Getting a Degree of Financial Security

October 14, 2019

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Luis Puente

Luis Puente

Financial Education

2711 LBJ Freeway Suite 300

Farmers Branch, TX 75234

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October 7, 2019

Mortgage Protection: One Less Thing To Worry About

Mortgage Protection: One Less Thing To Worry About

How many things do you worry – er, think – about, each day? 25? 50? 99?

Here’s an opportunity to check at least one of those off your list. Read on…

Think back to when you were involved in the loan process for your home. Chances are good that at some point during those meetings, a smiling salesperson mentioned “mortgage protection”.

With so many other terms flying around during the conversation, like “PMI” and “APRs”, and so much money already committed to the mortgage itself – and the home insurance, and the new furniture you would need – you might have passed on mortgage protection.

You had (and hopefully still have) a steady job and a life insurance policy in place, so why would you need additional protection? What could go wrong?

Before we answer that, let’s clear up some confusion.

Mortgage Protection Insurance is not PMI
These two terms are often used interchangeably, but they are not the same thing.

Both Private Mortgage Insurance (PMI) and Mortgage Protection are insurance, but they do different things. PMI is a requirement for certain loans because it protects the lender if your home is lost to foreclosure.

Essentially, with PMI you’re buying insurance for your lender if they determine your loan is more risky than average (for example, if you put less than 20% down on your home and your credit score is low).

Mortgage protection, on the other hand, is insurance for you and your family – not your lender.

There are several types of mortgage protection, but generally you can count on it to protect you in the following ways:

  • Pay your mortgage if you lose your job
  • Pay your mortgage if you become disabled
  • Pay off your mortgage if you die

Say, That Sounds Like Life Insurance.
Not exactly. Mortgage protection actually can cover more situations than a life policy would cover. Life insurance won’t help if you lose your job and it won’t help if you become disabled. Mortgage protection bundles all these protections into one policy – so you don’t need multiple policies to cover all the problems that could make it difficult to pay your mortgage each month. (Hint: A life insurance policy would be a different part of your overall financial plan and often has its own separate goals.)

How Does Mortgage Protection Work?
A mortgage protection policy is usually a “guaranteed issue” policy, meaning that many of the roadblocks to purchasing a life insurance policy, such as health considerations and exams, wouldn’t be there.

If you lose your job or become disabled, your policy will pay your mortgage for a limited amount of time, giving you the opportunity to find work or to make a backup plan. Again, your house is saved, your family still has a roof over their heads, and you’re a hero for thinking ahead. Accidents happen and people lose their jobs every day. Mortgage protection is there to catch you if you fall.

One More Thing…
A mortgage protection policy is a term policy, so you don’t need to keep paying premiums after your house is paid off.

Now that you know a little bit more about mortgage protection policies, have those 99 worries ticked down to 98? Reaching out to me for guidance on your financial worries could help you make that number smaller and smaller… 97… 96… 95…

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April 22, 2019

A Pocket Guide to Homeowners Insurance

A Pocket Guide to Homeowners Insurance

Homeowners insurance should bring peace of mind.

The right policy is there to help protect you if something happens to your home. Since a home may be the most significant investment many of us make in our lives, the proper homeowners insurance should be a major consideration.

Getting the right homeowners insurance is essential, but doesn’t have to be difficult. Still, how do you know if you’re selecting the right type of insurance policy for your house? Read on for answers to some common questions you might have.

What is the purpose of a homeowners insurance policy?
A homeowners insurance policy is a contract by which an insurance company agrees to pay for repairs or to replace your home or property if it is involved in a covered loss, such as a fire. A home insurance policy may also offer you liability protection in case someone is injured on your property and files a lawsuit.

Do I have to have homeowners insurance?
Your mortgage company will probably require a homeowners insurance policy. A lender wants to make sure their investment is protected should a catastrophe strike. The mortgage company would need you to insure your home for the cost to replace it if it were to be destroyed in a covered accident.

