The mortgage forbearance rate worsened yet again compared to last week, though as expected the increase has slowed as the pool of borrowers grows larger.
As of April 26th, some 3.8 million homeowners were in forbearance plans, per the Mortgage Bankers Association’s (MBA’s) most recent Forbearance and Call Volume Survey.
The forbearance rate increased from 6.99% to 7.54%, a mere eight percent rise from a week earlier, but still more bad news for loan servicers.
And I should note that we’re about to begin a new month, so those on the fence last month could request forbearance this week, creating a new surge.
Forbearance Rate Tops 10% for FHA/VA Loans
Ginnie-backed loans have a forbearance rate of 10.45%
Fannie/Freddie loans have forbearance rate of 5.85%
Private-label securities and portfolio loans have rate of 8.30%
Depository banks have rate of 8.41%, independent mortgage bank (IMB) servicers have rate of 7.13%
In terms of loan type, government-backed home loans continue to fare worst, with Ginnie Mae mortgages (FHA loans and VA loans) seeing forbearance rates climb to 10.45% from 9.73%.
Meanwhile, the Fannie Mae and Freddie Mac forbearance rate rose from 5.46% to 5.85%.
Other mortgages, such as private-label securities and portfolio loans, which can include jumbo loans, increased from 7.52% to 8.30%.
With regard to institution type, depository banks saw their forbearance rate go up from 7.87% to 8.41%, and independent mortgage bank (IMB) servicers saw their rate move from 6.52% to 7.13%.
It’ll be interesting to see what happens in the second week of May once the next wave of borrowers request forbearance.
It seems we’ve kind of plateaued for the month of April, but a new month means new layoffs, business closures, losses of income, etc.
And regardless, the numbers are already way above what was originally forecast, perhaps because the forbearance offered via the CARES Act is very attractive to homeowners.
MBA Senior Vice President and Chief Economist Mike Fratantoni noted that the millions of additional Americans filing for unemployment throughout the week will likely make matters worse, “particularly as new mortgage payments come due in May.”
$500 for Each Mortgage in Forbearance?
More relief for mortgage servicers may be on the way
Via a $500 credit paid by Fannie/Freddie for each loan in forbearance
Unclear if the same would be extended to Ginnie Mae servicers
Or if it’s enough to offset the massive losses some servicers are experiencing
That brings us to how loan servicers will fare in all of this, especially nonbanks that might not have as much access to capital.
We know that Fannie Mae and Freddie Mac have agreed to buy mortgage loans in forbearance, and only require servicers to advance the first four months of missed payments.
But those enormous costs could still put enough strain on some servicers to wipe them out.
To further ease the situation, it has been reported that Fannie Mae and Freddie Mac will pay servicers $500 per loan in forbearance to ease the pain.
This is according to Jack Navarro, president of Shellpoint Mortgage Servicing, who spoke about the developing situation during a Tuesday morning conference call, per Inside Mortgage Finance.
The so-called “$500 deferment fee is scheduled to take effect on July 1,” assuming it’s approved by the Federal Housing Finance Agency (FHFA).
That fee would obviously offset some of the cost associated with the forbearance advances, at least partially.
But if the forbearance rate keeps climbing higher in May, it still might prove to be too little too late.
Navarro also spoke to what happens after forbearance, saying the plan is “to allow borrowers to very quickly go from the forbearance process to a current loan with payments deferred to the end of the mortgage.”
That backs up the Fannie/Freddie partial claim I spoke about last week, which would make it relatively painless for borrowers who regain their job/income to continue making mortgage payments and put this all behind them.
About the Author: Colin Robertson
Before creating this blog, Colin worked as an account executive for a wholesale mortgage lender in Los Angeles. He has been writing passionately about mortgages for nearly 15 years.
Like pretty much all of life, real estate is filled with “what ifs.” What if the inspection uncovers major structural problems? What if my financing falls through? What if the bank appraisal comes in low? When you’re buying a home, the “what ifs” are handled, or at least mitigated, through contingency contracts.
What are contingencies? They are the clauses in your contract that give you an out if something unforeseen arises. They protect you from losing your earnest money and give you leverage to get the seller to help you deal with whatever comes up. As a buyer, contingencies are wonderful. They aren’t quite “get out of jail free” cards, but they can be close and they always work to the buyer’s advantage. So naturally, sellers aren’t so fond of them. That’s why, in a particularly competitive market, you’ll likely need to minimize them.
Timing is everything
Contingencies always come with a time frame. A “hard contingency” requires you to sign off physically, but a “soft contingency” simply expires at a certain date. If you need to cancel the contract because of a contingency, your offer to purchase will include the precise method you need to use to notify the seller. In any case, you should mark your calendar with contingency dates for your contract, along with how they are to be met. It’s wonderful to trust your real estate agent and escrow company to keep track of these things and most times they will. But this is your home and earnest money on the line so be your own backup.
Disclosure: The first contingency will be your acceptance of the seller’s disclosure form. Exactly what has to be disclosed varies from jurisdiction, but when the seller accepts your offer they will have a short time period to give you a form on which they disclose any material facts about the property.
Even if it’s not required by law, many real estate companies require their sellers to do this simply to protect them from potential litigation. If they don’t disclose within the allotted time frame or the disclosure makes you want to bolt, you are free to rescind your offer.
Just because you got a clean disclosure form doesn’t mean you can safely forego inspection. A seller may suspect something is wrong but not “know” it. In fact they may be purposely not looking too closely for fear that they will find something they legally need to disclose. There’s no penalty for inattentiveness.
Inspection: This contingency gives you the right, within a specified time frame, to have full access to the home to conduct a professional inspection. Once you get the inspection, you have a choice. If there isn’t much of note found, you may simply sign off on it and move on.
If there are some repair items you’d like the seller to attend to or give you a credit for, you will ask for that. They will either agree to everything or, if the list is long, counteroffer to fix some but not all of the issues. In short, you negotiate the repairs. If you find something truly frightening during the inspection, you may want to cancel the deal altogether. You’re out whatever you paid the inspector, but you should get your earnest money back.
Loan approval and home appraisal: Just because you are pre-approved for a loan doesn’t mean the bank is ready to wire the money. They will want to hire a professional, independent appraiser to walk through the home, take pictures and measurements, and note its condition. The appraiser will then make a written report with an “appraised value” attached. If the appraisal comes in at or above the sales price, smooth sailing. If the appraisal comes in low, you’ve got trouble.
In case of a low appraisal, you have options. First, if the purchase price is in line with CMA (comparative market analysis) numbers, you could ask the mortgage lender to have another appraisal done or to override the appraisal value and issue the original amount you requested.
If that doesn’t work, a properly written appraisal contingency clause would allow you to renegotiate the purchase price so that it matches the appraisal. If the seller is unwilling to do that, you’re down to two options. You can add the difference between the appraisal and the sales price to your down payment or you can walk away, cancel the contract and get your deposit back.
The appraisal isn’t the only thing that can go wrong with financing, which is why you will usually have an overall financing contingency, not just a standalone appraisal contingency. The lender will do a title search to search for outstanding liens on the title. If that doesn’t come back clear, your financing won’t go through and you can cancel your contract.
Likewise, job loss or something truly financially catastrophic could put the brakes on your loan. A tight financing contingency will protect against that. But again, remember the timeline. If the financing contingency expires before your loan goes through, your earnest money is on the line.
In a hot market or a multiple-offer scenario, it’s unlikely you’ll get to these contingencies and still have hope of getting the nod from a seller. But if it’s a buyers market, these tier-two contingencies could come into play.
