As the mortgage industry struggles with profitability in the current rate environment, diversification can help, but the going could get tougher regardless at this point in the cycle, according to an industry outlook report by consultancy Berkeley Research Group.
Even business lines like servicing and nontraditional products that can offset decline in demand for traditional mortgages will have their challenges, the report noted.
Servicing can bring in revenue after a runup in rates like that seen in 2022, but since periods like this have historically tended to end in recessions that increase defaults and expenses, those who engage in it will still need to run a tight ship.
That said, with some exceptions, lenders with effective servicing operations might fare better in this environment than others.
“If you’re not retaining servicing, you don’t have a business hedge if the origination volume dries up,” said Michael Canale, managing director, at Berkeley Research Group.
There are things pure lenders can do to diversify when rates rise, like add nontraditional loan products, but those strategies have their challenges.
“Non-qualified mortgages, governed by strict regulations, may strain the liquidity of companies forced to buy out underperforming loans at a loss,” the BRG report noted.
Meanwhile, there is a mix of challenge and opportunity in servicing in that it generally hasn’t been fully modernized.
“One thing about servicing, it’s still a pretty manual process,” said Canale.
Technology has improved over the last 10 years or so but it’s not always used, and the current ascendancy of servicing in the wake of the first steep and prolonged runup in rates has brought more attention to it.
The challenge now may be to get servicing technology efficiencies in place before a cyclical turn intensifies cost pressures for this part of the business.
“We worked with a top servicer to automate their bankruptcy check posting process,” he said, citing one example. “They had a team of six people that were handling that process. We were able to drop it down to one and a half or two full-time roles.”
Technologies applied to the process of handling and checking the amounts on checks from distressed borrowers in bankruptcy, which get distributed by their trustees, included optical character recognition used for document data extraction.
The company also applied robotic process automation to the process involved in ensuring amounts on the checks, which get determined in the bankruptcy process, were accurate.
When asked about whether artificial intelligence has become a game changer in servicing, Canale said, “I don’t think we’ve seen the truly ‘going to revolutionize’ stuff that everyone is starting to get excited about.
But, “with all the news about ChatGPT and other tools that have been released, I do think that the artificial intelligence tools that are out there are starting to get pretty interesting,” he said.
“I don’t think we’ve seen the truly ‘going to revolutionize’ stuff that everyone is starting to get excited about yet,” he added.
The gig economy was just beginning to blossom pre-pandemic. Between 2010 and 2020, the number of gig workers or side hustlers increased by 15%. Unlike many aspects of life, which stagnated during the pandemic, freelancing only grew. Statista reported that 73.3 million people work as freelancers in the U.S. right now, an increase from 57.3 million pre-pandemic.
Freelancing has tremendous benefits for many people. Freelancing or gig work can provide:
Flexibility
A better work-life balance
Increased income potential
But it can come with some financial complications, too.
As a freelancer, you’ll need to manage cash flow so that you’ll have money in your account to pay your bills. You’ll be responsible for paying your own taxes. And, with that in mind, you’ll want to track expenses carefully so that you can deduct the costs of running your freelance business from your bottom line.
That’s where having a business bank account can come in handy.
Why You Need a Bank Account If You Have a Side Hustle
According to tax laws, you don’t have to have a business bank account to run a side hustle or a freelance business. You can file your taxes using your Social Security number and receive a 1099 form as a sole proprietor.
But as your business grows, you may want to incorporate under a tax ID number. You may choose to register as a corporation like an S-Corp or, more commonly, a limited liability corporation or LLC. This can get confusing, so it’s important to speak to a tax account before you take this step.
If you incorporate your business, you’ll need a business checking account to keep your personal finances separate from your business expenses. You would pay yourself a salary out of your business account and use your personal bank account to pay for your daily living expenses, entertainment, and anything that isn’t considered a business expense.
Benefits of Business Accounts
Most small business owners, freelancers and side hustlers prefer to open a business account even if they aren’t incorporated. Having a dedicated business checking account makes it easier to track your business income and expenses, which makes filing taxes – and making quarterly estimated tax payments – easier. If you ever get audited, you’ll have a clear record of your personal and business finances.
Plus, if you do any sales and marketing for your freelance business, your business debit card can often pique people’s interest. You’d be surprised how having a debit card with your business name on it can help you generate leads in odd places, whether you’re at your favorite bar or paying for groceries.
If you’re ready to open a separate business account, it’s important to find one that will meet your needs.
Freelancer vs. Side Hustler vs. Entrepreneur
Before you choose a business account, you may be wondering about the differences between entrepreneurs, freelancers, and side hustlers. Which category do you fit in?
These are all loose terms to describe anyone who owns their own business or is self-employed. Self-employed is a tax designation, which means you are a 1099 contractor for other companies. This term would apply to most freelancers and side hustlers.
On the other hand, if you start your own business, you might consider yourself an entrepreneur. The dictionary defines an entrepreneur as someone who starts a business and is willing to take a financial risk in hopes of great success.
A freelancer may also take financial risks, including leaving a steady paying job. In a lot of cases, whether you describe yourself as an entrepreneur, small business owner, freelancer or side hustler is up to you.
Compare the Best Freelancer Checking Accounts
In most cases, business owners, freelancers and side hustlers can all benefit from a good business bank account. Read on as we compare the best business checking accounts for freelancers, gig workers, and entrepreneurs.
1. Lili Bank: Overall Best Bank for Freelancers
Lili calls itself “the one-stop shop for all your small business financial needs.” An online financial services company that provides business banking, accounting for freelancers, invoicing, and tax support, Lili is backed by Choice Financial Group Inc.
As a US-based bank, Choice is a member FDIC, which means your funds deposited in Lili are protected by the federal government up to $250,000 per account.
What sets Lili apart as one of the best bank accounts for freelancers?
In addition to all the other services it offers to business owners, Lili has no minimum balance requirements, no monthly fees for basic checking, and a network of 38,000+ fee-free ATMs nationwide. You can also open a business savings account and earn 1.50% APY at Lili.
Lili’s basic business checking account has no monthly fee, expense categorization for your purchases, and the ability to generate quarterly expense reports.
Alternatively, for $9 per month, you can earn 1.5% on savings, get a Visa business debit card with cashback rewards, overdraft protection up to $200 and tax, invoicing software, and accounting support.
Lili integrates with third-party services that gig workers may use, including Etsy, Shopify, Venmo, QuickBooks, and your PayPal business account.
