repeated recasting if the extra payment is large enough. Ask your lender about this feature beforehand if you’re interested in it. In my case, I get to re-amortize whenever I pay a lump-sum of at least $10,000.

My tentative plan, discussed briefly in my Quick & Dirty Plan To Reach Financial Freedom, is to make two extra mortgage payments a year. (If interest rates rise enough, the money will simply be placed into a long-term bond.) This will shorten my 30-year mortgage by an entire decade, so I’m mortgage-free in 20 years at age 50. The commonly discussed biweekly payment plan is the same as making one extra mortgage payment each year, and knocking off about 5-6 years.

For my mortgage, if I pay exactly $10,000, it would only lower my normal mortgage payment about $50 a month. Theoretically, if I keep my payments the same as if I didn’t re-amortize, my total interest paid would be the same, and my loan would still be paid off 10 years early. The lower required mortgage payment would simply provide an added bit of flexibility in case I run into financial trouble.

However, for my situation the $10,000 requirement would mean I’d have to wait and lump my payments every other year instead of making the payments whenever I like. I don’t think $50 a month is worth the added hassle, as I really do want to have this thing paid off in 20 years.

(As a reminder, I think paying extra towards your mortgage should only be done after you have maxed out your tax-deferred accounts like IRAs/401ks, as well maintaining an emergency fund or other liquid assets.)

Posted in Real Estate | 26 Comments »

Bank of America: $25 BillPay Promo For Existing Customers

BofA is also offering a $25 bonus to encourage existing customers to try out Online Billpay. Both personal and business accounts qualify. You have to register beforehand at the promotion page, and then pay 2 bills online within 30 days.

I would try and register anyway, but in the fine print at the bottom of the page, it states that this offer is only available to customers who have not made a bill payment with Bank of America Online Banking within the last 6 months.

Posted in Deals & Offers | 9 Comments »

Bank of America Promotion Offer Code: $100 Bonus For New Accounts

Saw this on TV. Bank of America is offering a $100 bonus for new checking account customers, both personal and business. A new customer is a “person who is not currently a signer and who was not a signer within the last 6 months on a Bank of America personal or business checking account.” The requirements:

Get $75 when you open a new qualifying personal or business checking account with a $250 deposit and make a purchase with your debit card.

Get an additional $25 when you make 2 online bill payments within 30 days. Business checking customers can pay 2 bills with our Small Business Online Banking Bill Pay service or use the Online Business Suite® Direct Payments service.

Be sure your application includes the promotion offer code WIWGASINT for personal accounts, and SBECASH for business accounts.

Posted in Deals & Offers | 14 Comments »

Martin Lodge-on-Wheels: 10′x20′ House for $37,900

While looking for more LendingClub P2P loans ($25 bonus) to fund today, I ran across a couple that was trying to buy a tiny home called a Lodge-on-Wheels. The current model is 10 ft. by 20 ft. and costs $37,900. I thought it was pretty neat to help fund this loan for people trying to achieve financial independence.

Many more pictures here.

Inspired by her experiences after Hurricane Katrina, owner Julie Martin wanted to design an affordable tiny house that can be easily moved from place to place on a trailer. It is made primarily out of wood, unlike most of the RVs out there, which probably doesn’t make it something you want to be moving around all the time. But I love the look and feel of it, much more “homey” to me.

To get started, just park the LoW, plug in an extension cord, and connect a garden house. Some features:

• Composting toilet, no sewer line required
• Tankless water heater
• Microwave/convection oven, 2-burner stove, fridge/freezer
• Cedar countertops, and even cedar-walled shower.
• Fully insulated
• Hardwood (bamboo) floors
• Loft for queen-sized bed

Beyond emergency housing, the possible uses for such a place are interesting. The site seems to be catering towards hunters and outdoorsy folks looking for a portable lake cabin. However, as the couple suggests, this could be a permanent home for anyone. You could simply “rent” someone’s backyard space and live in it. Find some cheap land and own your home for less than a BMW. If you have the yard space yourself, you could create your own rental property or in-law suite.

This also reminded me of the 250 sf condos in San Francisco that were selling for $279,000. I wonder how much they are selling for now?

$25 LendingClub Bonus
If you are interested in lending, you can still use this special $25 lender sign-up link to get a free $25 to try it out with no future obligation. There is no credit check and you don’t even have to deposit anything. After you are approved, the $25 will show up in your account balance, and you can lend it out immediately.

