It’s a new year, but the rent vs. buy a home argument hasn’t gone away, or become any clearer. It’s always a complicated decision, with or without confusing tax changes.
At the same time, it’s a personal question with a very subjective answer, dictated by your own unique situation coupled with your locale.
In other words, this post won’t provide a simple “yes” or “no” at the end to put you at ease.
You have to do your homework and determine why it is you want to buy a home in 2018 as opposed to continuing to rent.
Buying More Affordable in 54% of Housing Markets Nationwide
Buying is still more affordable in more than half of markets nationwide
But before you get too excited
You’ll notice that most major metros aren’t more affordable
Smaller towns tend to be the ones that favor buying
Here’s what we know now, according to the 2018 Rental Affordability Report from ATTOM Data Solutions.
The median-priced home in 240 out of 447 counties nationwide is more affordable than renting a three-bedroom property.
On the surface, that sounds kind of good, maybe? But are you currently renting a three-bedroom home? Doubtful. You’re probably in a one- or two-bedroom apartment.
Secondly, where are these 240 counties where buying a home is more favorable? Well, that’s the rub.
If you look at the map above, you’ll notice a lot of giant red circles, and a scattering of smaller green ones.
As you may have guessed, the red bubbles indicate that it is better to rent than buy, while the green dots are giving you the all-clear on going for that home purchase.
Here’s the problem with that seemingly favorable slant toward renting. Very few of the counties seem to be close to major metropolitan areas.
For example, in red-hot California, there’s just one county where buying is favored over renting.
That county is Kings, otherwise known as the Hanford-Corcoran MSA. The population of this entire county is only just over 50,000, per a 2010 census. And the nearest larger cities are Visalia and Fresno.
It’s the same story in most other West Coast states, like Arizona, Oregon, Washington, and so on. You won’t find an affordable county near the major metros.
Once you travel to the Midwest, affordability gets much better and a lot of states actually favor buying over renting. And there are even some major metros where this is still the case, such as Dallas and San Antonio, TX, and St. Louis and Indianapolis.
Down in Florida, both Miami and Tampa are on the buy side of things, and the same is true in Pittsburgh, Philadelphia, and parts of Washington DC.
But ultimately, renting is cheaper than buying a home in the 14 most populated counties nationwide, along with 30 of 39 counties with a population of one million plus.
So the first thing you should do is hone in on your local housing market, instead of reading an article that talks about national home prices. The situation can be very different depending on where you live.
What’s Your Goal in Buying a Home?
Ask yourself why you want to buy a home
Is it because you genuinely need more space?
Or want to start a family and create some forced savings?
Don’t do it just because you don’t want to miss out
The second thing you need to do is assess what your goal is in buying a home. Do you want to buy a home because you need more space, want something permanent, or plan to start a family?
Or do you want to buy a home because you want to turn a profit, or simply don’t want to miss out?
If it’s the latter, it might not be the best move, though in truth, both scenarios could well play out nicely the way things are going.
Home prices have risen dramatically over the past five years since bottoming out, and are still expected to notch some decent gains in 2018 as well.
And with mortgage rates still close to bottom, it makes for a compelling buy argument. The question is how much higher can/will home prices go during this cycle before peaking and/or falling?
As I’ve said before, I believe today’s housing market is very healthy by historical measures, mainly because most homeowners have really conservative financing in place.
We’re talking 30-year fixed-rate mortgages at rates below-market, and many borrowers with lots of home equity thanks to all that recent home price appreciation.
Even many of those who were underwater in 2012 are now sitting really pretty, thanks to years of paying down the mortgage coupled with mega price gains.
Worried About Buying at the Top of the Market?
While thing might feel frothy
It’s difficult to call a market top (or a near market top)
And things can take a long time to play out regardless
Don’t try to time the market, but do your homework to ensure the price makes sense
Until financing takes a turn for the worse, perhaps to accommodate diminishing affordability, the housing market should continue to exude excellent health.
And so if you’re worried about buying a home at the top of the market, realize that it might still be years away.
Just like the bottoming of the market, which took many years to be fully realized, a top can also play out over a long, extended period of time that defies estimates and expectations. And many don’t even think we’re at that top yet.
Once we get to that top, it could be several more years beyond that for another housing crash to actually take place.
Regardless, most home buyers shouldn’t concern themselves with such things if they’re purchasing a property for the right reason, which is to position themselves in a stable living situation that also provides for forced savings and accumulated wealth.
For the record, ATTOM based the rent vs. buy decision on a median-priced home with a 3% down payment that required mortgage insurance. So the equation could change quite a bit if you come in with 20% and avoid PMI.
As noted, you need to look at your specific situation and do the math based on how you’re structuring a potential purchase.
Even if the math doesn’t favor buying, it could still make sense if you want a home of your own. There are plenty of intangibles that you simply can’t calculate.
For borrowers the new financial year FY 23-24 has brought with it big relief from rising interest rate. The Reserve Bank of India (RBI) in its second monetary policy meeting of the current fiscal, held on June 8, has decided to keep the repo rate unchanged at 6.5% yet again. This is welcome relief for home loan borrowers who saw a steep and big rise in their home loan interest rates within a span of just 10 months starting from May 2022 to February 2023, when RBI raised the repo rate by a total of 2.5%.
Are the two consecutive pauses in repo rate hikes a signal for the end of the current rising interest rate cycle? Is there a chance of interest rates falling soon?
The big impact of the rising interest rate cycle Home loan borrowers, who had taken external benchmarked-linked loans recently and whose loan is linked to the repo rate, had to bear the full brunt of these repo rate hikes. Their home loan interest rates would have gone up in tandem with the repo rate hikes. As a result, for most of the borrowers, as a first recourse lenders typically increase the tenure of the loan. However, such an interest rate hike leads to situation where tenure rise option does not work anymore after a particular point. In such a situation, lenders are compelled to raise the EMIs.
For a home loan borrower who has taken a loan or Rs 40 lakh for 20 years at 7%, a rise of 2.5% means that his/her total interest payment has risen from Rs 34.43 lakh to 49.48 lakh. This is a whopping rise of 44% within such a short span. A tenure increase, which works to a limited extent, is not a less painful exercise. Despite an increase of 10 years in your tenure from 20 years to 30 years, the EMI would also go up by Rs 2,622 from Rs 31012 to Rs 33,634. In this case, the total interest outgo will rise from Rs 34.42 to Rs 81.08 lakh. This is a massive rise of 136% if you go for a combination of tenure increase and EMI rise.
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This is the reason why borrowers are advised to go for an EMI increase rather than tenure increase as the adverse impact of interest rate rise is reduced to a great extent. Is this the end of rising interest rates? The primary responsibility of the RBI has been to keep retail inflation at low levels in the range of 2-6%. The most critical factor that led to the interest rate hike cycle was rising retail inflation due to supply chain disruption caused by the Russia-Ukraine war. The very month of May 2022 in which RBI went for the first repo rate hike of this current cycle, witnessed the peak of retail inflation number of 7.79% for April 2022. Aggressive repo rate hikes helped RBI to bring inflation below 5% for the first time in April 2023 and as a result it was comfortable in pausing the interest rate hikes. Withdrawal of accommodation stance of the RBI further strengthens the case that the possibility of any rate hike in near future is highly unlikely. Future direction of inflation will be the biggest factor that will determine the direction of interest rates. WTI crude oil prices which had gone up to a peak of $123 per barrel in June 2022 have now come down to below $75 per barrel now. The wholesale price index has fallen to negative territory almost after 3 years when it registered an inflation of -0.92% in April 2023. The 10-year G-sec yield, which is a good indicator of future expectation of interest rate movement, has already fallen from the peak of 7.459% on March 8, 2023 to 6.983% on June 7, 2023.
“The central bank’s projection for inflation in FY24 CPI is 5.1%, lower than the 5.2% forecast at the last meeting. This suggests that the MPC has reached the end of the rate hike cycle, says Sooraj Singh Gurjar Founder and MD, Get Together Finance (GTF). All these factors indicate that while the fall of interest rates may take some time, however, the chances of any interest rate hike in near future is highly unlikely.
When will we see a fall in interest rates? The US central bank increased the interest rates by 0.25% to a level between 5.0% and 5.25%. But according to a monthly report by ICICI Direct, the central bank has indicated that it may not raise the interest rates further for now and focus more on credit and other economic challenges. The market reacted to the rate hike by lowering the yields, as it anticipates a possible rate reduction by the year-end, instead of just a halt in rate hikes.
Many advanced economies are struggling to grow, while some have faced recession, many others are confronted with very low economic growth. Unless there is a significant pickup in the overall demand in these economies, global growth may remain subdued. The reduction of interest rates to revive growth is a step which many central banks may resort to sooner or later.
“This affirms the view that interest rates will only have one direction which is downwards. This is a big positive for the home buyer as they know that their EMIs down the line will only decrease further,” says Piyush Bothra, Co-founder and CFO, Square Yards. Many experts see year-end 2023 or year beginning 2024 as a period when interest rate reductions may start globally. So, if there is durable sign of inflation subsiding, the RBI may follow also follow suit. Favourable monsoon may add the comfort. “If the monsoon turns out to be normal and the global scenario is favourable, the MPC could consider a rate cut in late CY2023 or early 2024,” says Gurjar.
“The worst seems to be over. Interest rates are stabilising. Inflation permitting, we may see rates drop before the end of 2023,” says Adhil Shetty, CEO, Bankbazaar.com. Some feel that the interest rate reduction may happen much earlier. “It is encouraging to note that domestic macroeconomic fundamentals are strengthening, with resilient economic activities, moderated inflation, comfortable current account deficit, and robust credit growth. If the situation persists or improves further, we can anticipate a potential rate cut in the next monetary policy review,” says V Swaminathan, executive chairman, Andromeda sales and Apnapaisa.com.
What should borrowers do? If you are a home loan borrower, there is hardly anything you can do about the interest rate movement but at least you can ensure that you are getting the best possible deal on your home loan. As interest rates have peaked, most borrowers will be paying the highest interest rates seen in the last three years on their EMIs. If you are an old borrower, servicing a loan under previous regimes like the MCLR or base rate, then it may be a good time for you to shift to the new EBLR regime. This is because when there is a fall in interest rates, you will quickly benefit from it.