When you compare the prices of other invoicing and online accounting services, you may find that Lili offers tremendous value for the money as one of the overall best banks for gig workers you can find.
Bluevine: Best for Business Interest Checking Account
Like Lili, Bluevine is a financial technology company. It is backed by Coastal Community Bank, Member FDIC to protect your deposits. The Bluevine business checking account offers 2.0% interest, which sets it apart from competitors.
To take advantage of the interest, you’ll need to either spend $500 per month with your Bluevine Business Debit Mastercard or receive $2,500 per month in customer payments to your Bluevine business checking account.
There are no monthly fees or minimum balance requirements and you can make unlimited transactions with no fees. Like Lili, Bluevine also offers other services for business owners.
If you are looking for a business interest checking account with value-added services, consider Bluevine. Your account integrates easily with QuickBooks, with no fees involved. Plus, you can set up sub-accounts to easily manage your money, add authorized users, and pay bills via ACH or wire transfer from your Bluevine account.
While many credit providers offer business credit cards, Bluevine is one of only a few business checking accounts that offers a business line of credit. You may qualify for a credit line of up to $250,000, with a rate as low as 6.2% interest. This interest rate is much lower than the national average of 20.46% for business credit cards right now, as reported by The Balance. Plus, you could get approved in as fast as five minutes, according to the Bluevine website.
For entrepreneurs seeking to purchase tools or resources, or freelancers in need of business equipment, Bluevine’s line of credit could provide you with the financial security you need to grow. Take note that you’ll need a credit score of 625 or more to qualify and $40,000 in monthly revenue. This is probably not a service for a gig worker, but for a seasoned entrepreneur.
Even so, it’s never too early to get started with a business checking account, especially one with no monthly fees.
Amex: Best for Debit Card Rewards and Bonus Offer
American Express is a renowned name in business and consumer rewards credit cards. But you might not be aware that the company also offers a business checking account with 1.30% APY on balances up to $500,000.
American Express also has no monthly maintenance fees, no fees on domestic ACH payments, and no fees at MoneyPass ATMs. The American Express Business Blueprint app makes it easy to manage your account.
Amex stays true to its credit card rewards roots with a rewards business debit card. Earn 1 Membership Reward point for every $2 on eligible purchases. You can combine points earned with Membership Rewards points accrued with other Amex cards, and use those points for travel, gift cards, or cash back. You can also convert those points into cash deposits directly into your new business checking account.
Amex’s bonus offer stands out to us. Earn 30,000 Membership Rewards points after you deposit $5,000 or more within the first 30 days of account opening, maintain that balance for the next 60 days, and make five or more qualifying transactions within those first 60 days.
NBKC Business Checking: Best for No Fees
If finding a business bank account with no fees is most important to you, a nbkc Business Checking account might fit the bill. The bank offers unlimited transactions with no fee, no minimum balance requirements, no monthly fees, and no opening deposit requirements either. You can also have out-of-network atm fees reimbursed for up to $12 per month.
If you are a freelancer just getting started or just looking to supplement your full-time income with a side hustle, you’ll find nbkc bank a low-cost and convenient option among free business checking accounts.
NBKC lacks some of the bells and whistles of the top choices on our list. You won’t get integrations with common business software or invoicing and accounting support. But a nbkc business checking account is free with your personal account and provides an easy way to keep your business and personal funds separate.
Novo: Best for Payment and P2P Money Transfer App Integration
Novo is another choice with no monthly maintenance fee, no monthly fee, free ACH transfers, and no minimum balance needed. Like many of the business bank accounts on this list, Novo is a financial technology company. It’s backed by Middlesex Savings bank, a Member FDIC, which means your money is protected up to $250,000 per account.
Novo is the best for business owners looking for an easy way to process payments or transfer funds. You’ll get free ACH transfers from another checking or savings account and refunds on all out-of-network ATM fees.
Novo integrates with many P2P payment apps, including Square, Shopify, and Stripe, as well as Etsy, eBay, Amazon and more.
When you use Novo Boost, you can get paid 95% faster through Stripe, or two business days before the funds would ordinarily appear in your account.
Plus, it’s quick and easy to open an account online, with approval as fast as 10 minutes – rather than days with some other online bank accounts.
Axos Bank: Best for New or Scaling Businesses
Many freelancers don’t think about opening a business account until they have incorporated their company to make that transition from self-employed to entrepreneur. If this sounds like you, Axos Bank could have the best bank accounts for you. The online bank is offering business owners who incorporated after June 2020 an extra $200 in their new business bank account.
If you aren’t newly incorporated, you can earn a $100 bonus.
Like many of the best business accounts on this list, Axos has no monthly fee, no minimum monthly average balance to hold, ATM fee reimbursements for all domestic transactions, and no minimum opening deposit. The bank accepts cash deposits or you can transfer money from other checking accounts via ACH.
Unlike many online banks, Axos offers business owners a dedicated relationship manager to help point you to the products and services that are best for your growing business.
Chase Business Complete Banking: Best for Credit Card Processing
As the largest U.S. bank, with assets of $3.31 trillion, Chase is a traditional bank that offers all the convenience of online banks. This includes personalized service, stellar fraud protection, and a host of other features and benefits we’ve come to expect from any financial institution.
The Chase Business Complete Banking account is ideal for entrepreneurs, offering unlimited transactions and no monthly fee (if you meet certain requirements). These requirements are relatively easy to meet with a $2,000 minimum balance, $2,000 in purchases on your Chase Ink Business credit card, a link to a Chase Private Client Checking account, or $2,000 in deposits from QuickAccept or Chase eligible merchant services.
The best aspect of Chase Business Complete Banking is the ability to process credit card transactions and receive funds the same day through Chase QuickAccept. (Additional fees apply.)
You can open an account with no minimum deposit to get started.
Wave Money Business Banking: Best for Free Business Banking
Wave Money integrates a free checking account with easy bookkeeping for freelancers and solopreneurs. Wave is best for those who want to improve cash flow with instant pay and want bookkeeping tools to make tax prep easier.
Wave has no monthly fee or transaction fees, so you keep more of what you earn. You can use the mobile check deposit feature for convenience, and make ACH transfers easily. There are no transaction limits with Wave, and you can also connect third party payment processors.
Wave is another fintech company, with banking provided by Community Federal Savings Bank, Member FDIC. That means your funds are insured for up to $250,000 per account.
TIAA Bank: Best for Business Investments
Besides checking accounts, TIAA Bank offers a variety of banking products for entrepreneurs and gig workers that sets it apart.
