How to Calculate Real Estate Taxes on Your Property

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For American homeowners, real estate taxes are an immutable fact of life. Virtually every homeowner pays real estate tax — property tax, in common parlance — to at least one jurisdiction:

  • Incorporated villages, towns, boroughs, or cities
  • Counties or parishes
  • School or utility districts
  • Special tax assessment districts, whose revenues go toward specific initiatives or into specific funds

Notice that these are mainly local or regional units of government, known as tax authorities. 

State governments may pass laws that directly or indirectly impact property tax collections. But they generally don’t assess property taxes for their own purposes.

How to Calculate Real Estate Taxes on Your Property

According to the Institute on Taxation and Economic Policy, local tax authorities calculate property taxes using the following formula:

  • Assessed Value: Market value x assessment ratio
  • Taxable Value: Assessed value – exemptions
  • Property Tax Before Credits: Taxable value x total millage rate
  • Total Property Tax Owed: Property tax before credits – homestead credits and circuit breakers

Note that the values for exemptions, homestead credits, and circuit breakers can all be zero. In these cases, property tax can be calculated with an even simpler formula: assessed value x total millage rate.

Property Tax Definitions

Let’s break down this formula even further:

Market Value

This is your taxing authority’s best guess at your property’s fair market value. That is, what it would sell for if someone made an offer on it tomorrow. It’s calculated using public and privileged information about your property. 

Factors that affect your home’s market value include:

  • Location
  • Values for comparable properties sold recently nearby (“comps”)
  • Recent additions or upgrades
  • General condition, which is a function of age and maintenance history

Market value is the most subjective factor in property tax calculations. It therefore plays a key role in most property tax assessment appeals.

Assessment Ratio

The assessment ratio can range from 0 to 1. Think of it as a discount to fair market value. In many jurisdictions, the assessment ratio is high, exceeding 0.9. But in others, it’s quite low — 0.2 to 0.4. 

Some states have laws that preempt dramatic changes to local assessment ratios or establish uniform ratios across jurisdictions. Others impose more complex rules that effectively limit assessment ratio increases. For instance, New York state law limits “the growth in annual levy … to the lesser of 2 percent or the Consumer Price Index (CPI), subject to certain limited exceptions and adjustments” outside the five boroughs of New York City.

Assessment ratios often vary by property type as well. For instance, commercial or agricultural property may have a lower assessment ratio than residential property.

Property Tax Exemptions

Property tax exemptions reduce assessed taxable value for select homeowner groups. Common exemptions cover:

  • Homesteads (primary residences)
  • Senior citizens, although often excluding high-income seniors
  • Disabled homeowners
  • Active-duty service members and veterans
  • Households falling below certain low-income thresholds
  • Homes that have seen energy-efficient home improvements and certain other renovations and upgrades

Millage

“Millage rate” is a fancy way of saying “tax rate.” A given property’s total millage rate is the sum of all applicable property tax rates. So, where a property lies in two overlapping tax jurisdictions, such as county and school tax districts, it could be subject to two property tax rates (or more). 

Property Tax Credits

Property tax credits directly reduce property tax liability. In some jurisdictions, homestead benefits are awarded via credits rather than exemptions. Other common property tax credits include:

  • Credits for taxes assessed by overlapping districts, such as school levy credits on county taxes
  • “First dollar” credits for improvements to vacant land
  • Lottery or gaming credits financed by receipts from state lotteries or local gaming facilities

Don’t confuse credits applied directly to property taxes with property tax credits applied to state income taxes.

Circuit Breakers

Property tax circuit breakers are special credits for low-income homeowners in high-tax jurisdictions. 

According to the Institute on Taxation and Economic Policy, a circuit breaker reduces property taxes to a predetermined maximum percentage of a taxpayer’s income. So, if your home city’s circuit breaker caps property taxes at 5% of income and you earn $50,000 annually, you can pay no more than $2,500 in property taxes each year. 

Who Is Totally Exempt From Property Tax?

Even after factoring in exemptions and credits, most middle- and high-income homeowners are required to pay at least some property tax. Very low-income homeowners who qualify for exemptions due to protected status may effectively pay no property tax.

Institutions totally exempt from property tax liability under normal circumstances include:

  • Religious organizations and houses of worship
  • Nonprofit organizations and NGOs
  • Nonprofit educational institutions and adjacent organizations

These organizations are generally exempt from other state and federal taxes as well.


How You’re Notified About Your Property Taxes

Property tax assessments become binding on a set date each year. In legal parlance, they’re said to become “attached” on this date. The attachment date varies by jurisdiction but is often the first day of the calendar year (January 1) or fiscal year (often October 1).

Proposed Property Taxes

Most jurisdictions send proposed property tax notifications late in the year prior to the binding date. If your binding date is January 1, you’ll likely receive your proposed tax notification in October or November.

The notification will be pretty detailed, with lines for all the factors involved in your property tax calculation. It’ll include assessed value (including the change from the prior year), total millage rate, exemptions, credits, homestead information, and special assessments.

Where multiple jurisdictions assess property taxes, homeowners may receive one consolidated assessment notification or multiple notifications from each jurisdiction.

Deadline to Appeal

Your proposed property tax notification will include an appeal deadline. The deadline can be as little as 30 to 45 days after you receive the notification but may be longer. Regardless, this is the most important date on your property tax calendar, so don’t forget it. Once it passes, it’s much harder — if not impossible — to appeal your property tax assessment or recover tax overages from previous years.

Tax Statements

Once your property taxes are set and the deadline for appeal has passed, you’ll receive a tax statement outlining when and how much you need to pay. Most jurisdictions accept tax payments twice per year, each accounting for half of the total. Where taxes are delinquent or special assessments required, payment sizes might be uneven.


Final Word

Local tax authorities don’t assess property taxes uniformly. Where you live has a lot to say about how much property tax you can expect to pay.

The northeastern United States is infamous for its hefty property tax burdens, while most southern and western states are much more homeowner-friendly. According to the Tax Foundation, New Jersey had the highest effective property tax rate (2.13%), followed by Illinois (1.97%) and New Hampshire (1.86%). Hawaii had the lowest effective rate (0.31%), followed by Alabama (0.37%).

But these percentages tell only part of the story. In states where property is expensive, like Hawaii and California (0.70% average effective property tax rate, per the Tax Foundation), the owner of a median-priced home could pay more in property taxes than their counterpart in a “higher-tax” state with lower property values. Just one more reason to know how to calculate your property taxes.

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Source: moneycrashers.com

What is the Capital Asset Pricing Model (CAPM)?

The Capital Asset Pricing Model (CAPM) is an investment assessment formula that shines a light on the relationship between the systematic risk in a security and its estimated return. Investors use the CAPM to determine whether an investment’s expected return is the same as its risk-free return, and to determine an asset’s expected returns.

Let’s take a deeper look at the capital asset pricing model and see what it means, and how it may impact everyday investors.

Recommended: How to Evaluate a Stock Before You Buy

CAPM Defined

The Capital Asset Pricing Model makes the process of measuring investment return and risk more efficient, to determine whether a particular asset offers a good rate of return.

CAPM is especially helpful when an investor faces significant investment risk, such as when trading equity options. The formula helps the investor determine whether the transaction has an acceptable measure of risk. By using CAPM, the investor is able to accurately assess if the potential investment return on a security is worth taking on.

Evaluating the fair value of a security is an ongoing endeavor, as investment risk factors and other variables change all the time. When those risks shift (think interest rate changes, company management changes, or a geopolitical crisis erupts, among other potential threats), investors can still use the capital asset pricing model to weigh an investment against constant risk and return variables.

