Common Problems With Accountants And How To Solve Them

Accountants can be infuriating. Sometimes it feels as if every job is twice as difficult and time consuming as it should be. Many companies’ common problems include:

  • Can’t get them to return a call?

Many people’s definition of an accountant is someone who is always elusive and frequently too busy. What’s important to remember is not to accept it. Chase your accountants up – don’t feel that you are imposing. Just follow up often.

  • They want to charge for even the smallest piece of advice.

Even when you pay out a small fortune for your accounts and tax returns, many accountants can be quick to charge for even a one minute phone call.

Be clear that you will not pay for any spurious or unnecessary billing. Confront them about it and don’t be talked down. As long are you are willing to be charged for any actual service or extensive advice/ guidance provided, you are doing nothing wrong.

  • Overcharging

If you feel your accountant overcharges, then talk to them about it, make it clear you have options and see if the rate is negotiable. If it isn’t then shop around and don’t be talked into signing up with the first accountant you speak to.

Alternatively, you can use a comparison site to make sure you are getting the best deal for the best possible price.

  • Personality Clashes

Sometimes even the most prompt accountant can rub you up the wrong way. Unfortunately this is the kind of problem that can’t really be fixed.

To try and avoid this issue ensure you take advantage of the free no obligation meeting most accountants offer. It gives you an opportunity to check that you can get along whilst also allowing them to talk you through what they can do for you.

  • Location

The best accountant in the world can be rendered more or less useless by a change of location on either party’s behalf.

However, don’t assume that an accountant must be on your doorstep. The majority of the work can be done via email or telephone. Weekly meetings with accountants are a myth as far as small companies go and anyway, who would want that?

A range of 15 miles is a practical distance, accessible on a semi regular basis without too much hassle. Some business types (medical, solicitors, hotels etc) may require a more specialized accountant which means accepting further distances but you do get someone who knows your business inside an out.

  • They don’t understand you business

Some accountants live in the dark ages, I’m sorry to day. In the ever evolving world of business, companies need an accountant who can understand their business model, ensuring that they get the best advice and help with the accounts management.

Make sure your accountant seems fluent in the business language you are speaking or find a specialist accountant in your field.

The most important thing to remember is that you pay them for a service. If they are not providing it then find someone that will! Simply typing ‘accountant in…’ into any search engine will allow you to find a selection of people in your area. If you have very specific needs it might be an idea to use a comparison site to do the leg work for you. So make sure any accountant you sign up for is thoroughly vetted first!

How to Decide if an adjustable rate mortgage is Right for You

An adjustable rate mortgage, called an ARM for short, is a mortgage with an interest rate that is linked to an economic index. The interest rate, and your payments, are periodically adjusted up or down as the index changes.

ARM Terminology

Index

An index is a guide that lenders use to measure interest rate changes. Common indexes used by lenders include the activity of one, three, and five-year Treasury securities, but there are many others. Each ARM is linked to a specific index.

Margin

Think of the margin as the lender’s markup. It is an interest rate that represents the lender’s cost of doing business plus the profit they will make on the loan. The margin is added to the index rate to determine your total interest rate. It usually stays the same during the life of your home loan.
Adjustment Period

The adjustment period is the period between potential interest rate adjustments.

You may see an ARM described with figures such as 1-1, 3-1, and 5-1.

The first figure in each set refers to the initial period of the loan, during which your interest rate will stay the same as it was on the day you signed your loan papers.

The second number is the adjustment period, showing how often adjustments can be made to the rate after the initial period has ended. The examples above are all ARMs with annual adjustments–meaning adjustments could happen every year.

If my payments can go up, why should I consider an ARM?

The initial interest rate for an ARM is lower than that of a fixed rate mortgage, where the interest rate remains the same during the life of the loan. A lower rate means lower payments, which might help you qualify for a larger loan.

How long do you plan to own the house? The possibility of rate increases isn’t as much of a factor if you plan to sell the home within a few years.

Do you expect your income to increase? If so, the extra funds might cover the higher payments that result from rate increases.

Some ARMs can be converted to a fixed-rate mortgage. However, conversion fees could be high enough to take away all of the savings you saw with the initial lower rate.

