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Hanover Mortgages

The Refined Mortgage Lending Company & Home Loan Lenders

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Posted on March 3, 2021

What is a Conventional Mortgage Loan?

Owning real estate is expensive. Even for those with a solid savings account and a comfortable salary, it’s unlikely that you’ll be able to simply buy a home outright. That’s why most people, when they decide to invest in property and purchase a home, decide to take out a mortgage loan. 

You’ve probably heard of mortgages at various points throughout your life, but you may not have ever arrived at answers to the questions, “what is a conventional loan?” or “how do mortgages work?” Don’t worry: we’re here to make it clear. Let’s start with a simple definition.

What is a conventional loan?

A conventional home loan is a large sum of money lent to a borrower by a bank, credit union, or lending agency—often referred to as a conventional mortgage when the loan is used to purchase property. The term conventional distinguishes this kind of financial product from other types of loan, like a jumbo loan, a VA loan, or an FHA loan.

In this article, we’ll walk you through the conventional loan basics you need to know to start your search with confidence. We’ve also included information on how to qualify for a mortgage and where to start looking for one when the time is right. 

How do conventional loans work?

Conventional loans work like this: the bank (or credit union or lending agency) purchases property on your behalf and turns the title over to you—however, you promise to pay back the lender with interest.

Interest is the percentage rate you pay the bank for the trouble of lending you money, and it’s how the bank makes money from having lent you such a large sum. Interest rates are either fixed or adjustable; in the latter case,  they typically change once per year depending on the state of the economy. The interest rate you receive on a conventional loan will also vary based on your own personal financial profile (more on that in a bit). 

Interest rates and qualifications for a mortgage can vary significantly across the wide range of home loan products available to consumers, but conventional home loan terms tend to fall into a narrower set of categories. One distinction you’ll find between two types of mortgage products is conforming vs nonconforming loans. 

Conventional mortgages are typically lent out with 15 or 30 year repayment periods; the one that’s right for you depends on your personal finances, your income, and the interest rate you can secure. 

Conforming vs nonconforming

In the US, there are two federally run institutions that oversee a large portion of mortgage lending: Fannie Mae and Freddie Mac. The important takeaway is that conforming loans abide by lending standards put in place by Fannie Mae and Freddie Mac. Most importantly, these limits determine the possible size of the loan; In 2020, the conforming loan limit for a single-family home is $510,400. (Limites are higher in Hawaii, Alaska, Guam, and the US Virgin Islands.)

Nonconforming loans, sometimes called jumbo loans exceed these borrowing amounts. Nonconforming loans can vary more in their limits, rules, and conditions. Because they present a larger risk to lenders, they tend to come with higher interest rates. Non-conforming loans are not necessarily risky by default—though the Consumer Financial Protection Bureau warns they sometimes can be—but it’s still wise to read the fine print when shopping, and be sure to shop around before committing to any lender.

If you’re curious whether the homes you are interested in can be financed with a conforming loan, you can read more about the 2020 Federal Housing Finance Agency guidelines on FHFA.gov. 

Who qualifies for a conventional loan?

Conventional home loans are more accessible to those with middle- to high-income, as they often necessitate a down payment and favorable financial profiles in order to secure a reasonable rate. This distinguishes them from government-backed loans, such as FHA loans, VA loans, and other products that are aimed at people with lower incomes, and make purchasing homes accessible to them.

In general, there are three areas that lenders care most about when assessing an applicant for a conventional loan: credit score, debt-to-income ratio, and down payment. Let’s take a look at each one of those qualifying criteria and what a lender might look for in a loan applicant. 

Credit score

You may have often heard about people who want to improve their credit, or who want to gain access to certain financial benefits due to having good credit. Your credit score is essentially a measure of your trustworthiness as a borrower. It’s based on your past abilities to consistently pay off debts in a timely manner, as well as other factors like the number of accounts you have open. This includes debts like:

In fact, one reason many people work to improve their credit scores is to gain more favorable terms on a home loan they hope to apply for in the future. Credit scores are measured using a few different metrics. Two of the most common credit reports pulled by lenders are FICO and VantageScore. Both of these are measured from 300 to 850, with a score of 300 representing a very dubious borrowing history (likely with many late payments and defaults), and a score of 850 representing a strong and trustworthy history of borrowing. 

Having high credit can mean the difference between a massive interest rate and one that’s much easier to manage. If you can, it’s smart to work on improving your credit before you seriously consider applying for a mortgage. 

Debt-to-income ratio

The next mortgage lender consideration is your debt-to-income (DTI) ratio. This ratio is pretty much exactly what it sounds like: the total amount of money you spend on debt in a month divided by the amount of money that you bring in. Lenders consider this metric important because it indicates how well you may be able to keep up with payments. If your ratio is too high, it may suggest that there will be strain on your finances when adding a mortgage payment to the mix.

Check out the graphic below for instructions on how to calculate your own debt-to-income ratio.

If your DTI is too high, it may be worth taking steps to lower it before you apply for a conventional loan. This can be done by asking for a raise at work, following a debt repayment strategy, or consolidating outstanding debts to lower monthly payments. Waiting might feel frustrating, but facing a high interest rate for years or decades down the road will be more of a hassle in the long term. 

Down payment

Your down payment is another significant factor that lenders closely consider when determining your eligibility for a conventional loan and the interest rate attached to it. A down payment is just a large lump-sum of money that you pay up front; it’s a percentage of the total cost of the home. For example, a 20% down payment on a home worth $500,000 would be $100,000; the remainder of the price could be financed through a conventional mortgage loan.

Many lenders may be more willing to approve you for a loan with a favorable interest rate if you’re able to put down a larger down payment. 

You may have heard that you need a 20% down payment in order to afford a home. The average house costs around $250,000 according to Zillow, so it’s understandable if you don’t have $50,000 on hand. While that 20% number is definitely still a great option if you can comfortably afford it, you don’t need to panic if you don’t have that kind of cash laying around. Some lenders may allow you to make a down payment as low as 3%.

However, it’s important to note that if you do make such a low down payment, you may have to purchase private mortgage insurance, or PMI. The cost of PMI is added to your monthly mortgage payments, usually until you’ve paid 20% or more of the balance on the loan. For this reason, it’s generally a good idea to put 20% down if you can; this way, you wave PMI fees, lowering your monthly payments. 

How to apply for a conventional loan

Applying for a conventional loan can be a nerve-racking process, but by making the right preparations and taking the right steps, it’s totally doable. If you’re considering applying for a conventional loan in the near future, here are some steps that you may want to take.

Consider your financial profile

Before you start seriously inquiring about a mortgage, it’s smart to get your personal finances in the best shape you can. That means repairing bad credit if your score is less than ideal, paying down existing debts and working on increasing your monthly income, and saving for a down payment as large as you can comfortably make. 

Research lenders

From local credit unions, to large multinational banks, and consumer-friendly lending agencies to less-than-reputable ones, there are tons of places where you might apply for a mortgage. Some offer more preferable terms than others, and some make it easier to apply—but might come with greater risk. 

These are all factors you should consider as you seek out the right lender for your mortgage. It’s smart to compare several lenders before you settle on the right fit for your needs. 

Apply for your mortgage

Once you’ve decided on which lender best suits your needs, you can apply for your mortgage. At this point, your house hunt can begin! The application process can take some time—sometimes more than a month—and involves heavy documentation so it’s smart to start this early, preferably before you’ve started house hunting in earnest. 

Conventional home loans can feel confusing and stressful, especially because there is so much money at stake. However, by learning the ins and outs of mortgages prior to applying, you can give yourself a leg up in the game, and the resources you need to find the financial product that’s right for you. 

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Posted on March 3, 2021

Matthew McConaughey Pays $7.8M for a Chic Beach Property in Hawaii

It’s hard to think of a better place to hang out for Matthew McConaughey than the Kaupulehu Residence—a brand-new $7,845,000 home on the big island of Hawaii.

Brimming with “barefoot elegance,” the home is part of the Kukio Beach and Golf Club community in Kailua-Kona, according to the listing.

The residence features six bedrooms and 6.5 baths, and the McConaughey family will be its first official residents after the purchase in December 2020.

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Esperanza Residence LLC bought the 1-acre lot for $1.65 million in 2018 and invested nearly $3.8 million into the construction of the home. It was designed by Kona architect Paul Bleck.

High-quality finishes in the home include floors of La Paz stone and wide-plank oak, and surfaces of handcarved limestone, Italian Calacatta marble, and quartzite.

There is also extensive custom woodwork, including teak cabinets, oversized cedar sliding doors, and the cedar ceiling in the lanai.

The luxe home is full of doubles, including two primary suites, two pools, two outdoor fire pits, and the indoor and outdoor kitchens.

New Kona residence
New Kona residence

realtor.com

Kitchen and great room
Kitchen and great room

realtor.com

Fire pit
Fire pit

realtor.com

On the singular side of things, there is one wine cellar, one media room, one bocce court, and one office/bonus room.

One of the home’s most striking features is the 66-foot infinity pool complete with spectacular beach views. Those views can also be enjoyed from the great room with 63-foot-wide pocket doors, which allow breezes to flow through the house.

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Watch: Matt Damon’s $21M Pacific Palisades Home Says ‘Big Time’

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The home initially went on the market in July 2019 for $7,995,000. The actor strolled in with an offer in late 2020.

Backyard with infinity pool
Backyard with infinity pool

realtor.com

As a resident of this exclusive gated community, McConaughey will have the opportunity to join the Kukio Golf and Beach Club, which features two golf courses, two clubhouses, a sports complex, and an indoor and outdoor spa. The community is located near the Four Seasons Resort Hualalai and Kona Village–Rosewood Resort.

McConaughey, 51, first blazed onto the scene in 1993, when he appeared in the coming-of-age comedy “Dazed and Confused.” He won a Best Actor Oscar for his performance in “Dallas Buyers Club,” and recently published a memoir, titled “Greenlights,” which debuted at No. 1 on the the New York Times nonfiction bestseller list.

Source: realtor.com

Posted on March 2, 2021

How to Stop Living Paycheck to Paycheck

November 8, 2017 Posted By: growth-rapidly Tag: Financial Advice

Living paycheck to paycheck means, in simple terms, that you are always running out of money before your next paycheck arrives. As any financial advisor would tell you, living paycheck to paycheck is incredibly stressful and can impact your financial well-being.