Posted in Retirement | 34 Comments »

Forex.com Account Promotion Code: $200 Bonus

Here’s another potential $200 bonus for placing a trade in newly opened account at Forex.com by July 31st. The application seems to suggest the backend is also run by Gain Financial, same as with Zecco Forex. The promotion code used is CashAd05. The offer appears open to all, as there is a banner linking directly the bonus page from the Forex.com home page.

The cost for a trade can be held under $10 if you simply do a quick buy and sell roundtrip trade. Use the demo program before trading with real money, so that you properly understand the effect of lot sizes and leverage. FX trading can be very tricky. The fine print:
Read the rest of this entry…

Posted in Deals & Offers | 18 Comments »

Dangerous Personal Finance Magazine Headlines: The Attraction of High Yields

With money market fund and savings account yields still pitifully low, it is very tempting to look for investments with higher yields. Indeed, the personal finance magazines know this all too well, dangling teasers on their covers like:

• Stocks That Pay 8% (Kiplinger’s Personal Finance, Oct 2008)
• How to Get 8% on Your Money (SmartMoney, Dec 2008)
• Grab These Bonds For 10% Yields (SmartMoney, Feb 2009)
• Stocks That Pay You 5% Or More (Kiplinger’s Personal Finance, Feb 2009)

I know that they need to attract casual readers to buy their issues off the crowded magazine rack, but I fear that these articles can hurt readers by focusing primarily on yields.

From tankers to pipelines to real estate stocks, we’ve uncovered the investments with the best yields.

Stock dividends and bond yields are certainly a very important component of return. But with such significantly higher yields, the real question should be why the yields are high, as there is definitely higher risk. If your investment spits out 5%, but the actual investment decreases in value by 5%, um… you don’t make any money. You would have made more money at a bank. And if it does worse…

“Earn 8% or More” becomes “Earn 8% or a LOT LESS”
I bring this up because I was just reading the June 2009 issue of Kiplinger’s with an article entitled (surprise!) Where to Find Top Yields. But as I read, they first meekly admit that their last “yieldfest” article missed the mark. So I found it, and did a little before-and-after comparsion:

In Earn 8% or More (July 2008), they wrote:

Shares of First Industrial Realty trust (FR), a national developer and operator of warehouses and light industrial buildings, more than doubled between November 2002 and November 2006 but have since fallen 33%, to $30, over concerns about flat rents and the firm’s high debt. The stock trades below First Industrial’s net asset value per share and pays 10%, one of the highest yields among long-established REITs. There is still ample cash flow to maintain dividends.

Pays 10% yield, ample cash flow, a long-established REIT. Almost sounds stodgy and safe. Fast forward to June 2009:

Credit-market chaos wreaked havoc with the recommendations in our previous “yieldfest”. Our best picks, emerging-markets bond funds such as Fidelity New Markets Income and Pimco Emerging Markets Bond, dropped about 10% over the past year through April 9. Pipeline stocks, such as Kinder Morgan Energy, also held up reasonably well. But we had our share of disasters. For example, First Industrial Realty Trust cratered by nearly 90%, while Genco Shipping & Trading dived 73%.

Their best picks still dropped 10%? Most were in the disaster category. Another pick from July 2008:

For example, look at First Trust Strategic High Income (symbol FHI), which borrows to invest in bank loans, mortgage-related securities and junk bonds. Its share price plunged from $20 in early 2007 to less than $10.50 eight months later, as its underlying assets fell victim to the credit crunch and the real estate recession. But the shares have rebounded to $12.25, and the fund’s net asset value per share, now $10.38, has stopped crumbling (unless otherwise noted, all figures are to May 12).

But even as the fund was collapsing, it kept paying out 16 cents a month. Based on the current share price, the payout (which doesn’t require borrowed money or represent a return of capital) comes to a yield of 15%. We generally don’t recommend closed-end funds selling at 18% premiums to NAV, but First Trust’s yield is too luscious to pass up.

From a share price of $12.25 at the time of recommendation, the share price of FHI as of 7/13/09 was $3.38. Including those “luscious” dividends, the 1-year total annualized return was -57.3%

They also neglected to mention the fact that FHI has management fees of 2.21% plus “other fees” of 2.11% for total annual expense ratio of 4.32%. Ouch.

Both of these are extreme examples, but an important lesson can be learned by reading the entire 2008 article first, and then reading the 2009 article. The story is always very convincing. You’ll get high yields, historical stability, and some sort of reason why things are looking up. It will be tempting. But remember, this part of your $5 magazine is selling sizzle, and won’t reimburse your losses when there’s no steak.