If you’re considering business savings accounts, TIAA offers CDs and money market accounts to earn interest at a rate higher than you may get with another account. Currently, TIAA’s one-year business CD offers an APY of 3.75%.
TIAA’s checking accounts offer easy online banking and mobile check deposit, along with personalized service from a business solutions specialist.
LendingClub Bank Tailored Checking: Best for Earning Checking Account Rewards
The LendingClub Bank tailored checking account for freelancers is one of the few banks on our list where you can earn interest on your checking balance, plus 1% cash back rewards when you use your debit card.
Account holders earn 1.5% APY on balances up to $100,000 and 0.10% APY on the portion of your balance that exceeds $100,000.
LendingClub Bank reimburses fees if you use an out-of-network ATM. The bank also supports QuickBooks, Quicken and Mint for budgeting and bookkeeping. You can also send digital invoices and get paid directly to your LendingClub account, making LendingClub Bank Tailored Checking one of the more robust and affordable online banks for freelancers.
Just make sure to maintain an average daily balance of at least $500 to have the monthly fee waived.
How to Choose the Best Bank Account for Your Business
When you’re evaluating business bank accounts, you’ll want to consider your needs and the features that are most important to you.
It should go without saying that you want an account with no monthly fees or no monthly fees. Unless you’re an established business owner, you may also want no minimum balance requirements. You don’t want to get saddled with fees if your business runs into cash flow problems or you have a down month.
If you run a high-volume business, look for a bank account with no transaction limits, no in-network ATM fees, and unlimited ATM fee rebates.
Need a way to manage contracts, collect invoices, and help with taxes?
Your business bank can represent much more than just a place to deposit cash and a means to pay your bills. Many of the best bank accounts on this list also offer freelancer invoicing, tax assistance, and ways to manage contracts.
Budgeting and Savings Features to Look For
When you’re a freelancer, it’s convenient to have an easy way to track your expenses and budget for not just expected costs, but surprise opportunities or financial emergencies.
Just as you should have a personal bank account established with emergency savings, you want a business savings account. In fact, you may want multiple business savings accounts or the ability to divide money into various buckets for known costs – like taxes – and unexpected expenses, such as car repairs or a new phone.
Some budgeting and savings features are nice to have, such as an interest-earning checking account and cash back on debit card purchases.
Why We Chose Lili as the Best Business Bank Account
Lili graces the top of our list because the fintech company offers so many value-added services for entrepreneurs that it’s virtually a one-stop shop for freelancers. However, the other banks on our list for best business accounts have their own benefits you might want to consider.
Should You Use Different Banks for Personal and Business Finance?
If you already have a separate bank account for your personal finance, there is something to be said for opening a business account through the same bank. You may get extra perks and benefits or waived fees. Best of all, it’s easier to use one app to manage all your personal and business banking.
But if you opt for an online financial services company, instead, it is typically easy to transfer funds between accounts. Also, companies like Lili and Bluevine specialize exclusive in business accounts, which means they have services tailored specifically to your needs.
Bottom Line
A lot of factors go into choosing the best bank account for your business checking needs. Knowing your must-haves, nice-t0-haves, and those features that don’t really matter to you can help make the decision easier.
FAQs
What is a business bank account?
A business bank account is a dedicated account separate from your personal accounts that you use to deposit cash, checks, or other customer payments earned through your business. You should also use your business checking account to pay for business expenses.
Do You Need a Business Bank Account if You’re a Freelancer?
Freelancers are not required by law to have a separate business banking account. But if your business is incorporated as an S-corp, C-corp, or LLC, you are required to keep your business and personal accounts separate.
Should You Have a Separate Bank Account If You’re a Freelancer?
Even though it’s not required by law, it’s a good idea to have an account separate from your personal checking account to help you keep track of business income and expenses.
What Makes a Business Bank Account Ideal for Freelancers?
Business bank accounts often have many of the same features as some of the best personal bank accounts. That would include low or no minimum balance requirements, no monthly maintenance fee, no transaction fees, and no hidden fees.
You may also look for features like mobile check deposit, unlimited electronic deposits, and low wire transfer fees if you have a lot of customers, clients, or vendors outside the U.S.
Methodology: How We Select the Best Bank Accounts for Freelancers and Side Hustlers
We evaluated the best bank accounts for freelancers based on the ability to earn interest, monthly maintenance fees, minimum balance requirements, the ease of making cash deposits, customer service, and more.
Some banks are better for freelancers who don’t maintain a high balance or only have a few transactions per month. Entrepreneurs with fast-growing businesses looking to scale may prefer a business checking account with unlimited transactions and the ability to accept credit card payments through the same bank.
Some business owners may want to be able to integrate their Quickbooks accounting system through their bank.
We have banks on this list designed for small business owners, freelancers and side hustlers at every stage of business growth.
Lenders offer borrowers to lock the mortgage rates for a period between the offer and the closing date, which vary according to their policies.
However, during periods of instability, locking the rate for a long period puts downward pressure on lenders’ margins, hurting earnings. That’s been playing out over the last few months due to massive rate increases. And more are expected to follow – the Federal Reserve signaled six additional rate hikes this year, with at least three more in 2023.
The latest weekly Freddie Mac PMMS survey, released Thursday, showed that the average purchase mortgage rate touched 4.67% early last week, up 25 basis points from the week prior and the highest reading since December 2018. Black Knight‘s Optimal Blue OBMMI pricing engine, which considers refis and data from the Mortgage Bankers Association (MBA), reported that rates on Monday averaged 4.86%, up around 80 basis points in one month.
“The sharp rise of the 2-year swap rate along with the rapid increase in credit spreads of the securitization market have led to an unusually fast increase in non-QM rates that the industry has not seen before,” Angel Oak’s spokesperson said.
Angel Oak Mortgage Solutions announced the change in its lock policy on March 31, which caused “confusion and stress” among brokers and borrowers, according to a company’s post on its LinkedIn page.
The company retracted the changes the following day, saying it was in the “process of making the appropriate system updates to reflect the original information of borrower’s loans.” After that, the spokesperson for the company told HousingWire on Tuesday that it will honor all current locks, with the new policy valid only for loans moving forward.
With mortgage rates now hovering around 5%, compared with 3% or lower for much of last year, lenders are investing more in non-QM products. UWM recently rolled out bank statement loans targeting the self-employed as well as investor loans. Likewise, Homepoint is unveiling bank-statement loans as well as non-QM cash-flow loans for real estate investors. (Several other big nonbanks have investor loan products as well.)
