Biz Directory
Contact Us
Mental Health
Financial advice
Youth Matters
Techno Corner

Francis Vayalumkal

During the height of the real estate boom, it was not only possible to buy a home with little cash and less-than-ideal credit, but with soaring real estate prices, it was easy to refinance as well.

As a result, many homeowners cashed in on lower interest rates and pulled equity out of their homes to pay off other debts. But that was then and this is now. As home prices fell and lenders started tightening their underwriting guidelines, the equity many thought they had vanished. While refinancing still provides the same great advantages to homeowners, fewer consumers will be able to benefit from it.

Homeowners have several good reasons to consider refinancing, Low rate is the most important reason to refinance. When the rate drops below 6 percent, people take advantage of the refinance and save money. By refinancing to a lower interest rate, consumers can often save a couple hundred dollars a month.

Homeowners can switch to a fixed rate. Homeowners who currently have an adjustable mortgage can refinance into a fixed-rate mortgage so they don't have to worry about rising mortgage costs after a loan resets.

Debt can be consolidated. Consumers with other debts may be able to refinance and use some of the equity in their homes to pay those debts off, improving cash flow.

Seeing the benefits of refinancing is easy, but for some, realizing those benefits is another story altogether.

Those consumers who won't be able to refinance typically fall into two categories.

People with low credit scores: There were people who had credit scores in the mid-500s who were able to get subprime loans. When they originally bought the property, their thought was that they would pay a premium now and work on improving the credit score and then refinance it. If they still have the low credit score, they are having a difficult time refinancing now.

People with low equity: The second group is made up of those who have little or no equity in their homes. Many people who bought at the top of the market have seen the equity in their homes decrease during the recent real estate correction. As a result, those with low equity will not be able to refinance now.

Worse yet, some homeowners are "upside down" (owe more than their home is worth) on their mortgages. In most cases, the less equity you have, the less likely it is that you'll be able to refinance.

Other homeowners who have credit scores in the 600s and a modest amount of equity may be able to refinance, but at a higher cost.

For example, mortgage loan providers Fannie Mae and Freddie Mac recently announced that borrowers who have credit scores of 680 and below will have to pay a surcharge that could add thousands to the cost of the loan.

There also are fewer options for people who have unconventional financial situations such as self-employed individuals. There are still programs, but fewer lenders are offering them. Such programs typically require higher credit scores and a larger down payment, meaning there is less money available to borrow if a homeowner is refinancing.

The odds of successfully refinancing are much higher for consumers with more than 20 percent equity in their homes and credit scores in the 700s or higher.

There are people who have purchased their property 10 years ago and housing prices have escalated astronomically. Those people who brought those properties, even with property declines, still have a level of equity that if they choose to refinance for better interest rate or some cash out, they can still do that.

Consumers with equity and excellent credit also will get the lowest interest rates, whether they use a bank, credit union or a broker, so it typically does not matter as much where they apply for their loan.

A good place to start your refinancing journey is with your current lender. But it never hurts to shop around and compare

Any good mortgage originator whether it be a bank, a credit union or a broker, should have no problem offering you a complete good faith estimate at your initial sit-down with them, whether you've officially applied or not.

Talk to a trusted mortgage professional to see if is worth it for you to refinance.

Francis Vayalumkal is a mortgage banker with Colonial Bank and can be reached at (813) 719-0303

Kamlesh Patel


During this slow business cycle, don't make your company's troubles worse by paying too much income tax. Consider some of these tax-smart moves to help offset the effects of an economic downturn.

Some tax breaks are obtained by just assessing the stark realities of your business situation. Are your inventory levels too high? An accurate accounting of inventory may reveal items that have lost value or become obsolete, which could in turn result in a tax write-off. Donating slow-moving inventory to charity may also help.

Another reality may be aging accounts receivable. Bad debts that can be documented as uncollectible, such as through bankruptcy records may be deductible. Estimates of uncollectible receivables alone are not sufficient.