* p.s. Don’t get me wrong, I don’t think that these magazines are all bad. They often have very useful articles, which I read and link to regularly. I am a paying subscriber, after all. However, I do think that these “yieldfest” articles are written primarily to increase their own revenue, not the investment returns of their readers.

Posted in Investing | 19 Comments »

Picture of California Tax Refund IOU (Registered Warrant)

You may have heard that California is broke, and is sending out IOU slips instead of checks for income tax refunds. I thought that I would be safe as I usually owe taxes, but due to an amendment of my return, I ended up getting one in the mail as well. Here is a scan for historical preservation:

(click for larger version)

Of course, I receive it the day after major banks like Bank of America stopped accepting them. There are some local credit unions that still accept them from members, but as they pay 3.75% interest I might just wait and see how things go.

Hopefully this doesn’t turn out to be really historical, as in “remember when California started printing its own money and the state government imploded?”…

Posted in Taxes | 33 Comments »

Tracking Investment Portfolio Using Google Docs

I spent a little time tinkering with Google Docs Spreadsheets today, trying to use it to track the asset allocation of my investment portfolio.

GoogleFinance() Function
This function allows you to import data from Google Finance like current stock prices, p/e ratios, or performance. Here is the Google Docs Help page. For example, if you want to pull up the price of a share of Google stock, you’d enter this into a cell.

=GoogleFinance("GOOG"; "price")

Importing Personal Data
I could not find an easy way to import my actual holdings into Google Docs, but I’m not sure if you want that capability due to privacy concerns. Google Docs does allow you to import from RSS or XML feeds. I ended up just manually entering the ticker symbols and number of shares I held for each mutual fund. This means I will have to update my 401(k) funds after each paycheck, and my other holdings when I make a transaction or when a dividend is paid.

Shared Example
Below is a shortened version of my online file, as a quick example.

You can view the full version more easily here. To edit, go to File and click on “Create a copy…”. You can then poke around and change the ticker symbols to your own.

In the full version, I have columns that compare my current asset allocation percentages to my target percentages. This can help people who wish to rebalance when their allocations are off by a certain amount. I can see that I am currently overweight in Emerging Markets due to their recent run-up, and underweight in TIPS. Everything else seems close enough.

The pie charting function seems a little buggy, I couldn’t get it to show the proper labels.

Posted in Investing, Tools & Calculators | 16 Comments »

WT Direct Promotion Code, Up To $150 Opening Bonus

The online division of Wilmington Trust Bank, WT Direct, is running another promotion for new customers. You can get up to $150 cash bonus on top of the standard interest rate (currently 1.76% APY) if you open a new account and maintain a certain balance from 7/31 to 10/31. Here are the balances and corresponding bonuses:

The fine print:

This offer is available to new WTDirect clients only. Primary account holder must not have held a WTDirect account in the past 12 months. To receive the bonus, a valid promotion code starting with the letters “WFIT” must be present on the application at the time of account opening. WTDirect account must be funded via electronic (ACH) transfer received by 7/31/09. Account must remain open and in good standing through 10/31/09, the end of the promotion period. There is no minimum balance to open the account but the bonus is determined by the account balance at the time of initial funding, which must be a minimum of $10,000 and must remain on deposit through the end of the promotional period. Bonus will be credited to client’s WTDirect account on or about 11/20/09. WTDirect reserves the right to cancel or modify this promotion at any time without notice.

If you click through the bonus link above, the promotion code of wfitc32_1760738 or similar should already be filled in for you.

The Numbers: 2.75 to 3% APY 3-month CD
How does the bonus work out when converted to an interest rate? To start, you are already getting 1.76% APY, or about 1.75% APR. On $10,000 for 3 months, that’s 10000 x 0.0175/12 x 3 = $43.75 in interest. Since the bonus is $25 for a $10,000 balance, this works out to about 2.75% APY. On a $50,000 balance, the bonus is $150 and works out to nearly 3% APY.

Therefore, you can treat this bonus as a 3-month CD paying 2.75 to 3% APY, which is more than 1% higher than any other available 3-month CD.

Application Process and Setup

I’ve already opened a WTDirect account for a previous bonus, so here a quick summary of what to expect when applying. First, they gather the personal info. Second, they use the now-popular Equifax ID check questions to verify your identity. Third, you can fund electronically with account and routing numbers, although you must come back and verify trial deposits later. Finally, you can electronically sign the application and disclosures. There were no physical forms to send in, although a welcome packet does arrive by mail. They state explicitly that there is no credit check.

As for practical matters, WT Direct’s online transfer system allows unlimited linked banks, and transfers to external accounts are free both in and out with a 2-3 day transfer time.