Investors’ appetite for non-QM loans also increases in a higher interest rate landscape, as they are seeking for more return on their investments. So far, this year, the non-QM volume numbers are impressive: year to date as of March 25, a total of 29 non-QM securitizations were completed or underway valued at $12 billion, compared to 17 deals valued at $4.8 billion over the first full three months of 2021, the most recent Kroll Bond Rating Agency’s data show.
The American Pet Products Association reports that a majority of households in the US have at least one pet, but many of them do not have a pet insurance policy that could take care of their medical and grooming needs. As a renter, you may not need to invest in a separate pet insurance policy, though.
Out of all the pet owners in the US, 59.4% own a dog, 34.6% own cats, and the remaining own a range of exotic pets. Thankfully, pet insurance for renters may not only cater to cats and dogs but birds and a range of other exotic animals as well. If you have a pet, you should always consider going through the renter’s insurance policy before choosing a property to understand what your insurance covers and what you may have to pay on your own.
The idea is that the renter’s insurance should ideally cover almost every type of injury and property damage for your pet. In essence, this isn’t just insurance for your pet, but also for the property. In this article, we will take a closer look at what pet insurance is for renters and the potential benefits that you (and perhaps the landlord) can reap from it.
What’s Ahead:
What is Pet Insurance for Renters?
Essentially, renters’ insurance for pets will cover any damage to the property or those around that your pet may cause. This means that if your pet decides to rip up the drywall for some reason or accidentally hurts someone visiting the property, the pet insurance will cover it. But how does it benefit you?
Renters Insurance for pets also covers any health expenses for your pet to make sure that it is in good health and not a threat to the property or those around it. This may include vet checkups or emergency surgery for almost any type of pet. Of course, the more exotic your pet is, the higher your premiums will be.
This means that renters’ insurance not only covers you against any damage to your property but also covers any health implications and injuries that your pet and your stuff may suffer.
Understanding The Difference Between Renters Insurance & Pet Insurance
It is common to mistake pet insurance for renters’ insurance if you are not careful enough. Pet health insurance policy and renters’ insurance policy are two very different policies and therefore offer different types of liability coverage. These policies are both designed to cover different forms of damage. Let’s take a closer look at the two.
What is Pet Insurance?
The concept of pet health insurance policies is quite straightforward; it includes covering a wide range of pet health liabilities, including many elective and emergency procedures. The goal is to reduce the burden of expensive treatments when they become dire, and in turn, you pay a small premium every month.
Coverage options vary with respect to the policy you opt for. For example, many plans may not cover pre-, while others may not cover alternative care (acupuncture, chiropractic procedures, neutering or spaying, and more). There are also some all-inclusive plans that cover almost every type of service and therefore have higher premiums.
Pet insurance plans are much like human healthcare plans and have tiered coverage. Pet owners decide whether they want to invest in pet insurance or not and what the insurance covers.
What is Renters Insurance?
Renters insurance is, in essence, pet liability coverage. It includes pet liability coverage against personal property and damage to others’ property or health because of your pet. Insurance companies deal with your landlord directly and the cost of premiums is usually added up to the rent or maintenance charges pet owners have to pay.
The policy helps deal with the potential liability exposure that your pet introduces as a renter. For example, according to the American Veterinary Medical Association (AVMA), there are over 4.5 million dog bites every year. You may end up having to pay damages as well as for their medical treatment against the dog bites.
As a renter, if there is a dog bit instance, the chances are that, depending on your renter’s insurance policy, the medical payments and damage will be paid directly by the insurance provider. You will only need to continue making insurance premium payments.
What Sort of Pet Liability Coverage Does Renters Insurance Offer?
In most instances, renters’ insurance policies offer protection against property- and injury-related pet liability. If you have a pet, renters’ insurance is a straightforward way to cover your legal risk in case your pet ever causes injuries or property damage to other people.
Apart from dog bites, you may be protected against cat scratches, macaw injuries, snake bites, insect infestations, and a range of exotic pets’ damage as a tenant. Individual renters’ insurance policy can also be acquired directly by the tenant, hence improving the tenant-landlord relationship.
Renter’s Liability Insurance Coverage
You can expect your renters’ insurance policy to offer a wide range of pet liability insurance, depending on the insurance companies you choose to go with. Normally, these include:
Personal Property Insurance
This clause usually covers any home content and personal belonging liability coverage.
General Liability Insurance
Also known as general pet liability insurance clause, this liability coverage includes any damages you or your family members have to pay as a result of your pet’s activities.
Additional Liability Insurance
This pet liability coverage includes any expenses needed to create a livable environment in your home/apartment as a renter. Insurance covers these ‘additional living expenses’, including those associated with your temporary living space or motel. Of course, the deductible varies based on your premiums and between different insurance companies.
Coverage Limits of Your Renters Insurance Pet Liability
Your liability coverage limit will depend entirely on the insurance company you choose. It is important to note that renters’ insurance liability coverage is usually limited by different insurance coverage policies and insurance company rules (which vary from insurance company to company).
Usually, renters’ insurance policies allow you to choose your own limit. Pet liability insurance can range from anywhere between $50,000 to over $100,000. These costs include legal costs and/or damages. Once you have reached your limit, you will need to deal with the remaining liability yourself – perhaps out of your personal property.
Impact of Insurance Premiums
As mentioned above, the premiums, as well as the renter’s insurance coverage, will vary from pet owner to pet owner as well. Take dog breed, for example. Pit bulls and rottweilers are among the most dangerous breeds and may require more coverage. For this, you may have to pay higher renters’ insurance premiums as well.
Renters’ insurance companies usually consider the type of pet you have very carefully. When you purchase renters insurance, you should also consider the chances of a dog bite claim or risk of damage (and aggressiveness) your pet poses. Remember, a $100,000 renters’ insurance amount may seem too much, but it really isn’t for any major damage.
This is particularly true if a pet damages someone else’s property and still remains a threat to others. Normally, the average cost for damages and repair in a bite or minor injury is $35,258.14. However, if the incident is severe, your renters’ policy may not be enough to cover the damage.
Will My Renter’s Insurance Liability Policy Always Help Me?
Note that your liability policy may not always protect you. Your renters’ policy may only offer coverage in cases that relate to unforeseen damage only, i.e., damage that could not have been avoided, even with due care.
For example, assume there is a pre-existing condition that causes something as small as your pet tortoise to become overly aggressive. If you knew about it and yet did nothing to protect others or the property in general, renters’ insurance doesn’t cover the damage.