“For home loan borrowers, it is better to stick to their floating interest rate loans for now. Fixed-rate loans may be available in the market at some discount compared to floating-rate loans. However, considering that rate cuts are expected a few quarters down the line, it makes sense to stick to floating rate loans,” says Anshul Gupta, Co-founder and Chief Investment Officer, Wint Wealth.
You must compare your interest rate with other lenders and if you find that they are offering a much lower interest rate to a new borrower, then you may transfer your loan after calculating the net benefit. “If you’re on a repo-linked loan, your rate should automatically reset after any repo rate change within a quarter. The lowest rates being offered in the home loan market today are in the 8.40 to 8.50 for eligible borrowers. If you’re paying a significantly higher rate, consider a refinance. If you’re able to shave off 50 basis points or more off your rate, it could lead to significant savings over the long term,” says Shetty.
While picking the next lender your research and good credit score may help in getting the best deal. “When you think about your home loan rate, also think of it in terms of the premium you pay over the repo. For example, at 8.50%, the premium over the repo is 2%. Prime borrowers with good credit histories and strong income credentials can borrow at the lowest premium while others will have to pay higher,” suggests Shetty.
However, if your lender is giving a much lower rate to new borrowers, then you may request your lender to reprice your loan at a lower rate. They usually charge a repricing fee and restructure your loan at the new rate.
If your affordability has gone up after getting a salary rise, then you may consider increasing your EMI so that your total interest outgo could be brought down. “Borrowers who loan tenures increased due to back-to-back hikes may now consider making partially or fully repayment of their loans as the repo rate remains unchanged,” advises Shetty. If you are getting a bonus or incentive, then you may consider going for partial prepayment so that your home loan outstanding comes down which will help you reduce the tenure and total interest outgo of the loan.
If you are planning to buy a house with the help of home loan you will have a more positive view about future rates which may fall from current levels. “As home loan rates are already at elevated levels of 9% and above, this is a significant breather for lenders, developers & homebuyers. First time homebuyers will be better placed to make their home buying decision in a stable lending rate regime. Fence sitters in the affordable & mid segment will have greater visibility of their EMIs & thus effect buying,” says Vimal Nadar, Head of Research at Colliers India
Indiana is a hub of industry, attracting households and businesses with its vast farmlands and thriving big cities. So, it’s only natural that a variety of banks have emerged, from branches of large national banks to small local banks.
The best banks in Indiana combine minimal checking account fees with competitive rates on savings and CDs. It’s also important to look for a bank that lets you manage your account online while also getting that in-person service when you need it.
18 Best Banks in Indiana
With so many banks in Indiana, it can be tough to narrow down the options. This list can help you get started.
1. U.S. Bank
U.S. Bank is a top choice for those seeking a blend of national reach and local presence in Indiana. With eight locations in the state, U.S. Bank offers convenient access to banking services, as well as a comprehensive suite of banking products.
One standout offering is the U.S. Bank Smartly Checking account, which is currently offering a $300 sign-up bonus to new customers. This account was designed to provide customers with a simple, low-cost banking experience.
Pros:
U.S. Bank Smartly Checking account offers no monthly maintenance fees and easy mobile banking
Eight convenient branch locations in Indiana
Access to over 32,000 fee-free ATMs nationwide
Cons:
Limited physical presence compared to some larger national banks
Higher-tier checking accounts may require minimum balances or direct deposits to avoid monthly fees
2. Chase Bank
If you prefer the power of a national bank, Chase is worth considering. In addition to online and mobile banking, Chase has branches and ATMs scattered across the state. You’ll find a wide variety of banking products, including savings accounts, personal and business banking, and wealth management services.
Pros:
ATM access at more than 15,000 ATMs and 4,700 branches nationwide
Sign-up bonuses on new checking accounts
No monthly service fees with direct deposit
Cons:
Only 0.01% APY on savings
$3-$5 fee for out-of-network ATM use
3. Fifth Third Bank
Fifth Third Bank is a regional bank with branches in 11 states, including Indiana. You can find fee-free checking accounts with Fifth Third, but savings rates are less competitive than some online and local banks.
Pros:
No fees or minimum balance on Preferred Checking
Student and military accounts available
Fee-free ATM use at more than 40,000 locations
Cons:
Lower rates on savings accounts
Branch locations tend to be near larger cities
4. Chime
Chime is an online bank that offers more conveniences than usual. Your checking account not only gives you fee-free cash access at more than 60,000 ATMs, but you can deposit cash at Walgreens and 75,000+ retail locations. You can manage the rest of your account online, and you’ll get no monthly fees or overdraft charges, as well as automatic savings features.
Pros:
Deposit cash at more than 90,000 retail locations
No overdraft fees
Credit-builder credit card available with no credit check required
Cons:
No in-person customer service available
Withdrawal limits can be low
5. GO2bank
Another online-only option with cash access is GO2bank, which allows fee-free ATM transactions at 43,000 AllPoint locations. You can also deposit cash at any CVS Pharmacy, Rite Aid, Walgreens, or Walmart. Checking accounts come with no monthly fees as long as you have at least one payment deposited directly each month. Direct deposit accounts are also eligible for up to $200 in overdraft protection.
Pros:
4.50% APY on savings account
Fee-free cash access at 43,000 AllPoint ATMs nationwide
Deposit cash at CVS Pharmacy, Rite Aid, Walgreens, or Walmart locations
Cons:
No in-person customer service available
Savings APY limited to first $5,000 of balance
Direct deposit required for fee-free checking
6. First Financial Bank
One of the best banks in Indiana is First Financial Bank, an Ohio-based bank with branches throughout Indiana, as well as in Illinois and Kentucky. You’ll get all the amenities of a national bank with the exceptional customer service that comes with banking locally. Some checking account options offer discounts on loans, and you’ll get rates of up to 4.50% on CDs.
Pros:
Local branches throughout Indiana
Fee-free ATM access at 55,000+ AllPoint locations
Interactive tellers provide personal service
Cons:
$25 overdraft fee
$10 monthly maintenance fees on checking (waived with $500 balance or debit card activity)
7. First Merchants Bank
First Merchants Bank is a local bank that primarily serves Central Indiana. But you’ll find branches as far north as Fort Wayne. First Merchants Bank has been voted one of the best banks in Indiana for its attention to customer service, community focus, and mobile banking features.
First Merchants Bank has a low barrier on its fee-free checking account, letting you qualify with only a $100 balance or at least one customer-initiated transaction each statement period.
Pros:
Free checking with $100 balance or one qualifying transaction monthly
Fee-free national access at 37,000 MoneyPass ATMs
Up to 4.75% APY on 12-month CDs
Cons:
Branches limited to Northern and Central Indiana
$37 overdraft fee per transaction
8. Huntington Bank
Although it’s a regional bank, Huntington Bank is headquartered in Columbus, Ohio, so Indiana was an easy fit for its expanded service area. One of Huntington’s premiere features applies to its overdrafts.
Deposit accounts qualify for 24-Hour Grace, which allows you extra time to take action if your account goes into the negative. But if you travel, be aware that Huntington’s ATM access is limited to its service area. You’ll pay $3.50 plus third-party fees for every out-of-network ATM transaction.
Pros:
24-Hour Grace allows extra time to resolve overdrafts
Fee-free ATM access at 1,434 Huntington locations
In-person service at branches throughout the service area
Cons:
$3.50 fee for out-of-network ATM transactions
Low savings account rates
9. CIT Bank
You won’t find local branches or ATMs, but CIT Bank is a great option for building savings. CIT’s Platinum Savings account offers up to 4.75% APY, and they have a no-penalty CD with rates as high as 4.80%.
Their eChecking product is impressive, as well, with no monthly maintenance fees and up to 0.25% APY on your balance. You can withdraw cash at any ATM and CIT will refund up to $30 in fees every month.
Pros:
Interest rates of up to 4.75% on savings
Great rates on no-penalty CDs
Up to $30 a month in ATM fee refunds
Cons:
No branches
No in-network ATMs
10. Centier Bank
Centier Bank is another local option considered one of the best banks in Indiana. Although it’s local, it’s certainly not small. In fact, it’s the largest family-owned bank in the state.
You’ll find branches from Fort Wayne to Indianapolis, as well as ATMs nationwide through the AllPoint and Publix Presto! networks. Savings rates pay as high as 5.00% APY when you connect your checking to your savings account.
Pros:
Up to 5.00% APY on savings account
Low monthly fees on checking accounts
Fee-free access to Centier, AllPoint, and Presto! ATMs
Cons:
$100 savings balance required to earn APY
$50 minimum opening balance
11. BMO Harris Bank
Indiana residents have access to BMO Harris Bank, a regional bank that also services Illinois, Arizona, Missouri, Minnesota, Kansas, Florida, and Wisconsin. You’ll find branches and ATMs across the state, with a heavy concentration in Indianapolis and Gary.
The savings account only offers 1.00% APY, but BMO’s CD rates are competitive, paying up to 4.50% APY. Currently, new BMO Harris customers can earn a $200 cash bonus on basic checking accounts and a $350 bonus on high-balance checking.
Pros:
Fee-free checking accounts
Fee-free access to more than 43,000 AllPoint ATMs
$200-$350 cash bonus for new customers
Cons:
Only 1.00% APY on savings account
$25 minimum opening deposit
12. 1st Source Bank
1st Source Bank is set up to serve banking customers in Northern Indiana and Southwestern Michigan, but it has a small presence in Florida as well. If you regularly travel and need cash, 1st Source Bank might not be the best option, as ATMs are limited to its service area. 1st Source will refund up to four ATM fees on their end each year, but you’ll still pay third-party ATM fees.
Pros:
Student checking option available
Offers Health Savings Accounts
Variety of loan options
Cons:
Branches are limited to Northern Indiana
Rates on CDs aren’t competitive
ATMs limited to Northern Indiana and Southwestern Michigan
13. Ally Bank
Another online and mobile banking option is Ally, which has an interest-bearing checking account that currently pays 0.25% APY and has no fees. You can withdraw cash at more than 43,000 AllPoint ATMs nationwide, and if you can’t find an AllPoint ATM nearby, Ally will reimburse up to $10 per statement cycle for out-of-network ATMs.
