crop man counting dollar banknotes

Second Stimulus Round 15…

Posted Leave a commentPosted in Budgeting, Finances, Investing, Real Estate, Stock Market
crop man counting dollar banknotes
Photo by Karolina Grabowska on Pexels.com

So here we go again… round 15… Yes, being a bit dramatic about it but this entire process took entirely too long. This next round of stimulus checks might not be enough to put a dent into the debt some people may have racked up during the past 8-9 months…

The last stimulus bill was passed March 27th 2020. With the CARES Act expiring at the end of the month, this small amount may be helpful for some. However, as I said in the beginning, this isn’t much help at all.

Related: Will the Stimulus Help
Related: CARES Act – Forbearance or Deferment

So, with all of that said, this post is mostly geared towards those that are still afloat during the pandemic and not behind on bills. It’s unfortunate, but a large majority of Americans will have to dump their entire stimulus check into back owed rent or other debts that have accrued over the last 8-9 months. I do empathize with you all that are still struggling… I am really hopeful that with the COVID-19 vaccine making it’s rounds; we can return to some type of normalcy within a few months…

What should I do?

For those of you that meet the criteria to receive stimulus checks that are up to date on your mortgages, rent, and payments what will you do? You are about to get $600 for yourself and each dependent 17 and under within your household. It’s not much, but for some of you, this may be a good opportunity to start investing. If you are debt free, this might be the right time. If you are not sure if the time is right for you to invest yet, check out my article on the 7 Steps to Financial Freedom or listen to the podcast episode here.

Don’t go crazy and dump everything into penny stocks hoping to hit it big. Be mindful of how you employ this money to work for you. “Free Money” most definitely comes with a price. The more stimulus payments that get issued and bailouts for corporations that happen, the more potential we have for some serious inflation. This is a good time to try and turn that $600 into something a little more.

Maybe look at investing in some REITs, index funds, or ETFs. This can be your opportunity to start building a passive income with dividend payments. It takes a lot of money to be invested before dividends start looking nice, but this can be your start.

If you have been looking to start your own business but didn’t want to cough up a few hundred dollars to start one, maybe this is the beginning. If you are able to invest this money in yourself or your business, then that works too. Maybe it’s a side hustle you’ve been thinking about. Maybe you wanted to open an Etsy shop but didn’t have the materials to do it; now you can buy those materials and get started.

Conclusion

The main takeaway of this post is to NOT use this money to go buy another PS5 or laptop, but to invest it into something that can help you build your wealth. Use this as your initial push rolling into 2021 to make this next year your best one yet. We all know this year was pretty much a wash… However, just because there is craziness in the world, it’s no excuse to not set goals and crush them. I started a podcast this year and it’s been awesome! Let’s roll into 2021 goal oriented and ready to attack it.

Mike Cavaggioni
Mike Cavaggioni

Mike Cavaggioni is an Active Duty Officer in the U.S. Navy, REALTOR-ASSOCIATE®, Real Estate Investor, and Finance Coach located in Honolulu, HI. He is the founder of Average Joe Finances and host of the Average Joe Finances Podcast. Mike owns real estate in Hawaii and Virginia and is building a community for people to come together to learn and build their wealth.

Aspiring Entrepreneur? Plan Your Escape From Your Job.

Posted Leave a commentPosted in General
Aspiring Entrepreneur

Have you ever thought about walking away from your current 9-5 job to start your own business? What’s stopping you? It’s likely to be one of two things: common sense or integrity. Both are very valuable traits.

Common Sense and Integrity

Common sense says that you most likely have commitments, obligations, and responsibilities that show up monthly, weekly, and even daily. Would it be smart to risk any of those commitments? It could cost you big time in the immediate future or long term.

You would put both yourself and your new business under immense pressure if you went in without being prepared.

It’s significantly better to have a support system in place when starting a new venture. Your family, friends, and countless other individuals can play a significant role in your future success.

Integrity takes a long time to earn. The integrity you have earned at your current job will give you some credibility to start with. Use the integrity you have built with your employers and with your work colleagues as much as you can. These could be very useful and influential contacts in the future.