Exotic Pet Coverage
Furthermore, if your exotic pet has already damaged something and you did not try to reduce the extent of further damage (and your pet injures someone), there is a very good chance not only will there be no financial protection, but your typical premiums will also rise.
Similarly, not all pets are covered by base renters’ insurance plans. In some cases, you may need additional coverage for your rental property. Insurance companies may choose to pay part of the damage, legal fees, or legal expenses incurred without additional coverage or may make no payment at all (based on the policy’s limits).
How Much Does Renter’s Insurance Cost?
According to the Insurance Information Institute (III), renter’s insurance premiums have fallen by 0.6% recently. The cost of a pet insurance plan may vary between different companies and even an insurance agent. Depending on the pet covered, the average cost in the US is between $13 to $17 per month.
Different Plan Coverage
These basic plans may offer $30,000 to $100,000 against the renter’s insurance. Of course, as the amount and circumstances of insurance coverage you need increase, so will the typical insurance premiums. Take an umbrella policy, for instance. An umbrella policy may offer large deductibles against property damage liability, but will also cost between $35 to $100 per month.
While renters’ insurance is not required by law, it can immensely help when you are trying to protect yourself and your pet against liability or those around you.
Learn more about renter’s pet insurance by reading more!
Now that I’m no longer semi-anonymous with my finance blogging, I tend to have a lot of friends and random people asking me finance questions.
I have people pouring what seems like their heart and soul to me because they really want to change and improve their situation.
This is something that I love about being a personal finance blogger – the fact that I can (hopefully) help someone change their life and teach them how to manage their money better.
Many of the questions I receive involve debt and what they can do to change their situation.
Someone told me they had over $200,000 in student loan debt, another person recently told me they had over $100,000 in credit card debt, some are hiding their finance problems from their families, some have told me that they are beyond house poor and they don’t know what to do.
The list goes on and on about the stories that I have heard.
I think the first thing a person needs to do when it comes to eliminating their debt is to realize WHY they are in debt in the first place (the next step is to actively reduce your debt – read How To Eliminate Your Debt). If you don’t know what your problem is, then it would be hard to make a positive change.
Yes, it is great to just start attacking your debt, but you also don’t want to fall into a vicious cycle of going into debt over and over again.
Here are some of the many reasons for why you may be in debt.
You think you have plenty of time to pay off your debt.
When I was in the middle of paying off my $40,000 worth of student loan debt, I remember being asked why I wanted to get rid of my student loan debt so quickly.
You know the saying about how there is no such thing as a stupid question?
Well, I thought that question was extremely stupid. I thought (and still think) it was probably the most stupid question I have ever been asked or heard.
I can’t remember the conversation exactly, but I remember them saying something about how I’m young and I should enjoy my money more and that I can worry about my student loans later.
UMM WHAT?!
Why not just pay off your debt more? Would you really rather have than 100th pair of jeans instead of putting more towards your debt? I know for a fact that I will probably completely forget about an article of clothing (even though I love clothes!) and I will appreciate my debt being paid off more.
I still enjoyed my life while I was paying off my debt, and I definitely do not think I was suffering at all.
It’s been around seven months since I completely paid off my student loans, and I couldn’t be happier!
You also never know what may happen. If you wait to pay off your debt and instead spend your money on things that you don’t need, you may fall into a bad situation. What would happen if you lost your job, came across high medical bills, or something else?
Wouldn’t you have wanted your debt to be gone?
You treat your credit card as income.
Your credit card is not a new income source. If you treat your credit card this way, then you should cancel your credit card.
Oh well if closing your account means that you will be lowering your credit score, you are probably doing worse damage anyways by racking up large credit card bills that you can’t pay.
If you are using a credit card, then you should be working to pay off your balance completely each month.
So-and-so has debt, so it’s fine if you do too.
Many people compare their debt amounts to others in hopes that they will feel more “normal” about their debt and not feel as bad. An example would be if you are 30 and the average 30-year-old has $10,000 worth of credit card debt (I completely just made that number up). You then use this number as a “guide” to yourself so that you can feel more comfortable about your debt.
However, WHO CARES about how much debt another person has? How exactly does knowing what the average amount of debt a random 30-year-old has affect you?
Is that person you?
NO!
So, why would another person’s amount of debt even matter to you? That makes no sense!
Just because someone else has $10,000 worth of credit card debt from buying too much clothing does not mean that you should too. You never know, this amount may be breaking them on the inside even if they aren’t showing it.
You believe you deserve the items you buy.
Yes, you may be awesome and think you deserve it, but should you really be buying it? Just because someone else just bought a 100 inch 3D TV (or a mansion, nice car, gadgets, a crazy-expensive wedding, etc.) doesn’t mean that you should as well.
You might think “oh well they have a comparable job to mine, so, if they can afford, then I can too.”
However, you have no idea how this person is paying for it. Maybe they saved for years, or maybe they are just putting everything on their credit card.
I recently talked to someone who has over $100,000 in credit card debt and I could tell they were in panic mode. They bought way too much house, way too much car, way too much everything. They thought they deserved it all since others were buying something similar.
You don’t need to keep up with the Joneses!
There are many ways to cut down your spending. Below is a quick list:
Lower your cell phone bill. Instead of paying the $150 or more that you spend on your cell phone bill, there are companies out there like Republic Wireless that offer cell phone service starting at $10. YES, I SAID $10! If you use my Republic Wireless affiliate link, you can change your life and start saving thousands of dollars a year on your cell phone service. I created a full review on Republic Wireless as well if you are interested in hearing more. I’ve been using them for over a year and they are great.
ATM fees. Why do people do this to themselves?
TV. Cut your cable, satellite, etc. Even go as far to go without Netflix or Hulu. Buy a digital antenna (this is the one we have) and enjoy free TV.
Sign up for a website like Ebates where you can earn CASH BACK for just spending like how you normally would online. The service is free too! Plus, when you sign up through my link, you also receive a free $10 gift card bonus to Macys, Walmart, Target, or Kohls!
Pay bills on time. This way you can avoid late fees.
Shop around for insurance. This includes health insurance, car insurance, life insurance, home insurance and so on. Insurance pricing can vary significantly from one company to the next. When we were shopping for car insurance last, we found that our old company wanted something like $205 to insure one car for one month, whereas the new company we have now charges $50 a month for the same exact coverage. INSANE!