Investors can factor market impactors, like interest rate flows, currency valuations, and stock market cycles, among other issues, into their CAPM analysis to better weigh risk versus return. Basically, the bigger the chance of risk, the more important CAPM becomes to investors weighing that risk against potential returns.

Recommended: What Is the Average Stock Market Return?

CAPM Formula Defined

CAPM can help evaluate an investment’s viability in a time of significant market angst, by measuring three important barometers in an investment equation – risk-free return, the market risk premium, and the investment beta.

Let’s take a look at how CAPM is calculated with all three factors included.

The (capital asset pricing model) CAPM formula is represented as below:

Expected Rate of Return = Risk-Free Premium + Beta * (Market Risk Premium) Ra = Rrf + βa * (Rm – Rrf).

The calculation reflects a series of financial metrics, which taken together can offer a balanced look at a potential investment’s risk and return, with the aforementioned metrics front and center.

Risk-Free Return (Rrf)

This metric represents the value given to an investment (like a stock or commodity, for example) that guarantees a positive investment return with no risk. U.S. Treasury bond, backed by the full faith and credit of the United States government, are a good example of risk-free return in action.

Since Uncle Sam guarantees the bonds, and there is virtually zero chance of the U.S. defaulting on its debt obligations, Treasuries are considered among the safest investments available. That’s a big reason why risk-free return value reflects the yield delivered by a 10-year U.S. government bond.

The Market Risk Premium (Rm-Rrf)

This financial metric represents the return an investor earns – or anticipates earning – from owning a more risk-abundant portfolio. The MPA is an important component of CAPM , as it enables an investor to assess risk and decide if the market premium rate is superior to an investment in a risk-free investment like U.S. bonds.

The Beta (Ba)

Wall Street analysts rely on beta to weigh the volatility of a given security against a broader market.

For instance, an investor looking to buy 100 shares of an emerging biotech company can use beta to evaluate that investment and see how it may perform if the broader stock market turns volatile. In that scenario, that biotech stock’s beta may be 13%, which means it would trigger a 130% variation from any significant (based on the exact calculation) of any shift in the broader stock market. Beta is always equal to 1 in any market evaluation equation, meaning it’s parallel to any potential shifts in a broader market.

Recommended: The Basics of Calculating Portfolio Beta

CAPM Formula Explained

Factoring in each component to the CAPM equation, the resulting formula looks like this:

Expected return = Risk-free rate + (beta x market risk premium).

The risk-free component focuses on the time value of money, or the concept that a cash amount in present form is potentially higher than the same amount of cash down the road, primarily because of money’s current earnings potential. A CAPM formula may also factor in excess risks taken on by an investor.

Next, beta is assessed to figure out just how much risk is on the table relative to the broader market. For instance, if ABC stock offers more risk than the broader market, its beta is higher than 1 (one). A beta that is lower than 1 assumes the investment will curb portfolio risk, which may make a security more palatable to risk-averse investors.

With the beta calculated, beta is multiplied by the market risk premium, and the result (value) is added into the investment’s risk-free rate to provide the security’s estimated rate of return.

In conducting a CAPM exercise, the investor must acknowledge some level of risk in any investment, primarily in two ways.

•   Loss is always possible, as common market securities like stocks, commodities, funds, or currencies may lose money, making them a depreciation risk.

•   The higher level of risk in a specific security often correlates to a higher potential investment return, as history shows that specific investments carry more risks and more rewards than others (stock options and future.

Problems with the CAPM

While the CAPM is an extremely useful tool for investors, it does have some drawbacks. One such drawback is the reliance on the risk-free rate and the beta, which frequently. That means that CAPM must be constantly recalculated in order to remain useful. It also does not account for transaction costs such as taxes and fees, which could make a potential investment less favorable than the model shows.

Efficient Frontiers and the Capital Asset Pricing Model

In theory, if an investor adhered perfectly to CAPM all of their investments would exist on the efficient frontier, meaning that all returns justify the risks taken. The efficient frontier is the optimal baseline for a portfolio, Since every investment comes with some risk, it’s important to make sure that the returns correspond to the level of risk.

The Takeaway

CPAM can help investors understand how the risk and return of a given investment relate to each other. Having the answer to that question can help investors make more knowledgeable portfolio decisions on an ongoing basis.

Whether or not you’re using the CAPM to make investment decisions, a great way to start building your portfolio is by opening a brokerage account on the SoFi Invest® investment platform. SoFi Invest offers access to financial planners and educational resources you can use to develop the best investing strategy for you.

Photo credit: iStock/PeopleImages


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Source: sofi.com

Sell Your Gold Safely for a Fair Price

You’ve got some gold you want to sell. Some of your late aunt’s jewelry, maybe. Or your grandpa’s coin collection. Some old earrings that don’t have partners anymore. Or a really hideous bracelet you never wear. You could use the cash much more than the knotted lump of old chains in your jewelry box. But selling gold can be intimidating.

We’re sure you’ve seen the signs promising quick cash for gold. What about an online buyer? Maybe you got a mail solicitation. Authorities warn about ripoffs, and knowing how to get a fair price in a volatile market is a challenge. But if you have some gold jewelry or coins or other gold you would rather cash in, there are ways to sell it safely and for the best price.

The key to this transaction is your comfort level and trust that the person you’re selling to is reputable. So one of the first rules is to do your research and shop around.

Pandemic Affects Consumer Gold Sales

More and more consumers are looking to sell gold items, according to Gary Smith, past international president of the American Society of Appraisers (ASA), even if gold prices aren’t particularly high right now. Part of the reason for the heightened interest in selling? It’s a bit dark: The high number of deaths from COVID-19 has left survivors to sell property owned by their deceased relatives, Smith said.

Also, people facing financial hardship because of the pandemic are looking to sell gold and other items. “People have actually come into our facility with very low-value jewelry,” said Smith, who owns PA Gem Lab in Montoursville, PA. “They need money and they’re willing to sell grandpa’s class ring. It is a sad state and people are hurting.”

With all this need, scams abound, according to Smith. So it’s wise to be cautious when selling your gold and jewelry. As with most things, knowledge is your key to success.

Before Selling Your Gold, Talk to an Appraiser

The first step, Smith said, is to talk to an appraiser. Smith pointed to the ASA, as well as the National Association of Jewelry Appraisers and the Appraisers Association of America as the major organizations in this area. In addition, he said there’s an organization for retailers called the American Gem Society. 

Appraisers who belong to one of these organizations must abide by strict codes of conduct and ethics, Smith said. All three of these outfits maintain databases on their websites where you can find an appraiser near you. For a small fee — perhaps as low as $20 — one of these independent appraisers can give you a quick assessment of what you have and what it should fetch, along with whether a piece of jewelry has intrinsic value beyond the gold weight and if the gems are real.

That should be enough, Smith said, to give consumers what they need to know to sell their items for a fair price. A seller shouldn’t need an expensive, written appraisal, such as might be required for insurance coverage.

“Most appraisers are pretty lenient that way,” Smith said. “We’re here to help and from ASA’s standpoint, we’re here to educate the general public.” Appraisers, he said, “want people to get value for their money.”

Shop Around Before Selling Your Gold

Amanda Gizzi, spokesperson for jeweler trade organization Jewelers of America, says that getting more than one offer and selling to a reputable purchaser are important steps to selling gold and jewelry safely for a fair price.

“Shopping around is a good way to understand the average price you can expect,” Gizzi said. “If you can find a jeweler that you like to buy jewelry from, you may find you get a higher amount if you use the money toward another jewelry purchase.”
Kate Mars, who lives in Arlington, Virginia, went by recommendations from people she trusted when she sold jewelry and a coin collection from a safe deposit box left when her father died.

Through the estate lawyer, she found a coin dealer in nearby Frederick, Maryland, where the dealer gave Mars a “sense of security” as he went through her books of coins and told her what had value.