When you are living paycheck to paycheck, it is nearly impossible to get ahead financially. You don’t have any extra money to save or to create an emergency fund. Sometimes you end up borrowing  money to make ends meet and get into more debt.

For most of us, it is just not feasible. We are just not making enough money. If this is the case, something needs to be changed.

This article will discuss how to stop living paycheck to paycheck. It will first discuss the various signs that suggest that you might be living paycheck to paycheck. It will also discuss the reasons why you would want to stop living paycheck to paycheck. If you’re serious about ending the cycle of living paycheck to paycheck, it makes financial sense to work with a financial advisor to come up with a financial plan.

One main reason why you would want to stop living from paycheck to paycheck is that you want to attain financial independence.

Find out now: 6 Reasons You Will Never Reach Financial Independence.

To be financially independent requires that you have a lot of money. We all have heard the saying that money can’t buy happiness or that money can’t buy love. Don’t get me wrong—there is some truth to this. For example, a millionaire, just as a poor person, can be very unhappy in life.

He or she can be sad, depressed, suicidal despite having a lot of money. But one thing we know for sure about being rich is that money can buy hard goods.

Money gives us options and protection. It can buy you better physical and emotional health. Money can buy a beautiful beach house in Hawaii. Money can give you peace of mind knowing that your kids’ college education is covered; and knowing that you and your family are protected after retirement. Having a lot of money can give you the freedom to put your mind to more positive things.

Here’s what being rich can give you: a home, owning rental properties, a vacation home, early retirement, private school for your children, financial independence, large bank account, freedom to travel the world, membership in country clubs. Who would not want these things!

Another reason why you need to stop living paycheck to paycheck  is to protect yourself in case of a financial disaster.

Living paycheck to paycheck also means that you are relying on your job/employer for your income and you always run out of money. The problem with that is that you are in deep trouble when an emergency comes.

You could lose your job. If you lose your job, not only you won’t have a paycheck to cover your monthly expenses, but also you have no cash reserves. You need an emergency fund to help carry you over possible short-term loss of income.

You could also be sued for damages if you are in a car accident. These things happen every day. Avoiding the vicious cycle of living paycheck to paycheck, thus having lots of money can protect you from these hazards.

Signs that you are living paycheck to paycheck

Living paycheck to paycheck is not hard to identify. Here are some signs that might suggest you are living paycheck to paycheck.

1. If your checking account always drop below zero before your next paycheck rolls around, then you are living paycheck to paycheck.

2. If you haven’t saved enough money for retirement or your children education than you are living paycheck to paycheck.

3. You are living paycheck to paycheck when you have no insurance whatsoever, whether it is car insurance, home insurance, health insurance, or life insurance.

4. You can’t pay your bills every month.

5. You have no savings.

6. You rely on credit cards to cover your expenses until the next payday.

7. Your salary is not enough to keep you from going into debt. I f you see yourself borrowing money from friends, family, to make ends meet, no matter how much you try to save and even if you are not spending money, then you are living paycheck to paycheck.

How to Stop Living Paycheck to Paycheck

1.Create a Budget

You are living paycheck to paycheck because you are not budgeting or are not making enough money to cover your expenses. The first step to stop living paycheck to paycheck is to create a budget. A budget helps you understand where the money goes. It shows you if you are spending more than you can afford. It helps you direct your money where it matters the most.

2. Cut Cost or Spend Less

Once you create a budget, you need to start to cut cost or spend less. This will allow you to have some extra money at the end of the month. For example, you might want to get rid of cable TV, which normally costs you around $130 a month. You might consider bringing lunch to work instead of eating out. You might want to making your own coffee instead of spending $100 a month on coffee at Starbucks.

This extra money can help you to pay off debt fast. Once you pay off your debt, you can start putting some money into an emergency fund.

3. Save Money After Each Paycheck

The main reason why you are living paycheck to paycheck is because you have no money saved up. So the key to avoid living paycheck to paycheck is to put aside in an emergency fund some money after each paycheck, no matter how little.

Even putting aside $50 after each paycheck can make a difference and can relieve worry and pressure. Having an emergency fund is the key to end the living paycheck to paycheck cycle.

Start saving your money by opening a savings account.

4. Obtain a Part-time Job

A part-time job can help you save more money, help pay off debt faster, thus breaking the living paycheck to paycheck vicious cycle.

There are some side hustles you can do to bring home extra money.

  • Start a blog. If you’re interested in starting a blog that makes money fast, I created a step-by-step guide that will help you start a blog of your own for cheap, starting at only $3.95 per month (this low price is only through my link) for blog hosting. In addition to this low price, you will receive a free blog domain (a $15 value through my Bluehost link if you purchase at least 12 months of blog hosting.
  • Take Surveys.  If you want to make extra cash, I suggest that you take surveys online. I recommend, Pinecone Research (earn minimum $3 per survey), InboxDollars ($5 sign up bonus + get paid to take surveys), Ebates (earn up to $40 cash back). See this blog post for a complete list. 
  • Sell your stuff on Decluttr. Do you have CDs, DVDs, Blu-rays, old cell phones and games you don’t want anymore? Then sell them through Decluttr! Decluttr is the fastest and easiest way to make extra cash by selling your unwanted CDs, DVDs, and more.
  • InboxDollars pays you in cash to watch fun videos, take surveys, play games, shop online, search the web and more.. They’ll also give you a $5 bonus for free just to give it a try. By spending just 5 to 10 minutes on your free time, you can earn $50 to $70 a month with InboxDollars.
  • Sign up for a website like Ebates where you can earn CASH BACK for just spending like how you normally would online. Also, when you sign up through my link, you’ll receive a free $10 gift card bonus to stores like Macys, Walmart, Target, etc.
  • Sell your photos on shutterstock. Do you like to take photos for fun? Why not get paid for it? Shutterstock is a marketplace that allows you to sell your photos.
  • There are many other side hustles listed in my post 16 Proven Ways to Make Money Fast.

5. Pay Off Debt

Another way to stop living paycheck to paycheck is to get out of debt. The more debt you have, the more likely you are living paycheck to paycheck. That means you cannot have any extra cash because it all goes to pay off debt.

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Source: growthrapidly.com

Posted on March 1, 2021

5 Ways to Save for College Now

When it comes to student loans, my husband and I have opposite stories. While my tuition was partly paid for by my parents and scholarship money, the rest came from $24,000 in student loans. My husband, on the other hand, sailed through school without taking on a single penny of debt.

That’s because his family had been saving in a college fund for most of his life. While I was struggling to make student loan payments and living on a shoestring budget after graduation, he was focusing on his passions and living comfortably on a more modest income than mine.

September is College Savings Month, so here are some of the best ways to save for your child’s college expenses – and how to get them involved in the process.

Types of College Saving Accounts

Start a 529

A 529 is a savings account specifically used for education-related expenses. Parents can contribute money to a 529, invest the proceeds and receive a special tax break.

The 529 is a popular option for parents because many states offer tax credits or deductions on contributions. The tax credits vary depending on where you live. For example, Indiana provides a $1,000 tax credit if you contribute $5,000, while Arizona residents can take a $5,000 deduction for individuals or $10,000 for families.

There are seven states that don’t allow any tax credits or deductions, including California, Delaware, Hawaii, Kentucky, Maine, New Jersey and North Carolina.

529 contributions are not deductible on your federal taxes. If you live in a state without income tax, then opening a 529 won’t help you save money on taxes.

529 funds can only be spent on education-related expenses, including tuition, fees and textbooks. If that money is spent on ineligible fees, the family will have to pay a 10% penalty on their taxes. Traveling to and from college, paying for study abroad expenses and school supplies are some examples of non-qualified expenses.

Because you can invest money in a 529 like you would invest in a retirement account, your contributions can grow over time. You can invest those contributions in an index fund or mutual fund.

Many 529 providers allow you to create a personalized URL so other people can add money to the account. For example, you could send out this link before Christmas or your child’s birthday to encourage grandparents and other relatives to make a 529 contribution instead of buying toys.

Anyone can save in a 529, even if they’re not a parent, guardian or direct relative. Plus, they’ll also get the tax credit or deduction.

Each state creates its own annual limit for 529s, and they range from $235,000 to $529,000. Because the limits are so high, you don’t generally have to worry about exceeding them.

Roth IRA

Parents who live in states without 529s can contribute to a Roth IRA. Contributions are tax-deferred, and there’s no penalty for taking withdrawals for college expenses.

The annual contribution limit in 2020 for a Roth IRA is $6,000.

Encourage Your Child to Save

Making your child help save for their own education will teach them a valuable financial lesson. It will show them the importance of putting away money regularly and the patience of saving. If they have a part-time job, encourage them to put a percentage of that money toward their college fund.

If they get birthday or Christmas checks, convince them to deposit most of it in their college fund. Remember, your kids will barely remember the presents they got for Christmas, but they will remember when they apply for college and have to pay tens of thousands of dollars for tuition. You could incentive their savings habit by matching every dollar they put in.

Make Saving Automatic

Putting money away for college is similar to saving for retirement or any other long-term goal. It’s easier to save if you make it an automatic process. Most 529s, IRAs and other accounts let you set up automatic contributions from your checking or savings account.

Choose an amount you’re comfortable contributing every month. If you’re saving in a 529, try to save at least enough to get the maximum tax deduction or credit.

Open a Cash-Back Card

Instead of using a credit card to earn miles or other cash-back rewards, open a credit card that specifically helps you save for a 529. Here are a couple options:

Fidelity® Rewards Visa Signature® Card

The Fidelity® Rewards Visa Signature® Card provides 2% cashback on all purchases, and cardholders can transfer that cashback toward a Fidelity 529 account. If you spend $1,000 a month with the card, you’ll earn $240 a year in cashback.

There’s no limit on how much cashback you can earn, and there’s no annual fee. You’ll have to create a Fidelity-sponsored 529 account if you don’t already have one.

Upromise Mastercard from Barclays

The Upromise Mastercard offers 1.25% cashback on all purchases and provides a $100 sign-up bonus if you spend $500 within the first 90 days.

If you link the card to a 529 College Savings Plan, the cashback will receive a 15% bump. If you spend $1,000 a month, you’ll earn $172.5 in cashback rewards annually.

This card also comes with a round-up feature where you can round every transaction to the nearest dollar. The difference will be placed in your 529 and will also earn 1.25% cashback. There is no annual fee.