ARM Indexes

While you can’t dictate which index a lender uses, you can choose a loan and lender based on the index that will apply to the loan. Ask the lender how each index used has performed in the past. Your goal is to find an ARM that is linked to an index that has remained fairly stable over many years.

When comparing lenders, consider both the index and the margin rate being offered.

Discounted Rates and Buydowns

When you’re buying a home you might encounter sellers who offer to pay a buydown fee that allows the lender to offer you an initial rate that’s lower than the sum of the index and the margin. New home builders sometimes offer that type of purchase package to help get people into their homes.

The buydown rate will eventually expire and your payments could rise significantly if an ARM rate is adjusted upwards at the same time the discount expires.

Keep in mind that sellers sometimes raise the price of a home by the amount they pay to buydown your loan. The extra cost may in time override any savings from the initial discount.

Interest Rate Caps

Rate caps limit how much interest you can be charged. There are two types of interest rate caps associated with ARMs.

  • Periodic caps limit the amount your interest rate can increase from one adjustment period to the next. Not all ARMs have periodic rate caps.
  • Overall caps limit how much the interest rate can increase over the life of the loan. Overall caps have been required by law since 1987.

Payment Caps

A payment cap limits how much your monthly payment can increase at each adjustment. ARMs with payment caps often do not have periodic rate caps.

Carryovers

If an interest rate cap held your interest down at an adjustment even though the index went up, the amount of the increase can be carried over to the next adjustment period.

Beware of Negative Amortization

Amortization takes place when payments are large enough to pay the interest due plus a portion of the principal.

Negative amortization occurs when payments do not cover the cost of interest. The unpaid amount is added back to the loan, where it generates even more interest debt. If this continues you could make many payments, but still owe more than you did at the beginning of the loan.

Negative amortization generally occurs when a loan has a payment cap that keeps monthly payments from covering the cost of interest.

The Bottom Line

Lenders are required to give you written information to help you compare and select a mortgage. Don’t hesitate to ask as many questions as it takes to help you understand every aspect of ARMs and other home loans that are offered to you.

Foreclosure By Walking Away

The housing market has been a wild exhilarating and joyful ride up these past several years only to nose dive down with increasing speed and equal frustration. The stomach turns within the belly of the homeowner, as this once profitable investment becomes a heavy weight around his or her family’s neck. Mortgage Millstone; perhaps a fitting name for the negative equity experienced by millions upon millions of Americans today. Our finances affect our lives, our disposition, and our ability to function from day to day. So, what to do? Some say simply to walk away.

Have you ever failed a test? I’ve failed a test. I’m sure we all have at some point. Whether academic, work-related, personal, etc. we’ve all failed a test; but does it stop there? Do we throw the proverbial baby out with the bath water? Wouldn’t we be failing another test in so doing?

I’ll argue that at this point the test for homeowners is ongoing. But what are the rules? The rules and the goals are what defines your next coarse of action. Ultimately, what matters is where you will be in the future and not where you are today. The game is halfway done and the test is not over until the end of the game.

Lenders have failed the test too. Mortgage loans are upside down. The Federal Reserve Chairman Ben Bernanke in a March 4, 2008 speech suggested: “In my view, we could also reduce preventable foreclosures if investors acting in their own self interests were to permit services to write down the mortgage liabilities of borrowers by accepting a short payoff in appropriate circumstances.” This is a profound suggestion and one that could provide a passing grade for millions.

Your mortgage loan can be written down to a lower balance and forgiven. This is something that I personally am seeing being done every day. A mortgage loan that is $100,000 higher than the value of the home is written down by $100,000 and that $100,000 is forgiven. Poof! An instantaneous passing grade is achieved in real estate.

With a reduce mortgage balance a homeowner can refinance the mortgage to an FHA mortgage loan with a 5.5% fixed rate of interest. With a reduce mortgage balance a homeowner can sell the home on a short sale to a new buyer. With a reduced mortgage balance a homeowner can avoid foreclosure. With a reduce mortgage balance a homeowner can pass the test!

In any of the above scenarios where the mortgage lender reduces the principal balance of the loan for the homeowner to facilitate a short payoff for a refinance or a short sale, the homeowner is able to preserve his or her credit standing. This has the effect of controlling the damage done to that homeowner’s reputation in functioning in business and in life. About half of the state foreclose through judicial process and the foreclosing lender can then pursue a deficiency judgment against the homeowner immediately or can bring a suit under common loan years later based on the defaulted note. This article is not to be considered legal advice. It’s just some of the issues that one needs to investigate with an attorney.