Sale of your current home: If you already own a home and need the proceeds from selling it in order to close on your new home, you can make your offer contingent on the sale. Even if you have a buyer and your existing home is in escrow, you may want to insert this contingency. Sales can and do fall through and if you can get away with it, this contingency insures you from losing your earnest money if that happens with your existing home. However, this contingency makes your offer much weaker to the seller, especially in a competitive market.
Homeowners insurance: To get your loan, you will have to obtain homeowners insurance. It’s not optional. However that insurance could cost far more than you expected. You can protect against this by making the purchase contingent upon a satisfactory Comprehensive Loss Underwriting Exchange (CLUE) report, or upon your being able to obtain affordable insurance. (Your agent may need to attach a rider or an addendum to the purchase contract.) A complete guide to coverage can be found here.
Homeowners associations: Essentially if there is anything that would make you not want the home, you can write a contingency. If there is a homeowners association (HOA) that only allows exterior colors you hate, or there’s a fence between the neighboring property that is in the wrong place or any host of things that might be deal breakers, there’s a way to write a contingency that covers it. The key is to make sure it’s really important to you, or only truly desperate sellers are going to want to deal with it.
EarnUp, a “consumer-first payments platform,” has announced a $25 million funding round that it plans to use for a platform that helps homeowners and mortgage providers get a handle on at-risk loans. So reports The Fintech Times.
EarnUp said it will put the money toward expanding its GetAhead platform, which automatically provides lenders with advance notice on loans that might go into forbearance or qualify for a refinance.
The Series B round was led by Bain Capital Ventures. SignalFire, Blumberg Capital and Flourish Ventures also participated.
Different? Yes. Complementary? That too. Learn when to use a checking or savings account.
Every day you make hundreds of choices. Should you wear jeans or dress pants to work? Eat a burrito or sandwich for lunch? Take public transit or hop in a cab? These may be easy questions to answer, but sometimes you get stuck on a question because you don’t know enough about the relative merits of one choice versus another.
This may be especially true when focusing on finances, particularly when comparing different types of bank accounts. It can seem like a puzzle, right? If you’re debating whether to open a checking account or savings account, you’re probably ready for a rundown of the benefits of each account type. The answer to the checking account versus savings account question will ultimately come down to how you intend to use your account and the funds you park there.
Make one of today’s choices easier by answering the following questions to decide whether you should choose a checking account or savings account:
Do you need regular access to your funds?
If you want to deposit money that you plan on regularly accessing for everyday spending, a checking account is the way to go.
“If you anticipate heavy monthly traffic in your account from paying your bills—such as student loans, car loans, credit cards, auto insurance, mortgage—then it’s best to set up a checking account,” says Ogechi Igbokwe, founder of OneSavvyDollar, a website that helps millennials find jobs and make good financial choices.
Igbokwe adds that federal law limits the number of certain types of withdrawals and transfers from savings accounts.1
checking account benefit to consider.
“Checking account holders have access to online and mobile banking, ATMs and the use of debit cards and checks to make purchases or withdraw funds from the account,” adds Alexander Lowry, executive director of the Master of Science in Financial Analysis program at Gordon College in Wenham, Massachusetts.
You can still get access to online and mobile banking if you open a savings account, and you can have official checks drawn on your account. Bonus: If your savings account is at the same financial institution as your checking account, you could also use your debit card for ATM withdrawals. While savings accounts don’t often allow you to write checks for purchases, you can transfer or withdraw your funds ahead of time.
How much are you looking to deposit?
If you’re thinking about opening a checking account or savings account, it may be helpful to consider how much your money can earn in both accounts.
Since checking accounts don’t typically pay interest, they may be better suited for smaller balances. Still, some offer other rewards, such as Discover Cashback Debit, which allows you to earn 1% cash back on up to $3,000 in qualifying debit card purchases each month.2
Get 1% cashback on Debit from Discover. 1% cashback on up to $3000 in debit card purchases every month. Limitations apply. Excludes Money market accounts.Discover Bank,Member FDIC.Learn More
If you’re looking to open a checking account or savings account and want to deposit a larger amount of money—perhaps you want to build an emergency fund or are planning for a big financial milestone—you might want to put it in savings.
“[Savings accounts] are ideal for individuals looking to save while earning interest,” Lowry says.
Should you use both a checking and savings account?
While choosing a checking account or savings account depends on your financial needs, many people ultimately find that having both types of bank accounts is the best way to improve their money management and achieve their financial goals. According to a Discover Savings Survey, 41 percent of those using a savings account also use a checking account.
“Using a savings account can increase your propensity to save,” Lowry says. “On the other hand, checking accounts help you keep better track of what you spend. Thus the two accounts can work hand in glove to help set you on a better path to financial knowledge and stability.”
Take full advantage of your new account
If you decide to open a checking account, Lowry recommends managing your checking account wisely.
“A checking account is a primary tool for managing personal finances,” he says. “Be sure to realize the full opportunity it avails by signing up for direct deposit, signing up for online and mobile banking, taking advantage of alerts and arranging automatic payments.”
Now that you’ve figured out whether to open a checking account or savings account, you can move on to answering all the other question that pop up in a given day. We hope you’re pleased with the outcome of that burrito versus sandwich lunch debate, too.
1Federal law limits certain types of withdrawals and transfers from savings and money market accounts to a combined total of 6 per calendar month per account. There are no limits on ATM withdrawals or official checks mailed to you. To get an account with an unlimited number of transactions, consider opening a Discover Cashback Debit account. If you go over these limitations on more than an occasional basis, your account may be closed. See Section 11 of the Deposit Account Agreement for more details.
2ATM transactions, the purchase of money orders or other cash equivalents, cash over portions of point-of-sale transactions, Peer-to-Peer (P2P) payments (such as Apple Pay Cash), and loan payments or account funding made with your debit card are not eligible for cash back rewards. In addition, purchases made using third-party payment accounts (services such as Venmo® and PayPal™, who also provide P2P payments) may not be eligible for cash back rewards. Apple, the Apple logo and Apple Pay are trademarks of Apple Inc., registered in the U.S. and other countries. Venmo and PayPal are registered trademarks of PayPal, Inc.
According to Kelley Blue Book, the average price for a light vehicle in the United States was almost $38,000 in March 2020. Of course, the sticker price will depend on whether you want a small economy car, a luxury midsize sedan, an SUV or something in between. But the total you pay for a vehicle also depends on a number of other factors if you’re taking out a car loan.
Get the 4-1-1 on financing a car so you can make the best decision for your next vehicle purchase.
Whether or not you should finance your next vehicle purchase is a personal decision. Most people finance because they don’t have an extra $20,000 to $50,000 they want to part with. But if you have the cash, paying for the car outright is the most economical way to purchase it.
For most people, deciding whether to finance a car comes down to a few considerations:
Do you need the vehicle enough to warrant making a monthly payment on it for several years?
Is the deal, including the interest rate, appropriate?
Factors to Consider When Financing a Car
Obviously, the first thing to consider is whether you can afford the vehicle. But to understand that, you need to consider a few factors.
Total purchase price. Total purchase price is the biggest impact on how much you’ll pay for the car. It includes the price of the car plus any add-ons that you’re financing. Depending on the state and your own preferences, that might include extra options on the vehicle, taxes and other fees and warranty coverage.
Interest rate, or APR. The interest rate is typically the second biggest factor in how much you’ll pay overall for a car you finance. APR sounds complex, but the most important thing is that the higher it is, the more you pay over time. Consider a $30,000 car loan for five years with an interest rate of 6%—you pay a total of $34,799 for the vehicle. That same loan with a rate of 9% means you pay $37,365 for the car.