However, the best thing about Ally is its rates on savings accounts and CDs. Currently, Ally is offering up to 4.80% on CDs and up to 3.75% on your savings account.
Pros:
Great rates on CDs and savings
Fee-free access to more than 43,000 AllPoint ATMs
No fees or minimum balance requirements
Cons:
No physical branches
No cash deposit option
14. Old National Bank
With branches across Indiana, as well as in Michigan, Wisconsin, Minnesota, Kentucky and Illinois, Old National Bank is a great brick-and-mortar option. Although it’s a regional bank, Old National Bank has plenty of amenities found with national banks, including a full-featured mobile app and cash deposits at select ATMs.
Pros:
Some Old National ATMs accept cash deposits
Fee-free cash withdrawals at Old National and AllPoint ATMs nationwide
Student checking accounts available
Cons:
Savings account rates lower than some competitors
Direct deposits or minimum balance required for free checking accounts
15. First Bank
For Indiana’s small business owners, First Bank is a great local Indiana bank. First Bank serves Indiana and Illinois businesses with online and mobile banking options to help you manage everything.
You’ll find a variety of financial products for small business customers, including business loans, equipment financing, and cash management tools. One downside, though, is that it’s a completely online branch, but you’ll get fee-free cash access at more than 40,000 MoneyPass ATMs nationwide.
Pros:
No-fee checking options available
Great rates on business and equipment loans
Fee-free ATM use at 40,000+ MoneyPass locations
Cons:
No local branches
Only serves Evansville, Haubstadt, Mount Vernon, Poseyville, Princeton, and Vincennes businesses
16. Regions Bank
One of many regional banks with a heavy Indiana bank presence is Regions Bank. You’ll find branches throughout Indiana, as well as in Alabama, Arkansas, Florida, Georgia, Illinois, Iowa, Kentucky, Louisiana, Mississippi, Missouri, North Carolina, South Carolina, Tennessee, and Texas.
Regions Bank’s checking account lacks the amenities of some online-only and national banks, with a $1,500 balance required to eliminate the monthly maintenance fees.
Pros:
Earn rewards on savings and checking through Regions Cashback Rewards
User-friendly mobile banking experience
24/7 customer support
Cons:
$1,500 balance to qualify for free checking
Branches limited to service area
$3 transaction fee for non-Regions ATM
17. Community First Bank of Indiana
If wealth management services are your top priority, consider Community First Bank of Indiana, which offers financial assistance through a dedicated investment services team.
In addition to wealth management services, Community First Bank offers the personalized customer service that’s typical of a local bank. But if you regularly travel outside the area, note that Community First has no nationwide ATM network.
Pros:
Community focus with great customer service
Fee-free checking accounts
Dedicated investment support team available
Cons:
Only seven branch locations
Fee-free ATMs limited to seven branch locations
18. Bank of America
There are benefits to a national bank like Bank of America. Like most national banks, you’ll find branches and ATMs throughout Indiana, but with Bank of America, this is found in towns throughout the country. Bank of America also offers better-than-average rates on home equity loans and auto loans.
Pros:
Automatic savings options
Earn rewards with debit card
Large ATM and branch presence nationwide
Cons:
Minimum balance or direct deposit required for free checking account
Low interest rates on savings
Life can be busy. Managing your financial life can be much easier if you find a bank that fits your needs. Whether it’s a fee-free checking account or help to build your retirement accounts, the right bank can make all the difference.
Finding the Best Banks in Indiana
Whether you’re in the market for a personal checking account or business banking options, there are plenty of FDIC-insured banks in the state. To help you narrow down your options, here are some questions to ask yourself.
How often do you visit your bank right now?
As you’re browsing a list of banks in Indiana, you probably know right away which ones have branches near you. Are you the type of person who visits your local branch frequently? Even the best checking accounts won’t benefit you if you prefer that in-person experience and your new bank doesn’t offer it.
How well do you handle online communication?
Some online, national, and regional banks offer customer service via text chat, video chat, or telephone. If this is sufficient, you’ll likely find your options up open considerably. You may choose an online bank for your checking account while you go with a bank that has a local branch for personal loans.
How often do you need cash?
Some of the smaller banks in Indiana fall short when it comes to ATM access. Having a no-fee checking account but paying $30 monthly in out-of-network ATM fees isn’t ideal. You may be better off going with a bank that charges fees, but gives you fee-free access to cash when you need it.
Is it time to play defense? Economists have a fairly simple story to tell about the 2023 economy: things are weird. Inflation raged out of control in 2022, but has been falling in 2023. A volatile stock market remains below its 2021 highs, but still trended positive since the start of the year and may have entered a new bull market. Mortgage rates have tripled, but try telling that to the housing market. Economists and investors alike have issued steady warnings about a coming recession, but it feels like each month’s labor statistics beat the last.
A financial advisor can help you prepare your portfolio for a potential recession. Find a financial advisor today.
In other words, nobody really has a handle on what’s happening out there. That said, there are some potentially troubling signs ahead, especially for the third quarter of 2023. Several long-term factors may come to a head in late summer, ranging from top-level issues such as banking instability and delayed-impact Federal Reserve rate hikes to bottom-up issues such as resumed student loan payments. Together, it might all be enough to finally tip the economy into a long-awaited recession.
The right approach to this, as Morgan Stanley argued in a recent brief, might be to start thinking defensively.
“The stock market has managed to stay positive for much of this year. However with interest rates at their highest level in more than a decade and economic growth slowing, not to mention recent turmoil in the banking sector, uncertainty looms large,” writes Daniel Skelly, managing director and head of Morgan Stanley’s wealth management market research and strategy team.
“Additionally, equity valuations are already high relative to earnings – and current earnings estimates may be inflated. As a result, investors may see another drop in the stock market before they can truly declare the bear market over,” Skelly also writes.
In the face of this uncertainty, Skelly says investors may want to consider playing defense in the back half of 2023. In particular, he recommends seeking out dividend stocks. The reason is volatility, as dividend stocks tend to be an excellent buffer against unpredictable markets for four key reasons.
Price Supports
Dividend stocks tend to have built-in support against price volatility. In the short term, when companies issue a dividend to their shareholders, the price of a stock tends to drop. This has to do with a number of factors, most often the fact that new investors don’t want to invest if they’re being left out of the upcoming payments.
That’s not a bad thing, though, because when the share price drops for a dividend-paying stock the asset’s overall yield rises. For example, say you pay $10 per share for a stock that pays $1 in dividends. That’s a 10% yield on your investment ($1 dividend payment / the $10 you paid to receive it). If the share price drops to $8, but the company maintains its $1 per share dividend, that yield floats up to 12.5%.
That builds in a counter-cyclical pressure on the stock. As the share price falls, the yield increases. As the yield increases, more investors will get interested in the stock. That new interest will presumably drive new investment, boosting the share price back up. It’s not a guaranteed cycle, there’s much more going on here, but it can help smooth out volatility relative to stocks that generate their value entirely based on returns.
Stronger Returns
Historically, dividends have played a much larger role in market returns than many investors realize. As Morgan Stanley notes, in recent years dividend payments have lost ground compared to capital gains. From 2013 to 2022, only about 17% of the stock market’s overall returns came in the form of dividend payments. However, this has less to do with reduced payments and more to do with the explosive gains in stock value over that decade.
Historically, though, dividend payments have accounted for anywhere between 37% and 40% of the market’s overall returns.
Morgan Stanley expects a reversion to norms. “The next several years are likely to be marked by lower equity returns and higher volatility,” Skelly writes, “which could lead dividends to account for a greater portion of total stock market return.”
If the economy does slip into a recession, or even if the stock market simply enters longer-term bear territory, then capital gains-based returns will suffer. Long-term investors who can afford to wait out a downturn will probably be fine, but anyone who is looking to generate returns in the next year or two will probably face much less reliable, often less profitable, share prices. Dividend stocks can help offset that risk.
Signals for Good Fundamentals
Long-term investors should take note too, though.
As Morgan Stanley writes, dividends are a very strong bellwether for the underlying strength of a company. “When a company can reliably pay dividends or even increase them, it likely has a certain level of financial strength and discipline. For investors, this regular income stream can offer some hedge in what continues to be an uncertain stock market. In fact, in 2022, the S&P 500 overall lost about 18%, but the S&P 500 Value Index (which is often used as a proxy for dividend stocks) kept its losses to about 5%, and the S&P 500 High Dividend Index lost about 1%.”
In essence, when a company can afford to pay or maintain dividend payments, it’s signaling that it has significant cash on hand above and beyond its business needs. Now, to be sure, this is not always the case. It is not unheard of for corporate leadership to recklessly reward themselves and other investors at the expense of long-term business interests. So make sure you evaluate a company’s whole picture. If dividend payments take place in the context of weak leadership or an atmosphere of poor judgment, pay attention.
Otherwise, dividends can show that the company has strong revenue, good cash reserves and a handle on its debt, and that it expects this situation to continue. Especially if the economy enters recession, that’s an excellent signal for fundamental value. It suggests that this company can be a good long-term investment, regardless of current share prices.
Inflation Hedge
Finally, dividend stocks have historically been an excellent hedge against inflation.
Dividend-paying stocks tend to make up an enormous portion of the stock market’s return during periods of high inflation. One analysis by Fidelity found that when inflation was at 5% in the 1940s, 1970s and 1980s, dividends made up 54% of the S&P 500’s overall returns. This is in large part because companies can adjust their dividend payments on a quarterly basis, letting them keep up with the changing value of money.
In an atmosphere of ongoing inflation, dividend stocks are historically a strong choice.
Where to Focus Your Attention
For active stock pickers who would like to pursue a defensive dividend strategy, Morgan Stanley recommends four key areas of investment:
Industrials: Manufacturing and logistics firms are likely to benefit from increased infrastructure and defense spending, according to Morgan Stanley.
Health care: Medical firms have tended to outperform the market in past recessions, and are poised to take advantage of new technologies.
Consumer goods: Morgan Stanley expects these firms to raise consumer prices and recover well from high commodity prices over the past year.
Global stocks: Investing in global high-dividend stocks can allow investors to diversify their portfolios and capitalize on the momentum in this area.