Apply for Scholarships

Once your child is in high school, they can start applying for merit-based and need-based scholarships to offset the cost of tuition. Students can start searching for scholarships at any point in high school, but should especially focus during their junior and senior years.

Students can search on national databases like Scholly and FastWeb, but also try to find scholarships on their own. They can search for scholarships based on their particular interests, city or state and other personal details. For example, if they’re interested in computer programming, they can find computer programming-specific scholarships.

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Posted on March 1, 2021

HomeStreet Bank Mortgage Review

Good Financial Cents
Hawaii.

The institution’s assets have grown to $7 billion as of 2018, and it now employs over 1,200 mortgage employees, while continuing the impressive growth that has allowed it to continue expanding for nearly a century.

HomeStreet Bank offers an extensive portfolio of loan options to borrowers of differing financial abilities, including fixed- and adjustable-rate mortgages of varying terms. Government-backed FHA, VA, and USDA loans are also offered to qualifying borrowers.

In addition to conventional loans, HomeStreet Bank offers jumbo loans that cover up to $3 million.

Despite receiving several regional awards, HomeStreet Bank is not featured on our list of the best mortgage rates of 2018.

Current HomeStreet Bank Mortgage Rates

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HomeStreet Bank Mortgage Options

HomeStreet Bank provides borrowers with a relatively comprehensive list of loan options to choose from, including conventional, jumbo and government-backed mortgages.

Fixed-Rate Loans

With a fixed-rate mortgage, the interest rate remains the same throughout the entire term of the loan, rather than adjusting over time. It allows borrowers to choose between 10-, 15-, 20- and 30-year fixed-rate mortgages.

The shorter loan terms require more substantial payments but typically carry smaller interest rates, making them a good choice for those who can afford to pay off their mortgage quickly or expect to sell the property relatively quickly. Conversely, longer loan terms make sense for those who expect to live in their new home for many years to come. 

Adjustable-Rate Loans

An adjustable-rate mortgage (ARM) carries a lower interest rate at the start of the loan term, then eventually adjusts to higher rates after a set number of years. 

HomeStreet Bank provides 5/1, 7/1, 10/1, and in select cases, 15/1 ARMs, meaning the interest rate is fixed for the first five, seven, ten, or fifteen years of the mortgage, then fluctuates annually according to the market. Borrowers who can pay off the loan before the rate begins to adjust can benefit from an ARM loan.

Jumbo Loans

The maximum value that can be assigned to a conventional loan is $453,100, according to the limit set by Fannie Mae and Freddie Mac in 2018. Loans that exceed that maximum require jumbo mortgages, which HomeStreet Bank provides in the form of both fixed-rate and adjustable loans.

The lender will cover loans of up to $3 million, requiring as little as five percent down for loan amounts up to $625,500 and ten percent down for loans up to $850,000.

FHA Loans

Borrowers with a credit score of 580 or higher can potentially qualify for loans backed by the Federal Housing Administration, which can be obtained with as little as 3.5 percent down. The relatively low credit minimum and down payment requirements make FHA loans very popular with first-time homebuyers.

VA Loans

If you are a veteran, active service member, or surviving military spouse, you may qualify for a VA loan, which requires no down payment and no mortgage insurance. The Department of Veterans Affairs guarantees VA loans issued by HomeStreet Bank. 

USDA Loans

USDA loans, like FHA and VA loans, are government-backed mortgages that HomeStreet Bank Mortgage offers to qualified candidates. These are designed to provide more affordable financing options to low- or moderate-income homebuyers purchasing property in rural areas.

HomeStreet Bank Application

Though HomeStreet Bank has a history that dates back to the early twentieth century, the financial institution’s mortgage application process has clearly entered the twenty-first.

Borrowers can fill out an application online and will be provided with a quote upon completion, though a Social Security Number is required as part of the process. HomeStreet Bank’s website is also easy to navigate, with thorough explanations of each loan type, along with links to homebuyer assistance programs and resources for first-time homebuyers.

It even offers a mobile mortgage app that allows you to calculate monthly mortgage payments, scan documents to your loan officer and keep track of the loan process.

However, those who prefer the old-fashioned approach can also speak with a loan officer on the phone, or at any of the bank’s branches in Washington, Oregon, Idaho, Hawaii or California.

HomeStreet Bank is a long-running regional lender that has won many awards for its community involvement, including a 2013 Innovative Community Banks of the Year Award, a 2014 Community Spirit Award, and a 2015 Community Commitment Award.

HomeStreet Bank Lender Grades

After nearly a century in business, HomeStreet Bank has built up a solid reputation, and has been profiled for its “honest, practical and diverse mortgage lending services.” Additionally, the company’s Seattle headquarters has received an A+ rating from the Better Business Bureau.

HomeStreet Bank is also a BBB accredited business and has only had eight customer complaints, which were closed in the past three years. 

  • Information collected on Dec. 26, 2018

HomeStreet Bank Mortgage Qualifications

Non-traditional credit history considered? Debt-to-income requirements? Minimum down payment requirements? Gift funds or down payment programs accepted? Minimum credit scores?
Yes Varies for different loan products As low as 0% for VA and USDA loans, 3% for some conventional loans, and 5% for certain jumbo loans Gift funds accepted for some loan products and several down payment programs available 580 for FHA loans, no minimum for HARP refinance loans

Government-backed VA and USDA loans are available with no money down for qualified applicants. Some conventional loans can be acquired for as little as 3 percent down, depending on the borrower’s credit status.

For jumbo loans, five percent down is required for loan amounts up to $625,500 and ten percent down for amounts up to $850,000.HomeStreet Bank advertises itself as a flexible lender willing to work with borrowers of limited means.

As such, it will consider non-traditional credit history mortgage applications, as well as gift funds and several state-specific down payment assistance programs, many of which are grants that don’t require taking on extra debt.

Minimum credit scores vary by loan product, with FHA loans only requiring a score of 580. Additionally, there is no credit minimum for Home Affordable Refinance Program loans.

HomeStreet Bank Phone Number & Additional Details

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Good Financial Cents, and author of the personal finance book Soldier of Finance. Jeff is an Iraqi combat veteran and served 9 years in the Army National Guard. His work is regularly featured in Forbes, Business Insider, Inc.com and Entrepreneur.

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Source: goodfinancialcents.com

Posted on March 1, 2021

Coronavirus Travel Restrictions, Airline & Hotel Cancellation Policies

The ongoing COVID-19 pandemic is wreaking havoc on the global travel industry, upending millions of travelers’ lives, and threatening countless livelihoods in the process.

It’s likely the pandemic will affect many travelers, either directly or indirectly. Because this is a fluid situation that changes by the day, bookmark this list to refer to frequently so you can get new information as it becomes available. The list includes:

  • A running tally of countries and regions with coronavirus travel restrictions
  • Guidelines for determining when to cancel planned travel and how to get a refund or credit if you do
  • A list of cancellation and change policies for major airlines, hotels, and cruise operators.

Countries & Regions With Coronavirus Travel Restrictions

Due to the fast-moving nature of this situation, this summary does not necessarily reflect all current restrictions. Before booking international travel, refer to your destination countries’ English-language government websites for up-to-the-minute details and check the U.S. Department of State’s list of country-specific travel advisories.

Entry Restrictions for U.S. Travelers

Many countries remain closed to U.S. citizens and nationals who don’t meet certain narrow exceptions, such as holding dual citizenship, having close family members in-country, or traveling on qualifying “essential business.”

The good news is that most countries and territories that continue to permit entry to U.S. travelers lie on this side of the Atlantic, within a few hours of the mainland United States by air. They include Mexico, the Dominican Republic, Ecuador, and most Caribbean island nations and territories, though some Caribbean nations impose arrival restrictions that can impede free movement. Farther-flung countries that remain totally open to U.S. travelers include Turkey, Maldives, and several Balkans nations.

The United Kingdom and Cambodia, among a few other popular tourist destinations, allow U.S. citizens to enter but generally require some combination of quarantine upon arrival, confirmed negative COVID-19 test result, ongoing health monitoring and check-ins for up to 14 days after arrival, and a sometimes hefty financial deposit to ensure compliance.

CNN has an up-to-date list of countries that allow Americans to enter and what restrictions or entry requirements, if any, American travelers face. The U.S. Department of State (State Department) maintains a more comprehensive and technical list of country-specific restrictions and requirements.

Because the situation remains fluid, neither this list nor CNN’s or the State Department’s should not be considered comprehensive. Refer to both before booking and commencing international travel but also check with local immigration authorities to determine whether you’ll even be permitted to complete your journey or required to quarantine on arrival for it renders travel impractical.

U.S. Department of State Travel Advisories

The State Department is closely watching the COVID-19 situations in other countries with an eye to keeping U.S. national travelers and expats safe abroad. Four travel advisory levels denote the relative danger of travel to each country and subcountry region:

  • Level 1: Exercise Normal Precautions. These are low-risk countries.
  • Level 2: Exercise Increased Caution. These areas often present an elevated risk of property crime or exposure to novel illnesses not common in the U.S.
  • Level 3: Reconsider Travel. Travel to these areas is unusually risky due to political instability, widespread violence, disease outbreaks, and other dangerous conditions.
  • Level 4: Do Not Travel. The State Department does not advise travel to these areas, and U.S. persons already in Level-4 areas should leave as soon as possible. The State Department has little or no effective presence in some Level-4 countries.

On March 31, 2020, the State Department issued a global Level-4 travel advisory for the entire world outside the United States, effectively discouraging any international travel for the foreseeable future.

The State Department’s global advisory expired in early August 2020, but certain countries remain at Level-4 due to severe coronavirus outbreaks or other potential health risks. Again, because many international jurisdictions effectively prohibit entry by Americans and others require lengthy quarantines upon arrival, planning nonessential international travel remains difficult at best.

Depending on your home base, you might have trouble completing internal U.S. travel plans as well. Some states have (or had and may reimpose) strict quarantine-on-arrival or pre-arrival testing requirements. For example, New York State requires travelers from noncontiguous states and countries where COVID-19 is widespread to quarantine for up to 10 days, promptly take a COVID-19 test, or both upon arrival.

Check with your destination state’s tourism and health authorities for up-to-date information before making nonrefundable bookings.

Cancellation & Change Policies for Major Airlines & Hospitality Companies

This running list of coronavirus cancellation and change policies includes major airlines and hospitality companies, many of which are waiving change fees and dispensing credit for rebookings many months into the future. Refer to each company’s website for more details and cancellation or rebooking information specific to your destination.