The terms. A loan term refers to the length of time you have to pay off the loan. The longer you extend terms, the less your monthly payment is. But the faster you pay off the loan, the less interest you pay overall. Edmunds notes that the current average for car loans is 72 months, or six years, but it recommends no more than five years for those who can make the payments work.
It’s important to consider the practical side of your vehicle purchase. If you take out a car loan for eight years, is your car going to still be in good working order by the time you get to the last few years? If you’re not careful, you could be making a large monthly payment while you’re also paying for car repairs on an older car.
Buying a Car with No Credit
You can buy a car anytime if you have the cash for the purchase. If you have no credit or bad credit, your options for financing a car might be limited. But that doesn’t mean it’s impossible to get a car loan without credit.
Many banks and lenders are willing to work with people with limited credit histories. Your interest rate will likely be higher than someone with excellent credit can command, though. And you might be limited on how much you can borrow, so you probably shouldn’t start looking at luxury SUVs. One tip for increasing your chances is to put as much cash down as you can when you buy the car.
If you can’t get a car loan on your own, you might consider a cosigner. There are pros and cons to asking someone else to sign on your loan, but it can get you into the credit game when the door is otherwise barred.
Personal Loans v. Car Loans: Which One Is Better?
Many people wonder if they should use a personal loan to buy a car or if there is really any difference between these types of financing. While technically a car loan is a loan you take out personally, it’s not the same thing as a personal loan.
Personal loans are usually unsecured loans offered over relatively short-term periods. The funds you get from a personal loan can typically be used for a variety of purposes and, in some cases, that might include buying a car. There are some great reasons to use a personal loan to buy a car:
If you’re buying a car from a private seller, a personal loan can hasten the process.
Traditional auto loans typically require full coverage insurance for the vehicle. A personal loan and liability insurance may be less expensive.
Lenders typically aren’t interested in financing cars that aren’t in driving shape, so if you’re buying a project car to work on in your garage during your downtime, a personal loan may be the better option.
But personal loans aren’t necessarily tied to the car like an auto loan is. That means the lender doesn’t necessarily have the ability to repossess the car if you stop paying the loan. Since that increases the risk for the lender, they may charge a higher interest rate on the loan than you’d find with a traditional auto loan. Personal loans typically have shorter terms and lower limits than auto loans as well, potentially making it more difficult for you to afford a car using a personal loan.
Steps You Should Follow When Financing a Car
Before you jump in and apply for that car loan, review these six steps you should take first.
1. Check your credit to understand whether you are likely to be approved for a loan. Your credit also plays a huge role in your interest rate. If your credit is too low and your interest rate would be prohibitively high, it might be better to wait until you can build or repair your credit before you get an auto loan. Sign up for ExtraCredit to see 28 of your FICO scores from all three credit bureaus.
2. Research auto loan options to find the ones that are right for you. Avoid applying too many times, as these hard inquiries can drag your credit score down with hard inquiries. The average auto loan interest rate is 27% on 60-month loans (as of April 13, 2020).
3. Get your trade-in appraised. The dealership might give you money toward your trade-in. That reduces the price of the car you purchase, which reduces how much you need to borrow. A few thousand dollars can mean a more affordable loan or even the difference between being approved or not.
4. Get prequalified for a loan online. While most dealers will help you apply for a loan, you’re in a better buying position if you walk into the dealership with funding ready to go. Plus, if you’re prequalified, you have a good idea what you can get approved for, so there are fewer surprises.
5. Buy from a trusted dealer. Unfortunately, there are dealerships and other sellers that prey on people who need a car badly. They may charge high interest or sell you a car that’s not worth the money you pay. No matter your financial situation, always try to work with a dealership that you can trust.
6. Talk to your car insurance company. Different cars will carry different car insurance premiums. Make a call to your insurance company prior to the sale to discuss potential rate changes so you’re not surprised by a higher premium after the fact.
Next to buying a home, buying a car is one of the biggest financial decisions you’ll make in your life, and you’ll likely do it more than once. Make sure you understand the ins and outs of financing a car before you start the process.
High-risk car insurance is reserved for drivers who fall into the high-risk category, which includes anyone with multiple traffic violations, at-fault accidents, and other issues that result in higher costs for car insurance companies.
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If you’re in the high-risk category, your auto insurance quotes will be higher, and it may take several years for things to return to normal.
When are You Considered a High-Risk Driver?
You’re considered to be high-risk as soon as the statistics suggest that you’re more likely to make a claim.
For instance, you’ll be given the high-risk label if you are responsible for a major car accident or receive a DUI conviction. You’ll be given the same treatment if you have speeding tickets, run a red light, make an illegal turn, or fail to stop at the scene of an accident.
But that’s not all.
You also fall into the high-risk category if you’re a teenage driver who has just passed their test. Young drivers are significantly more likely to be involved in an accident and the same is true for male drivers and inexperienced drivers.
As a 16-year-old male getting behind the wheel for the first time, you’re considered to be just as much of a liability, if not more so, than an experienced driver who has previously been convicted of a serious driving offense.
The same is true for drivers over the age of 70, as the rate of accidents and claims increase after this milestone. That’s why many states insist on regular renewals along with vision tests, reaction tests, and letters from physicians.
How will Offenses Increase my Premiums?
Traffic violations can increase your car insurance rates and those increases will remain for several years. A DUI works in the same way, although, in this case, you may face an immediate suspension, as well as fines, and it could be some time before you’re allowed behind the wheel again.
The following price increases are based on national averages, but all auto insurance companies have different underwriting processes and take several other factors into consideration.
Driving Under the Influence = 70% to 80%
Reckless Driving = 75%
Racing = 70%
Speeding (30mph or more over the limit) = 30%
Texting While Driving = 22%
Distracted Driving = 21%
Speeding (15 to 30 mph over the limit) = 20%
Illegal Passing = 20%
Speeding (up to 15 mph over the limit) = 18%
Illegal Turn = 15%
Failure to Yield or Stop = 15%
Talking on Phone = 15%
Driving without Car Insurance = 10%
Not Wearing a Seatbelt (in New York) = 3%
Cost of High-Risk Insurance in Every State
Your location is one of the biggest factors determining the cost of your car insurance quotes and this is true whether you have a clean driving record or several moving violations.
In the list below, we have included the average cost of car insurance in each state, followed by the potential increases from speeding tickets and DUI/DWI convictions.