The jewelry had been appraised for the estate and none of it was particularly valuable, Mars said. She took that to a jewelry store that was recommended to her — and that had been in business for a long time. “The people were nice,” she said. “They looked everything up…Even if I could have made a few more bucks (going somewhere else), I am happy with the experience.”

They also helped by providing the documentation she needed as executor of her father’s estate.  And note that for everyone selling gold or jewelry, getting a good receipt should be part of the process. It should include all the details of the transaction, including the name and address of the buyer, the date of the sale and the weight, fineness, prices and names of all precious metals involved. 

How Much Do You Get for Selling Gold?

A variety of sources online, such as kitco.com, will give you the spot price of gold. Don’t expect to get that amount, though, for old jewelry or coins. For one thing, those are wholesale values, and you are selling to a middleman, who is going to need to make a profit when he resells your property.
Smith, the past international president of the American Society of Appraisers  said some places that post signs offering to buy gold pay just 40 to 45% of the value. Pawn shops may pay just 20%. So what’s a fair value? Consumers should sell to someone who will pay 65 to 88% of the value of an item, according to Smith.

Why can’t you get more? There are several reasons. For one, businesses that buy gold are usually required by state law to hold onto items for a set number of days before selling them, Smith said. This can be a gamble because of the volatility of gold prices. The purchaser of your gold also will likely sell to a refiner or to a middleman who sells to refiners. The gold will pass through two or three sets of hands before it is ultimately sold for its value.

“Gold jewelry isn’t always very heavy, so the price that something was purchased for will not be the same as what you sell it back for,” Gizzi said. “Remember, the retailer that buys the gold, has to process it, clean it, and oftentimes melt it down to make it into something else before they can resell it.”

Another important variable that will affect price is the gold’s purity, measured in karats. Pure gold — think bullion bars — is 24 karat. But pure gold is soft, so it’s usually mixed with other metals to make it harder and more durable such as when used in jewelry. 

The karat measurement tells you how much pure gold is in the piece. The proportions of pure gold and other metals will add up to 24. So, if your jewelry is 18K, or 18 karats, that means it has 18 parts of gold plus six parts of other kinds of metal. A 10K piece of gold is 10 parts gold with 14 parts of other metals.

Should You Sell Your Gold Online?

Like with almost every other business transaction, the internet is an option for selling your gold. Ebay, for example, has a marketplace where sellers can send a photograph of their item and receive a quote — without sending in their item. Notably, their buyback partner, APMEX, only accepts bars, coins and rounds.
If you have coins or bullion, Smith said, selling the items on eBay is “better than a pawn shop.” But he prefers local in-person transactions to online sales. “Basically you know who you are dealing with,” he explained. “I guess I’m old school inasmuch as I like to deal face to face. If I don’t get that ‘warm fuzzy vibe of trust’ I go elsewhere.”

Special caution is warranted, though, if you elect to mail your items to a potential purchaser as part of an online sale. Make sure to take photographs of your items and make a list before mailing them out. Also, you should insure the package before mailing it.

Check Businesses Before Selling Your Gold

And as long as we’re discussing precautions, with potentially significant amounts of money changing hands, you want to do at least as much due diligence as if you were, say, trading in a car. In addition to professional associations and recommendations, you can check with the Better Business Bureau to find out if there are complaints against a business you’re considering, and if so, how they were resolved.

It’s smart to weigh your gold before taking it to a buyer — a kitchen or postal scale should give you a reasonable idea of the weight of your items. And make sure that when the buyer is weighing the gold, you pay attention to the procedure.

Is Selling Your Gold a Good Idea?

Is now the right time to sell? Should you wait for the price to go up, or will waiting risk losing money if the price goes down?

“Selling gold now is a good idea for those who need cash or want to use the gold to reinvest in a newer piece of jewelry,” Gizzi said. “Outdated jewelry that is broken or single earrings also make great items to sell.”

That being said, it’s possible to have regrets. “Always remember that once the piece is gone, you can rarely get it back,” Gizzi explained. “Just because a piece of jewelry is outdated, doesn’t mean that it won’t come back.” 

Source: kiplinger.com

What Is a Piggyback Mortgage Loan?

At its simplest, a piggyback mortgage can be defined as a second mortgage, typically a home equity loan or home equity line of credit (HELOC).

Piggyback mortgage loans might be a smart option for homebuyers looking to finance a home without a large down payment. They are taken out at the same time as main mortgages and may save homebuyers money over the life of their loans by not having to pay for private mortgage insurance (PMI).

Read on to learn more about what a piggyback loan is and how it works.

What Is a Piggyback Loan?

Homebuyers can use a piggyback mortgage loan to fund the purchase of a property. Essentially, they take out a primary loan and then a second loan, “the piggyback loan,” to fund the rest of the purchase.

Using the strategy helps homebuyers reduce their mortgage costs, such as by not needing a 20% down payment to qualify. It also helps them avoid the need for private mortgage insurance, which is usually required for those who don’t have a 20% down payment.

How Do Piggyback Loans Work?

When appropriate for a homebuyer’s unique situation, a piggyback mortgage might potentially save the borrower in monthly costs and reduce the total amount of a down payment.

Here’s an example to consider of how they work:

Jerry is buying a home for $400,000. He doesn’t want to put down more than $40,000 for the down payment. This eliminates several mortgage types. He works with his lender to secure a first mortgage for $320,000, then another to secure a piggyback mortgage of $40,000 and finishes the financing process with his down payment of $40,000.

Piggyback home loans were a popular option for homebuyers and lenders during the housing boom of the early 2000s. But when the housing market crashed in the late 2000s, piggyback loans became less popular, as a lack of equity proved homeowners more vulnerable to loan defaults.

Fast forward to today’s housing market and piggybacks are starting to become a viable and acceptable option again.

Recommended: Guide to Buying, Selling, and Updating Your Home

Types of Piggyback Loans

A 80/10/10 Piggyback Loan

There are different piggyback mortgage arrangements, but an 80/10/10 loan tends to be the most common. In this scenario, a first mortgage represents 80% of the home’s value, while a home equity loan or HELOC makes up another 10%. The down payment covers the remaining 10%.

In addition to avoiding PMI, homebuyers may use this piggyback home loan to avoid the mortgage limits standard in their area.

A 75/15/10 Piggyback Loan

A loan with a 75/15/10 split is another popular piggyback loan option. In this case, a first mortgage represents 75% of the home’s value, while a home equity loan accounts for another 15%. And like the 80/10/10 split, the remaining 10% is the down payment.

For example, a $300,000 75/15/10 loan would break down like this:

Main loan (75%): $225,000
Second loan (15%): $45,000
Down payment (10%): $30,000

80/10/10 Piggyback Loan 75/15/10 Piggyback Loan
Structure: 80% primary loan
10% HELOC
10% down payment
75% primary loan
15% HELOC
10% down payment
Typical use: Commonly used to avoid PMI and stay under jumbo loan limits Commonly used when purchasing a condo to avoid higher mortgage rates

The Potential Benefits and Disadvantages of a Piggyback Mortgage

A piggyback mortgage may help homebuyers avoid monthly private mortgage insurance payments and reduce their down payment. But that’s not to say an 80/10/10 loan doesn’t come with its own potentially negative costs.

There are pros and cons of piggyback mortgages to be aware of before deciding on a mortgage type.

Piggyback Mortgage Benefits

Allows for retention of liquid assets. Some lenders request a downpayment of 20% of the home’s purchase price. With the average American home price at nearly $303,288, this can be a difficult sum of money to save. A piggyback mortgage may help homebuyers secure their real estate dreams with less cash.