When you look for dividend stocks, be somewhat judicious. In particular, be careful of stocks with yields that are too high, Skelly advises. This can signal an imbalance between the stock’s share price and its dividend payments, suggesting high payments that the underlying business may not be able to sustain.
Also, look at the stock’s price-to-earnings (P/E) ratio. Despite concerns over bear market territory, investors are also worried that many of the market’s high-performing stocks may be overvalued relative to the company’s underlying earnings. In those cases, investors can often expect the stock to lose value, and to lose value particularly quickly in the event of a recession.
Bottom Line
Many investors are worried about a recession in late 2023. To insulate your portfolio, Morgan Stanley recommends investing in dividend stocks to take advantage of their historic stability and potential for outsized returns in down markets. Active stock pickers who wish to pursue this strategy may consider dividend stocks in the industrial, health care and consumer goods sectors.
Dividend Investing Tips
If you need help investing in dividend stocks or want more guidance when it comes to your whole portfolio, consider speaking with a financial advisor. Finding a financial advisor doesn’t have to be hard. SmartAsset’s free tool matches you with up to three vetted financial advisors who serve your area, and you can have a free introductory call with your advisor matches to decide which one you feel is right for you. If you’re ready to find an advisor who can help you achieve your financial goals, get started now.
Interested in dividend investing? You’ll want to familiarize yourself with how dividends are taxed. The exact dividend tax rate you pay varies by the type of dividends you have: non-qualified or qualified. Here’s everything you need to know about dividend taxes.
Eric Reed
Eric Reed is a freelance journalist who specializes in economics, policy and global issues, with substantial coverage of finance and personal finance. He has contributed to outlets including The Street, CNBC, Glassdoor and Consumer Reports. Eric’s work focuses on the human impact of abstract issues, emphasizing analytical journalism that helps readers more fully understand their world and their money. He has reported from more than a dozen countries, with datelines that include Sao Paolo, Brazil; Phnom Penh, Cambodia; and Athens, Greece. A former attorney, before becoming a journalist Eric worked in securities litigation and white collar criminal defense with a pro bono specialty in human trafficking issues. He graduated from the University of Michigan Law School and can be found any given Saturday in the fall cheering on his Wolverines.
Montana is a beautiful place to live, with its waterways and mountainous terrain. If you live and work in the state, you likely need a great place to park your money. The best banks in Montana give you everything you need to pay your bills and manage your money while also keeping fees to a minimum.
The banking industry in Montana is thriving, with a wide range of brick-and-mortar banks that include local, national, and regional banks. Online banking can be a great option, as well, offering reduced fees and savings interest rates that are above the national average.
14 Best Banks in Montana
This list offers a combination of different bank accounts to help you find the right combination of features to fit your needs.
1. First Interstate Bank
With branches in Montana, Arizona, Colorado, Idaho, Iowa, Kansas, Minnesota, Missouri, Nebraska, North Dakota, Oregon, South Dakota, Washington, and Wyoming, First Interstate Bank has a fairly large footprint.
You’ll also get fee-free access to ATM withdrawals nationwide through the MoneyPass network. First Interstate’s free checking account waives monthly maintenance fees with direct deposit or at least a $250 daily balance. Account holders under the age of 24 also pay no service fees.
Fees:
$5 monthly service fee (waived with requirements)
$10 overdraft fee
Balance requirements:
$100 minimum deposit to open
No minimum balance requirements
ATMs:
Fee-free at First Interstate Bank ATMs
Fee-free at 37,000+ MoneyPass ATMs nationwide
$2.50 out-of-network ATM fee
Interest on balance:
Up to 0.25% APY on savings accounts
Up to 0.25% APY on money market accounts
Up to 4.29% APY on CDs
Additional perks:
Open a FirstRewards World Mastercard along with a checking account and get 5,000 bonus points
Wealth management services available
2. GO2bank
GO2bank is an online-only bank that integrates all your banking functions into its app. You’ll get most of the features you need to manage your bank account in the app, including mobile check deposit and the ability to transfer money from checking to your savings account.
But what sets GO2bank apart from other online and mobile banking options is its cash accessibility. Not only can you withdraw funds at any Allpoint ATM, but you can also deposit cash at more than 90,000 retail locations nationwide.
Fees:
$5 monthly fee
$15 overdraft fee
Balance requirements:
No minimum deposit to open
No minimum daily balance requirement
ATMs:
Fee-free at Allpoint ATMs nationwide
$3 out-of-network ATM fee
Interest on balance:
4.50% APY on savings accounts
Additional perks:
Deposit cash at 90,000+ retail locations nationwide
Secured credit card helps you boost your credit score with no credit check required
3. U.S. Bank
Multiple national banks have branches in Montana, including U.S. Bank, which operates 21 branches across 14 towns. You’ll find ATMs across Montana, but the bank doesn’t operate in every state. You will, however, enjoy fee-free access to cash while you’re traveling through the MoneyPass network, which currently operates about 40,000 ATMs nationwide.
The U.S. Bank Smartly checking account is an interest-earning account that doesn’t charge fees, provided certain conditions are met. These conditions include having monthly electronic deposits of $1,000 or more, maintaining a minimum average balance of at least $1,500, or possessing an eligible U.S. Bank credit card. Alternatively, you can also qualify for fee-free status if you reach one of the bank’s rewards tiers.
In addition, for a limited time, you can earn a $400 sign-up bonus with qualifying activities.
Fees:
$6.95 monthly maintenance fee (waived with requirements)
$35 overdraft fee (waived up to $50)
Balance requirements:
$25 minimum opening deposit
No minimum daily balance requirement
ATMs:
Fee-free at U.S. Bank ATMs
Fee-free at MoneyPass ATMs nationwide
$2.50 fee per out-of-network ATM transaction
Interest on balance:
Up to 0.05% APY on checking accounts
0.01% APY on savings accounts
Up to 4.75% APY on CDs
Up to 4.00% APY on money market accounts
Additional perks:
Smart Rewards program helps you earn rewards for purchases
Up to $750 bonus for business checking accounts
4. Stockman Bank of Montana
Those who prefer brick-and-mortar banks should take a look at Stockman Bank of Montana. As Montana’s largest family-owned bank, Stockman Bank offers branches and ATMs throughout the state. It might not be the best option if you regularly leave Montana, though, as you’ll pay an out-of-network ATM fee of $1 per transaction in addition to third-party ATM fees.
Fees:
No monthly maintenance fees
$15 overdraft fee
Balance requirements:
$100 minimum deposit to open
No minimum balance requirements
ATMs:
Fee-free at Stockman ATMs
$1 out-of-network ATM fee
Interest on balance:
Up to 0.60% APY on savings accounts
Up to 4.39% APY on CDs
Additional perks:
High ratings for customer service
Enhanced debit card security features in mobile banking app
5. Opportunity Bank of Montana
Based in Helena, Opportunity Bank of Montana is another community bank with access to a nationwide ATM network. There are two free checking account options.
Opportunity Checking has all the basics, but Opportunity Reward Checking issues 1% unlimited cash back on qualifying purchases. To qualify for reward checking, you’ll need to receive at least $1,000 in monthly direct deposits and have at least 10 qualifying purchase transactions on your debit card.
Fees:
No monthly service fees
$30 overdraft fee
Balance requirements:
$100 minimum deposit to open
No minimum daily balance requirement
ATMs:
Fee-free at Opportunity Bank ATMs
Fee-free at MoneyPass ATMs nationwide
$2 fee for ATMs outside the Opportunity and MoneyPass networks
Interest on balance:
Rates not publicly disclosed
Additional perks:
6. Glacier Bank
It might be a regional bank, but Glacier Bank has a heavy presence in its service area. You’ll find 222 branches in Montana, Idaho, Utah, Washington, Wyoming, Colorado, Arizona, and Nevada, and you can use your ATM card at any Allpoint ATM across the globe. In addition to local bank branches, you’ll also get great deals on checking accounts, as well as savings and business banking options.
Fees:
No monthly fees
$30 overdraft fee
Balance requirements:
No minimum deposit to open
No minimum balance requirement
ATMs:
Fee-free at Glacier Bank ATMs
Fee-free at 55,000 Allpoint ATMs worldwide
$2 fee for ATMs outside of Glacier Bank and Allpoint networks
Interest on balance:
Rates not publicly disclosed
Additional perks:
New checking account comes with a thank-you gift
Robust business banking services
7. Chime
If you have direct deposit, Chime is an online banking option that’s worth considering. Chime doesn’t charge monthly service fees on its checking account, and automatic savings features can help move money from your checking account to your savings account regularly. There is no cash deposit option with Chime, but you can withdraw cash from any Allpoint ATM.
Fees:
No monthly service fees
No overdraft fees
Balance requirements:
No minimum deposit to open
No minimum daily balance requirement
ATMs:
Fee-free at 60,000+ ATMs nationwide
$2.50 outside ATM fee
Interest on balance:
2.00% APY on savings accounts
Additional perks:
8. Chase
Chase Bank is another national bank with branches and ATMs in Montana. You’ll find branches in Helena and Billings. One of the best things about Chase is its nationwide presence. Chase has 4,800 branches and 16,000 ATMs spread across 48 states and the District of Columbia.
The most popular account is Chase Total Checking, which is fee-free if you receive at least $500 in electronic deposits monthly, have a daily balance of at least $1,500, or maintain an average combined balance of $5,000 across all your Chase Bank accounts.
Fees:
$12 monthly service fee (waived with requirements)
$34 overdraft fee
Balance requirements:
No minimum opening deposit
No minimum daily balance required
ATMs:
Fee-free at 15,000+ Chase ATMs
$3-$5 non-Chase ATM fee
Interest on balance:
0.01% APY on savings accounts
Up to 3.75% APY on CDs
Additional perks:
$300 bonus for new checking accounts
Autosave makes it easy to transfer funds to your savings account
9. Farmers State Bank
Another community bank is Farmers State Bank, which has locations across Montana. Farmers State Bank offers both e-banking and traditional banking services to meet all your needs. Although their checking accounts require an opening balance, you can find a fee-free option with no minimum balance requirements or fees.