Save money on food. I recently joined $5 Meal Plan in order to help me eat at home more and cut my food spending. It’s only $5 a month (the first four weeks are free too) and you get meal plans sent straight to you along with the exact shopping list you need in order to create the meals. Each meal costs around $2 per person or less. This allows you to save time because you won’t have to meal plan anymore, and it will save you money as well!
Fuel savings. Combine your car trips, drive more efficiently, get a fuel efficient car, etc.
Trade in your car for a cheaper one. For us, we are car people. Cars are one of our splurges. However, if you only have a nice car to keep up with the Joneses, then you might want to get rid of it and get something that makes more sense.
Live in a cheaper home. I’m not saying you need to go live in a box, but if you live in a McMansion then you may want to think about a smaller home. This way you can save money on utility bills and your mortgage payment.
Use a programmable thermostat so that you can heat and cool your home efficiently and more affordably.
Learn to have more frugal fun. We don’t spend anywhere near the same amount of money on entertainment as we used to. There are plenty of ways to have frugal fun.
Check out my recommendations page for a full list on money-saving websites.
Some ways to make extra money are below, but check out the related articles below to see many, many more:
Start a blog. Blogging is how I make a living and just a few years ago I never thought it would be possible. I made over $320,000 last year by blogging and I’m hoping to double that in 2016. You can create your own blog here with my easy-to-use tutorial. You can start your blog for as low as $3.49 per month plus you get a free domain if you sign-up through my tutorial.
Sell your stuff. There are many things you can do to make money by selling items. We all have extra things laying around that can be sold, or you can even search for items that can be bought and resold for a profit.
Rent an extra room in your home. If you have extra space in your home, then you may want to rent it out. Read A Complete Guide To Renting A Room For Extra Money.
Answer surveys. Survey companies I recommend include VIP Voice, Earning Station, American Consumer Opinion, ProOpinion, YouGov, Pinecone Research, Opinion Outpost, Survey Spot, and Harris Poll Online. They’re free to join and free to use! You get paid to answer surveys and to test products. It’s best to sign up for as many as you can as that way you can receive the most surveys and make the most money.
Use Swagbucks for your online searches. Swagbucks is something I don’t use as much, but I do occasionally earn Amazon gift cards with very little work. Swagbucks is just like using Google to do your online searches, except you get rewarded “Swagbucks” for the things you do through their website. Then, when you have enough Swagbucks, you can redeem them for cash, gift cards, and more. You’ll receive a free $5 bonus just for signing up today!
Try InboxDollars. InboxDollars is an online rewards website I recommend. You can earn cash by taking surveys, playing games, shopping online, searching the web, redeeming grocery coupons, and more. Also, by signing up through my link, you will receive $5.00 for free just for signing up!
Find a part-time job. There are many part-time jobs that you may be able to find. You can find a job on sites such as Snagajob, Craigslist (yes, I’ve found a legitimate job through there before), Monster, and so on.
Related articles:
Why are you in debt? What reasons have you caught yourself using?
If you’re feeling extra brave, please share how much debt you have (house, car, student loans, credit cards, etc.).
In my article on Spotify last week, a couple of commenters took me to task for suggesting that subscribing to access for music could be better than buying your own permanent copies of the songs you love. A few thought that, as a personal-finance writer, I should be urging people to buy their stuff instead of throwing money away renting access to it.
That’s an interesting idea. I think it’s often the case that renting or subscribing for access to something is better than buying it outright. Buying stuff can be great, too. Ultimately, I don’t think the question is whether to rent or buy; it’s how to find the solution that gives you the best value for the thing you need to use. Sometimes, you’ll spend more money renting access to an item than you would just buying it outright. Other times, the reverse is true.
The Rise of the Transumers
Most products aren’t investments. They lose value the moment you take them home from the shop, and continue to depreciate the longer you own them and the more you use them. This is true of everything from cars to designer shoes. There are a few things that can appreciate in value: collector’s items, houses, jewelry. For most of our stuff, though, we can hope to recover some of what we spent on it by selling it when we no longer need it, but we’re kissing the bulk of our money good-bye when we make the purchase.
Given that, there are plenty of times when it makes more sense to rent. Anytime you’re buying something you have a limited use for, you might want to pause and consider renting instead. High-end designer handbags?Specialized power tools for a home improvement project? You can rent this stuff for a fraction of the cost that you’d spend buying it.
There’s a whole movement of people who call themselves “transumers”. These folks make an effort to own as little as possible, renting what they want or need and then swapping it for new rental items after a short time. They’re not crunchy hippie types: They’re young professionals renting cars and furniture — and even their clothes. They just want to always have the latest trends, so instead of buying their stuff they rent it and turn it in every few months for the hot new item.
In addition to big companies or niche websites that provide rental items to consumers, there are websites that specialize in connecting individuals who own stuff with other individuals who want to borrow it — for a fee. These are like a rental version of the swap sites I’ve written about before. Instead of trading your Stuff permanently for other Stuff you can rent it out. For example, you can rent your fall textbooks on Chegg.com. Some textbooks you may want as reference texts later on in life, but most of them you’ll never need to touch again. Maybe it makes sense to rent instead of buying them?
In some economic conditions and for certain types of investors, it even makes more economic sense to rent your primary residence rather than own it.
Rent or Buy?
How can you decide whether to rent or buy? The bottom line is minimizing the expense for having the Stuff you want.
Consider the cost. How much does the object cost to buy? How much is the rental fee? How long would you have to rent it before you’d have paid as much in rental fees as you would have to purchase it outright?
Consider how frequently you want to use an item. Is this something you’re going to use once, like a floor sander or a formal gown? Or something you want to have on hand at all times, like a hammer or your running shoes?
Consider how long you want to use the item. Do you want to have your residence for the next year or the next 20 years? Will you need that car for a weekend or a daily commute?
Consider its resale value. Does this object appreciate in value, hold a fairly steady value, or rapidly lose value?
Consider how much your use will impact the item. Some of our stuff we wear out. Some of it we leave little trace on. Are you buying a sofa that is going to be destroyed by your kids? Or a DVD that you’ll watch a few times and then re-sell good as new on eBay?
There’s no simple answer to the rent vs. buy question. For some people, it probably makes economic sense to rent furniture. They may want to change their furnishings frequently, and have a thing for high-end designer items that lose value quickly as they go out of style. Renting a couch for six months in those circumstances makes more sense than shelling out thousands of dollars for one. I, on the other hand, am happily using the couch that I received as a hand-me-down from my mom when I moved out. I expect to use until it breaks or my kids grow up, whichever comes first.