Possibly no PMI required. In what may be the largest motivator in securing a piggyback mortgage, homebuyers may not be required to pay PMI, or private mortgage insurance, when taking out two loans. PMI is required until 20% of a home’s value is paid, either with a down payment or by paying down the loan’s principal over the life of the loan.

PMI payments can add a substantial amount to a monthly payment and, just like interest, it’s money that won’t be recouped by the homeowner when it’s time to sell. With an 80/10/10 loan, both loans meet the requirements to forgo PMI.

Potential tax deductions. Purchasing a home provides homeowners with a list of potential tax deductions . Not only is there potential for the interest on the main mortgage loan to be tax deductible, the interest on a qualified second mortgage may also be deductible.

Potential Downsides of Piggyback Mortgages

Not everyone qualifies. Piggyback mortgages can be risky for lenders. Without PMI, there is an increased risk of a financial loss. This is why they’re typically only granted to applicants with superb credit. Even if it’s the best option, there’s no guarantee that a lender will agree to a piggyback loan scenario.

Additional closing costs and fees. One major downfall of a piggyback loan is that there are always two loans involved. This means a homebuyer will have to pay closing costs and fees on two loans at closing. While the down payment may be smaller, the additional expenses might outweigh the initial savings.

Savings could end up being minimal or lost. Before deciding on a piggyback loan arrangement, a homebuyer may want to estimate the potential savings. While this type of loan has the potential to save money in the beginning, homeowners could end up paying more as the years and payments go on, especially because second mortgages tend to have higher interest rates.

To quickly make an assessment, make sure the monthly payment of the second mortgage is less than the applicable PMI would have been on a different type of loan.

Pros of Piggyback Loans Cons of Piggyback Loans
Secure a home purchase with less cash Only applicants with excellent credit may qualify
Possible elimination of PMI requirements Extra closing costs and fees may apply
Could qualify for additional tax deductions A second mortgage could cost more money over the entire loan term

Qualifying for a Piggyback Mortgage

It’s essential to keep in mind that you’re applying for two mortgages simultaneously when you apply for a piggyback home loan. While every lender may have a different set of requirements to qualify, you usually need to meet the following criteria for approval:

•   Your debt-to-income (DTI) ratio should not exceed 28%. Lenders look at your DTI ratio — the total of your monthly debt payments divided by your gross monthly income — to ensure you can make your mortgage payments. Therefore, both loan payments and all of your other debt payments shouldn’t equal more than 28% of your income.

•   Your credit score should be close to excellent. Because you are taking out two separate loans, your risk of default increases. To account for this increase, lenders require a good credit score, usually over 680, to qualify. A higher credit score means you’re more creditworthy and less likely to default on your payments.

Before you apply for a piggyback loan, make sure you understand all of the requirements to qualify.

Refinancing a Piggyback Mortgage

Sometimes home owners will seek to refinance their mortgage when they have built up enough equity in their home. Refinancing can help homeowners save money on their loans if they receive a lower interest rate or better terms.

But, if you have a piggyback mortgage, refinancing could pose a challenge. It’s often tricky to refinance a piggyback loan because both lenders have to approve. In addition, if your home has dropped in value, your lenders may even be less enticed to approve your refinance.

On the other hand, if you’re taking out a big enough loan to cover both mortgages, it may help your chances of approval.

Is a Piggyback Mortgage a Good Option?

Not sure if a piggyback mortgage is the best option? It may be worth considering in the following scenarios:

If you have minimal down payment resources: Saving up for a down payment can take years, but a piggyback mortgage may mean the homebuyer can sign a contract years sooner than any other type of mortgage.

If you need more space for less cash: Piggyback loans often allow homeowners to buy larger, recently updated or more ideally located homes than with a conventional mortgage loan. This advantage can make for a smart financial move if the home is expected to quickly build equity.

If your credit is a match: It’s traditionally more difficult to qualify for a piggyback loan than other types of mortgages. For most lenders, a homebuyer will need:

•   10% down payment

•   Stable income and employment (proven by tax records)

•   Debt-to-income ratio of 43% or less

Piggyback Mortgage Alternatives

A piggyback mortgage certainly isn’t the only type offered to hopeful homebuyers. There are other types of mortgage loans homebuyers may also want to consider.

Conventional or Fixed-Rate Mortgage

This type of loan typically still requires PMI if the down payment is less than 20% of the home’s purchase price, but it is the most common type of mortgage loan by far. They’re often preferred because of their consistent monthly principal and interest payments.

Conventional loans are available in various terms, though 15 years and 30 years are the most popular.

Adjustable-Rate Mortgage

Also known as an ARM, an adjustable rate mortgage may help homebuyers save in interest rates over the life of their loan, but the interest rate will only remain the same for a certain period of time, typically for one year up to just a few years.

After the initial term, rate adjustments reflect changes in the index (a benchmark interest rate) the lender uses and the margin (a number of percentage points) added by the lender.

Interest-Only Mortgage

For some homebuyers, an interest-only mortgage can provide a path to homeownership that other types of mortgages might not. During the first five years (some lenders allow up to 10 years), homeowners are only required to pay the interest portion of their monthly payments and put off paying the principal portion until they’re better financially situated.

FHA Loan

Guaranteed by the Federal Housing Administration , FHA loans include built-in mortgage insurance, which makes these loans less of a risk to the lender. So while it’s not possible to save on monthly insurance payments, homebuyers may still want to consider this type of loan due to the low down payment requirements.

Other Options to Consider

Some other alternatives to a piggyback mortgage might include:

•   Speaking to a lender about PMI-free options

•   Quickly paying down a loan balance until 20% of a home’s value is paid off and PMI is no longer required

•   Refinancing (if a home’s value has significantly increased) and allowing the loan to fall under the percentage requirements for PMI

•   Saving for a larger down payment and reducing the need for PMI

The Takeaway

Before signing on for a piggyback mortgage, it’s always recommended that a homebuyer fully understand all of their mortgage options. While a second mortgage might be the best option for one homebuyer, it could be the worst option for another. If a piggyback mortgage is selected, understanding its benefits and potential setbacks may help avoid financial surprises down the line.

SoFi offers a variety of mortgage loan options for homebuyers securing their first mortgage or homeowners interested in refinancing their current home. There is an easy online application process and you can keep even more money in your pocket with SoFi’s low, competitive rates.

Explore mortgage options at SoFi. 


SoFi Loan Products
SoFi loans are originated by SoFi Lending Corp. or an affiliate (dba SoFi), a lender licensed by the Department of Financial Protection and Innovation under the California Financing Law, license # 6054612; NMLS # 1121636 . For additional product-specific legal and licensing information, see SoFi.com/legal.

SoFi Home Loans
Terms, conditions, and state restrictions apply. SoFi Home Loans are not available in all states. See SoFi.com/eligibility for more information.

Tax Information: This article provides general background information only and is not intended to serve as legal or tax advice or as a substitute for legal counsel. You should consult your own attorney and/or tax advisor if you have a question requiring legal or tax advice.
External Websites: The information and analysis provided through hyperlinks to third party websites, while believed to be accurate, cannot be guaranteed by SoFi. Links are provided for informational purposes and should not be viewed as an endorsement.
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Source: sofi.com

Stock Market Today: Dow Extends Slide After Rally Attempt Fizzles

The major indexes looked ready to put an end to their recent mini-slump Thursday, but early gains turned to ash despite some good news on the jobs front.

The Labor Department said that initial filings for unemployment benefits during the week ended Sept. 4 declined by 35,000 to a pandemic-low 310,000 – below expectations for 335,000 claims.

Nonetheless, the Dow Jones Industrial Average, ahead by as much as 169 points (roughly 0.5%) in morning trade, swung to a 151-point, 0.4% loss to 34,879 for its fourth consecutive decline. The S&P 500 (-0.5% to 4,493) and Nasdaq Composite (-0.3% to 15,248) similarly flipped from green to red.