Yet, some say walk away. This is insane; walk away and leave the test. Walk out of the school and leave the test. Holding your head low forever. This is not responsible. This is not a solution. This, my friends, is simply failing the test.

Second Mortgage or Remortgage: Which Should I Choose?

A second mortgage is not the same as a remortgage. There is a lot of confusion about this. Second mortgage and remortgage are different ways of getting hold of the equity in your property.

If you have had your mortgage for a fair length of time, you have probably noticed that the value of your property has increased. The most likely way to find this out is if a neighbour’s house similar to yours goes on the market, and you get a surprise when you see how much it is going for.

If this increase has in fact taken place, the difference between the amount of the outstanding mortgage (plus any other loans secured on your property) and the current value of your house is the equity. Using this equity is one of the most sensible ways of raising extra cash if you need it for any reason.

Basically there are three ways of using your equity:

  1. Refinance your mortgage with your existing lender
  2. Remortgage with a new lender, for a larger loan.
  3. Keep your existing mortgage as it is and take out a further loan secured on the equity in the property. This is what is called a “second mortgage”.

Each of these methods has its pros and cons.

  • The advantage of staying with your existing lenders is that they are familiar with you and your payment record, and also with the property. So there should be fewer checks and formalities to go through, to refinance the loan. However, if it’s a long time since you took out the first mortgage, they may still need a new valuation. They may also need a check on your finances – they know whether you’ve kept up your mortgage payments or not, but they don’t know what other financial commitments you may have.
  • Sometimes you can actually do much better by switching to a new lender – you may get better rates, as lenders often reserve their best rates for new customers! It quite often happens that people remortgage with a new lender for a much bigger loan, and actually end up with lower monthly payments than before. The lenders will of course need surveys, valuations, credit checks, etc.
  • If you take out a second mortgage, this becomes a “second charge” on the property, with the lenders of the original mortgage keeping the deeds. This means that if the house is sold or repossessed, the lenders of the first mortgage have first claim to repayment. The holders of the second charge then have the next claim to recover what is owed to them. The lenders of the second mortgage thus have a higher level of risk, and so their interest rates may be higher than those for the first mortgage. However, they are still competing for your business, so you can still get very good deals on your second mortgage if you shop around. And the rates will certainly be better than for an unsecured loan.

Whichever of these methods of utilizing your equity you choose, lenders are very unlikely to release the full value of the equity. They will always wish to retain some equity in the property in case of a fall in value or other emergency. However, if you are looking for a second mortgage, it is possible in some cases to find a lender who will go up to 100 per cent – at much higher rates, to reflect the higher risk.

Whether a second mortgage or a remortgage is better for you will depend on your individual circumstances. A broker or financial adviser will help you decide what’s best for you.

How to Use 25% Less Gasoline With The Vehicle You Already Own

Increased gasoline prices are here and they’re here to stay. It’s been over 3 years since we’ve seen prices that are consistently under $2.00 a gallon, and they don’t seem to be headed down anytime soon. Instead of griping about the high cost of gasoline, we should instead adopt a positive attitude and look at ways that we can reduce our personal consumption of gasoline to bring the cost of fueling one’s vehicle back into the realm of reason. Here are some ways that you can make a gallon of gasoline take you a lot further.

Check Your Air Filter – Having a clean air filter can improve your gas mileage by up to 10%, and studies indicate that one out of every four vehicles desperately need a new filter. Purchasing a new filter will save you the equivalent of 25 cents per gallon alone!

Properly inflate Your Tires – The NHTSA says that the average car tire is under-inflated by 7.5 lbs of air pressure, causing a loss of 3% in fuel efficiency. Making sure your tires are properly inflated will save you 7.5 cents per gallon in gasoline

Get Your Car Aligned – If your vehicle is improperly aligned, your tires will wear out more quickly and your engine will have to work harder. This can reduce your gas mileage by up to 10%, or 25 cents per gallon!