Alabama – Statewide Average Car Insurance Cost = $1,300; Cost with One Speeding Ticket = $1,670; Cost with One DUI = $2,500
Alaska – Statewide Average Car Insurance Cost = $1,200; Cost with One Speeding Ticket = $1,500; Cost with One DUI = $2,800
Arizona – Statewide Average Car Insurance Cost = $1,450; Cost with One Speeding Ticket = $1,780; Cost with One DUI = $1,800
Arkansas – Statewide Average Car Insurance Cost = $1,550; Cost with One Speeding Ticket = $1,900; Cost with One DUI = $2,400
California – Statewide Average Car Insurance Cost = $1,850; Cost with One Speeding Ticket = $2,400; Cost with One DUI = $4,000
Colorado – Statewide Average Car Insurance Cost = $1,780; Cost with One Speeding Ticket = $2,500; Cost with One DUI = $2,400
Connecticut – Statewide Average Car Insurance Cost = $1,650; Cost with One Speeding Ticket = $2,300; Cost with One DUI = $3,200
Delaware – Statewide Average Car Insurance Cost = $1,850; Cost with One Speeding Ticket = $2,200; Cost with One DUI = $2,600
D.C. – Statewide Average Car Insurance Cost = $1,900; Cost with One Speeding Ticket = $2,200; Cost with One DUI = $2,600
Florida – Statewide Average Car Insurance Cost = $1,230; Cost with One Speeding Ticket = $3,000; Cost with One DUI = $3,700
Georgia – Statewide Average Car Insurance Cost = $1,800; Cost with One Speeding Ticket = $2,200; Cost with One DUI = $3,000
Hawaii – Statewide Average Car Insurance Cost = $1,300; Cost with One Speeding Ticket = $2,400; Cost with One DUI = $4,200
Idaho – Statewide Average Car Insurance Cost = $1,050; Cost with One Speeding Ticket = $1,300; Cost with One DUI = $1,500
Illinois – Statewide Average Car Insurance Cost = $1,300; Cost with One Speeding Ticket = $1,400; Cost with One DUI = $1,900
Indiana – Statewide Average Car Insurance Cost = $1,180; Cost with One Speeding Ticket = $1,300; Cost with One DUI = $1,500
Iowa – Statewide Average Car Insurance Cost = $1,050; Cost with One Speeding Ticket = $1,280; Cost with One DUI = $1,700
Kansas – Average Premiums for Most Drivers = $1,400; Cost with One Speeding Ticket = $1,650; Cost with One DUI = $2,200
Kentucky – Average Premiums for Most Drivers = $1,600; Cost with One Speeding Ticket = $2,100; Cost with One DUI = $3,600
Louisiana – Average Premiums for Most Drivers = $2,300; Cost with One Speeding Ticket = $2,700; Cost with One DUI = $4,200
Maine – Average Premiums for Most Drivers = $850; Cost with One Speeding Ticket = $1,000; Cost with One DUI = $1,500
Maryland – Average Premiums for Most Drivers = $1,550; Cost with One Speeding Ticket = $1,800; Cost with One DUI = $2,600
Massachusetts – Average Premiums for Most Drivers = $1,250; Cost with One Speeding Ticket = $1,900; Cost with One DUI = $2,350
Michigan – Average Premiums for Most Drivers = $2,600; Cost with One Speeding Ticket = $3,400; Cost with One DUI = $5,800
Minnesota – Average Premiums for Most Drivers = $1,380; Cost with One Speeding Ticket = $1,700; Cost with One DUI = $2,350
Mississippi – Average Premiums for Most Drivers = $1,400; Cost with One Speeding Ticket = $2,000; Cost with One DUI = $2,300
Missouri – Average Premiums for Most Drivers = $1,280; Cost with One Speeding Ticket = $1,400; Cost with One DUI = $1,900
Montana – Average Premiums for Most Drivers = $1,600; Cost with One Speeding Ticket = $1,800; Cost with One DUI = $2,100
Nebraska – Average Premiums for Most Drivers = $1,300; Cost with One Speeding Ticket = $1,650; Cost with One DUI = $1,750
Nevada – Average Premiums for Most Drivers = $1,550; Cost with One Speeding Ticket = $1,900; Cost with One DUI = $3,000
New Hampshire – Average Premiums for Most Drivers = $1,100; Cost with One Speeding Ticket = $1,450; Cost with One DUI = $1,850
New Jersey – Average Premiums for Most Drivers = $1,520; Cost with One Speeding Ticket = $1,800; Cost with One DUI = $3,000
New Mexico – Average Premiums for Most Drivers = $1,400; Cost with One Speeding Ticket = $1,800; Cost with One DUI = $2,000
New York – Average Premiums for Most Drivers = $1,800; Cost with One Speeding Ticket = $2,450; Cost with One DUI = $3,000
North Carolina – Average Premiums for Most Drivers = $1,100; Cost with One Speeding Ticket = $2,200; Cost with One DUI = $4,400
North Dakota – Average Premiums for Most Drivers = $1,170; Cost with One Speeding Ticket = $1,350; Cost with One DUI = $2,200
Ohio – Average Premiums for Most Drivers = $1,180; Cost with One Speeding Ticket = $1,250; Cost with One DUI = $1,700
Oklahoma – Average Premiums for Most Drivers = $1,500; Cost with One Speeding Ticket = $1,900; Cost with One DUI = $2,500
Oregon – Average Premiums for Most Drivers = $1,300; Cost with One Speeding Ticket = $1,450; Cost with One DUI = $1,850
Pennsylvania – Average Premiums for Most Drivers = $1,200; Cost with One Speeding Ticket = $1,600; Cost with One DUI = $1,850
Rhode Island – Average Premiums for Most Drivers = $1,850; Cost with One Speeding Ticket = $2,500; Cost with One DUI = $3,350
South Carolina – Average Premiums for Most Drivers = $1,440; Cost with One Speeding Ticket = $1,600; Cost with One DUI = $2,200
South Dakota – Average Premiums for Most Drivers = $1,270; Cost with One Speeding Ticket = $1,500; Cost with One DUI = $2,200
Tennessee – Average Premiums for Most Drivers = $1,300; Cost with One Speeding Ticket = $1,550; Cost with One DUI = $2,100
Texas – Average Premiums for Most Drivers = $1,800; Cost with One Speeding Ticket = $1,900; Cost with One DUI = $2,300
Utah – Average Premiums for Most Drivers = $1,200; Cost with One Speeding Ticket = $1,450; Cost with One DUI = $1,900
Vermont – Average Premiums for Most Drivers = $1,100; Cost with One Speeding Ticket = $1,350; Cost with One DUI = $2,050
Virginia – Average Premiums for Most Drivers = $1,070; Cost with One Speeding Ticket = $1,200; Cost with One DUI = $1,550
Washington – Average Premiums for Most Drivers = $1,400; Cost with One Speeding Ticket = $1,600; Cost with One DUI = $2,000
West Virginia – Average Premiums for Most Drivers = $1,480; Cost with One Speeding Ticket = $1,750; Cost with One DUI = $2,100
Wisconsin – Average Premiums for Most Drivers = $950; Cost with One Speeding Ticket = $1,450; Cost with One DUI = $1,950
Wyoming – Average Premiums for Most Drivers = $1,600; Cost with One Speeding Ticket = $2,000; Cost with One DUI = $2,200
High-Risk Insurance Options
Many insurance carriers will still offer you a policy if you are in the high-risk category, you’ll just be quoted much higher prices until you clean up your driving record.
Try the following tips to ensure you get the best car insurance even when you are considered to be a higher risk.
1. Improve Your Credit Score
Underwriters look at your credit score to determine your risk. They know, for instance, that someone with bad credit is more likely to make a claim on their policy. As a result, bad credit drivers are charged much higher rates than those with good credit.
There are a few likely scenarios here. The first is that people with good credit are more financially responsible. Not only are they less likely to drive fast or recklessly, but they are also more likely to pay for small accidents out of pocket.
Perhaps more importantly, a good credit driver is more likely to pay for their premiums on time, thus causing fewer problems for the insurer.
Maintain a good credit history by meeting all your monthly payments on time; avoid applying for any new loans or credit cards; increase your credit limits where possible, and clear as much of your current debt balances as you can.
All of these simple methods will ensure your credit score stays strong.
2. Take a Defensive Driving Course
A defensive driving course can undo some of the damage done by a traffic violation and give you the experience and skills you need to stay safe behind the wheel. A knowledgeable driver is a safe driver, which is why defensive driving certificates can save you money.
3. Buy a Suitable Car
If you’re a new driver or you’re making a transition from one vehicle to the next and have the luxury of, then you’re in a very strong position.
Many young drivers, for instance, will get the fastest and most powerful car they can afford. Either that, or they save every cent they can and purchase the latest trendy new vehicle. But neither of these options will result in an affordable car insurance policy.
A new car typically costs more to insure than an older car, as the cost of replacing it and repairing the electronics will be much higher. As for sports cars and luxury cars, they have much lower safety ratings and, as a result, will almost certainly drive those insurance premiums sky-high.