How do I know how much insurance to buy for my home?
The limit – or amount of insurance you place on your home – is determined by several factors. The construction of your home is typically going to be the largest determinant of the cost to replace it. So consider what your home is made of. Construction types include concrete block, masonry, and wood frame. Also, consider the size of your home.

Personal property is another consideration when determining how much insurance to purchase for your home. A typical homeowners insurance policy usually offers a personal property limit equal to half the replacement cost of your home. So if your home is insured for $100,000, your policy may automatically assign a personal property limit of $50,000.

What is the best deductible for a homeowners insurance policy?
When it comes to deductibles, consider selecting one that you can easily and quickly come up with out of pocket, just in case. Homeowners insurance policy deductibles may range from $500 to $10,000. Some policies offer percentage deductibles for certain damages, such as windstorm damage. For example, a coastal resident may have a windstorm deductible of two percent of the dwelling limit and a $1,000 deductible for all other perils.

There may be some cost savings features when you select a higher deductible on your homeowners insurance. Talk with a licensed insurance professional about your deductible options and premium savings.

Know the policy exclusions
All homeowners insurance policies typically contain exclusions for accidents and damages they don’t cover. For example, your policy likely does not cover damage to your home caused by an ongoing maintenance problem. Also, most homeowners insurance policies don’t automatically cover losses resulting from a flood.

Exclusions are important because they drive coverage. Talk to your insurance professional about your policy’s exclusions.

Know the basics and talk to a professional
As far as homeowners insurance policies are concerned, it’s crucial for homeowners to know the basics – limits, coverages, deductibles, and special exclusions. If you have specific concerns about your homeowners insurance, seek guidance from a licensed insurance professional.

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This article is for informational purposes only and is not intended to promote any certain products, plans, or strategies that may be available to you. Before taking out any loan or enacting a funding strategy, seek the advice of a licensed financial professional, realtor, accountant, and/or tax expert to discuss your options.

March 25, 2019

Credit unions: What you should know

Credit unions: What you should know

If you’ve always used the services of a traditional bank, you might not know the ins and outs of credit unions and if using one might be better for your financial situation.

Credit unions are generally known for their customer-focused operations and friendliness. But the main difference between a bank and a credit union is that a credit union is a nonprofit organization that you have to be a member of to participate in its services. Credit unions may offer higher interest rates and lower fees than banks, but banks may provide more services and a greater range of products.[i]

Read on for some basics about what you should know before you join one.

Protection and insurance
Just like banks, your accounts at a credit union should be insured. The National Credit Union Share Insurance Fund (NCUSIF) functions to protect consumer deposits if the credit union becomes insolvent. The fund protects up to $250,000 per customer in deposits.[ii] Be sure the credit union you select is backed by the NCUSIF.

What credit union is best for you?
Today there are many credit unions available. Many now offer 100 percent online banking so you may never need to visit a branch at all.

The most important feature in selecting a credit union is to make sure they meet your personal banking needs and criteria. Here are a few things to consider:

  • Does the credit union offer the products and services you want? Can you live without the ones they don’t?
  • Do they have competitive interest rates when compared to banks?
  • Are the digital and online banking features useful?
  • What are the fee schedules?
  • What are the credit union membership requirements? Do you qualify for membership?

Take your time and do some research. Credit unions vary in the services provided as well as the fees for such services.

What to expect when opening a credit union account
Each credit union may have slightly different requirements when opening an account, but in general, you will most likely need a few things:

Expect to complete an application and sign documents. When opening a credit union account, you will likely have to fill out some forms and sign other paperwork. If you don’t understand something you are asked to sign, make sure you get clarification. Be prepared to show identification. You will likely be asked to show at least two forms of identification when opening an account. Your credit union will also probably ask for your social security number, date of birth, and physical address. Be prepared to show proof of your personal information.