The key is to answer the questions above and figure out if it will cost you more to rent or buy the thing you want. It’s an equation you should probably be able to solve for anything you want to buy. The equation would look something like cost to buy — resale value vs total cost to rent. You’d also want to factor in maintenance costs on items you own.
What About Spotify?
To go back to the original example of music, it probably depends a lot on how you consume music. If you follow what’s hot, and tend to listen to a new artist or album for a few months and then move on to the next new thing, you’re probably better off with a subscription service. If you have a few favorite bands you want to hear over and over, you’re not spending money on new music every month. Subscribing to a music service might be a waste for you.
Aside from cost, there are psychological issues. The transumer movement has been around for awhile, but it doesn’t seem to have really caught in with most things. People seem to prefer owning stuff to renting it. For instance, I rarely rent anything. I own my home, my car, and all of the possessions I regularly use. I’m experimenting with subscription services like Netflix and Spotify for my media, but the truth is I don’t buy a lot of media anyway. I tend to use my library for books, and often get music and movies from the library too.
What about you? Do you see yourself becoming a transumer? In what situations have you found it makes more sense to rent than to buy? Or do you think that renting is always a waste?
Just
like the Federal Housing Administration (FHA), the United States Department of
Agriculture (USDA) Rural Development executive order was created during the
Great Depression to help less fortunate families relocate. It wasn’t until the
fall of 1994 that the USDA Development Department was created to help
administer the USDA Home Loan Program for rural housing. Today, 97% of the
United States is eligible to qualify for a USDA loan based on the population
guidelines, which state that if an area has a population of 35,000 or less,
those residents are able to apply for a loan through the USDA.
What are
your options:
The USDA Home Loan Program offers two types of loans:
• USDA Direct Loan: This loan comes from the USDA with the ability to have longer than the typical 30-year terms, lower rates, and lower monthly payments. USDA Direct is catered towards those borrowers with lower income (between 50% and 80% of the median income for the area) looking for a property to be their primary residency.
• USDA Guaranteed Loan: This loan option is given by a lender and guaranteed by the USDA. This loan is strict with borrowers meeting the requirements. USDA Guaranteed is catered towards those borrowers with an average income (up to 115% of the median income for the area). There are less property restrictions with this loan.
Credit
score requirements:
In our last post,Let’s Talk Loan Options: FHA Loan, we discussed how mortgages are not a one size fits all financial investment, therefore it is important to shop around for the mortgage program that is right for you. We also discussed the importance of a credit score when looking at mortgage products. While you should always work to improve your credit score, the USDA does not have a minimum credit score requirement set by the department itself. However, lenders may set one of their own.
If a
lender sets a credit requirement for a USDA loan through their business, they
typically use 640 as a benchmark. However, just like the FHA loans, if you have
a lower credit score, it does not mean that lenders will turn you away. The
USDA uses a program for their underwriting process called GUS, or Guaranteed
Underwriting System. When a potential borrower has a 640 or above, they qualify
for automation approval. For those potential borrowers who fall below the
benchmark, they require a manual underwriting process rather than the
automation.
Down
payment requirements:
One of the main advantages of a USDA loan is the 0% minimum down payment that is required. This takes the burden off of borrowers to come up with a down payment for their future home. Now, you may be thinking that because there is no down payment that there must be additional fees somewhere throughout the loan. The good news is that USDA loans don’t have private mortgage insurance or PMI.
In
exchange, USDA loans have an upfront fee that is paid once (about 1% of the
loan) and an annual fee (about 0.35% of the loan). As an example: let’s say the
cost of your future home is $200,000 and you have chosen the USDA loan as your
best fit. Your upfront fee will be around $2,000 while your annual fee will be
around $700.
It is
important to note, when taking out a USDA loan on a property, the property that
the USDA loan is on needs to be your primary residence. If it is not, you will
not be able to qualify for this loan option.
Summary:
USDA loans are great for those who want more grass than pavement surrounding their permanent residency, and for borrowers who are worried about making a down payment, providing a less stressful mortgage process for those who decide to borrow!
Carter Wessman is originally from the charming town of Norfolk, Massachusetts. When he isn’t busy writing about mortgage related topics, you can find him playing table tennis, or jamming on his bass guitar.
created a new rule, which took effect Monday. It changes mortgage fees based on a borrower’s credit score.
Here’s why you should care: If you are an American who has worked hard for good credit, you are likely to pay more on your home loan now than you would have before this revision.
By charging borrowers with good credit scores higher fees, those with non-stellar scores will pay less steep fees than they did previously. Think of it as mortgage socialism.
“It is absolutely intended to create a greater cross-subsidy,” Mark Calabria, a senior adviser at the Cato Institute and former FHFA director, told me. “So the kind of outrage you may be hearing in conservative circles about how this is penalizing people who have good credit to subsidize people with bad credit is 100% true.”
Hint: Biden and Democrats don’t think it’s parents
‘Equitable’ for whom?
Biden tried to do something similar with his $400 billion-plus student loan “forgiveness” plan by creating a situation that unfairly penalizes those who have paid the loans they took out – and the ones who never got loans in the first place – by making them pay for this leniency.
This housing rule change will have broad impact, as it affects most loans guaranteed by Fannie Mae or Freddie Mac, which are in turn backed by taxpayers. These loans comprise about 60% of the mortgage market.
Biden must compromise on debt ceiling:Otherwise, we’re all headed toward disaster
look at what happened in 2008 with the mortgage meltdown.
sent a letter last month to FHFA Director Sandra Thompson, a Biden nominee.
“This shortsighted and counterproductive policy demonstrates a profound misunderstanding of the necessity of accurately tailoring housing finance products to credit risk and establishes a perverse incentive that punishes hardworking Americans for their fiscal prudence,” the letter said.
Joe Biden wants you to think GOP is the biggest ‘threat’ to Social Security. He’s wrong.
In addition, state treasurers and finance officials from 27 states sent a letter on Monday urging the Biden administration to backtrack from the policy.
“It is already clear that this new policy will be a disaster,” they wrote. “It amounts to a middle-class tax hike that will unfairly cost American families millions upon millions of dollars.”
Even a former federal housing official under President Barack Obama slammed the Biden rule, saying it’s “unprecedented” and “not the way” to encourage more home ownership.
The cost of the fee change won’t be huge for most borrowers, but one estimate pegs the extra costs for higher-credit borrowers at $3,200. That’s not an insignificant charge, especially one caused by bureaucratic meddling.