Airline Cancellation Policies

All major U.S. airlines and budget carriers have coronavirus-related cancellation and change policies. Unless otherwise noted, rebooked flyers must pay the fare difference between the original and new fares, if any. If you’re flying with a smaller carrier, check their website for details.

Also, be aware of any airline-imposed hygiene requirements, as most major airlines now require passengers to wear masks or face coverings on flights and in boarding areas.

American Airlines

American Airlines’ policy waives change fees for passengers booked before Sept. 8, 2020, for travel between March 10, 2020, and March 31, 2021, to rebook and complete travel by Dec. 31, 2021. The policy applies to all airports served by American and allows changes to destination and connecting cities.

Separately, American Airlines now waives change and standby fees for all domestic and short-haul international flights (primarily within North America, Central America, and the Caribbean) booked after Oct. 1, 2020. This policy applies to paid and award fares in all fare classes.

United Airlines

United Airlines’ policy waived change fees for all international passengers booked before March 2, 2020, for travel between March 9 and Dec. 31, 2020. The rebooked itinerary must begin within 24 months of the original ticket date. This policy applies to all airports served by United.

Beginning Jan. 1, 2021, change fees may still apply to international itineraries originating and terminating in non-U.S. territories.

For domestic U.S. passengers traveling from a U.S. airport (including Alaska, Hawaii, Puerto Rico, and the U.S. Virgin Islands) to any domestic or international destination, United no longer charges change fees on most new economy and premium cabin bookings. Per United, this change complements several other passenger-friendly updates to the airline’s ticketing policy. However, the policy may not apply to Basic Economy fares.

Separately, all electronic travel certificates issued for flight cancellations are now valid for 24 months from the booking date. United has not specified an end date for this policy. United also waives change fees on all new bookings for 12 months from the booking date, though this waiver will likely end at some point.

Delta Airlines

Delta has permanently eliminated change fees and award redeposit fees for most fare classes on flights from North America to anywhere in the world. This policy may not apply to Basic Economy fares.

Delta also waives change fees for all other flights booked after March 1, 2020, for travel through March 31, 2021. Affected travelers have at least until Dec. 30, 2022, to complete travel.

Alaska Airlines

Alaska Airlines’ policy waives change fees for all flights to and from all airports booked on or before Feb. 26, 2020, for travel through Dec. 31, 2020. The airline also waives change fees for all flights booked from Feb. 27, 2020, to March 31, 2021, for travel through February 28, 2022.

In both cases, rebooked travel must commence one year from the original travel dates.

Southwest Airlines

Southwest never charges change fees for rebooked travel. Under normal circumstances, travelers who cancel flights at least 10 minutes before scheduled departure receive credit equal to the fare for rebooked travel within a year of the original reservation date.

However, Southwest has made two important but temporary exceptions to this policy:

  • Beginning Sept. 8, 2020, any accumulated fare credits expire on Sept. 7, 2022.
  • Through Dec. 15, 2020, Southwest Rapid Rewards members can request to convert fare credits set to expire on Sept. 7, 2022, into Rapid Rewards points, which never expire.

JetBlue Airways

JetBlue has permanently eliminated change fees on most fares, beginning on April 1, 2021. Changes to Blue Basic fares may still incur change fees as high as $100 per ticket, however.

JetBlue’s existing temporary change fee waiver continues to apply on all flights booked through March 31, 2021, for travel at any time. Rebooked travel may commence at any time (provided JetBlue has scheduled flights far enough out). Canceled flights produce a travel credit good for 24 months from the original travel date equal to the original fare.

Spirit Airlines

Spirit allows passengers who change their travel plans due to coronavirus to make one free fare modification (to change the destination city or travel dates, for instance) for travel at any point in the future.

Passengers who choose to cancel rather than change their flights receive travel credit equal to the original fare for use within six months of the original travel date or a full refund of the fare.

Frontier Airlines

Frontier Airlines’ policy waives change fees for any booking, provided the change is made at least 60 days before the first date of travel. Later itinerary changes cost up to $119 per change.

Hawaiian Airlines

Hawaiian Airlines offers fee-free changes for all flights to all markets. The waiver applies to all flight dates. Tickets purchased through Dec. 31, 2020, for travel at any time, are valid for two years from the ticket purchase date. Tickets purchased through March 31, 2021, are valid for one year from the ticket purchase date.

Check with Hawaiian health and travel authorities before booking or commencing travel, as Hawaii has had stricter arrival restrictions than most other states.

Hotel & Resort Cancellation Policies

These major hospitality operators have coronavirus-related cancellation and change policies. If you’re staying at an independent property or with a smaller chain, refer to the operator’s website for more details.

Hilton

Hilton no longer has a coronavirus cancellation or change policy in place. However, the chain has made some important modifications to its loyalty program:

  • Extended 2020 Hilton Honors members’ status through March 31, 2022
  • Extended expiration on all unexpired Weekend Night Rewards issued until Aug. 30, 2020, through Aug. 31, 2021
  • Paused Hilton Honors point expiration through Dec. 31, 2021
  • Rolled over all status-eligible nights earned on stays through Dec. 31, 2020, into the 2021 calendar year, keeping them eligible for 2021-2023 tier status

Marriott

Marriott waived cancellation fees for all bookings worldwide (refundable and nonrefundable) through June 30, 2020. This policy was not extended past June 30, 2020, and it’s unclear whether it continues to apply on a case-by-case basis. Check with your destination hotel or Marriott’s customer service hotline for more information.

Separately, Marriott has extended 2019 elite status awards through February 1, 2022, for all Bonvoy loyalty program members, according to an October 2020 release from the company. In February 2021, Bonvoy members who earned elite status in 2020 were eligible for a one-time bonus equal to 50% of their 2020 tier’s annual Elite Night Credit requirement.

Hyatt

Hyatt is waiving change or cancellation fees for all bookings worldwide (refundable and nonrefundable) through July 31, 2021. Limited exceptions apply for certain Hyatt brands, including MGM Resorts.

Additionally, Hyatt is suspending loyalty point forfeiture through at least June 30, 2021. In other words, you won’t lose loyalty points or status due to canceled or deferred travel or because you simply didn’t travel as often as usual during the pandemic, as would normally be the case.

Other loyalty program changes include extending program members’ status tiers as of March 31, 2020, through Feb. 28, 2022, without requiring any additional stays or other qualifying activities.

InterContinental Hotels Group

InterContinental Hotels Group (IHG) has relaxed its reservation change and cancellation policies indefinitely. IHG also instituted a new rate class (“Book Now, Pay Later”) that allows guests to change or cancel reservations up to 24 hours before arrival, with limited exceptions.

Choice Hotels

Choice Hotels offered fee-free cancellations to travelers booked worldwide (refundable and nonrefundable) until Sept. 30, 2020, after which local market policies resumed.

Additionally, Choice Hotels has paused points expiration for Choice Privileges members through at least Dec. 31, 2020. Further loyalty program changes may be on the horizon as well.

Airbnb

Airbnb is broadening its extenuating circumstances policy, which provides compensation when guests need to cancel for extraordinary reasons, to all markets it serves through Oct. 31, 2020. Qualifying bookings must have been made prior to March 14, 2020.

Bookings made after March 14, 2020, are subject to the host’s normal cancellation policy unless the guest or host is sick with COVID-19 on the scheduled check-in date.

Vrbo

Vrbo doesn’t have a global coronavirus cancellation policy, other than a promise to refund its Traveler Service Fee on successful cancellations. The platform encourages guests and hosts to heed travel and health warnings from the World Health Organization and work together to reach a solution when guests must cancel. Vrbo always encourages guests to purchase travel insurance.

When & How to Cancel Planned Travel for a Refund or Credit

Use these guidelines to determine whether to cancel planned travel to affected areas and how to get your money back (or credit toward future travel) if you do.

If you’re still not sure whether the pandemic impacts current travel plans or if you’re not sure you’re eligible to cancel for a credit or refund, check with your carriers, hotels, or tour operators.

When to Cancel Planned Travel Due to the Coronavirus Pandemic

Seriously consider canceling planned travel due to the coronavirus pandemic if you’re a member of a high-risk group, taking high-risk travel methods, or traveling to a high-risk region. Other considerations also apply.

  • You’re Planning International Travel. As the State Department’s global Level 4 warning suggests, international travel is extremely high risk and vulnerable to disruption in a pandemic environment, even when the destinations involved don’t appear to be hotspots. Moreover, the risk works both ways. Even if you’re healthy and relatively unlikely to become seriously ill from COVID-19, you could become a carrier and spread the disease to higher-risk people. Remember, due to the high incidence of COVID-19 in much of the U.S., many international markets require U.S. travelers to quarantine on arrival or prohibit them entirely.
  • You’re a Member of a High-Risk Group Who Has Not Yet Received a COVID-19 Vaccine. That includes people over age 60 and those with underlying health conditions, such as immune system disorders, diabetes, and hypertension. The risk of serious or fatal complications of COVID-19 is much higher for these groups.
  • Your Trip Includes a Cruise. If you’re booked on a cruise anytime soon, you should closely monitor developments and seriously consider rebooking at a much later date, especially if you’re a member of a high-risk group. Communicable diseases spread quickly on cruise ships and many cruise lines have yet to resume normal operations.
  • You Can Get a Refund for Any Reason. If you’re not going to be out money for canceling your planned trip, the calculus is a lot more straightforward. You can cancel altogether or rebook for a later date.
  • You Have “Cancel for Any Reason” Travel Insurance Coverage. Standard travel insurance policies don’t cover cancellations due to concerns about becoming sick. They only apply if you’re actually ill. More generous policies with “cancel for any reason” riders are a bit more expensive but allow you to cancel without penalty no matter what. If you were fortunate enough to purchase such a rider, now is the time to use it.
  • Your Destination or Transit Countries Are Considering Travel Restrictions. You don’t want to get stranded in a foreign country due to sudden travel restrictions. Check reputable local news sources in your destination and refer to English-language government websites for signs of pending restrictions.
  • Your Trip Is Not Essential. Canceling a trip abroad to visit an elderly relative you haven’t seen in years is much more difficult than canceling a destination bachelor party that’s easy to reschedule for after the wedding.