Posted in Banking, Deals & Offers | 8 Comments »

Zecco Forex Promotion Code: Up to $200 Bonus

Zecco Trading, best known for their free stock trade offers, recently started a Forex platform where you can trade foreign currencies. Since Forex appears to be a zero-sum game (negative if you account for inflation and spread costs), I wasn’t really interested. However, today I received an e-mail that they are giving me a $200 bonus to try it out. Okay, now I’m listening.

You must open a Zecco Forex account, fund the account, and make your first trade by July 31st, 2009. The promotional code given to me was CashAd04. The actual bonus amount depends on how much money you have in the account when you place your first trade:

The fine print:

To qualify for cash bonus, you must open and fund a new Zecco Forex trading account by July 31, 2009. After first trade is initiated, cash bonus will be deposited to your account within 3-5 business days. Bonus amount varies based on amount of deposit according to the following schedule: $200 bonus with deposit of 10,000 or more; $100 bonus with deposit of $2500 -$9999; $75 bonus with deposit of $1001-$2500, $50 bonus with deposit up to $1000. Cash bonus cannot be withdrawn within 90 days of initial funding. Existing Zecco Forex customers who have funded and traded are not eligible to receive this promotion. Self-directed trading accounts only; managed accounts and accounts referred by an Introducing Broker are not eligible to receive this promotion. Limit one cash bonus per customer. This offer is non-transferable.

Credit card funding. An possible extra is that you can fund via a credit card. According to posters in this FW thread, this should show up an a purchase, which means we can get miles or cash back on top of the $200 bonus. There is a $5,000 cap on each credit card funding, but you can perform multiple transactions. However, there is a chance that withdrawals will also be done to a credit card, which would negate any rewards. Worth a shot?

Warning. Forex accounts let you use things like 200x leverage, which means you can both win or lose a lot of money really, really fast. (More likely lose due to spreads.) Don’t place a trade until you know what you’re doing. I’ll post my trades if I do them. So far, I am looking at placing an unleveraged/minimally leveraged trade with a 1-2 pip spread in a Mini account.

Posted in Deals & Offers | 25 Comments »

What Is Your Motivational Burrito Currency?

(image credit: chipotlebreakfast.com)

Sometimes people wonder why a guy who makes a six figure salary will still bother to fill out a form for a free razor, or sign up for a credit card for the $100+ bonus. Well, for one thing it’s a habit leftover from making $15,000 per year. Back then, adding anywhere from $2,000-$5,000 a year to my annual income from various shenanigans was a huge benefit. It allowed me to enjoy niceties like not eating spaghetti three times a week and booking flights to visit my girlfriend (while still paying down student loans).

In this way, I started to correlate little savings with specific things. $5 meant a plate at the Indian food cart or a loaded burrito. So $100 wasn’t just an amorphous $100 to be deposited into a bank and forgotten, it was 20 meals. I’ll do XX for a month of naan & curry!

By extension, creating additional freelance income of $1,000 to me meant a flight + hotel to a new and strange spot in the world I hadn’t been before. For another person, they might think in terms of Lucky jeans, automotive gear, or ski lift tickets. I know this is a consumeristic form of thinking, but you don’t have to spend all the money you make, nor do you have to save all the money you make.

Do you have a form of motivational currency? Or is cash king?

Posted in Frugal Living | 34 Comments »

American Express Card Statement Shows Restaurant Tips

If you’re like me, you keep receipts to reconcile with your credit card transactions online. If you dine somewhere you leave a tip, you might be wary that the waitperson might alter your tips, either by accident or on purpose. If you just see the total amount charged and lose your receipt, it’s hard to remember what your tip was. Well, I just noticed on an American Express credit card statement that they actually break down the food and tip charges for your convenience.

I didn’t bother scanning, but it looks just like this:

MOM & POP INDIAN CUISINE $26.44

FOOD/BEVERAGE $22.44
TIP $4.00

A nifty feature, I wonder why others don’t do this as well. However, I am still sticking with the Citi Forward for the 3.5% cash back.

Posted in Credit Cards | 12 Comments »

Monthly Net Worth Update - July 2009

Credit Card Debt
I have taken money from credit cards at 0% APR and placed it into online savings accounts, bank CDs, or savings bonds that earn 4-5% interest (much less recently), and keeping the difference as profit. I even put together a series of step-by-step posts on how to make money off of credit cards in this way. However, given the current lack of great no fee 0% APR balance transfer offers, I am mostly waiting on existing offers to end. My credit score remains high enough that I haven’t seen any negative actions.