It’s unwise and unhelpful to put your integrity in jeopardy.

So, instead of just pulling the plug, it’s important to plan your escape. Common sense and integrity need to be your guiding principles moving forward.

Business Preparations

It makes good sense to do plenty of research on your new business and get all your questions answered before you make any decisions. Here are a few things you can take in for consideration.

  1. Get an insider’s opinion. Getting an insiders’ view would serve you well. Standing on the outside looking in is significantly different from being on the inside looking out. It could save you time and money as you move forward into your own business.

    – Find someone who has already done something similar and ask them, “If you were doing this all over again, what would you do differently?”The answer they provide will be the most valuable conversation you could possibly have for your new business.
  1. How will you generate a profit? This is a crucial part of moving forward with a new business. It’s important to figure out, the easiest and most effective way of generating a profit from your new business. Yes, a profit… income… not just breaking even. Both the business and you as an individual will not survive without an income.
  2. How will you scale up? Determine what you need to have in place to scale your business to grow. Customers are key! They are the people who will provide your profits and build the reputation of your business.
  3. How much time do you need to get the business started? Determine how much time you have available to get your business off the ground. Naturally, the more effort and energy you put in, the quicker everything will go.

Once you’ve determined these aspects, it should be possible to calculate what needs to be done in order for you to create a timeline for escaping from your job.

Related: I am Afraid of Being Laid Off

Start Your Business Wisely

So, now you can quit your job, right? Hold on a second! You’re almost there!

Many smart people get their business into the marketplace by working part-time from home while they keep their regular job intact. Even if it takes 9 months or a year, or even a couple of years, to get it working efficiently and effectively, it’s got to be worth it, right?

Remember to factor in some wiggle room for the unexpected… Make room for some down time and even holidays.

Talk to people who have already made a similar transition to get an idea on what is reasonable and doable for your situation.

Author’s note: I personally started my own business while still being active duty in the Navy. Becoming a licensed REALTOR-ASSOCIATE®, investing in real estate, and starting a blog and podcast. It’s been an absolute blast so far.

Check out our Average Joe Finances merchandise here

Work Smarter, Not Harder

Your new business should have no requirement for you to work 40+ hours a week. Your intent is to move on up in terms of profit and income potential and move down in terms of time needed to create it.

Consider different ways to work smarter, not harder. If hard work was any guarantee of success, most new entrepreneurs would already be wealthy.

It’s not about working hard. Your success will come from having a plan, an effective strategy, and the discipline and enthusiasm to follow through on it.

Speaking of working smarter and not harder… Check out this post by Bella Wanana regarding tax deductions here. Knowing about tax deductions and what you can claim with your business can save you tons of money.

It’s time to work out a sensible plan to quit your job once you can check off these two items:

  • You’re confident that you have a profitable business plan.
  • You’re working part-time on your business and showing some profits

Yes, this entire process takes patience. Just remember what your “why” is. In time, you’ll look back at the job you once had and smile knowing that you have replaced that income with something that’s your own.

Mike Cavaggioni
Mike Cavaggioni

Mike Cavaggioni is an Active Duty Officer in the U.S. Navy, REALTOR-ASSOCIATE®, Real Estate Investor, and Finance Coach located in Honolulu, HI. He is the founder of Average Joe Finances and host of the Average Joe Finances Podcast. Mike owns real estate in Hawaii and Virginia and is building a community for people to come together to learn and build their wealth.

How to Resolve Information on a Credit Report

Posted Leave a commentPosted in Finances

The information in your credit report can affect many areas of your life. It’s important to keep track of what’s in it. If you find incorrect information, it’s your job to dispute it and have it removed from your credit report. ONLY YOU are looking out for your own credit rating, no one else… Pay attention to your report!

There are actually three credit reporting bureaus: Experian, Equifax, and Trans Union. Make sure you are monitoring all three of these credit reports. It’s essential because the information can differ from report to report.

Follow this process to ensure your credit reports are accurate: Request your credit report

There are a few methods to track your credit score and credit reports. The fastest way to get a copy of your credit report is to visit Annual Credit Report. You’re entitled to receive a copy of each of your three reports for free once per year.