Get a Tune Up – Getting your vehicle properly tuned up can improve your gas mileage by 4% according to the National Highway Traffic and Safety Administration. It might not seem like much, but that’s 10 the equivalent of 10 cents per gallon if the price of gasoline is $2.50

Keep Your Foot Off The Breaks – By avoiding using your breaks, you will reduce the wear and tear on them as well as dramatically improve your fuel efficiency. If you have a “heavy foot” you could improve your fuel economy by up to 35%

Drive the Speed Limit – For every 5mph of speed that you drive on the highway, you will reduce fuel consumption by 7%. If you switch from driving 70 on the highway to 65, you’ll save 19 cents per gallon of gasoline.

A lot of people think they need to purchase a new car to get better fuel economy, but that’s just not the case. You can do a lot with the car that you already have to improve the efficiency of your engine.

Life Insurance – Why is it Required?

The need for Life Insurance

Why do we need Life Insurance? Consider this. Under any circumstances, the loss of a loved one is a traumatic experience. But, if your family is also left without sufficient money to meet basic living needs or prepare for future goals, they will have to cope with a financial crisis at the same time. If faced with an economic crunch, your family might have to move to a less desirable home, cut back on the quality of life, your children might have to abandon higher studies plans. Your family might even be forced to go into debt to pay the expenses, like medical bills, that result from your death. I hope that by now, you realise that the lack of sufficient life insurance coverage when a loved one dies can have devastating consequences for a family, results that can last for years. Hope now you get why we need life insurance.

What is Life Insurance?

You read about why we need life insurance. Now you must be wondering what life insurance is, after all? Life Insurance is a way of transferring the risk attached to your life to the insurer. In other words, life insurance is a policy bought from a life insurance company, which provides financial stability to a family after a member’s death, usually the breadwinner of the family. Its function is to help beneficiaries financially after the owner of the policy dies.

If the policy owner dies while the contract is in force, the insurance company pays a specified sum of money free of income tax to the person or persons you name as beneficiaries. The cash benefit helps provide for your family’s future needs as well, including college education for your children and part or all of your spouse’s retirement needs.

Life Insurance can also be a form of savings in the long run if one purchases a plan, which offers the option of contributing regularly. Additionally, a little known function of life insurance is that it can be tied in with a person’s pension plan. A person can make contributions to a pension that is funded by a life insurance company.

Types of Life Insurance?

You read about why need life insurance and what is life insurance. Now, let’s discuss the various types of life insurance available in the market:

  • The cheapest Life Insurance – Term Insurance

    Term life insurance also called pure insurance, is the most straightforward type of life insurance and the easiest to understand. It protects for a specific term period – ranging from 1 year to 25 years or more. If the policy owner dies during this period, then the insurance company pays cash benefits (as decided upon policy subscription) to the nominees of the policy owner. However, once the term is over, coverage ceases.
    The policy has no financial investment value. If you are looking for the maximum amount of coverage at minimum cost, term life insurance will give you the most “bang for your buck”.

  • Life Insurance with Returns Endowment Assurance

    An endowment life assurance policy covers risk for a specified period, at the end of which the sum assured is paid back to the policyholder, along with the bonus accumulated during the term of the policy. An endowment life insurance policy is designed primarily to provide a living benefit and only secondarily to provide life insurance protection. Therefore, it is more of an investment than a whole life policy. The premium on endowment life insurance policies is payable for the full term of the endowment policy unless the insurer dies earlier. When compared to pure life policies, the premium rates for endowment life insurance policies are higher. But one of the significant attractions of endowment policies is that they provide a return on premium payments when the plan comes to an end.

  • Money-Back Life Insurance

    Money-Back Life Insurance offers the critical benefit of cash lump sums at periodic intervals of five years, ensuring that you can meet any of your financial obligations. Such a plan not only provide life cover but also entitle you to a guaranteed addition and bonus on maturity. Money-back Life Insurance plans like these not only let you enjoy regular cash flows during the policy term; they also get you a life cover.

  • ULIPs

    ULIPs are a category of insurance cum investment solutions that combine the safety of insurance protection with wealth creation opportunities. In ULIPs, a part of the investment goes towards providing you life cover. The residual portion is invested in a fund which in turn invests in stocks or bonds. The value of investments alters with the performance of the underlying fund opted by you.