Your house and the home mortgage attached to it are probably the largest single item of debt you have. It’s amazing to me how many people either don’t care or still do not know about some of the home refinancing options out there. Since this is a large amount of debt were talking about here, even minimal interest rate or loan term reductions can have very large benefits to your families wealth over time.
The two most common programs are:
The FHA Streamline Refinance program for those who have FHA backed mortgages.
The HARP Refinance Mortgage program for those who have Fannie May or Freddie Mac backed loans.
The eligibility for these two programs has recently changed to include more people than ever before. You owe it to yourself and your family to make an inquiry to an independent mortgage lender, NOT your primary servicer (Wells Fargo, Bofa, Chase, etc) to see if you can save some money here.
Since many people don’t have the benefit of two stable 40 hr per week jobs anymore, and health insurance benefits can be difficult or expensive to come by, couples need to adjust their outlook accordingly. Oftentimes the limiting factor in starting a business, taking outside (higher paying) contract or consulting work is health insurance for a family. If one spouse had a very steady, but non progressive job that provides income and health benefits i.e. nursing, education, many state and government jobs. Then, the other spouse can be more risky with starting a business in order to provide the ‘upside’ income potential.
Flexibility is also key here with kids schedules, housekeeping, and coordinating the couples schedules.
Let’s just get this out of the way now. 401k’s should only be relied upon for the tax benefits and employer matching contribution, NOT for any appreciation. If there is anything the stock market has taught us the last
12 years, it’s that fraud is rampant on Wall Street, fund managers and fund companies are solely interested in their own well being, and any large corporation executives pretty much have free reign to play ‘beat the number’
every quarter to ensure they get the largest bonus even if it destroys the long term value of the business. They DO NOT have small shareholder interests at heart.
So, what can you do?
Real Estate. If you’ve been hit financially from the real estate crash (who hasn’t), then the last year or two and presently is the time to be buying rental properties and getting some benefit from the upside appreciation that rental real estate is currently enjoying. Plus if your actively managing it, you get the tax breaks, current return on income (which is probably better than your 401k is doing these days), as well as the capital appreciation. While it is too in depth to go into a detailed analysis in this post about the financial technical details of rental real estate benefits, I’m sure most of you are already familiar with the basics.
Also, don’t forget the 1031 exchange from a rental(s) into a primary residence and then selling that residence tax free using your homeowners exemption as a way to completely avoid any captial gains taxes.