If you have worthless business equipment that has not been fully depreciated, you could be entitled to a write-off by abandoning it. Review your equipment ledger for items such as computers, copiers, or other pieces of equipment that are no longer being used.

A business downturn also may be an opportunity to focus on the smaller things. Are you properly documenting the business use of your personal vehicle or cell phone? Would your home qualify for a home office deduction? Perhaps you should adjust your final 2008 estimated tax payment to reflect lower business income. Every little bit helps.

Even if your business operations result in a net operating loss, there is a silver lining. You can carry operating losses back two years and obtain an immediate tax refund of prior-year taxes. If your business loss is partially the result of a federally declared disaster, you may be entitled to even more tax benefits. Tough times call for tough action, but sometimes it is the little things that make all the difference.


With natural disasters occurring with increasing regularity, business managers should be thinking about how a disaster would affect their business. Here's a quick review of what to consider.

- Disaster plan. Too few businesses do any kind of disaster planning. Yet even a simple plan can make the difference between being back in business quickly and floundering in chaos for weeks. Bring together the managers of key areas and brainstorm on the critical steps needed to recover from a disaster. Consider at least two scenarios: a company-specific event such as a fire that affects just your business and a regional disaster that affects the whole area.

- Communications. Create a plan for communicating with employees, vendors, and customers after a disaster. At a minimum, each manager should have a contact list for his or her key employees.

- Records. Identify essential company records and how you'll access them. Computer backups are a key measure, but make sure the backup tapes or disks are stored in a safe location off-site. You may also need paper backups of certain key information in case of a power blackout.

- Insurance. Meet with your agent and review the scope and dollar limits of your coverage including business interruption insurance.

- Relief payments. Your sources of relief will be insurance payments and possibly federal disaster loans. You may also be eligible for a variety of tax breaks.

- Tax breaks. At a minimum, your business may qualify for a casualty loss deduction. If you're in a presidentially declared disaster area, you have the option of claiming the deduction against your prior year's taxes. Often this will give you a faster refund. A variety of other tax benefits cover replacing damaged property, or even abandoning the business and starting anew.

For guidance in your disaster planning, give us a call. We can help.


Who have you designated as beneficiaries for your insurance policies and retirement accounts? If you can't remember, you're not alone. But it's worth checking. If you make the wrong decision, it could affect who inherits those assets. In some cases, it could also change the taxes your beneficiaries will pay and the value they'll receive. Here are some key facts about beneficiary designations.

What are they?

- When you designate a beneficiary for an account, you are naming the person you want to inherit that account.

- Your designation determines who will inherit the assets in the account, regardless of what your will might say. Generally, the assets will bypass probate and go straight to the person or institution you named. - You can designate a person or group of persons, a charity, a trust, or your estate. You may also want to designate a secondary or backup beneficiary in case the primary is no longer living. Why are they important?

- It's important to keep beneficiary designations up to date because they determine who will inherit the assets in your accounts. Changing your will won't change the beneficiaries.

- There can be tax implications too. With a traditional IRA, your choice of beneficiary can affect how quickly withdrawals must be made and taxes paid. That can change the value of the IRA to your beneficiary. How do I update them?

- First, find copies of all your current designations. Contact your insurance company and plan trustees if you can't locate the documents.

- Review them and decide what changes you'd like to make. Make an appointment to go over the changes with your tax or estate planning advisor.

- Send your updated designations to the account trustees. Make sure you receive confirmations and keep copies in your records.

Kamlesh H. Patel, CPA, can be reached at (813) 949-8889 or e-mail or

Contact Information
The Editor:
Send mail to with questions or comments about this web site. Copyright © 2004 Khaas Baat.

Anything that appears in Khaas Baat cannot be reproduced, whether wholly or in part, without permission. Opinions expressed by Khaas Baat contributors are their own and do not reflect the publisher's opinion.

Khaas Baat reserves the right to edit and/or reject any advertising. Khaas Baat is not responsible for errors in advertising or for the validity of any claims made by its advertisers. Khaas Baat is published by Khaas Baat Communications.