Homeowners’ Life Insurance Options

Buying a home usually means taking on one of the biggest financial obligations of your life. A homeowner’s life insurance policy can be essential financial protection, particularly when you’re obtaining a mortgage with a partner.

Homeowners with a mortgage spent an average of $12,639 on their mortgage payments (not including insurance) in 2014, according to the U.S. Bureau of Labor Statistics. That amounted to 13% of the $97,309 average pretax income among homeowners who had a mortgage. House payments take up a larger share of income for many first-time buyers and in many parts of the country.

Mortgages can become unaffordable if one partner dies. You wouldn’t want your family to have to move and find a cheaper home if you were no longer around.

Here’s how life insurance can help.

Term life insurance can cover your mortgage

Term life insurance promises to pay a set amount if you die while the policy is in effect. You choose the coverage amount and how many years the policy should last.

New homeowners can buy a term life insurance policy timed to match the duration of their mortgage. For example, if you have 20 years left on your mortgage, you could buy a 20-year term life policy. If you want the same policy to cover other obligations, like replacing your income if you die, you would buy a policy with a longer term and a higher amount.

[Life insurance quotes are available through NerdWallet’s Life Insurance Comparison Tool.]

Mortgage life insurance has limited benefit

An alternative to term life insurance is mortgage life insurance, which serves one purpose: It pays off your mortgage balance if you die. It pays the exact amount of the mortgage balance, and the payout goes directly to the lender, not your spouse or family.

Therefore, families are usually better off with a term life insurance policy. The policy amount can encompass more than just the mortgage balance, and your family members can use the payout for their most pressing financial need, whether it’s the mortgage, health care, college or another issue.

Mortgage life insurance might make sense if you need life insurance to cover a mortgage but you have a health issue that would prevent you from qualifying for term life coverage. Here’s more on mortgage life insurance vs. term life.

Permanent life insurance may be too much

A permanent life insurance policy lasts your entire life and builds cash value over time. It can be considerably more expensive than term life. If your family’s financial obligations are finite — like the years covering a mortgage or college tuition — term life insurance is suitable and will give you more bang for your buck.

NerdWallet’s life insurance comparison tool can help homeowners find the right coverage amount and compare rates.

Aubrey Cohen is a staff writer at NerdWallet, a personal finance website. Email: acohen@nerdwallet.com. Twitter: @aubreycohen.

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Image via iStock.

Tips for Cutting Costs but Not Jobs

There are many great aspects of being an entrepreneur and owning your own small business. Unfortunately the occasional need to layoff staff isn’t one of them. With a reported 70% of business costs being staffing related, many businesses first look to their employees when money gets tight. However, as a recent post by Minda Zetlin on Inc. highlighted, there are some ways that you can help reduce your business’ costs without having to lose any of your team.

One of their first cost-cutting tips is to sublet part of your office space. In addition to the monetary assistance that comes with having someone to split the rent with, there are other benefits of sharing space with the right company. Perhaps the business you bring in could be a potential partner or customer for your company in the future. Just like any roommate situation, you’ll want to take a hard look at who you’re subletting to and make sure it’s a good fit (even if you don’t end up collaborating directly).

So what do you do if you don’t have much room to sublet? Consider allowing some of your employees to work remotely. Often times this will be a welcomed change for them as they’ll be free of a daily commute but you’ll also have more room to lease out to another business. There are many free or inexpensive tools like Slack that small businesses can use to communicate with their team and stay on task even if they’re not in the same physical space. However you will want to be sure to bring your whole team together in person periodically. Additionally keep in mind that some employees will actually prefer to come into the office every day and so you shouldn’t force them to stay home.

An alternative plan for keeping your team employed without incurring the costs is to loan your employees out to a fellow business. Obviously you don’t want to turn over your assets to a competitor but perhaps you know another business that could use the extra help and skills that your employees provide that would be willing to take on a portion of your payroll. Once again you’ll want to ensure that your employees are comfortable with whatever arrangement you devise, but many will understand the predicament you’re in and appreciate your effort in ensuring their financial security. Additionally such an arrangement will make it easier to bring your team back full time once you have to money to do.

Lastly another way to minimize your costs is to negotiate with your vendors and suppliers. While there’s no guarantee they will be open to price changes, it is possible that they’ll be willing to reconsider your pricing in order to hold on to your business as a customer. They may have other conditions that go along with their discounted pricing but it’s definitely worth asking especially if it means you don’t have to lose any of your staff.

If your small business is experiencing some lean times you may feel like you’ll need to let go of some of your employees. Luckily with some creative problem solving, that might not be the case. By following these tips and thinking of other ways that make sense for your business to cut costs in other areas you can help ensure that you make it through the rough patches with your entire team on board.

The post Tips for Cutting Costs but Not Jobs appeared first on Dyer News.

