Christian Finance

Our refinance story - part 9 (the conclusion)

As our last official act of business prior to going into vacation mode, I am happy to say that we signed the docs to close on our re-fi today!

It has been a long and tedious process - the lender took an impossible amount of time every step of the way.  However, because our new interest rate is so low (4.5%), I would not let the slowness of the process stop me from going through with it.

Some interesting things I noticed:

1.  They did not do an income verification.  I know that they called my HR department to verbally confirm my employment, but they did not request salary information.

2.  They did not request any financial information (e.g. checking account statements, investment account statements, etc).  

3.  Things moved impossibly slow at the beginning - we originally applied in April and the file did not even get looked at until well into May.  Over the past month however, contact with the loan processor was more frequent, so it appears that the lender has either hired more staff or the volume of work for them has dropped off significantly.

Points 1 and 2 surprised me quite frankly.  With all of the talk about higher mortgage standards and difficulties in getting financing, I would think that a lender would at least demonstrate a small amount of interest to confirm that I can actually afford to make my mortgage payments.

Notwithstanding the process, I am pleased with the final outcome. We managed to take 8 years of payments off of our old loan and will be saving thousands of dollars in the process.  I am thankful that this is finally complete!

I'll be back in a week.

Summer Vacation

My family and I are taking off a few days for a well earned vacation.   I will be back in about a week with more from about the wonderful world of Christian Finance.

Take some time to savor that which is around you.  God has blessed us all in so many ways - remember to thank Him for that!

Our refinance story - Part 8

After a rather strange week, our mortgage re-fi is finally ready to close.  We are scheduled to sign the docs on Saturday.  

There was a small hiccup this week that had the potential to delay things - it related to certain closing costs and whether they would be rolled into the loan.  When I applied for the re-fi, I was specific as to what I expected to roll in, but somewhere along the line, this was 'forgotten' by the bank and the net result was that I now have to come up with extra dollars at closing time.

Even though I was right - and the loan processor even admitted that they messed up - I still decided just to close as is.  I had calculated that each day this process dragged on was costing me about $15 in additional interest costs (yes, $450 per month) so it just wasn't worthwhile to potentially delay closing by a couple of extra weeks over this issue.

I am very excited by this - our new loan will be for 15 years with a 4.5% interest rate (8 years and 1.5% less than our current mortgage).  This will save us thousands of dollars over the life of the loan - good stewardship indeed!

Investing Choices

So let's assume for a minute that you recieved some type of unexpected windfall - for example an inheritance - and you now have $25,000 of free cash burning a whole in your proverbial pocket.  What would you do with it?

I know somebody in this situation and they have been kind enough to share their thoughts on options they are considering (note that they are debt free other than their mortgage and are not included to go on a spending spree):

1.  Invest the windfall in a portfolio of stocks and/or funds;

2.  Invest the proceeds as a down payment on a condominium (and borrow additional money) and then rent the condominium out; or

3.  Invest the proceeds as a down payment in a cash flow positive small business (again borrowing additional money) that could possibly pay off the loan and return your investment within five years.

Each of these of these choices brings its own set of risks and rewards along with it.  Because the choices are so diverse, it must also be recognized that each choice will have differing amounts of work attached to them.

From purely a cashflow standpoint, it is likely that the third option will provide the greatest reward - however, at what cost will that reward be achieved? (think about the hours of work that will be involved in handling the affairs of the business).  This individual has to seriously consider whether they are willing to invest the time required to generate business profits.

If a limited amount of effort needs to be expended, then leaning toward an investment portfolio may be a good consideration.  However, consider that with an investment of that size, it is unlikely that a good portfolio of quality stocks can be put together, so the investor must choice funds instead - and these bring their own set of risks and rewards along with them.  Rewards from this option will likely be lower - I would not anticipate long-term returns of greater than 8% (notwithstanding any market fluctuations).

If long-term gains are the goal, then the real estate option is likely the best choice to make. Because the condominium is available at a deflated price, a good rental market and low interest rates gives it almost a positive cash flow from day one with a limited amount of work - along with a lot of long-term potential upside once the housing market rebounds.

So what is the point of this?  It simply comes down to choices.  As an investor, you must make choices that work for you - notwithstanding what your friends might be saying or what you have heard on TV or from reading some kind of blog.  Sit down and think about what you are investing in; don't jump in too fast or without thinking things through; do your research.

Most importantly: pray about it! (duh)  It is not every day that you come into a lump sum of cash.  Be a good steward with what God has blessed you with.