The potential of an earlier slowing of Federal Reserve stimulus might still be on investors’ minds, as the European Central Bank said today that it will pare back a similar asset-purchasing mechanism.

“Based on a joint assessment of financing conditions and the inflation outlook, the Governing Council judges that favorable financing conditions can be maintained with a moderately lower pace of net asset purchases under the (pandemic emergency purchase program) than in the previous two quarters,” the ECB said.

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“The Fed has to taper regardless of labor markets,” says Tony Roth, chief investment officer of wealth services firm Wilmington Trust. “There is so much wage pricing pressure that the Fed needs the option to raise rates. They can’t do that if they have not moved far into tapering, but we will see it by the end of the year and the equities markets have already priced this in.”

Also of note: Several carriers, including United Airlines (UAL, +2.3%) and American Airlines (AAL, +5.6%), revised their quarterly forecasts lower Thursday, saying that growing COVID cases had weighed on bookings. While the industry’s stocks actually rose in response, the news could serve as an economic red flag.

Other news in the stock market today:

  • The small-cap Russell 2000 held onto gains until the final minutes of the day, eventually sustaining a marginal loss to 2,249.
  • Lululemon Athletica (LULU, +10.5%) shares took off in response to a beat-and-raise second-quarter earnings report. LULU said Q2 revenues grew 61% to $1.45 billion and adjusted earnings popped 123% to $1.65 per share – those figures beat respective expectations for $1.34 billion and $1.19 per share. Lululemon also raised its forecast for Q3 2021, expecting revenues between $1.40 billion and $1.43 billion, and adjusted earnings per share (EPS) of $1.33 to $1.38. William Blair analysts were among the pros chiming in with praise Thursday, reiterating their Outperform (Buy) rating “given continued upside potential to estimates alongside the brand’s long-term growth runway, exceptional connection with consumers and tangential opportunities to broaden lululemon’s global TAM to $3 trillion.”
  • GameStop (GME, +0.2%) looked like it was going to be in for a long day after it reported growing Q2 sales but a steeper-than-expected loss and provided a disappointing post-earnings call. “As the board lays groundwork to transform GameStop into a ‘technology’ company that delights gamers, many details still remain a mystery, particularly as the shift toward game downloads, streaming and cloud services picks up steam,” says Baird analyst Colin Sebastian, who does not have a rating on GME shares. “We appreciate more details on infrastructure build-out, filling management roles, and expanding the product catalog, but it looks more like the strategy is to create a slimmed-down, omni-channel version of Best Buy. We encourage Mr. Cohen to be a little more transparent with his plans if he wants support from longer-term oriented investors.” Nonetheless, GME erased early losses of more than 10% by the close.
  • U.S. crude futures dropped by 2.0% to $67.87 per barrel after China announced plans to tap state oil reserves.
  • Gold futures bounced back a little, gaining 0.4% to $1,799.50.
  • The CBOE Volatility Index (VIX) climbed 4.3% to 18.74.
  • Bitcoin made a slight 0.3% improvement to $46,573.60. (Bitcoin trades 24 hours a day; prices reported here are as of 4 p.m. each trading day.)
stock chart for 090921stock chart for 090921

Make the Most of a Difficult Road Ahead

The market has its work cut out for it.

A team of Bank of America Securities analysts, for instance, says it believes the S&P 500 will hit 4,250 by year’s end, and 4,600 by the end of 2022 – that’s a respective 5.4% decline and 2.4% improvement from current levels.

“Sentiment is all but euphoric with our Sell Side Indicator closer to a sell signal than at any point since 2007,” BofA’s team says. “Wage/input cost inflation and supply chain shifts are starting to weigh on margins. Interest rate risk is at a record high … and valuations leave no margin for error.”

Not exactly an ideal situation for picking stocks.

BofA suggests inflation-protected yield, which you can find among these inflation-fighting funds, as well as small-cap stocks, given more attractive valuations at present and a tighter tether to U.S. GDP growth.

However, if you’re looking for stock picks on the road typically more traveled, consider taking a gander at investors who are plunking down tens and even hundreds of millions of dollars into their best ideas.

Institutional investors, hedge funds and billionaires have unique access to research and insights that most of us simply don’t, and that alone makes their choices worth a closer examination. Read on as we explore 25 of their highest-conviction stock picks – bets that all grew to some extent during the most recent quarter.

Source: kiplinger.com

Good Debt vs. Bad Debt: What’s the Difference?

Good debt. There couldn’t possibly be such a thing, right? Well it turns out not all debt is bad, because without debt, nobody knows your creditworthiness, and that actually makes things very, very tricky when it comes time to consider you for a loan or anything else in the financial space.

It’s time to take a look at good debt vs bad debt so we can understand the differences between them, and try to utilize good debt to our advantage as much as possible.

Good Debt vs. Bad Debt

What Are Examples of Good Debt?

Good debt can be beneficial to your creditworthiness and help you in the long run. It can even be used as collateral (depending on what the good debt is), and equity can be drawn off of it. Good debt needs to be well thought-out, properly executed, and with a healthy level of risk assessment involved. This is what good debt looks like.

  • Education: We see this all the time. While there is a student loan debt crisis going on in the United States, it doesn’t mean you’ll be joining that crisis by taking out education loans. Truth be told, a lot of education loans come across as predatory, but if you’re smart about your choices and you know what you want to do, this can actually help you in the long run. Education loans are tricky and you have to make sure you pay them back properly, but they can help your creditworthiness during your early adult years, when building credit matters most.
  • Business Endeavors: Starting up a business is difficult, but when it’s off the ground and running and you know the business model works, small loans to purchase inventory, expand operations when you know it’s going to work (or, as well as you could possibly know), and when other well thought-out, well-executed business strategies come into play, will benefit you in the long run. These loans are seen as good debt because business loans are often paid back relatively quickly (nowhere near as long as a 15-year mortgage), so you’re building long-standing accounts and showing that you can pay them down completely. Just be sure you don’t pay them off early, otherwise you’re not using all the time that you could use to build up your business credit.
  • Personal Property: Personal property can appreciate in value, especially if you plan out your purchase properly. That’s why even though this is often the biggest financial decision that anyone will make in their life, it can still be seen as an investment. Properties are supposed to increase in value over time, so if that’s the case, your investment and continued maintenance of your home will increase its value over time, and be seen as an asset, not a liability. This is good debt.
  • Rental Property: This is listed separately because it’s an entirely different ordeal. This is something you’ll make money off of immediately, and it’s one of the most common ways that individuals begin a real estate empire: they begin renting out one property. This is good debt since there will be income gained from it, so you have more leverage when you negotiate the terms of your loan, and your credit continues to rise when you show that this property and business endeavor hybrid works out. This has a higher level of risk than personal property depending on the size, but rental property or income property debt is good debt.
  • Auto Loans: These can be volatile, because auto loans generally have more complex terms than other loans and can be tricky, but once again, knowing what you’re doing before you sign your name on a loan is completely key. If you’re able to look over the terms properly and understand what you’re getting yourself into, and you don’t take out anything too massive, auto loans can be good debt.

Is Good Debt Really Good?

Yes it is. Good debt is manageable debt that you could completely wash away with liquid assets at a moment’s notice, if you had to. We saw examples of good debt, but we didn’t really talk about why it’s good and how to make sure it isn’t volatile.

If you lost your job tomorrow and had to use your current assets to survive off of while you found a new job, and you quickly realize you’re living paycheck to paycheck and can’t afford anything for even one week with no inbound money coming in, you’re not in a position to take on good debt.