The ideal car is one that has a high safety rating, is affordable, comes with numerous safety features and anti-theft features, and doesn’t have many custom parts or hard-to-replace parts.
Not only will car insurance companies look more fondly on vehicles that fit this mold, but you can also take more liberties with regards to the deductible and the coverage options.
For example, a brand-new car will need New Car Replacement coverage, as well as collision cover and comprehensive cover. That way, if you hit a wall, a tree or an animal, or your car is stolen, vandalized or damaged following an extreme weather event, you don’t stand to lose all of your investment.
If the car is cheap, you can dismiss those potentially expensive options, knowing that you can cover all minor repairs yourself and write off the vehicle entirely if anything major happens to it.
4. Compare and Contrast
Hundreds of insurance companies operate in every single state and you can sign up over the phone, online or via an insurance agent. With so many choices and possibilities, you have no excuse not to shop around.
A car insurance policy is like any other big purchase you make. You wouldn’t buy a brand new $2,000 computer after visiting just one store, nor would you drop several grand on the first car you see.
With car insurance, you need to consult many reps from many major insurance companies (Allstate, GEICO, State Farm, Progressive, Nationwide) as well as a few local and specialized ones (The General, USAA).
It’s the only way to guarantee the best rates and this applies whether you have a clean driving history, or one filled with violations and insurance claims.
5. Get Some Car Insurance Discounts
Reduce your car insurance premiums by checking all possible discounts and getting as many of them as you can. Car insurance discounts differ from provider to provider and from state to state, but generally, they include:
Good Student Discount: Many state authorities require insurance carriers to offer discounts for students who maintain a high-grade point average. This is also true for high-risk auto insurance providers and for all qualifying applicants, the discounts can be incredibly generous.
Safety Features Discount: The addition of front-and-side airbags could save you as much as 40% on comprehensive insurance coverage. The risk of serious injuries and fatalities drops considerably when these basic safety features are installed. Discounts are also offered for anti-lock brakes, car alarms, and other features designed to keep drivers safe and prevent the vehicle from being stolen or vandalized.
Multi-Car Discount: Add multiple vehicles to the same policy to qualify for a discount. If you have multiple cars and drivers in your household, this discount is a must.
Multi-Policy Discount: Insurers use this discount to encourage policyholders to sign up for additional services. For instance, most major standard and non-standard auto insurance carriers will give you a discount if you purchase homeowners insurance along with auto insurance.
Student Away Discount: If you’re a young driver who lives and studies on campus, you may qualify for this discount, which takes advantage of the fact you will spend much less time on the roads.
Senior Discount: Some states offer discounts to senior drivers, and those drivers could save even more if they have a long and clean driving record behind them. Bear in mind, however, that many states also require additional vision/reaction tests to ensure you’re still capable and responsible.
Low Mileage: Mileage based car insurance providers charge you by the mile. You may pay more if you drive a lot but could save yourself a few dollars if you drive very little. The major providers offer something similar, installing apps that monitor your driving habits and use the data gathered to tweak your insurance premiums.
Married Homeowner Discount: Although it’s not a discount as such, you will receive a much cheaper auto insurance policy if you own your home and are married. Insurers covet married policyholders as they are more responsible, less likely to claim, and they can also get a two-for-one deal.
Bottom Line: Higher Premiums but Still Affordable
Receiving the high-risk label doesn’t mean you’re doomed forever, nor does it mean you’ll be paying through the nose for the most basic of car insurance policies.
You’ll pay more than you would for a standard insurance policy, but by doing a little research and a lot of comparison shopping, and by keeping a clean driving record from this moment on, you’ll save yourself thousands of dollars and avoid concerning rate increases in the future.
“Hottest Summer ever in Phoenix recorded history and also the hottest July ever for real estate sales in the Greater Phoenix area. Our market is smoking! In the last 20 years, monthly sales have topped 10,000 only four previous times. July 2020 has reached this milestone with 10,303 sales!” -Wayne Graham, Head of Real Estate Operations at Homie Arizona.
Data via ARMLS® from July 1, 2020 to July 31, 2020.
According to the data from the ARMLS® from July 1, 2020 to July 31, 2020, real estate sales are up +8.4% month-over-month . The year-over-year comparison is up +12.1% at 10,303 compared to 9,192 in 2018-19.
*Data from the ARMLS® from July 1, 2020 to July 31, 2020.
Average new list prices are up +15.7% at $418.2K compared to $361.3K in 2018-19. The year over-year median is up +12.9% at $325K, compared to $287.9K in 2018-19.
*Data from the ARMLS® from July 1, 2020 to July 31, 2020.
Home values are staying strong. The average sales price is up +14.6% year-over year at $391.6K, compared to $341.6K in 2018-19. While the year-over year median sales price is also up +12.5% at $315K compared to $280K in 2018-19.
Days on Market (DOM)
*Data from the ARMLS® from July 1, 2020 to July 31, 2020.
We saw the Average Cumulative Days on Market decrease in July 2020-19, averaging 55 days on market versus 63 Average Cumulative Days on Market in 2018-19. At Homie, we are continuing to see sellers getting multiple offers on their homes.
July Breaks Records in 2020
A message from our Associate Broker, Jennifer Hull:
It’s a jungle out there for buyers! Despite recent appreciation rates the Home Opportunity Index* measure for the Greater Phoenix market increased to 64.8% for the 2nd Quarter in 2020; the previous measure was 63.0%. This means that a household making the current median family income of $72,300 per year could afford 64.8% of what sold in the 2nd Quarter of 2020. By comparison, the HOI measure for the United States was 59.6%.
Historically, a normal range for this measure is between 60-75%. During the bubble years of excessive appreciation between 2005-2006, the HOI plummeted from 60.1% to 26.6%. Typically if it falls below 60%, the market should start to see a drop in demand. With the most recent increase however, Greater Phoenix is still within normal range and experiencing demand 20% above normal for this time of year.
What makes this market significantly different from the infamous bubble and crash is the relation between resale housing growth and population growth. In the early 2000’s, housing was growing faster than the population and creating a surplus. This surplus went unnoticed due to excessive speculator (i.e. “false”) demand fueled by loose lending practices. When loans tightened up, the surplus came roaring into focus as vacant inventory soared to over double the normal levels. However since 2006, the population has grown faster than housing. It has taken 14 years, but the population growth fueled by job growth has finally consumed the surplus of resale housing created during the bubble years and now the market is facing a shortage of homes for sale.
This type of market and appreciation is not sustainable long term, however it’s here now and properties purchased today are expected to continue appreciating over the next 6-12 months.
So much for the summer slowdown, July had a record number of closings go through the Arizona Regional MLS; surpassing every July as far back as 2001. July also had record breaking sales in dollar volume with $3.9B sold. The best July ever recorded prior was in 2005 at $2.9B. The monthly appreciation rate finalized 12.5% higher than 2019 and was the 4th highest appreciation rate for July going back to 2001.
“One third of homes closed were over asking price and only 15% involved any sort of seller-paid closing cost assistance; down from a high of 27% last May. Half of all sellers who accepted contracts in the first week of August did so with 7 days or less on the market.
Contracts on luxury homes over $1M are up an incredible 93% over last year at this time. Between $500K-$1M, contracts are up 64%. Between $300K-$500K, they’re up 39%. Between $250K-$300K, up 15%. If you need to sell, this is indeed the time to do it!” -Jennifer Hull, Associate Broker at Homie Arizona.