Fees:
No monthly fees
Balance requirements:
$25 minimum deposit to open
No minimum balance requirement
ATMs:
Fee-free at Farmers State Bank locations
$1 non-Farmers State ATM fee
Interest on balance:
Up to 0.03% APY on savings accounts
Up to 2.27% APY on money market accounts
Up to 4.59% APY on CDs
Additional perks:
Consumer and business loans available
Scholarship program available for students
10. Trailwest Bank
Serving Ravalli, Missoula, Mineral, and Flathead Counties, Trailwest Bank is a locally owned bank with checking and savings options. One feature that sets Trailwest Bank apart is its rewards checking account. Your account comes with a debit card that issues unlimited $.10 rewards per purchase with no fees or minimum balance required.
Fees:
No monthly fees
$30 overdraft fee
Balance requirements:
$25 minimum deposit to open
No minimum daily balance requirement
ATMs:
Fee-free at Trailwest Bank locations
Fee-free at Allpoint ATMs nationwide
$2 ATM fee for transactions outside the Trailwest and Allpoint networks
Interest on balance:
Rates not publicly disclosed
Additional perks:
Wide range of personal loans available
Business checking and savings account options
11. Ally
Another online banking option is Ally, which stands apart from other online banks due to its competitive interest rates on checking accounts, savings accounts, CDs, and money market accounts.
Ally pays up to 0.25% APY on checking account balances, as well as 3.85% APY on savings accounts. One perk included with your Ally checking account is spending buckets, a tool that helps you better balance your budget.
Fees:
No monthly fees
No overdraft fees
Balance requirements:
No minimum opening deposit
No minimum daily balance requirement
ATMs:
Fee-free at 53,000+ Allpoint ATMs nationwide
Up to $10 in third-party ATM fees reimbursed monthly
Interest on balance:
0.25% APY on checking accounts
3.85% APY on savings accounts
Up to 4.80% APY on CDs
4.15% APY on money market accounts
Additional perks:
Robo Portfolios available to help you build wealth
CoverDraft helps you avoid overdrafts
12. Independence Bank
When it comes to local Montana banks, Independence Bank is a great option. You’ll find physical branch locations across Montana, each offering the in-person customer service you can only get from a brick-and-mortar bank. Independence Bank offers two checking accounts, including one fee-free option.
Fees:
No monthly maintenance fees
Balance requirements:
No minimum daily balance required
ATMs:
Fee-free at Independence Bank ATMs
Interest on balance:
Rates not publicly disclosed
Additional perks:
Robust business checking options
Special perks for account holders aged 60 and over
13. Valley Bank of Kalispell
Valley Bank of Kalispell is a community bank with more than a century of experience in the area. The bank’s main office is in downtown Kalispell, with an additional loan office in Eureka. You’ll find multiple basic checking accounts with no monthly maintenance fees, each with its own requirements and features.
Fees:
No monthly maintenance fees
Balance requirements:
$50 minimum opening deposit
No minimum balance requirements
ATMs:
Fee-free at Valley Bank ATMs
Fee-free at MoneyPass ATMs nationwide
Interest on balance:
Rates not publicly disclosed
Additional perks:
Easy check ordering
Wide variety of auto and recreational vehicle loan options
14. Wells Fargo
Wells Fargo is a national bank with branches in 4,900 branches in 37 states. You’ll get fee-free ATM use while traveling at 12,000 ATMs, but if you travel to one of the states without a Wells Fargo presence, Wells Fargo will charge a $2.50 fee for each non-Wells Fargo network ATM withdrawal.
This is in addition to the fee charged by third-party ATM providers. Currently, you can earn a $300 bonus by opening an Everyday Checking Account with a $25 deposit and receiving at least $1,000 in direct deposits within the first 90 days.
Fees:
$10 monthly fee (waived with requirements)
$35 overdraft fee
Balance requirements:
$25 minimum opening deposit
No minimum daily balance requirement
ATMs:
Fee-free at Wells Fargo ATMs nationwide
$2.50 fee for non-Wells Fargo ATM transactions
Interest on balance:
Up to 2.51% APY on savings
Up to 4.51% APY on CDs
Additional perks:
$300 bonus on new checking accounts
FICO score available in mobile banking app
How We Picked These Accounts
Banking needs vary from one person to another, so it can be tough to say what the best banks are. First, there’s the national vs. local debate. Someone who travels often might prefer a bank with branches everywhere, while others might prefer the sense of community you get with a local bank.
This list of best banks also takes into account the different banking services available. You might prioritize a free checking account over a high-yield savings account, for instance. In case you’re looking for a checking or savings account that earns money, we also included banks that pay interest on your savings account, CD, or money market account.
Frequently Asked Questions
What national banks are in Montana?
There are several national banks that have branches within the state of Montana, including U.S. Bank, Chase Bank, and Wells Fargo. If you live in Billings or Helena, Chase might work well for you, but otherwise, U.S. Bank and Wells Fargo will have the statewide coverage you need.
What is the most reliable bank?
Nothing’s guaranteed, but if you go with an FDIC-insured bank, you should be covered, even if you choose an online banking or extremely local bank. Large, corporate banks have a bigger asset base, so if stability is your biggest concern, that might be the way to go. However, there are plenty of FDIC-insured regional banks and small, local banks that are well-established and unlikely to go anywhere.
What Montana bank is ranked the best?
Opinions can vary from one source to another, so it’s important to look across multiple rankings to pull out some trends. When it comes to national banks with a large number of bank branches in Montana, U.S. Bank tops a lot of lists.
As for local banks, two banks receive quite a few mentions. Both Glacier Bank and Stockman Bank of Montana get high marks for their customer service and community focus. Since both of these options are among the best banks for keeping fees low, they’re worth considering.
What should I look for in a Montana bank?
With so many Montana banks, it can be tough to narrow it down to just one. Once you’ve ensured a bank is FDIC insured, it’s a matter of weighing the cost against the rewards. That includes perks like rewards for debit card transactions and checking accounts that pay interest. Here are some factors to consider as you’re researching the best banks.
Overall Better Fee Structure
You’ll see plenty of banks that offer free checking account options, but it’s important to look at the big picture. You’ll see account fees charged for the following:
In most cases, you won’t be penalized for not using an account as long as it doesn’t sit dormant for a while, but it’s essential to look at that. Also consider ATM availability. If you think you’ll regularly need to withdraw cash, the best checking accounts will give you fee-free access whether you’re at home or traveling.
Easy-to-Achieve Fee Waivers
Most online banks and community banks have free checking. But many national and regional banks have strings attached to their free accounts. The best checking accounts have attainable fee waivers, if any at all. Pay close attention to banks that require a lot of debit card purchases every month if you tend to spend more using cash or a credit card.
Some fee waivers will also require a minimum daily balance. This goes for both checking and savings accounts. Before choosing an account, make sure you can maintain that balance, day after day, or be prepared to pay the fee.
Low (or No) Minimum Deposits
Banks often require a small deposit on the account holder’s part to establish checking and savings. But you’ll find plenty of free online banking and smaller local banks that waive the minimum deposit to let you get started with no money whatsoever.
Among the banks that require an opening deposit, though, you’ll find options with small requirements. You might find a bank that lets you open a savings account with just $25 or $50 with a free or low deposit to establish checking. If it’s lower than what you’d put into savings with a different bank, that small checking deposit might be worth it.
Competitive Interest Rates
In addition to fees, you’ll also need to look at the return you’ll get on your savings. The best savings accounts offer a high yield without requiring a ridiculously high balance. Take a look at the interest rate and compare it to other banks to make sure you’re getting the best deal.
Variety of Accounts and Loans
Whether the account pays a higher interest rate is a great consideration, but there’s a benefit to having a one-stop shop. You might find community banks and credit unions offer highly competitive interest rate options on personal loans.
Being an account holder might even get you a discount on auto loans and mortgages. Although you can always shop for loans with other banks, some people prefer to have everything in one place.
Digital banking
Over the years, banking has moved to mobile devices and websites. Whether you go with a large or small bank, take a quick look at the digital offerings. The app should make it easy to pay bills, transfer funds, and keep an eye on your accounts. You might find an online bank gives you better options in this area, particularly if you don’t need to visit a local branch and you rarely deposit cash.
Most importantly, make sure the bank’s mobile app works with your particular mobile device. The app can’t help you at all if you can’t access it. Even if you rarely use the app, it’s a handy tool to have if you suddenly need to take a look at your account when you’re away from your computer.
The best savings accounts and checking accounts offer all the amenities you need while also keeping your balances strong. With so many banks and credit unions in Montana, it’s fairly easy to find a solution that will meet your own needs.
Simple living is great. Avoiding shopping malls in favor of clothing swaps, cooking meals at home with your spouse, holding a music jam with friends instead of shelling out big bucks for a concert — all these activities not only save you money, but they also connect you more deeply with what you love.
In a sense, they make you more alive. Which is what getting rich is ultimately about: not simply achieving material wealth, but living a rich life.
Pay now, save later Some things just shouldn’t be scrimped on, though. There are expenses that save you money down the line. Some also save you time and improve your quality of life. It might be tempting to cut corners on this stuff, but the truly frugal person knows that laying out cash up front will pay off in savings later.
Consider these expenses an investment in your life. You’ll reap material as well as personal rewards when you keep up with these areas of your life:
Your health. Preventative health care saves thousands on major medical costs every year. In addition to keeping up with your annual physical, be sure to get your teeth cleaned regularly. Dental insurance typically offers only partial coverage of major dental work, and those crowns can add up to huge dollar amounts in a hurry. Taking care of your health also means eating well and getting enough exercise. These things can be done relatively cheaply: You don’t have to spend a fortune at Whole Foods or join a trendy gym to keep fit. It’s worth putting some money into eating well and keeping your body moving, though. Look for bargains at your grocery store, but don’t eat Fruit Roll-Ups instead of fresh fruit just because you have a coupon. Over time, you’ll save money by staying healthy.
Your home. You don’t need to live in a mansion. A smaller, cheaper home can often bring you more joy because it comes with fewer financial headaches and less labor to keep it clean. Whatever roof you choose to lay your head under, you’ll need to maintain it. Unless you rent, or have a condo association managing it for you, it’s important to stay on top of upkeep on your property. Like your health, preventative maintenance can go a long way towards saving you money and guarding against real harm in the future. Fixing your leaky roof promptly, replacing your water heater as needed, and cleaning your heating system each year will cost you in maintenance fees. But it’s a small fraction of the cost you’ll pay if you let those things slide until they become emergencies.