If you haven’t been following what’s in your credit reports, start out by requesting all three reports at once. The information they contain can actually vary quite significantly, depending on which creditor has reported what to them. Differences from one report to another can amount to a significant credit score difference.

Once you’ve obtained and corrected past information in your reports, you can stay updated by spreading out your credit report requests to every 4 months. Request your report from one of the credit reporting agencies every 4 months. Over the course of a year, you’ll have received all three.

Promptly correct mistakes in all 3 of them if you find an error.

Information accuracy

Comb over all three credit reports carefully in search of incorrect information. Any detail that isn’t right should be changed, even if it’s just a wrong address, because these pieces of information can have an impact on how lenders view you when considering your loan application.

Contact the credit reporting agency

If you find information that needs to be changed in your credit report, the next step is to contact the agency (Experian, Equifax, or Trans Union) of that specific report. It can take some time to dispute incorrect information, so the sooner you do it, the better.

Writing a dispute letter

You can find sample dispute letters online that will give you a good starting point for writing this letter. Be professional, use facts and not emotions, and include all of the necessary proof that the information is incorrect so the credit agency can make the change.

Be sure to include copies of any documents that support your position. Do not include the originals.

The process of disputing an item

Typically, the credit agency will contact the company that reported the false information, and an investigation will follow to determine whether or not the information is inaccurate.

Add accounts to your file

If you are missing credit accounts on your credit file, then you may want to ensure that missing information is added. You can make this happen by contacting the companies that aren’t reporting your credit history and asking them to begin reporting for you.

* Note: Not every company will want to report this information for you, so it can take some time for you to have this information added to your account. However, if you’re diligent, you should be able to have the information added

Check out our Average Joe Finances merchandise here

Follow up

Be sure to follow up on your requests if you don’t hear anything from the credit reporting agency within 30 days, as this is the normal length of time for an investigation.

The power is in your hands to keep your credit report in good standing. If there is inaccurate information in your credit report, or if important information is missing, then take the steps to get the information corrected. Your next job, home, or loan may depend on it. Are you checking your credit score and credit reports?

Mike Cavaggioni
Mike Cavaggioni

Mike Cavaggioni is an Active Duty Officer in the U.S. Navy, REALTOR-ASSOCIATE®, Real Estate Investor, and Finance Coach located in Honolulu, HI. He is the founder of Average Joe Finances and host of the Average Joe Finances Podcast. Mike owns real estate in Hawaii and Virginia and is building a community for people to come together to learn and build their wealth.

The Market is Crazy! Get In, or Get Out?

Posted Leave a commentPosted in Finances, Investing, Stock Market

The title of this post is what I keep seeing and hearing daily. I joked around with some people at work talking about how I was going to pull everything out of the stock market after the President was diagnosed with Covid-19. The funny thing is, while I was joking, other people said that they fully intend to do just that. This reminded me about how important it is to “stay the course” as we say in the Navy.

It has been clear cut to me that time in the market is more important than timing the market. As we continue down this volatile road of uncertainty, it is important that people do not look at market dips as losing money. YOU ARE NOT LOSING MONEY! Your assets are simply losing value.

Now, let’s take a look at the stock market historically…

https://www.seeitmarket.com/comparing-todays-stock-market-with-the-1970s

Some Bumps Along the Way, but Steady Gains

The portion highlighted in yellow are the dips that happened back in the 1970’s. If you look further back, you can see when the great depression happened in the 1930’s. The main thing I want to point out with this graph is simple… Look at the trend even after all of the dips. What does the Dow Jones continue to do? Over the years, it continues going up…

These dips should be looked at as buying opportunities to purchase stocks at a “discounted” price. Your focus should be on the cost average of each stock you purchase versus the most recent price you paid.

Check out our Average Joe Finances merchandise here

What are your goals?