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What are some of the biggest lessons you received about money growing up? For me, a few things stand out. We didn’t get too many formal lectures about money, but from time to time, I’d get a lesson sprinkled in here and there.If I spent my allowance too fast, then I’d hear about why it’s important to budget. If I wanted a video game, I’d get suggestions on how to earn extra cash for it. When it came time for a car, I got a crash course on saving and negotiating. I’m grateful for those lessons.
I’m also aware that were certain gaps in my financial knowledge growing up that I didn’t learn until many years (and mistakes) later.
Now that we’re parents, we want our kids not only to be savvy with their money but also generous and wise.
Crucial Money Lessons to Pass on to Your Kids
Teaching our kids about money doesn’t have to be a difficult thing. Kids are naturally inclined to learn and that includes finances. When I spoke to Paul Vasey, the creator of Cash Crunch Games, he emphasized how the key is approaching things on their level. Lots of smaller conversations can have a bigger impact than a few big ones.Where do you start though? And what are the big topics you need to cover?
Today, I want to share tips from some of the best financial experts in the space on the essential money lessons your kids need to know from starting from pre-school to when they graduate high school.
Defining Needs vs Wants
They skip the numbers and instead focus on key concepts like identifying needs vs wants. Being able to tell and understand the difference between the two is something that they’ll need as they grow up. It’s also important to let them know that wants aren’t bad, they just have to be kept in check.
You can make it a game, going through the groceries or exploring around the house. Talk about which things are needs and which are nice to have items. It’ll also give them a chance to see that some items fall somewhere in the middle.
Speaking of games, there are wonderful options like Cash Crunch Jr that are specifically designed for kids to learn about money.
Save, Spend, and Share
Another crucial concept kids can pick fairly early is the choices you have with money.No, I’m not talking about picking stocks or finding the best rates for savings. What you can pass on to your kids is how they can spend, save, or share their money.
Spending tends to be the easiest one for them to get. If they have the money for the toy, snack, or game, they can spend the money then.Saving is a bit more advanced as you’re helping them see that they have to wait a bit and grow their money before they purchase it.
Use visuals like a chart to track how much they’re saving. Every time they make a ‘deposit’ they can color it in or put a sticker on. Sharing can actually be something they catch on based on ourexample. Talking about where and why we donate or volunteer is a fantastic opportunity for us to explain to our kids what we value.
Our daughters have to set aside a certain percentage of their allowance to share, but they have a say on what they spend it on. Our oldest likes to buy flowers for neighbors and our youngest makes cards. Giving them some choice with this makes it more personal and hopefully will become a habit throughout their lives.
Understanding Budgets are About Priorities
When I chat with new members of the Couple Money community, one of the first things I notice is how they view budgets. For many of them, they see them as a restriction. They feel like a budget is something that tells you what you can’t spend on. Honestly, if that’s how you see budgets, then it makes sense why you’d want to skip out on them altogether. Who wants deprivation?
However, when I interviewed couples who’ve done some incredible things like wipe out over $100,000 of debt together or pivoted their careers and lives for their dreams, I noticed that their take on budgets was completely different.
They saw budgets as a way to prioritize what was important to them. And that’s something we can pass on to our kids. Let them see you put together the family. Open up your Mint app or glance at it on the desktop so they can visualize what’s going on. Talk about not just the bills, but how you’re saving up for things you enjoy like a family trip.These conversations can help them see that you may cut back on spending in one area because you’d rather spend it elsewhere.
As they get older, they can also offer suggestions and ideas on how to save more, which helps them put into practice prioritizing goals.
Allow Them to Handle Back to School Shopping
As they (and you) gain more confidence with how they’re handling money, allowing them to manage back to school shopping can give me a chance to plan and budget for their supplies and clothes. Sit down with them and create a basic budget with an app like Mint so they have a plan for how they’re spending their money. Depending on their maturity, you can decide how much to step back and when you need to budge them in a better direction.
Have Kids Chip in with the Bills
Bill Dwight, the creator of award-winning family finance app FamZoo, suggested that teens should start accepting responsibility for some of the bills around the house. Taking care of their portion of the cell phone bill, for example, can give them some practice on what it means to stay on budget. Even a small bill like $15- $20 a month depending on how much they use and their income can teach them about everyday costs and how to allocate their bills. And if you feel bad about charging them, you can always accept their payment and then stash it away in a high yield savings account. When they graduate high school, they now have some extra savings they can use.
One of my favorite jobs, when I was working through college, was at a family-owned Italian iccee shop. I remember one of the managers, a guy maybe a few years older than us. We had a slow period and the shop was already prepped so he used the time to go over some of his investments. To the rest of us, we were a bit skeptical that this guy would have any portfolio (again, he was maybe early twenties at most), but he showed us his statement. He explained that he started investing as a teen around the time he got his first job. Small contributions at first, but his parents walked him through the basics of investing.
You can do the same with your teen as they work – have them set aside a certain percentage for investing (and possibly offer to match it) so they can become comfortable. Using Mint can be handy because they can link their accounts and get a clear view of how they’re doing.
Having hands-on experience along with conversations about the differences between stocks and bonds, how mutual funds work, and asset allocation will give them a big leg up later when they’re signing up for their company’s 401(k).
Teaching Money is More Than Lectures
As your kids are learning about money, expect them to make mistakes. It’s normal and actually a good thing.Typically the mistakes they make at home are going to be smaller in scale compared to trouble they may get into as adults who can now sign loans and open credit cards. If they’ve had some fails under their belt, they’re more likely not to repeat them.
Speaking of money fails, there are some great teaching moments you can have with your kids about your own. As Holly Reid Toodle, CPA and author of Teach Your Child to Fish, told me, parents have to be willing to sharing our money fails as well as the wins. “As parents, be vulnerable and actively share how you haven’t always had perfect credit or made the best decisions financially.
Some of our most meaningful lessons come from observing or hearing about the mistakes or missed opportunities of others, so don’t overlook the value of those stories and moments with your child.”So take time to share your experiences of being in debt and the downsides of not having a budget. It’ can be a real asset to your child’s financial well-being.
Your Take on Kids and Money
We can’t cover all the money lessons to pass on to your kids, but we hit the major ones.
I’d love to get your take. What lessons are you passing on to your kids?
Massachusetts has some of the highest housing prices in the nation, especially in the popular Boston area. This state has an average overall home value of $464,000, which is much higher than the nationwide average of about $263,000. These high home prices are due, in part, to the central location of the state, the easy access to major metro areas and the many other perks that this state offers.
Despite the high home prices in Massachusetts, this could be the perfect time to buy a home in the state. Not only are the nationwide mortgage loan interest rates low across the board, but the Massachusetts mortgage rates are also at some of the lowest points ever.
Those rates, along with the state’s housing prices, are expected to rise in the next year. If you’re looking to move to Massachusetts, or if you’re a resident of this state and are ready to buy or refinance a home, here’s what you need to know.
Mortgage Rates in Massachusets
The mortgage interest rate table below is updated daily to reflect the most current mortgage rates available in the market. According to Bankrate’s latest survey of the nation’s largest mortgage lenders, these are the current average rates for a 30-year fixed, 15-year fixed, FHA and VA mortgage rates.
Rate Last Week
30-Year Fixed Rate
20-Year Fixed Rate
15-Year Fixed Rate
10-Year Fixed Rate
30-Year FHA Rate
30-Year VA Rate
Rates data based on Boston, Massachusetts as of 3/5/2021
Mortgage Rates Trends
In this graph: On , the APR was for the 30-year fixed rate, for the 15-year fixed rate, and for the 5/1 adjustable-rate mortgage rate. These rates are updated almost every day based on Bankrate’s national survey of mortgage lenders.Toggle between the three rates on the graph and compare today’s rates to what they looked like in the past days.