Your marriage. Divorce isn’t just painful, it’s expensive. A divorce typically lowers each former spouse’s net worth by 70%. (But it sure boosts the net worth of the lawyers!) Putting some resources into keeping things strong between you and your partner is a great investment, in financial terms as well as emotional. Set money aside for time together, for small thoughtful gifts to let your beloved know you’re thinking of her. If you have kids, spring for a babysitter to create some much-needed time alone. If your marriage is in trouble, consider therapy. The therapist’s fee may seem steep, but it’s a fraction of the hourly rate a divorce attorney will charge, and the end result will likely be happier.
Your career. Typically, your career is your greatest source of money. But it also creates expenses. These range from having the right clothes for your office environment to taking graduate courses. There’s an art to knowing which expenses will pay off. Do you really need $200 shoes to fit in at work? Is that new laptop an essential business expense or a neat toy? While it’s easy to overspend on your career, especially if you’re self-employed, work is an area where some investment up front can bring you huge returns over time. If a graduate degree will help you step into a higher paying position, or even switch careers entirely, it’s probably worth the cost of tuition bills in the here and now.
Your happiness. You can’t live entirely in the future. While you save for your long-term goals, be sure to put some energy into being happy in the present. That doesn’t mean splurging on expensive whims to buy yourself a moment of happiness in a bleary day. Spending money you don’t have won’t make you happy. Debt is a major cause of stress and sadness in people’s lives. But as you take control of your finances, be sure to also tend to the joy in your life. That’s best done by fostering close relationships and engaging in activities you love. Unlike the other “life investments” I’ve talked about here, this one comes with a small price tag or none at all. A talk with a close friend, a trip to the library, or a free movie at your local university can all bring big doses of happiness for free.
Investing in these core areas pays off in a better quality of life and saves you money on emergencies. A healthier, happier life is also a cheaper one.
Budgeting for now and later To get the long-term financial and personal gains of this approach, you’ll need to do some careful budgeting. Make sure you leave room for “unexpected” expenses like home repairs and dental work. A review of your last few years’ spending records should give you a pretty clear idea of what your family typically spends on these periodic maintenance items. By budgeting for them, you’ll have the cash on hand when you need it.
You can also make your life easier by funding a three- to six-month emergency fund to tap into when life throws you a big curveball like a suddenly failed appliance You shouldn’t rely on your emergency fund to cover your new running shoes or evening computer classes, though. Budget for these “life investments” and they’ll fit more easily into your life.
As with any expense, it’s important to make these choices with care. Yes, you’re investing in your life. Keeping your health, your home, your marriage, and your career strong will bring you more happiness every day. But like any investment, take care not to overextend yourself. Sometimes last year’s running shoe is just as good as this year’s — and for half the price. Getting the most out of your money without shortchanging your quality of life is the truly frugal approach.
You are getting closer to age 60, you start to seriously consider what’s going to happen to your family after you’ve passed on.
It is never too late to obtain life insurance although there is certainly no better time than the present. You will most likely find that there are still options available to you at this point in your life.
Life Insurance at Age 58
At age 58, you can still obtain very reasonable rates on life insurance. Even if you are not in good health, we have some guaranteed issue plans available to you.
One of the most important things to consider when shopping for life insurance at age 58 is the importance of determining who to name as your beneficiary? Your spouse or your children or a charity? Be sure and discuss this with your tax adviser.
Why Would a 58 Year Old Want to Buy Life Insurance?
In our experience, we have seen a frequency where folks have waited until buying or changing their life insurance until they were 58 years old. Here are the top reasons given by our clients:
One or more of their parents have passed away and have either left them life insurance proceeds or didn’t leave them with life insurance proceeds. This makes them begin to re-evaluate their own situation.
The need for term life insurance is no longer an issue. Maybe the home mortgage or other debt has been paid off and/or there is no longer a need to save for a college fund for the kids.
There is a greater concern to have enough life insurance to pay final expense costs throughout the remainder of the life, even to age 80 or 90. Typically this would require some type of permanent life insurance.
There is a realization that Social Security benefits might not be enough on going income for a surviving spouse to live on.
One of the family members is retiring, and just realized they will not have any life insurance since they might have only been covered at work.
The client may be in a good enough financial situation now to consider taking out a life insurance policy to the benefit of their favorite charity. In this case the life insurance premiums could be a tax deductible donation.
And last, our client has either retired from their lifelong work and is borrowing money to start their own business, or is still working but finally able to buy out a business partner or former employer.
Obviously it is good to look now, even though every year you wait, the life insurance premiums begin to increase. Regardless of what you have or haven’t done in the past, take care of your loved ones today and get your life insurance situation taken care of.
What are Your Options for Life Insurance at Age 58?
This day in age, you will find that your resources for information are endless. With the internet at your disposal, there is never a better time to shop and compare rates on life insurance. You can do this yourself and spend a lot of time and energy, or take the convenient route and let us get the lowest rates from different companies for you. Just complete the quote form on the right side of this page.
The advancement of technology has brought about an even playing field for many industries and life insurance is certainly one of these. We are independent agents and are constantly looking to represent the companies with the lowest rates.
The two popular choices are term life insurance and permanent life insurance. Term insurance is the standard choice for coverage. Term life insurance is extremely affordable. If you live past the initial term that you chose, for example, a 20-year term policy, then the rates will begin to increase in year 21. The rates should be guaranteed to be the same rates for the first 20 years.
The other type of insurance available to you as a 58 year old is permanent insurance, which could be either whole life insurance, or universal life insurance. This type of insurance is permanent and lasts until a claim is made on it, or until you stop paying the premium and the cash value runs out. It can be viewed as an asset as it does typically accumulate a cash value over time from which you can borrow against. At age 58, this type of insurance could be expensive unless you are looking at death benefit amounts of $50,000 or less.
Over the last few years, there is what I call a type of a hybrid life insurance plan, which combines the best of term insurance and permanent insurance. I have also referred to it as permanent term insurance. This type plan is designed to last until age 100, but is not designed to build a lot of cash value. It costs more than straight term life insurance, but less than traditional permanent life insurance. For someone at your age, this might be the best choice if you want a higher death benefit (over $100,000), but are not concerned with building up a lot of cash value in your plan.
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Life Insurance Rates for a 58 Year Old
Giving you samples of quotes is a murky guess. There are so many factors which will change how much you pay. We can only give you a rough estimate of how much you’ll pay.
For a $250,000 20 year term life insurance policy, a 58-year-old male will pay about $89.61 per month. A female will pay about $64.38 per month. You want to get life insurance quotes from the best life insurance companies. You can fill out our Compare Quotes form on this page and we can shop the life insurance market for you and find the lowest rates available in your area.
See the chart below to also view rates for a 10 year term policy and a 30 year term policy. These rates are also for someone in excellent health wanting $250,000 in death benefits.
Sex
10 Year
20 Year
30 Year
Male
Protective – $50.37/month
SBLI – $89.61/month
Transamerica – $201.03/month
Female
Protective – $39.76/month
SBLI – $64.38/month
Transamerica – $141.53/month
If you aren’t in very good health, then the rate could be over $400 per month for a male, or over $275 for a female. If you do have health issues, I will tell you it is much better to go ahead and talk with a licensed agent who can get some medical information from you, and then go to life insurance company underwriters to find the best quote for you.
Since rates can vary a great deal, you could end up paying way too much each month trying to do this yourself. You don’t want to get quotes from agents who only represent one company, because they may not have the best rates for your particular medical condition.
How Life Rates are Determined Based on Health
At age 58, you could still be in excellent health. If this is not the case rates will vary as seen from the above example. If you have had any medical problems in the last few years then you will probably get rated at a lower health rating than someone who has had a clean medical record.
In maybe 10% to 20% of our clients, we find that it is necessary to find cheap life insurance without taking a medical exam as a way to suit their life insurance application needs better at this time.
Obviously, life insurance companies are always running their business juggling the pressures of marketing and growing their premium volumes versus having profitable underwriting results. This means that they want to write new business and approve as many applications as possible, but at rates that can help them remain profitable.
This means they evaluate each individual’s medical conditions as they relate to life expectancy, and then their actuaries try to determine competitive rates that will maintain their profitability.
Getting Affordable Life Insurance for 58 Year Olds
When you look at rates on life insurance policies for people over 50 there will be a wide range on the premiums. These differences in price are mostly a result of different types of policies and people being rated differently by the life insurance underwriters.
Seeking out the guidance of a licensed insurance agent is advisable in most cases because they can not only shop all the companies that provide service to your area, they also bring about a wealth of knowledge as to which companies will provide you with the best rates regarding your personal needs.
So if you are a smoker, they will match you up with a company that does the best rates on life insurance for smokers, or if you have had some heart problems, they will know which company views that most favorably.
A home equity loan lets you access the equity you’ve built up in your home.
It’s how one investor, Kent He, afforded the down payment for his first investment property.
He says that had he never bought his primary home, he may not have been able to buy rentals.
When Kent He and his wife bought their primary residence in 2019, they looked at it as a long-term investment.
“We wanted to start building wealth,” He told Insider. Plus, it made sense timeline-wise. After renting in Boston for years, they’d moved to San Diego and, “we felt like, at the very minimum, we were going to stay there for at least three to five years.”
Their home purchase ended up leading to so much short-term wealth that He was able to quit his day job in 2022.
They didn’t buy and flip their home; rather, they noticed that their home had appreciated in value and then used what’s called a home equity loan to withdraw a significant chunk of equity and invest it into a short-term rental.
“If I never bought my primary residence, then I probably wouldn’t have gotten the equity to invest in short term-rentals,” said the 34-year-old, who is financially independent thanks to the two bachelorette-themed Airbnb properties he owns in Scottsdale, Arizona.
Their timing was good, He noted, as they benefited from the housing market frenzy fueled by the pandemic: “If we never bought, we would have never had an increase in equity when the housing market went really crazy.”
How home equity loans work
A home equity loan lets you access the equity you’ve built up in your home.