Besides, it’s the principle that counts. And Biden’s wrong on this one.
Ingrid Jacques is a columnist at USA TODAY. Contact her at [email protected] or on Twitter: @Ingrid_Jacques
These reports, excerpted and edited by Barron’s, were issued recently by investment and research firms. The reports are a sampling of analysts’ thinking; they should not be considered the views or recommendations of Barron’s. Some of the reports’ issuers have provided, or hope to provide, investment-banking or other services to the companies being analyzed.
Salesforce
CRM-NYSE
Buy • Price $213.69 on June 12
by Goldman Sachs
We reiterate our Buy rating and $325 price target, as Salesforce’s AI Day provided color on the company’s generative-AI tech stack, market strategy, and monetization plans after a slew of product announcements over the past few months.
Salesforce’s approach is likely to set the industry standard going forward, given that: 1) it’s not reliant on any one foundation model, 2) it will gather relevant information from a variety of data sources to drive personalized and accurate prompts/outputs, and 3) it offers an enterprise-grade solution for data governance.
Combining AI, data, and Salesforce capabilities, the company is uniquely positioned to execute on this strategy.
Oracle
ORCL-NYSE
Buy • Price $116.43 on June 13
by Mizuho
Oracle reported strong fiscal fourth-quarter results ahead of consensus. We believe investors continue to underestimate Oracle’s potential over the medium term to generate solid top-line and cash-flow growth, and exceed its fiscal 2026 targets. Strong fiscal-fourth-quarter results with upside potential from solid AI momentum should improve investor sentiment and drive upside to fiscal-2026 estimates. We reiterate our Buy rating and raise our price target to $150 from $116.
Chevron
CVX-NYSE
Buy • Price $157.09 on June 14
by UBS
We recently hosted CFO Pierre Breber and General Manager, Investor Relations Jake Spiering for investor meetings. A key strength of Chevron is its balance sheet that’s at 4% net debt/capital with $15.7 billion of cash on hand. While only $5 billion of cash is needed to run operations, we see Chevron maintaining a higher balance in the current uncertain economic environment.
However, cash will be deployed over time, including to support shareholder returns, should Brent crude oil fall to $50 a barrel. Chevron stressed the importance of dividend growth, and we’re modeling in 6% annual growth through 2027, but we see upside at $75-plus Brent. We view the $7.6 billion PDCE Energy acquisition as positive, with the transaction accretive to free cash flow per share and the return of capital profile. There’s also minimal integration risk. Target price: $212.
Netflix
NFLX-Nasdaq
Buy • Price $423.97 on June 13
by Guggenheim
We continue to see underappreciated opportunity in Netflix shares over the next 12 months, even after year-to-date outperformance. We believe that the company’s position as the global leader in high-quality, long-form streaming video will drive further financial upside through higher subscription average revenue per user, advertising revenue, and margin expansion. Our review of Apptopia download data supports broader feedback that the recently expanded paid-sharing initiative is not driving a sustained increase in member churn.
We raise our price target to $500 from $375.
Kohl’s
KSS-NYSE
Outperform • Price $23.09 on June 14
by TD Cowen
We upgrade shares of Kohl’s to Outperform, as we expect new home-decor and gifting products, improved fashion execution, a simplified promotional strategy, and pragmatic store layout revisions to drive healthier and more consistent traffic and faster inventory turns. Valuation is attractive at five times enterprise value/Ebitda, with an 8% dividend yield.
We believe the new CEO, Tom Kingsbury, has practical retail ideas that are well positioned to work after many years of insufficient change. Our take is that Kingsbury has a practical merchant background and is leveraging this experience to drive positive change.
We also believe he is making pragmatic edits to the store, such as deleting unused registers, adding gifting tables in attractive parts of the store, and moving to a more modern markdown cadence.
We believe these plans are supported by an encouraging foundation for younger customers, given the new Sephora shop-in-shops, which are outperforming the rest of the business. Price target: $30.
Floor & Decor Holdings
FND-NYSE
Buy • Price $94.87 on June 15
by Jefferies
Checks indicate that Floor & Decor’s in-home pilot has ramped over the past few years, as Texas and Florida homeowners have found value in the convenience of a designer-led consultation in their residence. Access to customer homes is a rarity in retail. Floor & Decor’s in-home pilot launched in early 2020, and our checks indicate that it has expanded to 15% of the store base. Customers are tiered depending on project size and pay a fee of $199 (one-to-two rooms), $399 (more than two rooms), or $599 (more than 5,000 square feet) for in-home visits. Floor & Decor’s in-store conversion is already industry-leading at about 81%, with levels higher when design associates are involved. Theoretically, in-home experiences should drive conversion even higher.
Thinking longer term, we’re intrigued with the data that Floor & Decor’s design associates may be able to gather and potential for proactive outreach. Price target: $110.
To be considered for this section, material should be sent to [email protected].
A new study that compared mortgage products from around the globe found that long-term fixed-rate loans aren’t necessarily the end-all, be-all solution to fix housing.
Per the study, entitled, “International Comparison of Mortgage Product Offerings”, 95 percent of new loans originated in the United States last year were long-term fixed mortgages, compared to just one percent in Spain, two percent in Korea, 10 percent in Canada, 19 percent in the Netherlands, and 22 percent in Japan.
Meanwhile, only five percent were adjustable-rate mortgages, while 92 percent in Australia and Korea were ARMs, along with 91 percent in Ireland, 47 percent in the UK, and 38 percent in Japan.
“By comparing the performance of mortgage products internationally, we see that many countries are experiencing lower default rates than the U.S., despite having a significant share of products such as adjustable rate mortgages and interest only loans,” said Dr. Michael Lea, who conducted the study.
“This indicates the problem with loan design in the U.S. during the crisis was one of a mismatch between borrowers and particular loan designs — not the existence of the loan features themselves. In addition, the lower default rates may reflect stricter enforcement of lender rights as all countries in the survey have recourse lending.”
Lea noted that the wide range of borrowers that exist in the mortgage market require an equally wide range of mortgage program offerings, and argued that a “robust mortgage market” requires a number of different instruments to meet the needs of both borrowers and mortgage lenders.
The survey comes in response to the “Dodd-Frank Bill,” which aims to prohibit prepayment penalties and yield spread premiums, while restricting balloon payments and interest-only periods.
According to the study, these “flexible payment designs” are common in other countries and not associated with higher rates of default.
But there obviously has to be a line, like no more option arms with zero down financing.