If you were to lose your job tomorrow and had enough money to survive off while you look for a new job, and it’s not contingent on that last paycheck coming in, then you’re most likely in a position to take on good debt. If you can use your assets to wipe away all your good debt and not shaft yourself, you’re in a good position.

Good debt is helpful to your situation and doesn’t hurt you. Good debt is manageable by your current assets without a second thought, so if you did lose your job or you were put in a position where your income was interrupted, you could use your capital to wipe away these debts and not go into bad debt just because of a little life disturbance.

Good debt doesn’t put a chokehold on your life. All it does is bring up your creditworthiness and help your overall financial situation in the long run. If it’s manageable and won’t sink you, it’s good debt.

How Much is a Good Debt?

A good debt doesn’t have a specific percentage, but suffice to say, that percentage should be relatively low. Your good debt can’t feasibly be wiped away in an instant, even though that’s an ideal situation, so if it is something like your education or your business, you don’t want it to run your life.

Any level of good debt should be an amount of money that won’t completely put you out. Remember that debt can be stressful and frustrating, so your good debt shouldn’t be something that adds to that.

It’s safe to assume that, if you’re talking about personal credit cards and debt for the sake of building your credit history, it should be less than about 10% of your total income. If you bring in $4,000 per month, your good debt shouldn’t be more than $400. It’s a good rule of thumb to live by, because as long as your living expenses aren’t more than 50% of your income, you’ll have free cash floating around to wipe out debt if need be, such as if your situation changes.

Why Exactly Any Debt is a Good Debt?

If you don’t have credit history, you’re losing out on the potential to increase your creditworthiness going forward. That may sound like it doesn’t matter if you pay for everything upfront or in cash, but not having credit can and will hurt you in the long run.

Credit comes up when you go to buy a car or a home, two of the biggest purchases that the average American makes in their lives. Even if you typically have a lot of liquid cash, simply paying for a home and missing out on equity and the ability to build your credit even further is a big mistake. You can use a big down payment to avoid PMI, but apart from that, you should be using credit to your advantage in an intelligent way.

Some debt is good. Investment debt is good (education, property, etc.). In today’s market, you can’t afford to not have debt, as silly as that sounds. You need to build your credit history.

Speaking of which, there are a lot of factors that go into your credit score, and one of those is history. Having a credit card for one month and paying the bill is less impactful than having a credit card for twelve months and paying the bill on time. Institutions want to see that you can be trusted over an arc of time, not just in the short-term.

Good Debt vs. Bad Debt (Main Difference)

There’s one key difference between good debt and bad debt. We’ve been over good sources of debt, but now it’s time to discuss what makes them good, and what makes a source of debt completely bad.

Good debt can be managed, and used as leverage to increase your creditworthiness. Good debt is seen as an investment because it is low-risk and offers a much more beneficial payout, such as education, property, and business expenses. There’s something monumentally valuable to be gained, and a careful, tactical investment strategy is in place to ensure it works out.

Bad debt doesn’t help you in any way. Bad debt is a personal credit card that was used on frivolous purchases, or debt that you take out but have no idea how you’ll pay it back. Bad debt will hurt your creditworthiness and make it more difficult to be trusted by lenders in the future.

Source: crediful.com

Chase Sapphire Preferred Card vs. American Express Green Card

The Chase Sapphire Preferred Card has long been a stalwart in the mid-tier category of cards, consisting of credit cards with annual fees around $100.

For a long time, American Express had great premium cards (such as the American Express® Gold Card or the many varieties of the The Platinum Card® from American Express) but not a strong competitor to the Sapphire Preferred. When Amex announced a major overhaul to the American Express® Green Card* a few years back, with (positive!) adjustments to its benefits and bonuses, that changed.

However, the Chase Sapphire Preferred Card has recently received a boost in benefits. Check out how the cards currently stack up.

Chase Sapphire Preferred vs. Amex Green Card

Card Chase Sapphire Preferred® Card
Chase Sapphire Preferred Card
American Green CardAmerican Express Green Card
Rewards rate
  • 5X points on travel booked through the Chase Ultimate Rewards travel portal
  • 3X points on restaurants, select streaming services and online grocery purchases (excluding Target, Walmart and wholesale clubs)
  • 2X points on all other travel purchases
  • 1X points on other purchases
  • 3X points on travel, transit and restaurants
  • 1X points on other purchases
Welcome bonus 100,000 points if you spend $4,000 in first 3 months 45,000 points if you spend $2,000 in first 6 months
Annual fee $95 $150
More things to know
  • Transfer points 1:1 to 13 travel partners
  • $50 annual hotel credit
  • Travel insurance
  • Primary car rental insurance
  • No foreign transaction fee
  • $0 authorized user fee
  • One year complimentary DoorDash DashPass subscription
  • 25% bonus on points redeemed for travel through Ultimate Rewards portal
  • Transfer points 1:1 to 20 travel partners
  • No foreign transaction fee
  • Up to $100 CLEAR credit
  • Up to $100 LoungeBuddy credit
  • $0 authorized user fee

Welcome bonus

The most valuable part of signing up for a new credit card is often its initial welcome bonus. Instead of only 1 or 2 points per dollar spent, the initial spend on a new card can often earn 10 or 20 points for each dollar spent toward earning the bonus.

That’s no different from the welcome bonuses on these two cards. Unfortunately, comparing the welcome offers on cards can be tricky, since credit card issuers often change them over time, or you may have access to different offers based on a prior relationship with the card issuer.

Still, we’ll take a look at the welcome bonuses of the Chase Sapphire Preferred versus American Express Green as of writing to compare which card comes out on top.

The current welcome bonus on the American Express Green card is 45,000 Membership Rewards points if you spend $2,000 in the first six months – and some individuals may see a 50,000 points welcome bonus targeted offer on Amex’s website.

For the Chase Sapphire Preferred, the current welcome offer is 100,000 Ultimate Rewards points if you spend $4,000 in the first three months (the highest the card has ever offered).

If you’re able to put $4,000 on the new card in the first three months, then the initial offer on the Sapphire Preferred is a clear winner. If your spending is lower, you might consider the lower spending requirement on the Amex Green card.

Like most Chase cards, the Sapphire Preferred is restricted by the Chase 5/24 rule, so if you’ve applied for five or more personal cards from any issuer in the past 24 months, you are unlikely to be approved for a new Sapphire Preferred card. In that case, the Amex Green card would have a huge edge for you.

Redeeming Amex Membership Rewards vs. Chase Ultimate Rewards

American Express and Chase have competing points programs with their Membership Rewards and Ultimate Rewards systems. Ultimate Rewards and Membership Rewards are widely considered to be two of the top systems of points out there.

Both types of points currencies allow you to either use your points directly for travel or transfer to a variety of hotel and airline transfer partners.

When redeeming your points for paid travel, Chase has a clear advantage. With the Sapphire Preferred, your points are worth 1.25 cents per point, and if you additionally have a Chase Sapphire Reserve card, you can combine your points for free and redeem for 1.5 cents per point. Chase also allows you to pay yourself back for purchases in certain categories at the same 1.25 or 1.5 cents per point value.

With the American Express Green card, you can only use your points directly for travel at a rate of 1 cent per point on airfare or 0.7 cents for hotels, car rentals or cruises. The exception is if you also have The Business Platinum Card® from American Express, where you can pay for airfare at a rate of 1 cent per point but then get 35% of your points refunded to you (on up to 500,000 points per calendar year when booked through amextravel.com), making your points worth 1.54 cents per point.

American Express and Chase also feature a variety of transfer partners. Whether the American Express 20 transfer partners are better than Chase’s 13 transfer partners is a matter of opinion, depending on where you like to fly or stay.

See related: 6 worst ways to redeem your credit card rewards

Comparing perks

The Chase Sapphire Preferred card ($95) and the American Express Green card ($150) have similar annual fees, and neither is waived the first year. Neither card charges foreign transaction fees.