How you invest should depend on your lifestyle and your goals. Day traders and swing like to buy into individual stocks and us several indicators to know when to buy and when to sell. Buy and hold investors like index funds, exchange-traded funds (ETFs), and diversifying individual stocks. I happen to be a fan of index funds and ETFs vice individual stocks. With an index fund, you are getting a piece of every company in that fund. If one particular company tanks, you are still safe. Index funds/ETFs like the Dow Jones above are consistent in constantly gaining value over time. I do buy individual stocks just to play around with, but it’s nothing serious. Most of the individual stocks I buy are not even “stocks” because they are mostly Real Estate Investment Trusts (REIT). I like REITs because they are normally steady in value and have exceptional dividend returns. I don’t even collect the dividends from those as I set all of them in to a dividend reinvestment plan (DRIP) back into the fund to reinvest into the REIT and buy more.

While you don’t have to invest the same way I do, you should most definitely have a strategy with the assets you are investing in. If you are new to investing, I would highly recommend that you speak with a professional or thoroughly research the asset class you are thinking about investing in. I am not a financial advisor and am only posting my thoughts and sharing what I am doing. However, I would be happy to assist you on your financial freedom journey. My email is always open if you want to reach out. Hope you all were able to get something out of this article. Also, be sure to check out our podcast.

Mike Cavaggioni
Mike Cavaggioni

Mike Cavaggioni is an Active Duty Officer in the U.S. Navy, REALTOR-ASSOCIATE®, Real Estate Investor, and Finance Coach located in Honolulu, HI. He is the founder of Average Joe Finances and host of the Average Joe Finances Podcast. Mike owns real estate in Hawaii and Virginia and is building a community for people to come together to learn and build their wealth.

Payroll Tax Deferral – What does it mean for you?

Posted Leave a commentPosted in Finances, General
Treasury Secretary Steve Mnuchin during a press briefing at the White House in Washington.
Kevin Lamarque | Reuters

Keeping this one short, sweet, and to the point.

Yesterday the U.S. Treasury Department released their guidance on how the President’s tax deferral would apply to companies.

Considerations

There is a key word everyone needs to focus on with this and that word is deferral. While your paycheck might look much nicer, it is important to know that a deferral means you will pay it back at a later time.

This isn’t all doom and gloom. There are things you can do to mitigate the impact of paying the taxes back.

What should you do if your company elects the deferral?

The important thing to do at this time is NOT SPEND THAT EXTRA MONEY! Look at your last paycheck and note how much FICA tax came out. When you get paid, take that amount and put it into a high-yield savings account, do not spend it!

The Fed is hoping this will cause an increase in spending to boost the economy. While this may happen, really consider saving your money and not spending it… yet.

What happens if the Fed forgives the deferral?

This would be the ideal situation for the taxpayer. If the Fed forgives the deferral, you get to keep it. Now your deferral is basically another stimulus check.

Now you can take that money and do whatever you want with it. Since you already did not expect to receive that money, consider investing it. This could be the opportunity for some people that have never invested before, to try their hand at it.

This will only help if you are employed.

This tax deferral will only help people that are currently employed. If you are currently unemployed, you will not see a benefit. This is an emergency action because our politicians cannot come to an agreement on the next stimulus. I am still hopeful that there will be something in the future to help those that are unemployed.

Related: Side Hustles

If you are unemployed and still struggling to find employment, try taking on a side hustle. I know many side hustles cost money to start, but there are many that do not. If you have a car, consider driving for Uber/Uber Eats or Lyft. There are other options as well such as Instacart, Door Dash, and Grub Hub.

Mike Cavaggioni
Mike Cavaggioni

Mike Cavaggioni is an Active Duty Officer in the U.S. Navy, REALTOR-ASSOCIATE®, Real Estate Investor, and Finance Coach located in Honolulu, HI. He is the founder of Average Joe Finances and host of the Average Joe Finances Podcast. Mike owns real estate in Hawaii and Virginia and is building a community for people to come together to learn and build their wealth.

Apple Shares

7,000 Shares of Apple… WWYD

Posted 2 CommentsPosted in Finances, Investing, Stock Market
Apple Shares

If you inherited 7,000 shares of Apple, what would you do?