Mortgage rates around the nation have reached their lowest levels ever over the last year due in major part to the COVID-19 pandemic and the actions the Fed took to lower rates during the coronavirus pandemic. Rates began falling in March at the start of the pandemic and have consistently dropped since that time, remaining low into the new year.
Massachusetts buyers may have access to mortgage rates that are even lower than the national average. Though these rates won’t exactly offset the high housing prices, they can help make homeownership a bit more affordable. In the second week of January 2021, the average rate on a 30-year fixed-rate mortgage in Massachusetts was 2.89%. During that time, the average 15-year fixed-rate mortgage loan in Massachusetts had a rate of 2.42%. The average rate for a 5/1 ARM was 2.80%, and the average rate on a 30-year fixed refinance in Massachusetts was just 2.95%.
There’s no way to know how rates will trend in the future, so it’s unclear whether the rates in this state will stay as low as they currently are. That said, many experts expect that rates will increase in early 2021.
[ Read: How to Calculate Your Mortgage ]
Massachusetts mortgage rates overview
The state of Massachusetts has the fourth-highest housing prices in the nation, especially in the Boston area. Prices in this state have increased dramatically over the past decade. The state’s average home price has increased more than $100,000 in just the past five years along.
The bad news for homebuyers is that prices are only expected to increase. Luckily, the state also has some of the most competitive mortgage rates.
Massachusetts homebuyers have plenty of options to choose from when it comes to financing a home. Common mortgage types include:
Conventional mortgage: Conventional mortgages are available with either fixed or adjustable rates with terms ranging from 15 to 30 years.
FHA loan: These loans are backed by the Federal Housing Administration to help low and moderate-income buyers get a mortgage.
VA loan: Backed by the U.S. Department of Veterans Affairs, these loans are meant to help current and former military members buy a no-down-payment home at a low interest rate.
USDA loan: Backed by the U.S. Department of Agriculture, these loans are used to help rural residents buy a home.
First time home buyer programs in the state of Massachusetts
The state of Massachusetts doesn’t directly offer any first-home homebuyer programs, but other organizations within the state do. MassHousing is an independent agency in the state that helps homebuyers find affordable housing solutions. MassHousing’s offerings include:
The MassHousing Mortgage — This program helps low and moderate-income borrowers buy a home as long as they meet certain income and credit requirements. The mortgage is available through more than 100 lenders in Massachusetts.
MassHousing Down Payment Assistance — This program provides buyers with down payment assistance for up to 5% of a home’s value. The maximum benefits vary depending on where in the state you are located.
[ Read: First-Time Home Buyer Programs and Grants ]
Most and least expensive places to live in Massachusetts
The average housing price in Massachusetts is well above the national average, but prices vary quite a bit depending on where you go. There’s a difference of more than $800,000 between the most affordable and most expensive cities in the state — showcasing just how wide of a price gap there is between areas in this state.
Least expensive places to buy real estate in Massachusetts
The areas below are based on Zillow’s Home Value Index, which was used to find the most affordable cities to buy real estate in Massachusetts. The numbers below reflect the typical home value for homes in the 35th to 65th percentile range.
Massachusetts has some of the highest housing prices in the nation, but there are a handful of cities that offer housing prices below (in some cases far below) the national average.
Springfield, MA: Average home price of $142,100
Worcester, MA: Average home price of $214,100
New Bedford, MA: Average home price of $223,400
Fall River, MA: Average home price of $234,300
Lawrence, MA: Average home price of $236,800
Most expensive places to buy real estate in Massachusetts
The average home prices below reflect the typical home value for homes in the 35th to 65th percentile range. A quick glance at a map will show you that each of the most expensive cities in Massachusetts are neighbors.
The top five most expensive places to buy real estate in Massachusetts includes the city of Boston, as well as its four neighbors to the west.
Newton, MA: Average home price of $982,600
Brookline, MA: Average home price of $822,900
Cambridge, MA: Average home price of $726,000
Somerville, MA: Average home price of $605,100
Boston, MA: Average home price $554,600
Massachusetts mortgage rates compared to the national average
As noted, Massachusetts has the fourth-highest home prices in the nation, following only California, Washington, D.C. and Hawaii. One reason for the high home values is that the household income in Massachusetts is $20,000 above the national average. Housing prices in the state have also increased since the pandemic began, which is a trend spotted in many states.
Luckily, Massachusetts home buyers currently have access to lower mortgage rates than much of the nation. The nationwide average interest rate in the second week of January was 2.94% on a 30-year fixed-rate mortgage, while the average for the same loan in Massachusetts was 2.89%.
Already own a home and want to refinance?
Historically low interest rates make 2021 an excellent time to buy a home, and current homeowners can take advantage of the low rates as well. The refinance rates in this state were 0.06% below the national average as of the second week of January.
If you’re considering refinancing your mortgage, be sure to shop around for the best rate. Your raate will depend on factors, such as your credit score, overall financial picture and current home equity, but rates can also vary quite a bit from one lender to the next.
[ Read: How to Refinance Your Mortgage ]
Too long, didn’t read?
There’s never been a better time to buy or refinance a home thanks to historically low interest rates. Housing prices in Massachusetts are well above the national average, which can make finding affordable housing a challenge. However, the state also has average mortgage rates below the national average, which could help offset some of the costs of living in this state.
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My husband Travis and I paid off $78,000 of debt in less than two years.
We paid off $53,000 alone in ONE YEAR!
Today I’m sharing 20 ways you can change things up, save money, etc, for how to pay off student loans faster… and what I would change if I had a do-over.
How to Pay off Student Loan Debt
Let’s start with some baseline facts. Throughout our debt payoff, our combined income was roughly $88K meaning we lived off $35K and put 60% of our income towards loans.
While we put $53K toward debt the first year we only put $25 toward it the second. That’s because we also bought a house around six months before we became debt-free. It’s not the order I’d recommend doing things but we were forced out of our rental and decided we’d rather put off our debt-free scream a few months than wait another year to buy.
Now for the hard truth: It was really easy signing for these loans but it was not easy paying them off.
Over $12,000 of my personal income alone was from side jobs and I (no lie) contracted shingles early on in the process from how stressed I was about the task at hand.
What’s also true, aside from the discipline it took to turn down trips to Disney and dinners out, is that I had a great year. I had fun, went out, and we even took a vacation. Even though sometimes I felt deprived in the moment, looking back I wasn’t deprived at all. Every “no” made me a stronger person.
There are countless stories on the Internet about how people paid off massive amounts of debt in short amounts of time and they mostly say the same thing. So I wanted to give you something a little different and tell you what I think are the 20 most important things we did to tackle this big problem as quickly as possible.
1. Determine Your “Why”
This is the first and most important step we took. We decided we want to travel and buy a home big enough to foster children (one of my side jobs was at a foster group home.) Every time it got hard I reminded myself of why we’re doing this and it influenced every financial decision I made. You’re gonna need this one to succeed.
2. Have Clarity
You can’t finish a race if the route’s not laid out. The next thing we did was take inventory of our debt, savings, income, recurring bills, etc. to have a clear picture of our financial situation. Some couples don’t combine their finances, for us it was necessary to be transparent with each other since his earned income would be paying off my loans and vice versa.
3. Make a Budget
You’re gonna need a specialized budget. It’s 100% necessary to have a written budget before every month begins. We do ours in EveryDollar, it’s the easiest user interface I’ve worked with. We’ve never made a perfect budget, we’re always tweaking throughout the month but we always spend less than we bring in. We’re able to meet and exceed our loan payment every month because of the budget.
4. Change How You Shop
I traded Publix for Aldi, Target for Walmart, and the mall for Goodwill. Some changes were better than others (LOVE Aldi, hate Walmart) but it’s all for the sake of saving money.