Make the required opening deposit. On the day you open your credit union account, you’ll likely be asked to make an opening deposit. Each credit union may have a different minimum deposit required to open the account. It could be up to $100 (or more), but call the credit union to make sure.

Unique benefits
Credit union accounts offer some unique advantages for members. You may enjoy more comfortable access to personal loans or even auto financing and mortgages. Credit unions may offer other perks such as fee waivers, as well as discounts on other products and services that come from being a member.

If participating in a customer-owned bank sounds interesting to you, a credit union may be a good option. There are more credit unions available today than ever. Do your research. You may find an option that compares to your current bank, but offers some greater benefits that will make it worth the switch.

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This article is for informational purposes only and is not intended to promote any certain products, plans, or strategies for saving and/or investing that may be available to you. Any examples used in this article are hypothetical. Before investing or enacting a savings or retirement strategy, seek the advice of a licensed financial professional, accountant, and/or tax expert to discuss your options.

[i] https://www.creditkarma.com/advice/i/difference-between-credit-union-and-bank/
[ii] https://www.ncua.gov/support-services/share-insurance-fund

December 3, 2018

Home Insurance: A Primer

Home Insurance: A Primer

A properly set up home insurance policy can be peace of mind.

Home insurance is designed to help you financially if something goes wrong with your home. It’s one of the most important insurance coverages you can have because it protects the very place that protects you.

Home insurance is a contract. Your policy lays out what it covers and what it doesn’t cover. It also includes your rights and responsibilities and those of your home insurance company. So how do you know if you have the right type of home insurance policy? How can you help ensure your home insurance will cover what you need it to cover? Read on to learn some basics.

What does a home insurance policy cover?
Basically, home insurance pays to repair or replace your home or property if it’s damaged in a covered loss, such as theft or fire. A proper home insurance policy also should offer liability protection if someone is injured on your property and then sues you.

Do you have to purchase homeowner’s insurance?
Homeowner’s insurance may be required if you have a mortgage. Your bank will want to make sure the asset is protected, so they’ll likely require you to purchase a homeowner’s policy. They’ll also want to see proof of coverage – sometimes called a binder or an Evidence of Insurance certificate. Such a document will list the insurance limit, deductible, and declare the bank as the mortgage holder.

How much insurance do you need on your home?
The limit for your home policy is based on the cost to replace your home – not the value of the home – and on several other factors. Considerations for replacement cost include:

Construction: The replacement cost of your home will depend greatly on the construction. Is it a wood frame? Masonry? Concrete block? What is the square footage? How about roof construction? All these construction features will help determine the replacement cost of your home.

Personal property: The policy limit for your personal property typically defaults to a percentage of the amount for which your home is covered. For example, if your home is insured for $100,000 and the percentage is 50%, the default personal property limit would be $50,000.

Bonus tip: Highly valuable personal property is excluded from typical homeowner policies. Special property such as antiques, fine art, or jewelry may be covered only up to a certain sublimit. If you have highly valuable property stored within your home, talk to your insurance professional about getting the proper coverage for these items.

Liability insurance: As stated, a basic home insurance policy should come with some liability coverage to protect you if you end up in a lawsuit. Such a suit may stem from someone getting injured on your property.

Bonus tip: Homeowners should have some extra liability protection. An “umbrella” liability policy can add more liability coverage in case you end up in a lawsuit.

What type of deductible should I select?
A typical homeowner policy deductible is between $500-$1,000 (this can vary by state).[i] But there are options for $5,000 all the way up to $100,000 deductibles. Some policies offer percentage deductibles where the deductible is counted as a percentage of the policy limit. For example, if your home is insured for $150,000 and you carry a 10% deductible, your out-of-pocket cost in the event of a claim would be $15,000.

Many homeowners opt for a high deductible to save on the cost of the policy. Bonus tip: Select the highest deductible you can afford. Just keep in mind that if you have a claim, you are responsible for paying the deductible. If the damage is less than the deductible, you will have to make the repairs without the help of insurance. Know your risks and select the right policy.