Your equity is your property’s value minus the amount of money you owe on your mortgage. Say your home is worth $300,000 and you owe $150,000 on your mortgage. That means you have $150,000 of “equity” — and you may be able to borrow against some of that with a home equity loan.
Lenders typically allow you to borrow up to a combined ratio of 80% to 90% of your home’s value, and you borrow the entire sum up front. Home equity loans typically come with a fixed interest rate, meaning you’ll make equal monthly payments until the loan is paid back.
Despite having recently bought in 2019, He happened to have a lot of equity because his home had appreciated significantly in value.
“When we bought, our home was $800,000, but it went up $200,000 in value,” he said. “Because we’re able to take out 80% of that, we could take out up to $160,000 of home equity to use it towards whatever we wanted, from capital improvements in the home to looking at other ways to invest the money.”
He chose to take that money and invest it into another property.
In August 2021, after extensive market research, he purchased a property in Scottsdale, Arizona and spent three months converting it into a bachelorette-themed Airbnb.
It was a savvy investment.
“Within a month of it going live, we had almost $100,000 in bookings,” he said. “It was pretty wild. I had done all my research, but there are no guarantees. It was really, really cool to see these bookings come in and see that people resonated with what we put out.”
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Don’t confuse a home equity loan with a home equity line of credit (HELOC). They’re similar in that you’re tapping into your home’s equity, but the way in which you receive the money is different: With a home equity loan, you get a lump sum all at once; with a HELOC, you get a credit limit that you can borrow against during the “draw period,” which is typically five to 10 years.
Using a HELOC is another way to fund an investment property if you don’t have enough upfront cash for the down payment. It’s how one Virginia-based investor who never made more than $52,000 a year, but ended up acquiring 25 rental units and retiring early, got his start.
Had He never bought his primary residence, he may not have been able to invest in Airbnb properties. If you’re a renter, consider saving up for your first home purchase, he advised. That way, you can start building equity, which gives you options.
If you’re already a homeowner, think about using the equity you’ve already built to create more wealth.
“I think for a lot of folks, over the last two or three years, there is a lot of nested equity in their homes,” he said. Maybe it doesn’t make sense to sell and move homes, since interest rates are relatively high right now, he added, “but you are now equipped with another tool in your tool belt. With all this equity, maybe you can take it out and put it into an investment, as long as the investment makes sense and it fits your risk appetite.”
It may be known for blues music and catfish farming, but the Magnolia State has plenty to offer when it comes to work and play. Mississippi is home to industries from technology to agriculture, with everything in between.
If you live in the state, you’re likely hoping to find the best banks in Mississippi to fit your checking and savings account needs.
12 Best Banks in Mississippi
Whether you’re looking for a national bank, a regional bank, or a small community bank, there are so many banks in Mississippi, it’s easy to find one that meets all your needs. You may even find the options overwhelming. Here’s a list of some of the best bank accounts in the state to help you narrow it down.
1. BankPlus
Local banks bring benefits like personalized customer service. BankPlus is a local bank with branches and ATMs throughout Mississippi. One downside to BankPlus, though, is its ATM availability. If you need to withdraw cash from your checking account, you’ll have to find a BankPlus ATM to avoid the fee.
Fees:
$6 monthly service fee
$36 overdraft fee
Balance requirements:
$100 minimum opening deposit
No minimum balance requirements
ATMs:
Fee-free at BankPlus ATMs
Interest on balance:
Up to 0.05% APY on savings accounts
Up to 0.55% APY on CDs
Additional perks:
Interactive teller machines connect you with live bank representatives
Up to $1,200 in cell phone protection per year
2. Planters Bank
Planters Bank could be a great option if you’re looking for a bank with physical branches. You’ll find physical locations across Mississippi, as well as in Tennessee and Louisiana.
This bank is better for those who don’t need to regularly make cash deposits and withdrawals while traveling. You’ll have to track down a SUM Network ATM, and even then, Planters charges a $1.50 fee in addition to what the third-party bank charges.
Fees:
No monthly maintenance fees
$36 overdraft fee
Balance requirements:
$50 minimum opening deposit
No minimum balance requirements
ATMs:
Interest on balance:
Up to 2.50% APY on money market accounts
Additional perks:
Robust mobile banking features
Unlimited check writing
3. Chime
Chime is an online and mobile banking solution that has everything you need to manage your accounts in its mobile banking app. You’ll get a fee-free1 checking account and access to a savings account that pays 2.00% APY3. With qualifying direct deposits in place, Chime will spot you in up to $2005 on debit card purchases with no overdraft fees.
Fees:
No monthly fees
No fees for overdrafts
Balance requirements:
No minimum opening deposit
No minimum balance required
ATMs:
Fee-free at 60,000+ ATMs nationwide
$2.50 for each out-of-network ATM transaction
Interest on balance:
2.00% APY on savings accounts
Additional perks:
4. Renasant Bank
Renasant Bank is a regional bank based in Tupelo. You’ll find 195 branches in seven states, including throughout Mississippi. There are multiple checking accounts, including a basic account that’s fee-free as long as you enroll in eStatements, have at least one direct deposit a month, or maintain a daily balance of $1,000.
Fees:
$10 monthly fee (waived with requirements)
$36 overdraft fee
Balance requirements:
$50 minimum deposit to open
No minimum balance requirement
ATMs:
Fee-free at 225 Renasant Bank ATMs and ITMs
$3 per out-of-network ATM transaction
Interest on balance:
0.05% APY on savings accounts
Up to 4.46% APY on CDs
Additional perks:
Small business owners have a wide range of checking and loan options
Children’s savings accounts available
5. GO2bank
Another online bank is GO2bank, which offers fee-free cash withdrawals through the Allpoint ATM network. If you need to deposit cash, you can take your free debit card to one of 90,000+ retail partners nationwide.
GO2bank’s checking account is free as long as you receive at least one payroll or government benefits electronic deposit each month.
Fees:
$5 monthly maintenance fee (waived with requirements)
$15 fee for overdrafts
Balance requirements:
No minimum opening deposit
No minimum balance required
ATMs:
Fee-free at Allpoint ATMs nationwide
$3 for each out-of-network ATM withdrawal
Interest on balance:
4.50% APY on savings accounts
Additional perks:
Secured credit card helps you build credit with no credit check required
Up to 7% cash back on gift card purchases
6. Cadence Bank
Cadence Bank began at the back of a hardware store in Verona, Mississippi in 1876. Over the years, Cadence has expanded to a regional bank and now has branches in Mississippi, Alabama, Arkansas, Florida, Georgia, Louisiana, Missouri, Tennessee, Texas, and Illinois.
The My Way checking account waives service fees as long as you maintain a $250 balance, have five debit card purchases monthly or at least one $100+ direct deposit, or are a student under 25.
Fees:
$8 monthly service fee (waived with requirements)
$36 overdraft fee
Balance requirements:
$50 minimum deposit to open
$250 minimum balance required
ATMs:
Fee-free at 400+ Cadence ATMs and ITMs
Interest on balance:
Up to 4.49% APY on CDs
Additional perks:
Special checking account option for seniors 62 and over
Wealth management services available
7. Ally Bank
Online and mobile banking have created an appealing alternative to big banks. Ally Bank gives you a checking account with no monthly maintenance fees and no minimum balance required.
You’ll have everything you need in the mobile app, as well as access to cash at Allpoint ATMs nationwide. But one of Ally’s best features is its competitive rates on savings accounts, CDs, and money market accounts.
Fees:
No monthly maintenance fees
No overdraft fees
Balance requirements:
No minimum deposit to open
No minimum balance requirement
ATMs:
Fee-free at 53,000+ Allpoint ATMs nationwide
Up to $10 in third-party ATM fees reimbursed monthly
Interest on balance:
0.25% APY on checking accounts
3.85% APY on savings accounts
Up to 4.80% APY on CDs
4.15% APY on money market accounts
Additional perks:
Paycheck funds available up to two days early
SpotMe covers you for up to $200 in overdrafts
8. Wells Fargo
National banks bring their own benefits, including a wide range of banking services and a vast branch and ATM network. Wells Fargo is one of the largest banks in the country, and you’ll likely find a bank branch near you.
Wells Fargo has a checking account with no monthly service fees as long as you keep a $500 balance, receive $500 or more in qualifying electronic deposits monthly, or you’re between the ages of 17 and 24. If you’re attending college, you can also enjoy a free checking account by linking your checking account to a Wells Fargo campus card.
Fees:
$10 monthly fee (waived with requirements)
$35 fee for overdrafts
Balance requirements:
$25 opening deposit required
No minimum daily balance
ATMs:
Fee-free at Wells Fargo ATMs nationwide
$2.50 fee for out-of-network transactions
Interest on balance:
Up to 2.51% APY on savings
Up to 4.51% APY on CDs
Additional perks:
$300 for new checking accounts
Earn 20,000 bonus points with the new Wells Fargo VISA
9. Regions Bank
Regions Bank is a regional bank that operates throughout the South, Midwest, and Texas. You’ll find branches and ATMs throughout Mississippi, including DepositSmart ATMs that make it easy to make check and cash deposits.
The Regions Bank LifeGreen eAccess Account is an online and mobile banking option with no monthly maintenance fees as long as you make at least 10 debit or credit card purchases each month.
Fees:
$8 monthly maintenance fee (waived with requirements)
$36 overdraft fee
Balance requirements:
$50 minimum deposit to open
No minimum balance required
ATMs:
Fee-free at Regions Bank ATMs
$3 out-of-network ATM fee
Interest on balance:
0.01% APY on savings accounts
Up to 4.75% APY on CDs
Up to 1.50% APY on money market accounts
Additional perks:
DepositSmart ATMs make it easy to deposit cash and checks
Wealth management services available
10. PriorityOne Bank
For a smaller, community bank, look at PriorityOne Bank, which has 16 locations across Mississippi. PriorityOne offers multiple checking account options, including a basic account with all the mobile banking features you’ll need, as well as unlimited check writing. This account is $7 a month, but you can have the fee waived if you keep at least a $100 daily balance.