While getting out of debt we committed to not paying full price for anything. I sit in my car or stand in line looking for coupons before I make a purchase. Here are some of the ways I save on full-priced items
Groupon and LivingSocial for deals on activities.
Shopping through Rakuten when making any purchases online will get you cash-back from virtually any retailer. (I never get a Groupon without getting Rakuten cash back!)
Use Blink to save on prescriptions.
EyeBuyDirect to save on prescription eyewear.
Energy saving methods like buying low-flow showerheads to reduce our utility bill or using wind power through Arcadia (it doesn’t save me money but it’s better for the environment!
Sites like Restaurant.com for dining deals.
ThredUp for nice secondhand clothing at steep discounts from retail.
I take advantage of free trials at gyms.
Apps like ibotta to save at grocery stores and other big box retailers.
5. Pick Up Extra Jobs
There are only so many things you can cut out of your life but there’s virtually no limit to the amount of money you can bring in. We started with hourly side jobs and since starting this blog I’ve had opportunities to freelance that have given me much more flexibility with my time.
You have to start somewhere and I am convinced bringing in extra income is the key to paying off large amounts of debt fast. If you can’t work any extra then negotiate a raise or find a higher paying job. This is that vital of a step.
I’ve laid out some 21 ways to make extra money and if you’re interested in blogging you can start here or check out my post about how to start and monetize a blog in any niche.
6. Drive Old Cars
We both drive Toyota Corollas and will drive them until we need something bigger. IMO, you don’t deserve a new car if you’re in debt, you don’t even deserve a nice used car. I don’t care how shiny it is.
You need something to get you back and forth from your 2 jobs and when you can pay cash for an upgrade then you deserve whatever you can afford.
7. Buy Used or Find Free
I don’t buy new clothes anymore and half of our furniture we got for free next to dumpsters and repainted. New doesn’t always mean better. We’ve saved a lot of money this year by not falling into that trap.
8. Meal Plan
I’m so passionate about this I wrote a book on it.
Meal planning is essential to saving money on food. I worked in restaurants during college and they did inventory every week and planned specials around it to minimize food waste and save money. So I do the same in my kitchen. I plan meals around what I have and the grocery budget has become the one section I never exceed because of it.
If you need help:
Making a simple DIY meal plan
Buying less and saving money at the grocery store
Preparing food once you plan it
And reducing the food waste in your house
Then check out my book Meal Planning on a Budget (It’s available on Amazon!)
If you’re bad at doing stuff like this or don’t have a lot of time, Cook Smarts is the meal planning I recommend. It’s the best value out there and I always say work smarter, not harder.
9. Celebrate Milestones!
Every time we pay off a loan or hit a milestone we have a little celebration. It’s usually dinner out (using Groupon or Restaurant.com) or a glass of whiskey and a movie on Netflix. If you have big loans that don’t have little milestones, make your own. $3K and $5K increments are a good start.
10. Sell Stuff
We didn’t have any big things to sell but we got a few nice appliances from our wedding so we sold the old stuff and made enough for gas for the month. We regularly sell clothes at Plato’s Closet and random stuff on OfferUp or Facebook Marketplace.
11. Find Cheap Housing
We own our house now but living in something small and cheap was clutch while we were paying off debt. You get smaller utility bills and have less room to buy “stuff” for. We live in a growing city in a pretty nice neighborhood and I’ve kept no secret that we paid $800 for a 1/1 in a duplex.
As the housing market rises so do rent prices so you have to get creative while looking. My husband went for runs in different neighborhoods and found it on one of those. It wasn’t listed. We also negotiated adding water & sewage into the rent.
12. Stop Eating Out Alone
We still eat out, even when we don’t have a gift card, but we stopped grabbing food out of laziness. I used to get tacos every Wednesday after work (not on Tuesday? Gasp.) and grits on Saturday before I went in.
For millennials, eating out is part of our culture, it unites us, but these taco and grits trips weren’t bringing me closer to anything but my fork. So now I only eat out if it’s with friends or my husband.
We had a 4 ft paper thermometer on our wall (next to our thermostat, lol) that we fill in after we’ve made our loan payment for the month. I used to just watch numbers get smaller in all my accounts but with this corny visualization trick, It’s been fun to see that red bar go up and the white space above it get smaller and smaller.
I made a free printable debt thermometer for you here if you want to try it!
Seems a little counter-intuitive doesn’t it? We could be making an extra $500 payment on our loan, shave a month or two off our total repayment. Only 67% of households give to charity & religious organizations.
It’s over half but Americans still get a D in social justice. It’s important to me to give what we can now so in the future giving more will be a natural progression.
15. Chill Out
Where all my Type A brothers and sisters at!? Let me hear you say “Ahhh. Omg. This is too much. I’m freaking out…” I used to live somewhere on that level.
It’s gotten a lot better since my Shingles outbreak (at the ripe age of 26) but I still have to remind myself to just go with the flow. Whatever happens, will happen and it’ll all work out in the end.
16. Unfollow Your Friends on Social Media
Confession: I unfollowed two of my best friends on Instagram and I didn’t tell them. I love them but they’re always traveling to cool places, eating great food, buying new stuff, and I just couldn’t handle it.
In no way has it affected our relationship (it’s probably improved it) and I can scroll a little safer now.
Also Read: Why Unfollowing my Friends Helped my Finances
17. No-Spend Challenges
I’ve done a few no-spend challenges and they’ve all taught me more about my spending habits. I still bought groceries and went out to eat but I didn’t buy any personal non-necessities. The beauty of a no-spend challenge is that it can look different for everyone and you’re guaranteed to save money for as long as you do it.
If you want to learn how to do a no-spend challenge that transforms your habits and causes you to spend more intentionally you can check out my other book on Amazon, The No-Spend Challenge Guide. (#shamelessplugs)
18. Check Your Bills
Whenever it’s time to renew or we see an ad for a good offer (on something we already pay for) we call to negotiate a better deal. It’s unfortunate that companies take advantage of their customers like they do but that’s how it is and it’s on us to keep our necessities affordable.
19. Ditch Cable
We never signed up so this one is a no-brainer. I don’t care how much you love sports or how many kids you need to keep occupied. There are cheaper, if not free, ways to do it than cable. Try Fire TV Stick or Roku to fill your cable sized void.
Our friend knows our budget is tight while paying off debt so she let us use her Netflix account for free. You never know, maybe one of your friends will do the same while you’re getting your finances together. And football isn’t going anywhere.
20. Stop Investing
I wouldn’t stop for more than a year or two but it motivated us to go that much faster. I know we missed out on future compound interest but the fire it lit under us helped pay way less in interest.
And now we max out a 401k, two Roth IRA’s, and an HSA. Which is way more effective than just $50 or $100 a month toward these accounts.
If you want to pay off your loans fast, then pile on the money you would be investing to your loan. And remember it’s not forever.
You Can Pay off Student Loan Debt!
So what would I do differently? I would’ve chilled out a little more but that’s really it. I’m proud of how flexible we were able to be and still stay motivated to get the job done so quickly. But there are still things I missed out on that I wish I would’ve spent the money and done.
Whew! That’s a lot, right? Don’t expect to start all these at the same time. We worked up to doing all these things. Start with the first four and work your way down, you’ll be surprised at how naturally they all come over time.
Jen Smith is a personal finance expert, founder of Modern Frugality and co-host of the Frugal Friends Podcast. Her work has been featured in the Wall Street Journal, Lifehacker, Money Magazine, U.S. News and World Report, Business Insider, and more. She’s passionate about helping people gain control of their spending.