4 Signs You’re Ready to Refinance Federal Student Loans

Federal student loan perks — such as deferment or forgiveness — can be crucial for some borrowers. But if you don’t need them, you might want to consider refinancing with a private company.

When you refinance your student loans, a private lender replaces your current loans with a new one at a lower interest rate, potentially saving you big bucks over time. Grads with good or excellent credit and a stable income have the best shot at refinancing.

Beyond those requirements, if you can check off these four boxes, you may be ready to refinance federal student loans.

✔︎ Your potential savings make refinancing worthwhile.

Borrowers whose federal loans have interest rates of 6.5% or higher have the most to gain from refinancing, since they’ll receive the largest interest rate reduction if they meet lenders’ requirements.

“The first thing [borrowers] need to consider is whether or not there is going to be a real, tangible benefit,” says Chad Pastorius, manager of strategic planning at the Rhode Island Student Loan Authority, a nonprofit student lender that offers refinancing.

Here’s an example of how it could work: Say you have a $30,000 federal loan at a 6.8% interest rate. You’ll pay $345.24 per month for 10 years and $11,428.92 in interest overall on the standard repayment plan. But two years into repayment, once you’ve developed excellent credit and solid income relative to your debt, you might qualify to refinance. If you do, your new lender will pay off your $25,508.40 federal loan balance and issue you a new eight-year private loan at a lower interest rate — for example, 4%.

Your new monthly payment will be $310.93, a savings of about $34 a month. You’ll also see a big difference in overall interest savings: You’d have $7,634.73 in interest left to pay on the 10-year loan, compared to $4,340.78 in total interest on your new eight-year loan. That means you’ll save $3,293.95 during the next eight years by refinancing.

✔︎ Your job won’t qualify you for student loan forgiveness.

The government offers certain benefits exclusive to federal loans. One of the most valuable is federal student loan forgiveness, a program which lets you get rid of your loans early if you meet specific criteria.

Public Service Loan Forgiveness, for instance, will dissolve your remaining federal loan balance if you work in the public sector for 10 years. Government employees, teachers, police officers and AmeriCorps volunteers qualify, among others. Teachers and Perkins loan borrowers can take advantage of additional programs that offer forgiveness after just five years.

Borrowers who refinance give up access to these programs. But that will concern you less if you work for a private company and wouldn’t be able to qualify for forgiveness. You can even refinance to a shorter repayment term — say, five or eight years — so you eliminate your loans faster and pay less interest overall.

✔︎ You’re able to to afford your loans without income-driven repayment.

The government offers several income-driven student loan repayment plans, which calculate your monthly payment as a percentage of your earnings. The newest, most generous plan, REPAYE, allows all federal direct loan borrowers to pay 10% or less of their salary every month toward loans — as little as $0 if they earn no income — and offers forgiveness after 20 years, or 25 for those with grad school loans.

REPAYE and other income-driven plans are best for borrowers who have a lot of debt compared to their earnings or who work seasonally and can’t predict how much they’ll make.

“Those programs can really provide borrowers with a lot of value if their financial circumstances were to change,” Pastorius says.

But if you have a steady income, and it’s high relative to your debt, you may not need an income-driven repayment plan. RISLA, for instance, welcomes refinancing customers who have debt loads that are less than half of their annual incomes, Pastorius says. In those cases, refinancing could save you thousands.

✔︎ You don’t plan to defer your subsidized loans.

It’s hard to predict the future, but if there’s a good chance you’ll want an advanced degree, you may want to keep your loans federal — especially if they’re subsidized.

The government pays the interest on subsidized loans when they’re in deferment, meaning a borrower has temporarily postponed payments. You can apply for deferment if you go back to school full time, are between jobs or have other qualifying circumstances.

It’s worth doing the calculation, though, Pastorius says. A much lower interest rate on a refinanced loan could still save you more money over time, even if you’re paying the interest on your refinanced loan while you’re in school.

If you’ve already gone to grad school, you have no plans to apply or you only have unsubsidized loans, giving up interest-free deferment doesn’t have to keep you from refinancing.

When you’re ready to refinance

NerdWallet has partnered with the marketplace Credible, which lets you compare offers from up to eight refinancing lenders at a time. Borrowers can enter initial loan information below to see how much they could save, then fill out a full application on Credible’s website to view real offers from lenders.

Refinancing companies outside Credible’s marketplace, including SoFi, Earnest and Darien Rowayton Bank, may also be worth considering. Shopping around for a refinanced loan — all within a 30-day period, so it doesn’t negatively affect your credit — can help you decide if refinancing is worth it for you, once you know you won’t use the benefits federal loans provide.

Brianna McGurran is a staff writer at NerdWallet. Email: bmcgurran@nerdwallet.com. Twitter: @briannamcscribe.