When it comes to finance, many consumers are ill prepared or uninformed and typically rush into decisions. The saying that fear of loss is more powerful than the hope for gain, seems to hold true. Though, some still are seduced and taken chasing lofty but unrealistic gains, with New York suing Trump University over false promises about real estate investing.
According to complaints, instead of meeting Donald, they instead were offered a photo with his cardboard cutout. Instructors were often failed real estate investors that advised particpants to call their credit card firms and request credit line increases so they could buy the $40,000 "Elite Program." At this point, it is unclear if those affected will
see any refunds.
And, other "schools" offering to train consumers in real estate, investing, finance and more are in the crosshairs of regulators. Student Loan fraud is alarmingly high, with a recent report stating that trends show borrowers receiving student loans and then dropping down to one class or dropping out altogether simply to utilize the loan for living expenses.
The mortgage world is heading towards a world of changes and potholes in the coming months. Germany, long the benchmark for economic strength in The EU, just announced scary jobs numbers. Brazil, India ,France and China are all showing signs of downturn and the Middle East is about to bring additional tensions.
Syria is surrounded by UN troops and Washington
is forced into a corner. The repercussions from military action will be wide reaching and dangerous. Skipping the obvious, most will focus on oil prices skyrocketing over military action. Truth be told, Syrian oil production is not huge compared to others. In fact, the biggest concern is in Libya, where production has dropped sharply. Rising oil prices will hit consumers in the pocketbook on all consumables. Not just gas, but food, clothes, lumber etcetera as anything shipped by plane, train or truck requires gas.
And, if rates rise further, will housing slow and the still tepid economy with it? Economists are already warning that the increase in rates since May has already slowed housing in both New Home Sales and Existing Home Sales. While affordability is still high, the combination of rising prices and rising rates has diminished the affordability for some.
Homebuyers looking now need to be cognizant of potential increases in energy and food costs when buying a home. Allow extra disposable income when buying today, even if that means buying a less expensive home. Utilizing an adjustable rate mortgage simply to get into a home can be dangerous (see last week's column on ARMs), so make certain that you understand exactly what you are signing. In some cases, walking away from a bad deal, though tough psychologically, is the best choice.
When it comes to rates, especially for those refinancing, recent rate increases have been tough to grasp. As equity has improved, more choices are available to help but many are still hesitant over deciding to act now and save money immediately, or wait and see if rates improve. Ask yourself this: An important item that you really need and want is always $50. You know it is worth it, but can't seem to spend the money. One day, your friend tells you a store has it on sale for $10 and you head own to find out that the sale ended yesterday but it is only $12.50 now.
Do you not buy because it went up $2.50 or do you consider yourself fortunate that what you wanted and needed is $37.50 off? In other words, do you focus on the loss or the benefit? Too many consumers are missing out on refinancing savings, despite slightly higher rates, because of how they view things. When it comes to finance, sometimes it is easier to make the correct decision when you substitute another item, as done above. Emotion and money are tantamount to oil and water - they don't mix!
Carl Delmont has been in the lending and financial markets since 1987. To submit questions or topics, email Carl@freedmont.com.