How to Cancel Planned Travel for a Refund or Credit

To get a refund or credit toward future travel if you need to cancel due to the coronavirus pandemic, you must likely rebook your flight, hotel, or tour within a period designated by its operator. Other steps could be necessary as well, including:

  • Checking the Operator’s Coronavirus Rebooking Policies. Check the list of cancellation and change policies in the preceding section and contact each operator for information specific to your booking or destination. When operators allow fee-free changes and rebookings, you could end up paying nothing out of pocket to reschedule.
  • Determining Whether You Can Cancel Without Penalty. If you prefer to cancel without rebooking, read each pertinent travel company’s cancellation policy. Unless you purchased a nonrefundable booking to get a lower rate, there’s a good chance your hotel or resort will allow you to cancel without penalty up to a week before your arrival (and sometimes even closer). If you’ve booked a short-term homestay through Airbnb or another rental platform, your host’s cancellation policy usually determines how much of your booking you can recoup, with options ranging from a full refund to total forfeiture. However, Airbnb has broadened its extenuating circumstances policy, which makes exceptions to host cancellation policies in times of crisis, for the countries hardest hit by the pandemic. Most airline bookings are nonrefundable after 24 hours, though you can pay more for a refundable fare if you’ve yet to book. Without a protection policy, which adds to the cost of the voyage, cruise fares generally aren’t refundable — but many cruise lines are making exceptions during the pandemic.
  • Buying Travel Insurance. If you booked less than three weeks ago, you could still be eligible to purchase “Cancel for Any Reason” insurance that’s valid for your trip. Policies vary by insurance carrier, but it’s worth a shot. You’ll be out the one-time insurance premium but not the full cost of your nonrefundable travel.
  • Calling Customer Service to Ask for a Refund. Expect to sit on hold for longer than usual, but the effort could be worth it. Even if your booking is nonrefundable, extenuating circumstances could curry favor with the rep you speak with (or their manager). For instance, if you’re flying with an elderly relative at high risk for COVID-19 complications, your decision to travel could literally have life-or-death implications.
  • Rebooking Within the Allotted Time Frame. If you can’t cancel your reservation for a cash refund, learn how long your rebooking credit remains in effect. Most airlines allow fee-free rebookings (less the difference in fare, if any) due to COVID-19 well into 2021, and a growing number of airlines now entirely waive change fees on most or all fares.

Final Word

The coronavirus pandemic is the most serious public health challenge caused by a communicable respiratory disease in living memory. Although the final toll is not yet known, this ordeal could well come to rival or exceed the Spanish flu crisis of 1918 to 1919 — the benchmark by which we judge all other modern pandemics — in its toll.

Until everyone who wants a COVID-19 vaccine can get one, we all need to do our part to slow the spread of the virus and protect the most vulnerable among us. If that means canceling the international vacation you’ve been looking forward to for years, so be it.

Source: moneycrashers.com

Posted on March 1, 2021

How are Auto Insurance Rates Determined?

  • Car Insurance

Auto insurance rates, like all insurance rates, are carefully considered calculations based on statistical probabilities and strict underwriting techniques. Insurers don’t throw random numbers at you in the hope that something sticks and, contrary to what you might think, they don’t charge as much as they think they can get away with.

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In this guide, we’ll look at all the things that go into setting your car insurance premiums, from the ones you’d expect to the ones you definitely wouldn’t.

This is how auto insurance rates are determined.

Age

Your age is one of the biggest factors in determining your auto insurance rates. Car insurance companies have a wealth of data concerning the ages you are most likely and least likely to be involved in an accident.

A 16-year-old driver is three to four times more likely to crash than a driver in their early 20s. That’s a difference of just four years, but in the eyes of the insurer, it’s the difference between a high-risk driver and a moderate-risk driver.

In fact, the risk is so disproportionately great for 16- and 17-year olds that they are nearly twice as likely to be involved in an accident than 18- and 19-year olds. They are also more likely to get speeding tickets and receive violations for racing and reckless driving.

We’ve all been there. If you weren’t that reckless kid who wanted to put the pedal to the metal and impress your friends, you knew someone who was. Thankfully, most drivers mature very quickly, the risk plummets, and insurers are able to reward them with lower rates.

Gender

Young men are more dangerous than young women behind the wheel. One of the highest risk demographics is a 16-year old male driver. By virtue of their age and their gender alone, their insurance quotes will likely be higher than at any other point in their life, even if they later make a claim for an at-fault accident or get convicted of a DUI.

It seems unfair, especially if you consider yourself to be a responsible, careful, young male driver, but insurers aren’t interested in promises. They focus purely on the statistics and for teenage boys, those statistics don’t look good.

Young female drivers are still considered to be a greater risk than older females, but they can expect to pay less than males on average.

There are a few caveats here that need to be addressed.

Firstly, while young men are charged more than young women, the same can’t be said for older drivers. In older drivers, the accident rate is higher in women than it is in men and some insurance quotes will reflect this.

Secondly, a handful of states have outlawed the practice of discriminating based on gender. These states include Massachusetts, California, Michigan, Montana, Hawaii, Pennsylvania, and North Carolina.

Homeowner and Marital Status

Married drivers are safer than single drivers. It seems like a strange statement to make as there is no direct and obvious reason, and what’s even stranger is that the difference is considerable.

In one study, researchers found that single drivers were twice as likely to be involved in a car accident when all other parameters were accounted for. In other words, a 25-year-old driver with a clean driving history is twice as likely to crash than a 25-year old married driver with the same driving history.

You could pay as much as 15% less on your auto insurance premiums just because you tied the knot!

While there is no obvious reasoning behind this, it seems plausible to suggest that married drivers are safer because they have more responsibility and more to lose. Getting married also requires making a very big commitment, and such commitments are more likely to be made by people who are responsible and grounded.

Of course, that’s not to say that you’re irresponsible if you’re not married or that you’re responsible if you are. We’re talking about averages.

By the same token, homeowners can secure lower premiums than renters. Not only are they deemed a lower risk, but they are also a better prospect to the insurer, as they have more money, are more financially responsible, and can purchase a homeowners insurance policy along with their car insurance policy.

In this sense, a homeowner can save money in two ways, making homeowner status one of the biggest determining factors in acquiring cheap car insurance.

Location

Car insurance quotes differ considerably from state to state. Drivers in rural areas may pay less than those in built-up areas, but that’s not always the case.

Underwriters will look at the level of car crime (theft, vandalism) and car accidents in your area, before using this information to set your rates. Weather and animal collisions will also be considered.

Credit History

Credit scores are checked in most states and higher premiums are charged to drivers with bad credit and no credit as there is a higher chance (statistically speaking) they will make an insurance claim.

Your credit score is an essential component of your financial life, something you need to nurture carefully and check at least once a year. 

35% of your credit score is based on your payment history, and there is no quick and easy way to improve it. The same applies to the smaller parts of your score that are based on account age. The only way to improve these aspects of your score is to keep making payments, avoid too many applications and new accounts, and prioritize all debt payments.

30% of your score is based on your credit utilization ratio and this can be changed following a few simple improvements. Credit utilization looks at your total available credit (credit limits) and your total used credit (debt). By increasing your limits and paying off as much debt as possible, you can improve this aspect of your score.

Claims History

Insurance companies will check your claims history before setting your premiums and may charge you more if you have any at-fault claims in your recent history.

It’s a different story if you have comprehensive claims and accidents that weren’t your fault, but generally, the more you cost your current insurers and previous insurers, the higher your premiums will be.

Driving Record

Your driving history is one of the biggest things affecting your car insurance rates. The more moving violations you have on your record, the more likely you are to be hit with high rates.

Even a speeding ticket can increase your rates by between 15% and 30%, while DUI/DWI convictions and reckless driving/racing charges could bump your costs by as much as 70%.

Type of Vehicle

One of the biggest mistakes that young drivers make is to purchase a flash, fast car that looks great but is far from practical. No 16-year-old boy dreams of buying a used Honda; they want sports cars, luxury cars, something they can show off to their friends.

Underwriters look at the likelihood of the vehicle being stolen (based on national and local statistics) and account for anti-theft devices, safety features, and the cost of repairs. The fewer features it has and the harder it is to find affordable and suitable parts, the higher your auto insurance quotes will be.

Instead, look for a vehicle that is a few years old but has a high safety rating, lots of safety features (front and side airbags, anti-lock brakes) and is not targeted by thieves. The difference between some luxury German cars compared to cheaper Honda and Toyota cars can be over 200%.

Mileage

How much you drive isn’t as important as you would expect. The difference between a driver who does 5,000 miles a year and one who does 15,000 is often just a couple of percent. It doesn’t make much sense at first, because surely the driver who does 15,000 miles is three times as likely to be involved in an accident as one who does 5,000.

But, as always, it comes down to statistics. 

Statistically speaking, the more miles you do, the more experienced you are, and this experience pays off. People who limit their driving to just a few thousand miles may do so because they don’t like driving in the dark or refuse to drive too far from their homes or on busy roads. They may not be confident behind the wheel.

Of course, that only applies to a small percentage of them, but that’s enough to skew the statistics and to balance things out. 

Lower mileage drivers will still be quoted less, but because of these factors, the difference won’t be as impressive as you might have thought.

Driving habits are just as important, with the underwriters looking at where you do those miles, how busy the roads are, what time you drive, and how common car accidents are in that area.

Bottom Line: You Won’t Always Pay More

In all of the above cases, we looked at risk and how it can impact car insurance rates. However, you won’t always receive higher insurance rates based on some of the factors we discussed. You will certainly be deemed a higher risk, but many states don’t allow insurers to discriminate in some of these areas.

As noted above, in some states, California included, it is illegal for insurance companies to charge higher rates based on gender. Make sure you check with your local authorities and insurance providers to better understand what is and isn’t considered when determining your auto insurance rates.

Source: pocketyourdollars.com

Posted on March 1, 2021

Plan an Exciting New Future: 4 Ways to Manage Your Finances After a Divorce

Learn how to get your finances in order and chart a new course after divorce.

Like so many single parents, Emma Johnson, 40, founder of WealthySingleMommy.com, worried about rebuilding financially after divorce and what the financial future would look like for her and her children, who were 2 and under 1 at the time.

“I was terrified that my kids and I would be living out of our car,” she says, “or that I would have to sell my home and move far from our community.”