Some of the best perks of the Chase Sapphire Preferred card are its trip delay and rental car insurance. You’ll also get a $50 hotel credit each year and a one-year complimentary membership to DoorDash DashPass.

On the Amex Green card side, helping to offset the slightly higher annual fee are a couple of potential statement credits:

See related: Best credit cards for international travel

Bonus categories and everyday spend

The Chase Sapphire Preferred earns 5 points per dollar on travel booked through the Chase Ultimate Rewards travel (2 points per dollar on other travel purchases), 3 points per dollar on dining and 1 point per dollar on all other purchases. The Amex Green card has similar bonus categories, with 3 points per dollar on dining and travel and an additional 3 points per dollar on transit purchases.

The two cards will earn a similar amount for everyday spend, though the American Express Green card will earn more for people who have high transit spending or a high spending on travel booked directly with hotels or airlines. Whether that is enough to offset the higher sign-up bonus on the Sapphire Preferred card will depend on your particular spending patterns.

Bottom line

Depending on your travel and spending habits, these cards come out pretty similarly. Your choice between these may come down to which points ecosystem you prefer – Amex’ or Chase’s. If you’re still unsure which card is right for you, you can also check out other top travel credit cards to expand your search.

*All information about the American Express Green Card has been collected independently by CreditCards.com. The issuer did not provide the content, nor is it responsible for its accuracy.

Editorial Disclaimer

The editorial content on this page is based solely on the objective assessment of our writers and is not driven by advertising dollars. It has not been provided or commissioned by the credit card issuers. However, we may receive compensation when you click on links to products from our partners.

Source: creditcards.com

9 Best No-Medical-Exam Life Insurance Companies of 2021

According to the LIMRA 2021 Insurance Barometer study, roughly half (52%) of American adults have at least one life insurance policy. That’s down 11 percentage points from the 2011 high of 63%, suggesting many Americans aren’t seeing the value in this particular type of financial protection.

Part of this hesitancy may be due to misconceptions about life insurance. Many would-be applicants assume that every life insurance application involves an exhaustive underwriting process rife with invasive medical questions, torturous financial disclosures, and an inconvenient medical exam.

It’s true that most life insurance underwriters do consider applicants’ medical histories and their voluntary answers to medical questions. But many don’t require medical exams as a condition of acceptance.

Policies issued without waiting on the results of a medical exam are known as no-medical-exam life insurance or simplified issue life insurance. They’re increasingly common, with most major life insurers (and many lesser-known upstarts too) backing them.

9 Best No-Medical-Exam Life Insurance Companies

These are among the best life insurance companies offering no-exam policies to U.S. applicants right now. With this list as your starting point, use a life insurance quote aggregator like Policygenius to narrow down your choice of candidates and choose an insurer and policy that best fits your needs.

Unless otherwise noted, all of the life insurers on this list offer term policies with no cash value, permanent (whole life insurance) policies, and universal policies for individuals. (Whole and universal life policies do accrue cash value over time.) Some may offer employer-sponsored or group life insurance policies as well, but those aren’t included in our analysis.

Each listing includes two key metrics of insurance company stability and performance, where available:

  • The AM Best financial strength rating, a closely watched measure of insurers’ capacity to pay benefits to policy beneficiaries
  • The J.D. Power 2020 life insurance survey rating, which measures overall customer satisfaction with the application and claims processes

Before applying for a no-exam life insurance policy, understand the difference between two no-exam types of life insurance: simplified issue and guaranteed issue life insurance (guaranteed issue policies).

The former typically has a higher maximum death benefit and a streamlined but not perfunctory underwriting process. The latter is a lower-benefit policy — often enough to cover final expenses like funeral costs but not much more — for which applicants can’t be turned down for health reasons.

Finally, understand that any life insurance policy (including a no-exam life insurance policy) is a long-term financial commitment that can have a significant impact on your household’s cash flow. Before applying, speak with a financial advisor to assess your coverage needs and confirm that purchasing any policy at all is in your best financial interests.

1. Bestow

  • A.M. Best Financial Strength Rating: A+ (Superior), for the North American Company for Life and Health Insurance
  • J.D. Power 2020 Life Insurance Study Rating: Not rated
  • Great For: Budget-conscious policyholders seeking higher coverage limits without a medical exam

Unlike most no-medical-exam life insurance providers, Bestow is entirely exam-free. That is, if you want a medical exam as part of your policy’s underwriting, Bestow is not for you.

Is this actually a disadvantage? Perhaps, in the sense that a no-medical-exam life insurance policy is likely to have a higher premium than an otherwise identical policy that does require an exam (due to the inherent uncertainty of insuring someone’s life without making sure everything is OK under the hood).

But Bestow largely solves this problem by eliminating inefficiencies elsewhere — inefficiencies that drive up the cost of coverage from full-spectrum insurers.

Either way, getting a life insurance policy from Bestow is ridiculously convenient. The online application process takes just a few minutes — doable on your lunch break or while unwinding in front of the TV after work.

Bestow’s underwriting process is fully algorithmic, meaning you won’t have to wait for a decision while your doctor sends along your health records — although algorithmic underwriting’s lack of transparency is a legitimate downside.

Bestow has some other key advantages, including a $1.5 million coverage limit — quite high for an algorithmic underwriter — policy terms as long as 30 years, and coverage beginning as late as age 60.

Bear in mind that Bestow only offers term life insurance policies, so you’ll need to look elsewhere for permanent life coverage.

Sign Up


2. Haven Life

  • A.M. Best Financial Strength Rating: A++ (Superior), for MassMutual
  • J.D. Power 2020 Life Insurance Study Rating: 769, for MassMutual
  • Great For: Policyholders seeking higher coverage limits, great customer service, and impeccable financial strength

Haven Life is another lean, technology-assisted insurer backed by one of the strongest names in life insurance: MassMutual.

Haven Life offers a no-medical-exam term life insurance product called Haven Simple. Offered by C.M. Life Insurance Company, a MassMutual subsidiary, Haven Simple comes in terms ranging from five to 20 years, offers benefit amounts from $25,000 to $500,000, and accepts applicants as old as 55 years.

In addition to perks like an accelerated death benefit, paperless application and document processing, and a no-obligation look period during which you can cancel with no premium due, Haven Simple can pair with an optional policy rider (add-on) called Haven Life Plus.

Haven Life Plus entitles policyholders who opt in to free or discounted perks like:

  • Adaptiv, a fitness app with thousands of original workouts set to music
  • Timeshifter, an app created to fight jet lag
  • Lifesuite, a secure digital storage vault for storing digital copies of sensitive estate planning documents (including a customizable and fully legal will that you can create with Haven) stored in your account dashboard
  • Discounted services at MinuteClinic locations inside thousands of CVS and Target stores

Like Bestow, Haven Life only offers term life insurance. You’ll need to look elsewhere for a no-exam permanent policy.

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3. Ladder

  • A.M. Best Financial Strength Rating: A+ (Superior), for Allianz Life Insurance Company of New York and A (Excellent), for Fidelity Security Life Insurance Company, Kansas City, MO
  • J.D. Power 2020 Life Insurance Study Rating: Not rated
  • Great For: Applicants seeking competitive rates and higher coverage limits

Ladder Life is yet another algorithmic underwriter with solid financial strength ratings and customer-friendly perks.

Like Bestow and Haven Life, Ladder offers a fully algorithmic insurance product that requires no medical exam — although applicants do need to answer a fairly extensive health questionnaire. Ladder actually one-ups both companies with no-exam coverage up to $3 million — a level nearly unrivaled in the space.