Home insurance policies don’t cover everything. They contain exclusions. For example, many homeowners policies don’t cover flood damage. Flood insurance must be purchased separately. If you live in a coastal area or near a large body of water, consider purchasing a flood insurance policy.

Bonus tip: Flood insurance has become more important for homeowners in recent years. Flooding can cause catastrophic damage and can also affect homeowners who are not in a so-called “flood zone”.

Knowledge is power. The more you know about homeowners insurance, the better prepared you’ll be if something goes wrong with your home. Get to know your policy’s limits, coverage, and deductibles, so you can help ensure you have the coverage you need, when you need it.

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Please consult with a qualified professional and read all of your homeowners insurance documents carefully. Make sure you understand your policy(s) and know what situations are covered or not covered.

[i] https://lendedu.com/blog/average-homeowners-insurance-deductible/

October 1, 2018

Consumer Debt: How it helps and how it hurts

Consumer Debt: How it helps and how it hurts

What exactly is consumer debt? It’s “We the People” debt, as opposed to government or business debt.

Consumer debt is our debt. And we, the people, have a lot of it – it’s record-breaking in fact. In May of 2018, U.S. consumer debt was projected to exceed $4 trillion by the end of 2018[i].

That’s a lot of zeros. So, in case you’re wondering, what makes up consumer debt?

Consumer debt consists of credit card debt and non-revolving loans – like automobile financing or a student loan. (Mortgages aren’t considered consumer debt – they’re classified under real estate investments.)

So, how did we get buried under all this debt?
There are a few reasons consumer debt is so high – some of them not entirely in our control. The rise of student loan debt: Most consumer debt consists of school loans. During the recession, many Americans returned to school to re-train or to pursue graduate degrees to increase their competitiveness in a tough job market.

Bankruptcy: Changing bankruptcy laws under the Credit Card Protection Act of 2005 made it harder for Americans to file for bankruptcy. This led to consumer credit card debt climbing to a record high of $1.028 trillion in 2008[ii].

Good auto loan rates: The number of auto loans has skyrocketed due to attractive interest rates. After the recession, the federal government lowered interest rates to spur spending and help lift the country out of the recession. Americans responded by financing more automobiles, which added to the consumer debt total.

Is all this consumer debt a bad thing?
Not all consumer debt is bad debt. And there are ways that it helps the economy – both personal and shared. A student loan for example – particularly a government-backed student loan – can offer a borrower a low-interest rate, deferred repayment, and of course, the benefit of gaining a higher education which may bring a higher salary. A college graduate earns 56 percent more than a high school graduate over their lifetime, according to the Economic Policy Institute. So, getting a student loan may make good economic sense.

Credit card debt that won’t go away
Credit card debt is a different story. According to the National Foundation for Credit Counseling (NFCC), 61 percent of U.S. adults have had credit card debt in the past 12 months. Nearly two in five carry debt from month-to-month.

Still, the amount of credit card debt Americans carry has been on the decline, with the average carried per adult a little more than $3,000.

Credit card debt won’t hurt you with interest charges if you pay off the balance monthly. Some households prefer to conduct their spending this way to take advantage of cashback purchases or airline points. As always, make sure spending with credit works within your budget.

If you’re carrying a balance from month to month on your credit cards, however, there is going to be a negative impact in the form of interest payments. Avoid doing this whenever possible.

Stay on the good side of consumer debt
Consumer debt is a mixed bag. Staying on the good side of consumer debt may pay off for you in the long run if you’re conscientious about borrowing money, plan your budget carefully, and always seek to live within your means.

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[i] https://www.lendingtree.com/finance/consumer-debt-report-may-2018/
[ii] https://www.creditcards.com/credit-card-news/up-g19-federal-reserve-credit-debt-02072018.php

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