Single father spending time with young son

Rather than continuing to see the prospect of managing finances after divorce as frightening, Johnson decided to use the life-changing 2010 event as an opportunity to re-evaluate her plans and create an exciting new future. She resumed working as a journalist and started her blog. This ultimately led to brand partnerships, speaking engagements and a book deal with Penguin Random House, not to mention new financial goals, including saving enough to retire by the time her children go to college.

“It is very scary to start out on life anew and without a partner,” she says. “Harness this fear to forge a new, exciting path that is free from an unhappy marriage. Your Plan B or C or Q can be far, far more fulfilling than you imagined.”

From separating joint bank accounts after divorce to revamping your financial plans, here are four things you can do to get your finances in order and chart a new course after divorce:

1. Update your budget

Getting divorced can come with financial costs and changes. From attorney’s fees to the tax consequences of selling assets, you may face some short-term financial expenses that could put a strain on your budget. For many people, managing finances after a divorce means spending less because you’ll only have your own income to draw on, and you might have to pay child support.

Jackie Pilossoph, 51, founder of Divorced Girl Smiling, got divorced in 2008 and found that getting a detailed understanding of what she was spending and what she was bringing in was critical. It helped her find places in her budget where she could cut back.

“I called all my utility companies and had the bills lowered, either through cutting plans or getting a better deal. I put a cap on Starbucks and allotted myself a weekly amount,” she says. “I also stopped buying bottled water, refinanced my home, stopped getting my nails done and basically didn’t buy myself a stitch of clothing for about two years.”

Mother and daughter baking together

Other ways to trim costs and manage finances after divorce might include finding opportunities to save on attorney’s fees or making budgetary changes like downsizing your home, eating at home more often or even scaling back your children’s extracurricular activities.

While these changes can be difficult to make, Johnson, of WealthySingleMommy, believes that you need to be open to a new lifestyle after a divorce in order to create a future on firm financial footing.

“Let go of trying to maintain the lifestyle you had while married,” she says. “You don’t need the stress associated with being over-leveraged on a home, living in debt, penny pinching or living paycheck to paycheck.”

“The good thing about divorce is that you are solely responsible for your financial future from this point forward. When you start seeing financial success from your own plan and your own job, there is no better feeling.”

– Jackie Pilossoph, founder of Divorced Girl Smiling

2. Evaluate your accounts

Just because you had certain kinds of banking and investment accounts as a couple doesn’t mean they’re necessarily right for you now as you rebuild financially after divorce.

“For both practical and emotional reasons, you need to evaluate every part of your financial picture during and after divorce,” Johnson says. “You now have to plan for a life without a spouse and invest appropriately based on your new lifestyle, goals and dreams.”

Woman deciding what do to with her joint bank accounts after divorce

She suggests asking your accountant about your new tax situation, your financial planner about college, emergency savings and retirement planning and your attorney about estate planning. You could even explore finding an investment adviser who specializes in managing finances after a divorce.

Take the time to understand the details of your various accounts, such as how much you’re paying per month in fees, how many no-fee transactions you get and how much you’re earning (or paying) in interest. Perhaps you don’t need the pricier checking account that includes so many transactions. Or maybe your bank requires a high minimum balance to waive the monthly fee on your savings account, and now you’re looking for an account that has no monthly fee for maintenance. Maybe you do need a new credit card since your old one was a joint account shared with your ex.

If you’re taking stock of your joint bank accounts after divorce and close any credit accounts, pull your credit report to make sure all joint accounts are closed. If you want to ensure that new credit accounts aren’t opened in your name, you could consider putting a credit freeze on your report by contacting the three national credit reporting agencies: Equifax, Experian or TransUnion.

When thinking about joint bank accounts after divorce, you may also consider removing your ex-spouse as a beneficiary on retirement accounts, life insurance policies and from your will.

Rebuilding financially after a divorce often starts with a budget

3. Define your goals and priorities

Just because you and your former spouse wanted to retire to Hawaii doesn’t mean that’s still your dream now.

“One of the saddest things about divorce that I hear from men and women is that the dream they always had is gone,” Pilossoph says, explaining that feeling is often only temporary. “What happens over time is that the dream just changes, and honestly, most of the time, it changes for the better.”

For Pilossoph, that’s meant that she’s developed dreams of retiring and moving to a warm Southern state, which she hopes to achieve alone or with a different partner.

She believes that rebuilding financially after divorce is a great time to rethink what you want to do professionally as well. Maybe you would rather stay home with your children, switch careers, find a better work-life balance or go back to school.

“Divorce is a great time for soul searching,” she says. “Divorce often makes people re-evaluate life and explore what is really going to make them happy.”

4. Sit down with a financial planner

Rebuilding financially after divorce and setting up a new financial plan can help you feel better prepared for life after your marriage ends. Although Pilossoph wanted to continue to stay at home with her children, who were 3 and 5 at the time, her financial planner helped her realize that wasn’t a good financial decision over the long term.

“It took a really good financial planner to get me to sit down and face reality. They forced me to look at what I was spending every month and what I was bringing in,” she says. “They made me see the deficit I was dealing with, and seeing the numbers on paper made me realize I had to make some changes.”

In addition to cutting back on expenses, she decided to return to work. She wrote a book, launched her blog and took a job with a newspaper.

A financial planner can be a critical resource when managing finances after a divorce, helping you turn your new short- and long-term financial goals into realities. They can clarify what you need to earn, how you need to save for retirement or your children’s futures and how your newly single status affects your taxes.

Divorcee meets with a financial planner to discuss his joint accounts after divorce

Stay focused on the positives

While divorce is undoubtedly an end to something important in your life, it is also a new beginning. If you look at it from that perspective, you may find it easier to focus your attention on rebuilding financially after divorce, rather than mourning the changes in your financial situation.

“The good thing about divorce is that you are solely responsible for your financial future from this point forward,” Pilossoph says. “When you start seeing financial success from your own plan and your own job, there is no better feeling. Looking in the mirror and being proud of your accomplishments and the way you live your life is very powerful.”

Source: discover.com

Posted on March 1, 2021

Credit Card Debt in the United States: Trends and Issues

  • Credit Card Debt

The average American consumer receives their first credit card aged 20. For many, it’s an exciting time, further proof they have ascended into adulthood and are ready for financial independence. 

The delinquency rate is high on these cards, but the credit is low, often between $1,500 and $2,000, and it gives the borrower a way to improve their credit score.

It also adds another cog to the massive US debt machine, one that creates more debt, more delinquencies, and more problems than any other. But why is this, why is the average credit card debt so high, and can anything be done about it?

State of American Credit Card Debt

The average US debtor has over $6,500 worth of credit card debt and in total the country owes more than $1 trillion. The average credit card APR is around 18%, and if we plug these two figures into a monthly repayment calculator and suppose that the debtor seeks to clear the balance in 5 years, then the average minimum monthly repayment is close to $120 and they’ll repay over $14,000 in total.

That’s not great, but it’s not that bad either, at least not at first glance. The problem is, it supposes that the debtor will stop using all credit card accounts, accumulate no more debt, and meet all monthly repayments. If not, their credit score will suffer, that 5-year term will almost certainly be prolonged, and there will be serious financial implications.  

How Much Credit Card Debt Does the Average American Have?

The average credit card debt is said to be $6,506. According to data published by the Federal Reserve, store cards, which tend to have the highest rates, account for $1,901 of this total, while the average per account is $1,760. This data also tells us that the average amount spent on a card with no balance is $1,154, which means even individuals who clear their cards every month are spending in excess of $1,000 on them.

55% of Americans with credit cards have balances they don’t clear every month and credit card delinquency is increasingly common, accounting for around 2% of total credit accounts. 

Which States Have the Highest Credit Card Debt?

You might expect the highest revolving credit card debt to be in New York or California, but it’s actually in Alaska. Connecticut follows closely behind. New Jersey, Virginia, Maryland, and Hawaii are next.

It’s no coincidence that these 6 states are all ranked in the top ten for the highest household income. The cost of living is also higher than the national average. The honor of the lowest average credit card debt goes to Iowa, Wisconsin, and Mississippi, where the cost of living is around 10% less than the national average.

Which Age Groups Have the Highest Debt?

Every few years the Federal Reserve conducts a survey that looks at debt across the age groups. Generational differences seem to have been in the news a lot lately, with Millennials and Baby Boomers often occupying opposing sides. It’s true that these generations have experienced life very differently with regards to opportunities, income, and debt, but they’ll both be happy to know that they have much less debt than other generations.

In fact, the last survey conducted by the Federal Reserve found that those aged 65 to 74 ($66,000) have a similar debt to those under the age of 35 ($67,400). Adults above the age of 75 have close to half that amount Gen Xers have the highest, nearly twice as much as Millennials and Baby Boomers.

Of course, we don’t need the Federal Reserve to tell us that debt is much less likely in those aged 75 and up. They’re often retired, have paid off the mortgage and are also more likely to have been in receipt of life insurance policies and inheritances. It will come as a surprise to many, however, to know that Millennials, on average, have half the debt of the generation that came before.

US Compared to Rest of World

Americans love credit, there’s no denying that. It’s very easy to acquire large amounts of debt in this country, and it’s just as easy to find a balance transfer card, personal loan, or debt consolidation loan to help you tackle it. 

But why are things so different here when compared to the rest of the world? 

Why is this Problem Worse in the United States?

American debtors have it much worse than debtors in other countries. Debt is more common, it tends to be much higher, and it’s widespread across all demographics. 

It’s easy to understand some of the reasons behind this difference, but not all. As an example, take student loan debt, which accounts for a significant proportion of young adult debt. The average cost of education is just under $25,000 when accounting for all institutions (private schooling costs around $42,000 while public schooling is below $18,000). 

Scholarships are available and many American families save money throughout the child’s lifetime so they can cover these fees when needed. The vast majority, however, are forced to acquire student loans, which can hang over their heads for years. In many European countries, college is free, and while there are some universities that charge, the fees tend to be significantly less, and the student loan systems are also more forgiving.

It’s the same with healthcare, which is cheap or free elsewhere, but hugely expensive in the US. However, it’s a different story with credit cards, so why is America’s average credit card debt so much higher than it is in other countries?

Why Average Credit Card Debt is Higher

There are many reasons America’s average credit card debt is higher than it is elsewhere, but the main reason is actually quite simple: American credit cards are better.

And we don’t mean that in a patriotic, “U. S. A!” way. 