This is a question A user on Reddit asked the community when he recently inherited 7,000 shares of Apple from his grandfather. Check out the MarketWatch article. Before diving into this post, I would like to express my sincere condolences for the original poster. I would also warn any of my readers before looking up the original Reddit post as there is some strong language in the original post and subsequent comments.

Apple is currently sitting at $498.90 a share. Inheriting 7,000 shares gives him a value of $3,492,300. That’s definitely something to work with. This Reddit user get’s many suggestions and comments on what he should do with his newly found riches. Let me share what I would do if I came into this type of inheritance.

What do I do with these shares?

First, I would cash out most of it except for about $250k (roughly 501 shares). I would keep this large sum as Apple is still a great company and a dominant force in the Tech industry. Since this is inheritance, I should only be taxed on what I’ve gained since inheriting the shares. This means I will pay very minimal taxes if the value goes up before selling it.

After the sale, I would have around $3.25 million. The name of the game is diversity. Spread the wealth. I would put at least $250k-$500k into a few high yield savings accounts as a safety net.

Investing at least $1.5 million in real estate (rental properties) would be my next move. This money would be used for several down payments on single family, multi-family and commercial properties. I would take out mortgages and leverage my debt service to the income I would make from the rental units.

I would invest the last $1-1.5 million in the stock market. Investing mostly in blue chip dividend paying stocks, index funds, and maybe a few REITs. I will already have a bunch of real estate, so maybe no REITs and just other dividend paying stocks.

Related: 6 Ways to Invest in Real Estate

Here is the income I would have just by letting my money work for me.

Having $500k in the savings account you are making roughly $10,000 a year from a 2% rate.

If you do well with your real estate investments and manage your debt service well, you can get around a 25% return. This would be between $250k – $375k a year.

And with that last $1.5 million, let’s say you are averaging a 5% dividend yield, that will give you another $75k a year.

Conclusion

With investing your money properly, you can make close to $460k a year to let that money work for you. I would donate at least 10% of my earnings per year so roughly $46k. As I’ve said on my podcast, I believe it’s important to give back. This is what I would do personally as you don’t want to have all of your eggs in one basket.

Sound off in the comments and let me know what you would do if you inherited 7,000 shares of Apple.

Mike Cavaggioni
Mike Cavaggioni

Mike Cavaggioni is an Active Duty Officer in the U.S. Navy, REALTOR-ASSOCIATE®, Real Estate Investor, and Finance Coach located in Honolulu, HI. He is the founder of Average Joe Finances and host of the Average Joe Finances Podcast. Mike owns real estate in Hawaii and Virginia and is building a community for people to come together to learn and build their wealth.

Website Flipping

Posted 2 CommentsPosted in Finances
Website Flipping

Website Flipping

Website flipping… Is that actually something you can make money off of? I am here to tell you that yes, it most definitely is. Going through this process reminded me so much of flipping real estate. This is essentially the same thing. You are flipping digital real estate. Pretty neat!

Related: 6 Ways to Invest in Real Estate

I purchased a few domains a while back and opened a some Shopify stores to try my hand at eCommerce a bit. My day job made it difficult to keep up with my drop shipping store as I had to manually fulfill orders each time someone purchased a product. After feeling a bit overwhelmed, I let it sit for some time. I started doing some research on the international database of Google on how to sell a pre-built website. Well what would you know, it’s a thing! There are website brokers and escrow companies out there, just like we have in the real estate world.

Where Do You Sell?

In my excitement after finding Flippa, I decided to look at different niche products and build a starter store to sell. I won’t go into too much specifics to protect my buyer. I even outsourced some of the building of the store on Fiverr. After getting the niche product set up as well as 24 others, I built the site and launched it to play around and see how it was. Made a few sales without much effort and knew this would be a good store for someone.

So, I wanted to get at least $500 for it… I listed it for $1,000. I received an offer for $500, but decided to negotiate a bit and countered with $750. After some negotiation, I sold it for $715 (675 on Flippa and $40 more on the Marketplace Exchange). Either way, I was happy about these results.