Retirement and Brokerage accounts
Markets most went sideways this past month. 401k contributions are still going regularly, and I want to make my 2009 non-deductible IRA contributions soon. I still think the best thing to do is to keep investing regularly, although it is quite boring to watch.

Cash Savings and Emergency Funds
We still have a year’s worth of expenses in our emergency fund, and it is still growing. Possible uses for extra cash might include capital improvements to the house, including a solar hot-water system to reduce electricity bills, or a photovoltaic system to possibly eliminate them! I love the idea of selling electricity back to the city.

Home Equity
Using four different internet valuation tools - Zillow, Cyberhomes, Coldwell Banker, and Bank of America (old version) - I took the average and took off 5% to be conservative and 6% for real estate agent commissions.

We remain “underwater”, with our outstanding mortgage balance greater than what we probably would net after selling our home. Home equity variations continue to dwarf all other activity, which is somewhat annoying since it’s not that important. Just gotta shrink that mortgage!

Posted in Goals, Investing, Real Estate, Retirement | 27 Comments »

Chase Sapphire Preferred 25,000 Point Sign-up Bonus

The Chase Sapphire Preferred card is offer 25,000 points after your first purchase. There is a $95 annual fee, but it is waived for the first year. (Update 7/10/09: Annual fee appears to no longer be waived.) Thanks to the readers who sent this in. (There is also a regular Chase Sapphire card with no annual fee, that is offering 10,000 points after first purchase. Don’t get that one.)

What can you do with 25,000 points? You can get a check for $250, a credit towards a flight purchase of $312.50 (online booking free, but $20 fee via phone), or 25,000 frequent flier miles with a 1:1 point transfer. The exact participating airlines are unknown. Info taken from their benefits guide.

Rewards program quality? At 1 point per $1 spent with no special bonus categories, and only a 20% bonus for $50,000 in annual spending, this card is not worth a $95 annual fee. I’d sign-up, redeem the points for a quick and easy $250, and then cancel the card within the first year.

Instead, get a 1:1 frequent flier point transfer and 1.25 miles per $1 spent with the cheaper Starwood American Express card (which also has their own 25,000 Starpoint sign-up bonus).

Posted in Deals & Offers | 33 Comments »

Citi Forward Card Bonus & Rewards Follow-up: 5x Rewards at Restaurants and Amazon.com

I promised to follow-up on the features of the Citi Forward card after getting mine, and am finally getting around to it. Read on to see how you can get a $100 gift card and also 3.45% cash back with this card at restaurants, Amazon.com, and more.

Sign-Up Bonus

New cardholders get 6,000 bonus ThankYou points after $250 in purchases made within 3 months. In addition, you get another 5,000 points for choosing paperless statements within 3 months.

The 11,000 bonus ThankYou points showed up promptly. I signed up for paperless statements immediately, and received the 5,000 points on my very first statement. I made the required $250 in purchases during the first month (showed up on the first statement), and received the 6,000 points on my second statement.

5x ThankYou Points

This card works off the same ThankYou points system as many other Citibank cards. 10,000 points = $100 gift card at stores like Sears, Macy’s, Staples, Old Navy, Gap, etc. 12,700 points = $100 towards a student loan or mortgage payment. 14,000 points = $100 prepaid Visa credit card. 14,500 points = $100 statement credit.

What makes this card unique is that you get 5 points for every $1 you spend on books, movies, music, and at restaurants. On everything else, you get the plain vanilla 1 reward point for every $1 spent. No annual fee.

5x Rewards at Restaurants
Again, at 1 penny per point with gift cards, getting 5x points is like getting 5% back when eating out. Even if you convert to straight cash, that’s still 3.45% cash back at restaurants (5/1.45). Or 3.57% back if you are okay with prepaid Visa card, which I am since they are usable anywhere that takes credit cards.

I have gotten my 5x rewards at fast food restaurants (McDonald’s), chain sit-down restaurants (Chili’s, etc), and also mom-and-pop places.

5x Rewards at Amazon.com
I can also officially confirm that Amazon.com is considered a bookstore. This is true even if your entire purchase (or any of it) did not contain books. I made one purchase with books, and one with only electronics, and got 5x points for both. So you can indeed get 3.45% cash back at Amazon, or 5% back in the form of gift cards.

The 5x points show up separately under the “Bonus Points by Category Earned” on your online statement:

I can also confirm it works at Regal movie theaters. I have this card stored online at my Amazon account so I don’t forget, and it’s in my wallet marked for restaurants only. Makes it easy to track my dining-out budget!

Posted in Credit Cards, Deals & Offers | 28 Comments »