Our refinance story - Part 7

In case you were wondering (it has been a while since my last update), the refinance is still going on - just very slowly.  After extending our interest rate lock yet again last week, I finally got word today that our file is ready to go to final underwriting.

I assume (and this is probably a bad thing to do) that things should go pretty smooth from here on in, so I am cautiously optimistic that we will be closing in the near future - and the sooner it closes, the sooner I can start enjoying a 4.5% interest rate.  Stay tuned!

GM Bankruptcy Shares - Update

As I outlined here, 'old' GM shares have absolutely nothing to do with the 'new' GM.  Old GM holds the assets that will be auctioned off to pay creditor debts.  As has been stated repeatedly by not just me, but even GM itself, it is highly unlikely that the shares will retain any value since the assets available are far less than the debts owing on those assets.  Anyway, the shares are trading again - now under the ticker symbol MTLQQ - under the name of Motors Liquidation Company.

If you happen to have any of these shares, it is up to you what to do with them, but the fact that they still hold a bit of value gives you the opportunity to recover at least something from your investment.  They will be worth nothing soon.  Be wise - and do the right thing!

Today's Stats

New claims for unemployment insurance dropped unexpectedly this week, to the lowest level seen since January of this year.  Continuing claims - for people who remain on unemployment insurance - also dropped significantly - the first such drop in recent memory.

Whether this week's numbers are a statistical anomaly or evidence of better things to come remains to be seen.  However, it is something positive that we can look at in hopes that the worst of things are behind us, and that perhaps better days are coming soon.

Summertime

With summer in full swing, things are pretty quiet on the finance front this week. There really is not a lot of interesting news out there right now, so I'll just throw out some advice: relax, enjoy, and savor life. Keep God as your focus, and don't lose sight of the really important things.

Is it safe to buy GM - Part 6

I know - I said that I wasn't going to post on this topic anymore, but recent activity in the market and resulting traffic to this website made me change my mind.

General Motors emerged from bankruptcy today.  The 'new' GM is owned primarily by the United States, with some shares owned by the Government of Canada, and the UAW.  Its stock is not tradable on any stock market or over the counter market because it is no longer a publically traded company.  If you have a hankering to own a piece of the new pie, there are indications that an initial public offering of stock may occur sometime next year.

Since the bankrupty declaration, the 'old' GM had been trading over the counter under the ticker symbol GMGMQ.  Its purpose for trading was explained in here and here.  I am bringing this to you attention again because it appears that many folks were purchasing these shares today with the belief that they were purchasing shares in the 'new' GM.  Trading was halted in these shares mid-day and at of the time of writing, there is no indication of whether they will trade ever again - which of course would mean that they are worthless.

If you hold these shares, then it is possible that you are stuck 'holding the bag' - an unfortunate investment lesson indeed.  If the shares do start trading again, I will inform you of such.  Sorry to be the bearer of such news right before the weekend.

Long Term Market Cycles

A couple of days ago, I heard something on CNBC that caught my interest - the concept of an 18 year market cycle.  Researching it a little more brought some rather startling revelations about historical market performance.  The general concept of this theory is that the stock market tends to run in cycles that last about 18 years - and these cycles are either bullish or bearish on an overall basis.

First think about the cycle itself: the last bull market is generally accepted to have begun in 1982 - and the way things look right now, it ended in the spring of 2000.  The bear cycle prior to 1982 begun in approximately 1974, with a bull market prior to that beginning after World War 2.  And prior to that, we had the stock market crash of 1929 with the resulting depression triggered by it.  Think about this for a moment: if this cycle turns out to be the case, it means that our current market cycle could last toward almost the end of the next decade!  Horror of horrors!  

I this proves to be true, then how can an investor watch out for themselves in this type of market?  The general theme is that a 'buy and hold' strategy will not work in a non-bullish cycle - obviously if a market moves sideways for years on end, there will be no capital gains made during that time frame.  This would conceptually apply to index funds as well (i.e. passive investing).

Rather, an active investing approach is required - which for most of us means professional management of funds through quality investment managers like Dodge & Cox or T. Rowe Price.

While I am not suggesting that this theory is a valid predictor of market behavior, it does provide an interesting historical perspective on market trends - so you may wish to consider it when allocating your investment dollars amongst actively and passively managed funds.  By taking a prudent investment approach, you can  help mitigate some risk to your investment portfolio while still trying to maintain positive investment returns - no matter what type of market cycle we may be in.