If you’re applying for more than $3 million in coverage, you’ll need to complete a health check, even if you’re in excellent health. But this can be done in the comfort of your own home with no lab or nurse visit required.

Like other algorithmic underwriters, Ladder keeps premiums competitive thanks to a stripped-down, low-overhead corporate structure. Policies can stretch as long as 30 years, although older applicants may not qualify for the longest terms. And, like Bestow and Haven, Ladder only offers term life.

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4. Lemonade

  • A.M. Best Financial Strength Rating: A+ (Superior), for the North American Company for Life and Health Insurance
  • J.D. Power 2020 Life Insurance Study Rating: 5 out of 5 (Among the Best)
  • Great For: Applicants seeking competitive rates with unusually high coverage limits

Lemonade is a diversified, tech-assisted insurance agency that got its start in the property insurance space (homeowners and renters insurance, to be exact). Later, the company extended its algorithmic underwriting process to life insurance, to the benefit of would-be policyholders put off by medical exam requirements.

Even by the standards of algorithmic underwriting, Lemonade’s process stands out. The application is entirely online, led by a smart chatbot that asks basic questions about your health history, habits, lifestyle, and other relevant details. To back up your answers and strengthen its confidence in its assessment of your health, Lemonade pulls (with your consent) your health records and other verifiable third-party data.

Lemonade’s policy terms range from 10 to 30 years and are available to applicants up to age 60, although the longest terms may not be offered to older applicants. Death benefits range up to $1.5 million.

Lemonade advertises life insurance rates as low as $9 per month, but your actual premium will depend on your coverage amount, age, health history, and other factors.

Like its fellow algorithmic insurers, Lemonade only offers term life insurance. If you’re looking for whole life coverage, Lemonade isn’t for you.

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5. Assurity

  • A.M. Best Financial Strength Rating: A- (Excellent)
  • J.D. Power Overall Satisfaction Rating: Not rated
  • Great For: Applicants seeking longer-term policies through an insurance agent

Assurity is a mutual life insurance company that’s decidedly more old-fashioned than newcomers like Ladder and Bestow. In fact, Assurity doesn’t sell directly to the public — you’ll need to work through an agent (or an employer, if that’s an option) if you want to take advantage of the company’s no-exam policies.

If you’re willing to take this step, there’s a lot to like about Assurity. The company’s NonMed Term 350 product provides coverage up to $350,000 for terms as long as 30 years and accepts applications from would-be policyholders as old as 65.

Assurity doesn’t make coverage decisions instantaneously, unlike its more tech-y competitors, but you should still know whether you’re approved for coverage within a few days.

Assurity has some other benefits worth noting, including a surfeit of riders: accelerated death benefit, return of premium, children’s term (covering the insured’s kids until they turn 25), and more.

And because Assurity also offers permanent life insurance, its NonMed Term 350 policies can be converted to permanent status and extended beyond the original term without waiting for the term to expire.

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6. Transamerica

  • A.M. Best Financial Strength Rating: A (Excellent)
  • J.D. Power 2020 Life Insurance Study Rating: 734
  • Great For: Younger applicants seeking high coverage limits

Transamerica is a full-spectrum insurer that offers no-medical-exam life insurance coverage (nonmedical underwriting) for applicants up to age 55.

The company distinguishes between applicants aged 18 to 45 and applicants aged 46 to 55, with the former qualifying for up to $2 million in coverage without an exam and the latter topping out at $1 million in coverage without an exam under normal circumstances.

Transamerica’s no-exam policies have up to 30-year terms and boast living benefits (accelerated death benefits) for qualifying policyholders diagnosed with chronic, critical, or terminal illnesses

The Trendsetter Super product is a convertible policy, meaning it’s eligible for conversion to permanent status if the policyholder so chooses, although medical underwriting is required for benefit amounts above $1 million or $2 million, depending on the policyholder’s age.

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7. Sagicor

  • A.M. Best Financial Strength Rating: A- (Excellent)
  • J.D. Power 2020 Life Insurance Study Rating: Not rated
  • Great For: Would-be policyholders seeking good customer service and higher coverage limits

Sagicor is one of the few life insurance companies (along with Bestow) that only offers no-medical-exam coverage. The difference is that Sagicor offers a wider range of no-exam policy options than many competitors: term, whole, and final expenses life insurance (a lower-benefit subtype of whole life insurance).

Sagicor’s term life policies top out at 20 years and $1 million, so they’re not for applicants with the longest time horizons or highest coverage needs. They’re certainly appropriate for younger and middle-aged folks seeking some measure of financial protection, though.

Sagicor’s whole life policies offer death benefits as high as $250,000 — again, not a massive amount of coverage, but enough for many use cases. Its final expense policies provide up to $50,000 in coverage, higher than many competing final expense insurance options.

Elsewhere, Sagicor prides itself on responsive customer service, despite its lean corporate profile, and a community-first ethos that sees it donating a portion of new policyholder premiums to charities operating in their home states.

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8. Ethos

  • A.M. Best Financial Strength Rating: A (Excellent) to A+ (Superior), depending on underwriter
  • J.D. Power 2020 Life Insurance Study Rating: Not rated
  • Great For: Applicants who’d like to choose from multiple underwriting companies, including some that accept older applicants

Ethos advertises no-medical-exam policies “for most” applicants. The company requires a medical exam only when absolutely necessary to determine whether a particular applicant is insurable — a relatively rare occurrence that’s usually due to known health conditions in the applicant’s medical record.

If you don’t have a history of chronic medical conditions (such as cancer) or an unusually risky lifestyle, you’re unlikely to need a medical exam with Ethos.

Assuming you don’t, what can you expect from Ethos’ no-exam policies? If you’re young and have no known health issues, there’s a good chance your policy will be fast-tracked through underwriting or subjected to a longer process that involves more follow-up questions and a more thorough investigation of your health history on Ethos’ end.

In either case, you’ll be able to choose from policy terms ranging from 10 to 30 years and coverage amounts up to $1.5 million. If you need help during the application process, Ethos has human agents on standby, but many applications occur entirely without person-to-person interaction.

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9. Mutual of Omaha

  • A.M. Best Financial Strength Rating: A+ (Superior)
  • J.D. Power 2020 Life Insurance Study Rating: 789
  • Great For: Applicants seeking a comprehensive lineup of life insurance solutions

Mutual of Omaha offers a comprehensive lineup of permanent and term life insurance policies, including a guaranteed issue whole life insurance product that provides a small but potentially valuable death benefit for older applicants (up to age 85 in most states and age 75 in New York).

Premiums remain level for the duration of the policy, regardless of health status or age, and the underwriting process involves no health questions. That’s a step up in terms of leniency from most no-exam policies, which do still ask detailed health questions during underwriting.

Mutual of Omaha has a glaring deficit for fans of term life insurance and no-exam coverage: It requires medical underwriting for term life applicants. So, while Mutual of Omaha is a great choice for final expenses coverage and other small-benefit whole life use cases, it’s not ideal for many working policyholders.

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Final Word

There are many reasons to buy life insurance. If you’re actively considering adding a policy in your name, you’ve probably determined that at least one applies to your personal situation.

There’s another side to the life insurance coin, of course. While applying for life insurance is not as difficult as it’s made out to be, the process does still involve some work on the applicant’s part. Throw in the still-common medical exam requirement and you’ve got an inconvenience on your hands — one that might be big enough to put you off applying altogether.

These no-medical-exam life insurance companies want to change this for the better. Apply for coverage with any of them and you can rest assured that you won’t have to sit through another blood draw or blood pressure check simply because you want to provide your family with some measure of financial protection in the event of your premature death.

You already know that life insurance provides valuable peace of mind should the unthinkable happen. Your decision to apply for no-exam coverage could be a difference-making source of assurance on the front end as well.

Source: moneycrashers.com