Closing Statement

Can Be A Source of Steady Monthly Income

While pushing this transaction through, I found out about Shopify’s Partners program. You can legitimately build starter eCommerce stores and transfer ownership when complete. You can sell it to a buyer or even make one for a friend. Here is the awesome thing about building the store through Shopify partners. When the new owner takes over and starts paying for the Shopify plan, you receive a 20% commission of the monthly plan costs from Shopify. How cool is that?

This doesn’t just have to be Shopify. Maybe try building a blog on WordPress and helping someone start their new hobby or side hustle. You can even do this with social media accounts too. I was talking with someone at work who told me they knew a young entrepreneur in her 20s that was making an average of $18,000 a month flipping Instagram accounts. WHAT?! Yes… flipping social media accounts is also a thing. Wow! Keep thinking outside of the box and maybe you will find that little something that can turn into a big something.

Learn Something New

If you are stuck at home teleworking, or lost your job, consider learning just a small amount of CSS and HTML. You don’t need to know much, just enough to start making some of these Shopify stores through their partners program. If you build enough, you can have a nice monthly paycheck coming in for those efforts. Keep on being creative and coming up with ways to add value to yourself by learning new skills. Keep on learning and earning.

Bottom line, there is some decent money to made from a side hustle like this. Is it something I will pursue? Maybe, maybe not. I have many other projects I am working on, however, I can see this as a viable option as another source of income. I proved it can work and had a nice payday to show for it.

Mike Cavaggioni
Mike Cavaggioni

Mike Cavaggioni is an Active Duty Officer in the U.S. Navy, REALTOR-ASSOCIATE®, Real Estate Investor, and Finance Coach located in Honolulu, HI. He is the founder of Average Joe Finances and host of the Average Joe Finances Podcast. Mike owns real estate in Hawaii and Virginia and is building a community for people to come together to learn and build their wealth.

Debt Consolidation

Posted 1 CommentPosted in Budgeting, Finances, Investing

Debt Consolidation

This is a shorter article, but can hopefully be a very helpful one for those of you seeking out a way to consolidate all your debt. While debt consolidation is not something we would necessarily recommend, we understand that some people can benefit from it. As we have explained in previous posts, our favorite way to get out of debt is by doing the “debt snowball” method. I have personally explained how sometimes I am not the best disciplined when it comes to budgeting, which is why I leave myself some wiggle room. By consolidating your debt into one payment, this can make paying your debt off easier if you do not want to follow a budget. Let’s break it down.

Related: 7 Steps to Financial Freedom
Watch: Average Joe Finances Episode 2

Credit Cards…

If you have several credit cards and loans and can’t seem to get on top of them, a debt consolidation loan might be a good move for you. Many lenders are offering low APR loans to help consolidate debt. I know I kept getting letters in the mail from SoFi. I just kept throwing them out, but one day, decided to open one and see what they had going on.

They were offering me a loan up to $100k with a 6% interest rate. That’s pretty darn good if you ask me. I considered taking it and using it to buy more real estate, but I didn’t. I didn’t want to take on another loan as I was still paying off the most recent kitchen and bathroom remodel (ouch).

Though, it made me think. If I had a lot of debt and didn’t know where to start, this would be a great option. Think about it.  Most credit cards are between 12-22% APR, right? By put all of that debt into the loan, you would save 6-18% of your interest. Of course, there is still some strong discipline required to use this option. If you take out a loan and consolidate all of your credit card debt, you need to have the discipline to NOT TO SWIPE THAT CARD!

What else do they offer?

While looking into SoFi’s loan options, I was able to see the other options they offer. You can open a brokerage account with them to get started investing just like Robinhood and Webull. The interface is pretty easy to use. The offer fractional investing so you can own a piece of Amazon with as little as $5. Pretty neat. If you want to check out investing with SoFi, you can join here.

Related: Our Recommended Products

Bottom line, if you are going to take out a debt consolidation loan, consider all of your options first. Our first recommendation would be to snowball your debt as we talk about here. If you can’t do that, make sure you can secure a loan with a lower interest rate than your debt. This will help you pay it off quicker and save a little more in interest over time.

Check out what SoFi has to offer!