Take the UK as an example, as our cousins across the pond have a very similar financial system. They have balance transfer cards, reward cards, credit scores, credit reports—they even have many of the same credit card companies that we have.

But they don’t enjoy the same freedom that Americans have when it comes to choosing a credit card. Competition isn’t as high, and rewards average a mere 0.5% cashback. US credit cards, on the other hand, offer as much as 5% through introductory offers and 1% to 2% thereafter.

The average APR is also lower here in the US, clocking in at 24.7% in the UK and less than 18% in the US. What’s more, surveys in 2018 and 2019 suggest that Americans use cash for just 14% of purchases, while in the UK it’s closer to 40%, and we know that credit leads to more impulsive purchases.

Simply put, the US is more obsessed with credit and banks, card providers, and lenders are taking advantage of that. That’s why the average credit card debt is much higher. 

Household Income vs Debt

The median household income in the US is over $62,000, but if you include student loans, credit cards, and mortgages, the average debt is close to $140,000. Take mortgages out of the equation and it drops below $40,000, but only just. 

Discretionary income is over $1,700 a month on average, but once you consider interest repayments, unexpected bills, vacations, college funds, and additional living expenses, it doesn’t leave much to clear those household debts. 

The Biggest US Credit Card Companies

The average credit card user has three cards. For most, their first card and their main card is provided by the same company that they bank with. The additional cards are reward cards and store cards as well as ones acquired solely for a balance transfer.

If you’re an average credit card user, there’s a high chance you will have at least one account with one of the following companies:

Discover 

The first provider to offer a cashback scheme, Discover also has one of the best modern rewards cards. Known as the Discover It, this card rewards consumers with as much as 5% cashback.

Discover is mistakenly seen as a card that isn’t accepted in many retailer locations. However, while this may be true outside the United States, you shouldn’t have an issue using it domestically. A few years ago, a survey found that Visa and MasterCard were accepted in 9.5 million locations, while Discover was accepted in 9.3 million, just a fraction less.

American Express

American Express is one of the best providers of airmile programs and other rewards programs. It also has some of the most sought-after premium credit cards, which are offered to big spenders. 

AMEX is actually the card that is accepted the least of all major providers. The study mentioned above found just 6.9 million retailers had embraced AMEX. However, it is accepted in more international locations than Discover.

Although figures are constantly changing, the most recent estimates suggest that there are around 1 million more American Express cards than there are Discover cards in the United States.

Chase

The Chase Freedom card is the most popular credit card in the United States, offering consumers a reasonable APR as well as several perks. Chase also offers the Slate card and provides cards on behalf of several major airlines, including British Airways.

In most cases, these cards are offered only to consumers with above-average credit scores, but they are not necessarily considered premium or elite user cards.

Mastercard

Mastercard is not the most popular credit card in the United States. In fact, there are around 191 million users of this card and over 320 million users of the card in first place. However, it is a long way clear of the other providers on this list. If you combine all users of Chase, American Express, and Discover cards then the number you arrive at is only just higher than the number of Mastercard users.

These cards are accepted in locations across the United States and all over the world. It’s the second biggest in the US, but it’s also the second biggest pretty much everywhere else.

Visa

It’s probably no surprise to see that Visa is number 1, as this is the biggest provider not just in the United States, but all over the world. There are more Visa credit cards and debit cards in existence than any other type; it is accepted in more locations, and it’s a brand name that is as instantly recognizable as Coca Cola and Sony.

Pros and Cons of American Credit Cards

Pros

  • Multiple types of cards
  • Huge rewards
  • Many companies to choose from
  • Accepted in most outlets nationwide
  • Competitive rates
  • Options for no credit and poor credit

Cons

  • Can be too convenient
  • High-interest rates
  • Few options and high fees for consumers with bad credit

If you have a good debt-to-income ratio, a solid payment history, and you can meet your minimum payment obligations without issue, the US is a great place to acquire credit. Reward cards give you an incentive to spend, balance transfer cards allow you to move your debt around, and you get the feeling that every bank and lender wants your business and will trip over themselves to get it.

If you have none of those things, like so many millions of Americans, then it becomes a nightmare. There are debt counseling, debt settlement, and debt management services to help, but if you can’t meet your monthly payments, and you find yourself prioritizing debt repayments over food, clothing, and family days out, it can become depressing very quickly.

What Does the Future Hold?

Now we’ve looked at the current state of credit card debt in the US and have established that things look pretty bleak, that begs one question: How does the US government plan on approaching this issue?

The truth is, they’ll probably do very little. The only way to prevent those figures from rising is for American consumers to stop spending so much, but that hurts the economy. If you change the mentality of the average American consumer, focusing more on frugality and less on consumerism, the GDP takes a nosedive, the country’s biggest companies suffer, and America’s position on the world stage is notably weakened.

The world is moving away from cash and towards a completely digital payment structure. Cash will soon become a thing of the past and everything, from bills to bus fares and grocery shopping, will be purchased with credit, whether you’re using a credit card, a smartphone app, or some other new-fangled device. Once this happens, the issues facing credit card users become more pronounced and the country’s $14 trillion worth of consumer debt grows ever larger.

In simple terms, the situation will likely get worse for debtors and better for lenders, but if we continue down this road then maybe we’ll start seeing fewer punishments for credit card delinquencies and more options for struggling debtors.

There are over 100 million Americans crossing their fingers and hoping for just that.

Source: pocketyourdollars.com

Posted on February 28, 2021

How Much Does Medicare Cost? – Parts A, B, D, Advantage & Medigap

Americans are used to paying high costs for health care. Even for those who have health insurance — and as of 2019, there are still millions who don’t — it doesn’t cover everything. However, many people assume that once they reach age 65 and start receiving Medicare benefits, it will cover all their costs. After all, we’ve already paid into the program through payroll taxes, so we should have no costs beyond that, right?

Wrong. In fact, the Medicare taxes you pay during your working years only cover the premium costs for Medicare Part A, or hospital insurance. However, you still have to pay a part of the costs for hospital stays and other inpatient care out of your own pocket. And on top of that, several other parts of Medicare have their own costs.

How Much Does Medicare Cost?

There are two primary forms of Medicare coverage. Original Medicare includes Medicare Part A and Medicare Part B, or medical insurance, which covers doctor visits and other outpatient care. You can also add Medicare Part D to cover prescription drug costs. Alternatively, you can choose a Medicare Advantage plan from a private insurer, which includes Medicare Parts A and B and usually adds coverage for drugs and some other types of care.

Put it all together, and your Medicare costs can add up to thousands of dollars. A 2020 analysis by AARP found that in 2017, people on Original Medicare spent an average of $5,801 on health care and that about 1 in 10 people spent $10,268 or more. (The analysis did not include people on Medicare Advantage plans because there was no reliable data available about their expenses.) These expenses fall into three primary categories: premiums, cost sharing, and expenses Medicare doesn’t cover.

Premiums

Most health insurance comes with a monthly premium — an amount you pay to the insurer each month for coverage. According to AARP, the average Medicare beneficiary paid $2,728 in premiums in 2017. However, this cost varied widely by age. People under 65 paid an average of $1,810, while those over 65 paid an average of $2,810.

How Much Does Medicare Part A Cost?

Most people don’t pay a premium for Medicare Part A because they have already paid for it through payroll taxes. However, if you have paid Medicare taxes for fewer than 10 full years (40 quarters), you must pay a fee to buy into Part A.

For the year 2021, the monthly premium is $458 if you’ve paid Medicare taxes for fewer than 30 quarters. If you have paid them for 30 to 39 quarters, the premium is $259. That adds up to either $3,108 or $5,496 per year.

Additionally, if you don’t sign up for Medicare Part A when you first become eligible for it, you must pay a late enrollment penalty. That causes your premiums to go up by 10%. You continue to pay the higher premium for twice the number of years you delayed signing up for Part A.

How Much Does Medicare Part B Cost?

All Medicare recipients pay a premium for Part B coverage. The standard premium for 2021 is $148.50 per month, or $1,782 per year.

If you have already started collecting Social Security benefits or retirement benefits from the Railroad Retirement Board, this premium is automatically deducted from your benefits check. Otherwise, you receive a bill for your coverage.

If you neglect to sign up for Medicare Part B when you first become eligible, you pay a late enrollment penalty for this as well. This penalty is even steeper than the one for Part A. It increases your monthly premium by 10% for each 12-month period you delayed enrollment — so if you sign up three years late, your premiums go up by 30%. Moreover, this higher rate lasts for the rest of your life.

How Much Does Medicare Part D Cost?

If you choose to add Medicare Part D to your coverage, you must pay an additional premium for it. The cost per month varies based on the plan you choose. However, the Centers for Medicare & Medicaid Services (CMS) estimates the average premium for basic Part D coverage at $30.50 per month ($366 per year) for 2021.

On top of that, there’s a late enrollment penalty for Medicare Part D. You pay this penalty if you go at least 63 days without having either a Medicare prescription drug plan or a Medicare Advantage plan that provides drug coverage. The penalty is equal to 1% of the “national base beneficiary premium” ($33.06 for 2021) times the full number of months you went without coverage, rounded up to the nearest $0.10.

This amount gets added to your Part D premium for life once you sign up. For instance, if you went 30 months without drug coverage, you would pay an extra $10 per month. Additionally, this penalty rises whenever the national base beneficiary premium increases.

Medicare also tacks on a monthly income adjustment for all beneficiaries whose income is above a certain level. For 2021, this adjustment ranges from $12.30 per month if your income is over $87,000 to $77.10 per month if it’s over $500,000.

How Much Do Medicare Advantage Programs Cost?

Medicare Advantage plans are sometimes called Medicare Part C, but they’re actually not part of the federal Medicare program. Instead, private insurance companies offer them. However, they must provide all the same coverage as Original Medicare, and many plans provide more.

When you join a Medicare Advantage plan, you continue to pay your Part B premium to the federal government. The government then pays a fixed amount each month to the insurer to help cover your care costs.

Some Medicare Advantage plans charge an additional monthly premium on top of your regular Part B premium. According to CMS, the average expected premium for the year 2021 is $21 per month. Since that’s less than the average cost for a separate Part D plan, Medicare Advantage is a cheaper way to get prescription drug coverage for the average Medicare user. However, specific prices and coverages vary from plan to plan.