Fees:
$7 service fee (waived with requirements)
$35 overdraft fee
Balance requirements:
$50 minimum deposit to open
No minimum balance required
ATMs:
Fee-free at PriorityOne Bank ATMs
Interest on balance:
Up to 0.10% APY on savings accounts
Up to 1.00% APY on CDs
Up to 0.20% APY on money market accounts
Additional perks:
Check Buy-Back program pays for unused check and debit cards from your previous bank
Variety of banking options for small business owners
11. Trustmark National Bank
Another option is Trustmark National Bank, which is headquartered in Jackson. Although Trustmark National Bank qualifies as one of the big banks, it’s confined to the Southeast U.S., with 180 branches, ATMs, and ITMs.
You’ll enjoy a free checking account as long as you make at least 15 debit transactions monthly, receive at least $100 in electronic deposits monthly, or keep an average balance of $1,500. Trustmark National Bank also currently has account options for both students and small business owners.
Fees:
$10 monthly fee (waived with requirements)
$36 fee for overdrafts
Balance requirements:
$50 minimum opening deposit
No minimum daily balance required
ATMs:
Fee-free at Trustmark National Bank ATMs
$2.50 for each non-Trustmark National Bank ATM withdrawal
Interest on balance:
Rates not publicly disclosed
Additional perks:
$50 bonus for opening Trustmark National Bank student checking account
Banking options for small business owners available
12. First State Bank
Another community bank option is First State Bank, which has multiple branches in Waynesboro, as well as in Ellisville, Laurel, Leakesville, Lucedale, Meridian, Quitman, and State Line. There are multiple checking options, but the best checking account if you’re looking for a fee-free option is Kasasa Cash Checking.
Although there’s no opening deposit, you’ll have no monthly fees. Best of all, it’s a rewards checking account. You’ll also earn up to 1.00% APY on your balance.
Fees:
No monthly fees
$37 fee for overdrafts
Balance requirements:
$100 minimum opening deposit
No minimum daily balance required
ATMs:
Fee-free at First State Bank ATMs
Up to $25 in out-of-network ATM fees refunded each cycle
Interest on balance:
Up to 1.00% APY on checking account
Up to 0.25% APY on savings account
Additional perks:
Rewards checking account with no monthly fees
Travel and Leisure Club open to account holders aged 50 and over
How We Determined the Best Banks in Mississippi
Personal preferences can vary widely when it comes to a bank account. For that reason, we looked at a variety of options, including national bank branches in Mississippi and small but powerful local options.
The banks we looked at had as many as six different checking accounts and four different savings accounts. To make a fair comparison, we looked at the simplest checking account at each bank. However, in your search, you may be willing to pay a monthly fee or maintain a high minimum daily balance in exchange for features like high interest rates and cash back rewards checking account options.
We also looked at rates on savings accounts, CDs, and money markets, but if you’re interested in those features, you may want to compare the minimum opening deposit, required balance, and fees that go with those account types.
Finding Your Ideal Checking Account
If you’re shopping for a bank, chances are you want a place to park your paycheck. From there, you can add on the savings accounts and other financial products you want. Here are some things to consider as you’re researching banks in Mississippi.
Big Banks vs. Online Banks
There are benefits to a big bank with physical branches across the country. You’ll typically see a large number of checking options, which means you’re likely to find the best checking account to fit your needs. Having access to cash and in-person customer service while you’re traveling is also a big bonus.
But there are benefits to an online bank account as well. Since a free debit card is a standard feature on both online and traditional bank accounts, mobile banking is often as full-featured as a brick-and-mortar financial institution. If you’re concerned about cash access, many checking accounts now feature partnerships with national ATM networks that let you withdraw cash without paying extra account fees.
Difficult to Meet Fee-Waiver Requirements
Free checking accounts sometimes come with requirements. This may be maintaining a balance every day. That means the monthly fees will kick in if your account ever drops below that minimum.
These days, though, many banks offer an alternative to that balance minimum. The best checking accounts also allow you to waive the fee by receiving a certain number of electronic deposits each month. If your paycheck or government benefits check goes into your account once or twice a month, this should qualify you for fee-free checking.
Access to Mobile Banking Services
What matters in a bank is what you can do through your mobile device. It’s important to not only look for features like bill pay and remote check deposit, but also check to see if an account offers budgeting tools and financial advice services. This is where some banks stand out. Online-only banks and large, corporate banks may have state-of-the-art mobile services, while small banks may struggle to keep up.
When you’re looking for the best checking accounts and savings vehicles, it’s important to consider the features you need, then look for the account that will fill those needs. National banks, regional banks, credit unions, and local banks each have their own benefits. But the best banks in Mississippi are the ones who give you the conveniences you need, whether you’re traveling or staying close to home.
Chime is a financial technology company, not a bank. Banking services and debit card provided by The Bancorp Bank N.A. or Stride Bank, N.A.; Members FDIC. Credit Builder card issued by Stride Bank, N.A.
1. Out-of-network ATM withdrawal fees may apply with Chime except at MoneyPass ATMs in a 7-Eleven, or any Allpoint or Visa Plus Alliance ATM.
3. The Annual Percentage Yield (“APY”) for the Chime Savings Account is variable and may change at any time. The disclosed APY is accurate as of May, 22, 2023. No minimum balance required. Must have $0.01 in savings to earn interest.
5. Chime SpotMe is an optional, no fee service that requires a single deposit of $200 or more in qualifying direct deposits to the Chime Checking Account each at least once every 34 days. All qualifying members will be allowed to overdraw their account up to $20 on debit card purchases and cash withdrawals initially, but may be later eligible for a higher limit of up to $200 or more based on member’s Chime Account history, direct deposit frequency and amount, spending activity and other risk-based factors. Your limit will be displayed to you within the Chime mobile app. You will receive notice of any changes to your limit. Your limit may change at any time, at Chime’s discretion. Although there are no overdraft fees, there may be out-of-network or third party fees associated with ATM transactions. SpotMe won’t cover non-debit card transactions, including ACH transfers, Pay Anyone transfers, or Chime Checkbook transactions. See Terms and Conditions.
Hoping to increase the housing supply and help families build wealth, the Federal Housing Administration on Thursday proposed several changes to its guidelines that could make it easier to buy a house with an accessory dwelling unit or to build an ADU.
The agency’s proposal would allow lenders to offer renovation loans to build ADUs and consider future rent from the unit when calculating how much a customer can afford to borrow. Under current rules for FHA-backed loans, lenders can consider rental income from duplexes but not ADUs.
The proposal would address one of the main barriers that people with little home equity and low to moderate incomes encounter when they try to get a loan for an ADU. “This is a huge step in helping us actually build ADUs,” said Meredith Stowers, a loan officer at CrossCountry Mortgage in San Diego.
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Other parts of the proposal would allow FHA-backed construction loans to be used to build a house and an ADU.
FHA Commissioner Julia R. Gordon said the agency is trying to advance two important goals with the proposal: enabling more people to own homes that include income-generating property, as the FHA does for duplexes, and increasing the housing supply.
The proposal is just a draft at this point, though, and it could change in response to public input.
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The FHA doesn’t lend money directly; instead, it provides guarantees for loans issued by banks, which increase banks’ willingness to lend and reduces the interest rate charged. The guarantees are available only for loans that stay within the size limits set by the FHA. In Los Angeles County, the maximum for a one-unit property is just under $1.1 million. (The proposal would classify a single-family home with an ADU as a one-unit property.)
Under an FHA-backed renovation loan, homeowners can borrow more than the current value of their homes if the improvements they’re planning would justify it. But the FHA will back loans only if the monthly payments are deemed affordable, which means that they can’t push the borrower’s recurring obligations over a set percentage of the borrower’s income.
That’s why including future rents could make a big difference — increasing borrowers’ income makes it more likely that they’ll be able to borrow enough money to build an ADU, which can easily cost $150,000 to $200,000.
In contrast to the FHA’s proposal, Fannie Mae and Freddie Mac — two giant, federally chartered purchasers of home mortgages — do not support loans that factor in theoretical rental income from a yet-to-be-built ADU. The inability to consider potential rental income “is a massive obstacle in helping my clients obtain loans to build their ADUs,” Stowers said. Most of her clients are using home equity lines of credit to build ADUs, but the FHA’s proposal “would allow us to offer much lower-interest first mortgages” to finance the purchase of a home and the construction of an ADU.
“This is what the vast majority of Californians want,” she said. Many of her clients are families that combine the resources of multiple generations to build compounds consisting of two houses and two ADUs, she said. “Why wouldn’t you support that? These families are building a strong financial foundation, but also social ties that are invaluable.”
Gordon said the lack of historical data about ADUs and the value they add to a property has made them a challenge for the FHA, Fannie and Freddie. “It’s a little bit of a chicken-and-egg problem,” she said — there’s not enough data for lenders to figure out how to underwrite the projects, but without the loans, there’s no way to generate more data.
“To be honest, the easiest thing to do in that situation is always to do nothing.”
The FHA’s proposal seeks to support ADUs the way the agency has supported the construction and purchase of duplexes, but with some extra safeguards. For its rapid online loan evaluations, it would allow lenders to consider only 50% of the fair market rents a new ADU could generate — with duplexes, the limit is 75% — and those rents could constitute no more than 30% of the borrower’s total income when determining how large a loan to issue.
“This is new territory, and that’s why we’re putting this policy on the drafting table to receive public input,” Gordon said.
ADU construction has taken off in California, accounting for 15% of the housing units approved in the state in 2021. But this type of project is starting to be a national phenomenon, Gordon said, as more communities grapple with shortages of affordable housing and the need to increase density.
“It’s my sense that many jurisdictions find that permitting ADUs to be a more palatable political first step in making adjustments to zoning,” she said. “That’s why I do think we will start to see more interest.”
An ADU that can be rented out and appreciate in value over the years also creates a chance to build wealth from generation to generation.
“In a more modest neighborhood, the ability of a household to get into first-time homeownership of both the unit that they’ll be occupying and the unit that has a rental opportunity can be an excellent wealth-building opportunity,” Gordon said. “Many families over the years have successfully increased their own prosperity and really the stability and prosperity of the neighborhood in this way.”
Stowers praised the FHA for moving forward and recognized the agency’s concern about going too far too fast. But she added, “All the agencies have been tiptoeing toward this moment. But my hope is they will tiptoe a lot faster.”
About The Times Utility Journalism Team
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