Mike Cavaggioni
Mike Cavaggioni

Mike Cavaggioni is an Active Duty Officer in the U.S. Navy, REALTOR-ASSOCIATE®, Real Estate Investor, and Finance Coach located in Honolulu, HI. He is the founder of Average Joe Finances and host of the Average Joe Finances Podcast. Mike owns real estate in Hawaii and Virginia and is building a community for people to come together to learn and build their wealth.

YouTube Channel and Site Updates

Posted Leave a commentPosted in General

We excited to announce that we now have a YouTube channel up and running. We will add more content to it as we continue to grow. Please check it out, like, and subscribe.

We also started recording our podcast. The podcast itself has not been officially released, but the YouTube video has the entire first episode.

We added a new section called Podcasts & Videos and you can check it out at the top of our page in the menu.

If you are interested in writing on the Average Joe Finance Blog, please email me through our Contact page.

We have also updated our Resources, Affiliate products, and Shop.

Thank you for all of the support and helping us grow the community. The Facebook Group has been an awesome source for those seeking out help or information.

Should I Refinance My Home?

Posted Leave a commentPosted in Finances, Real Estate

Should I Refinance My Home?

It’s been a little bit since I have written a post, but all for good reason. I took some time to finally finish my real estate license course and am now waiting on my certificate. Once I get that, I can take my real estate license examination. I’m pretty excited to continue this journey.

As the title of this post shows, the question is, should you refinance your home. Being that I recently refinanced my home at the end of March, it wouldn’t be a good move for me. However, percentage rates have dropped another half percent from when I refinanced!

When I refinanced my home in March, I was able to lock in a 2.75% rate and get a $10,000 credit to close. I lowered my mortgage payment by almost $400 a month! Now that rates are 2.25%, I could have saved an additional $200+ a month, but that’s ok.

There are many different reasons you may want to refinance your home…

  • It could be to pull out some equity to pay off debt or invest in more real estate.
    • With this option, you would pull equity out to pay off any high-interest credit cards or loans.
    • You could also take this equity to use as a down payment on an investment property.
  • Maybe you want to lower your monthly mortgage payment (my reason for refinancing).
    • Lowering your interest rate can save you a lot of money over the life of the loan. Depending on your goals, you can continue paying your old payment and build equity faster in your home. You can even pay off your home faster this way.
    • Another thing you can do is invest the money that you are saving on your monthly mortgage payment
  • You could refinance to pay off your home faster (moving from a 30-year to a 15-year mortgage).
    • Dropping from a 30-year to 15-year mortgage can get you an even lower interest rate, but your monthly payment will most likely be higher.
  • You may even have an adjustable-rate mortgage and you are changing it to a fixed-rate mortgage.
    • Adjustable-rate mortgages can be very risky. You may start at a lower rate than everyone else, but then in 5, 7, or 10 years, your rate can readjust to the current rate.
    • With rates this low, refinancing out of an ARM can be a safer move to make.

Whatever your reason, now is a good time to consider refinancing.

According to this Forbes article, the Federal Reserve is expecting the economy to contract 6.5% this year and will keep interest rates near 0% until 2022. With the rates staying this low, the opportunity to refinance may last for a while. Something to keep in mind is what happened back in March when so many of us refinanced. Many lenders have stepped up their requirements to qualify for a loan. For example, back in April, this CNBC article shows that JP Morgan Chase raised their credit score requirement from 640 to 700.

With all of the different ways to refinance, you should research which options work best for you. Refinancing might not even be an option for you at this time. However, if you are considering it, we recommend that you speak with a professional. A loan broker may be a good option as they can look at many lenders at once to find you the best rate. Hopefully, this article provides something to thought-provoking for you to consider.

Mike Cavaggioni
Mike Cavaggioni

Mike Cavaggioni is an Active Duty Officer in the U.S. Navy, REALTOR-ASSOCIATE®, Real Estate Investor, and Finance Coach located in Honolulu, HI. He is the founder of Average Joe Finances and host of the Average Joe Finances Podcast. Mike owns real estate in Hawaii and Virginia and is building a community for people to come together to learn and build their wealth.