According to the Kaiser Family Foundation (KFF), Medicare Advantage premiums are typically lowest for health maintenance organizations (HMOs), which require you to get your care from doctors within a specific network. They’re somewhat more expensive for preferred provider organizations (PPOs), which allow you to see an out-of-network doctor for an additional cost. The KFF does not evaluate old-fashioned fee-for-service plans, which let you see any doctor you choose, but in general, these plans are expensive.

How Much Does Medigap Cost?

Original Medicare has relatively low premiums, but there are also many costs it doesn’t cover. Many people buy Medicare supplement insurance, commonly known as Medigap, to fill the “gaps” in their Medicare coverage. These plans, sold by private insurers, cover your deductibles and coinsurance. Some of them also cover costs Original Medicare doesn’t, such as care received when traveling outside the United States.

If you buy a Medigap policy as an add-on to Original Medicare, you pay an additional monthly premium to the insurer. How much it costs depends on the specific plan you choose. Under state laws, Medigap plans are sorted into several standard categories, which most states identify by the letters A through N. A chart on Medicare.gov outlines each plan’s benefits. (Three states — Massachusetts, Minnesota, and Wisconsin — use different standard categories for Medigap policies. See each state’s specific rules.)

Insurance companies aren’t required to offer every type of Medigap policy. However, any insurer that sells Medigap policies is required to offer Plans A, C, and F.

According to eHealth Medicare, the monthly premium for a Medigap policy ranges from around $70 to $270 per month, depending on the plan type and where you live. According to Business Insider, Plan F — the most popular type of Medigap plan —  cost an average of $1,712 per year, or about $143 per month, in 2018. However, this cost varied by state, ranging from $1,310 per year in Hawaii to $1,947 per year in Massachusetts. You can find cost estimates for Medigap policies in your area by entering your zip code on the eHealth Medicare site.

Cost Sharing

On top of your Medicare premiums, you must pay a portion of the cost for all the health care services you receive. The AARP study found that Medicare recipients paid an average of $1,522 for their share of covered care in 2017. This cost came to $1,441 for beneficiaries under age 65 and $1,536 for those 65 and older.

How Much Are Medicare Deductibles?

Medicare requires you to pay a certain amount of your medical bills out of your own pocket before your Medicare coverage kicks in. This portion is called your deductible.

As of 2021, Medicare Part A charges a deductible of $1,484 for each benefit period. A benefit period starts when you enter a hospital or skilled nursing facility as an inpatient. It ends once you haven’t received any inpatient hospital care for 60 days in a row. That means you may have to pay your Medicare Part A deductible more than once in a single year.

For instance, suppose you go to the hospital for a knee operation in January, and they discharge you later that month. During that time, you pay all your care costs up to the $1,484 deductible. Then, in June — more than 60 days later — they admit you again after a fall. That starts a new benefit period, so you must once again pay all your care costs up to the deductible. There’s no limit to the number of benefit periods you can have in a single year.

Medicare Part B also has a deductible, but you only have to pay it once per year. For 2021, the Part B deductible is $203.

Medicare Part D plans usually have a deductible as well. The cost varies from plan to plan, but Medicare sets limits on how high it can be. As of 2021, your Part D deductible cannot exceed $445. According to eHealth, the average Part D deductible was $308 in 2019.

As for Medicare Advantage plans, some have deductibles and some don’t. According to eHealth, the average deductible for a Part C plan that includes prescription drug coverage was $292 in 2019. A plan can charge one deductible for all your care or have separate deductibles for medical care and prescription drugs. You have to look at the details of a specific plan to find out how much the deductible is and how often you need to pay it.

How Much Is Part A Coinsurance?

Even after you meet your deductible for Medicare, you must continue to pay a portion of your medical bills out of pocket. This amount is called coinsurance.

For Medicare Part A, the cost of coinsurance varies based on how long you spend in the hospital. You pay $0 for the first 60 days and $352 per day for the next 30. These numbers reset at the beginning of each benefit period. In other words, if you stay in the hospital for 60 days, then leave and return three months later, you’re back to Day 1 and your cost is $0.

If you stay in the hospital for more than 90 days at a stretch, you start using up your lifetime reserve days. You pay $704 per day, and Medicare pays the rest — but only for a maximum of 60 days over your entire lifetime. If you spend any more time in the hospital than that, you must pay the full cost.

That doesn’t mean you have to pay all your hospital bills in full for the rest of your life. Once you leave the hospital, your benefit period resets after 60 days. If you go back in, you start over again at Day 1, with 60 days for free and another 30 days at $352. But if you’re still in the hospital on Day 91 and you have no lifetime reserve days left, you’re responsible for the full cost.

How Much Is Part B Coinsurance?

Coinsurance costs for Part B are more straightforward than for Part A. After meeting your deductible, you pay 20% of the Medicare-approved amount for all covered medical expenses. The Medicare-approved amount is the standard amount Medicare agrees to pay all doctors and other health care providers.

You pay this 20% coinsurance for all services covered by Part B, including doctor visits, outpatient therapy, and durable medical equipment. However, if your doctor or provider charges more than the Medicare-approved amount, you must pay all the additional cost on top of your coinsurance.

How Much Are Prescription Drug Costs?

Costs for Medicare Part D vary. Some Part D plans require you to pay coinsurance — a percentage of the cost of each prescription. Others charge copayments — a flat fee for each prescription.

Many Medicare prescription drug plans sort covered drugs into different tiers. For instance, some drugs are “preferred” and have a lower copayment. According to the KFF, average costs for different tiers in 2020 were:

  • Preferred generic drugs: $0
  • Other generic drugs: $3
  • Preferred brand-name drugs: $42
  • Other brand-name drugs: 38% coinsurance
  • Specialty drugs: 25% coinsurance

Under Medicare rules, once your total prescription drug costs for the year — including the amounts paid by you and your insurer — have reached a certain amount, your coverage changes. This limit, which includes your deductible, is $4,130 for the year 2021. Once you hit this limit, you pay up to 25% of your medications’ total cost. The manufacturer of the drug pays 70% of the cost, and your insurer pays the rest.

However, that doesn’t necessarily mean you have to keep paying 25% for the rest of the year. Once your out-of-pocket costs for prescriptions hit a second limit — $6,550 in 2021 — your share of your prescription costs drops to only 5%.

To help you get out of this coverage gap (called the “doughnut hole”) faster, Medicare allows you to count the discount received from the drug manufacturer as part of your out-of-pocket costs. For instance, if you have a drug that costs $100, your insurer pays $5 for it, you pay $25, and the manufacturer pays $70. However, you can count a full $95 — your share and the manufacturer’s — toward your out-of-pocket costs. That pushes you closer to the $6,550 upper limit at which your payment falls.

How Much Are Medicare Advantage Costs?

Most Medicare Advantage plans charge you a copayment for doctor visits and other services rather than the 20% coinsurance you pay with Original Medicare Part B. However, the exact cost varies by plan. Factors that affect your copay costs include where you live, the type of plan you buy, and the company that issues it.

Costs Not Covered by Medicare

There are certain services Original Medicare simply doesn’t cover. In general, you must pay all your own costs for:

  • Dental care, including checkups, fillings, root canals, and dentures
  • Vision care, including eye exams, eyeglasses, and contact lenses
  • Hearing exams or hearing aids
  • Routine foot care, such as callus removal (according to AARP, Medicare does cover costs for foot injuries and ailments, such as heel spurs and problems related to nerve damage caused by diabetes)
  • Cosmetic surgery
  • Acupuncture
  • Long-term care in a nursing home or assisted living facility
  • Any medical care received outside the U.S.

You can get some of these expenses, such as dental and vision care, covered under a Medicare Advantage plan. However, it depends on the plan you choose. Neither Original Medicare nor Medicare Advantage ever covers costs for care received outside the country. However, some Medigap policies provide this coverage.

According to the 2020 AARP analysis, the average Medicare recipient in 2017 spent $1,551 on health care costs not covered by Medicare. This amount was $932 for beneficiaries under 65 and $1,662 for those 65 and up.

Limits on Total Costs

The $5,801 AARP says the average person on Medicare spends each year is a significant chunk of money. However, some Medicare beneficiaries have much higher costs. The 2020 study found that people at the 90th percentile for spending — those who had health care costs higher than all but 10% of the population — spent a total of $10,268 on their care in 2017. That includes $5,218 for premiums, $3,740 for cost sharing, and $2,537 for expenses not covered under Medicare.

In fact, under Original Medicare, there’s no limit on how much you can pay each year for health care. Although the program covers a large share of your costs, it doesn’t protect you from the kinds of sky-high medical bills that can drive people into bankruptcy. A 2010 paper from the University of Michigan found that more than 1 in 3 seniors who file for bankruptcy cite medical expenses as a reason.

There are two ways to put a cap on your out-of-pocket costs under Medicare. One is to choose Medicare Advantage. According to CMS, all Medicare Advantage policies are required to limit out-of-pocket spending for in-network care, which can be no higher than $7,550 in 2021. However, this out-of-pocket limit does not include the amount you spend on premiums.

If you prefer Original Medicare, you can cap your costs by adding a Medigap policy that comes with an out-of-pocket limit. Medigap Plan K policies limit your out-of-pocket costs to $6,220 for 2021, and Plan L caps them at $3,110.

You can estimate how much your total out-of-pocket costs are likely to be under different Medicare plans using the out-of-pocket cost calculator on Medicare.gov. It lets you compare Original Medicare, with or without Part D and Medigap, with a Medicare Advantage plan that includes drug coverage. The calculator factors in all your costs, including premiums, deductibles, and coinsurance. You can look at typical costs for plans with high, medium, or low premiums.

Final Word

If you’ve been thinking of Medicare as a permanent fix for high health care bills, it can come as a shock to learn how much the average beneficiary pays. However, the average cost cited in the AARP report is just that — an average. You can reduce your costs for Medicare the same way you would with any other significant expense: by shopping around.

Medicare makes it easy to comparison-shop for plans. On the Plan Compare page at Medicare.gov, you can review your Medicare coverage options and compare specific Part D and Medicare Advantage plans available in your area.

The site asks you for details about where you live and what type of plan you want, then lists available plans with their premiums, deductibles, copays, and out-of-pocket limits. With a little more information, it can also show you how much you’ll pay out of pocket for prescription drug costs on each plan. The site even includes star ratings for each plan just like you might use to find the best products when shopping online.

To learn more about comparing Medicare plans and signing up, check out our Medicare enrollment guide.

Source: moneycrashers.com

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