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Francis Vayalumkal

Homeowners now have several choices when it comes to getting money out of their home’s equity. Many people treat their houses like piggy banks, transforming their equity into cash and credit. Some of the most popular methods used are home equity loans, home equity lines of credit and cash-out refinancing.


Unlike the home equity loan types, with cash-out refinance you refinance your mortgage for more than you currently owe, then pocket the difference.

For example: if you owe $100,000 on a $150,000 house, and you want a lower interest rate. You also want $20,000 cash, maybe to spend on a new car or any other purpose. You can refinance the mortgage for $120,000. Ideally, you get a better rate on the $100,000 that you owe on the house and you get a check for $20,000 to spend as you wish.

Cash-out refinancing differs from a home equity loan in several ways:

A home equity loan is a separate loan on top of your first mortgage.
A cash-out refinance is a replacement of your first mortgage.
The interest rates on a cash-out refinancing are usually, but not always, lower than the interest rate on a home equity loan.
You pay closing costs when you refinance your mortgage.
Generally, you don't pay closing costs for a home equity loan.
Closing costs can amount to hundreds or thousands of dollars.

It doesn't make sense to refinance a higher amount at a higher rate. If your current mortgage is at a lower interest rate than you could get now by refinancing, it's probably better to get a home equity loan. Or, if you're 20 years into a 30-year mortgage, you're paying more principal than interest with each mortgage payment. If you are that far into a loan, then it might not make sense to refinance, even if your current rate is slightly higher.

So, if you want to extract a bundle of cash from your three-bedroom piggy bank, how do you decide whether a cash-out refi is right for you?

It depends on how much you would save each month and what you want to spend the money on.

When you decide whether to do the cash-out refinancing option, keep in mind that you'll have to pay private mortgage insurance if you end up borrowing more than 80 percent of your home's value. If you would have to pay PMI, it might be cheaper to take out a home equity loan.

Even before you do the math, it's best to take a close look at how you plan to spend the money from cash-out refinancing. Specifically, is the cash for a short-term purpose or a long-term purpose?

If you're going to make payments for 15 or 30 years, it makes sense to spend the money on something enduring: an addition to the house that will increase its value, potentially lifesaving experimental medical treatment that your health insurance won't pay for or to start a business.

Maybe you want the cash so you can bulldoze a mountain of high-interest credit card debt. Yes, you're paying a lower interest rate and you can take a tax deduction, but you're probably lengthening the time it would take to pay off the credit card debt.

In essence, you're taking 30 years to pay off credit card debt that you might have been able to tackle in five or 10 years by cutting other expenses or taking out a shorter-term home equity loan.

Don't break the piggy bank – you're living in it.

As always, talk to a loan officer to help you make the decision on what type of refinancing/equity line is best for you.

Francis Vayalumkal is a loan officer at Market Street Mortgage and can be reached at (813) 932-4578, Ext. 234 or via e-mail at

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Nitesh Patel

In terms of personal pleasures, buying life insurance doesn’t usually fall in the same category as buying a new car or a spring wardrobe. However, despite its lack of glamour and prestige, the decision to buy life insurance can be infinitely more important to a family and its future financial security.

Before you begin your search for a life insurance policy, it is important to give some thoughtful consideration to your financial goals. For most of us, it’s hard to imagine how life would be without us in it. But this is the first step in determining what financial resources you need to leave your family so they can maintain the lifestyle you would want for them in case you die.

You might start by making a list, which includes:

those who depend on your income and/or support;

your financial obligations;

your assets;

expenses that would arise which you may not have now. For example, if you are the primary caregiver for your children, what would it cost your family to provide that care without you?

Also, don’t overlook estate taxes. After adding up the value of their homes, cars, investments, pensions, 401(k)s, life insurance coverage and other belongings, many people are shocked to find their total assets could be subject to estate taxes at death. A qualified insurance professional can help you address these and many other concerns.

Additionally, here are 10 things you can do to help you and your family make the most appropriate life insurance purchase:

Do it now. Don’t put off a decision that can have such a profound impact on your family. Also, make sure you have a current will or trust.

Shop for quality. Buy from a company that has the top ratings for insurance financial strength and claims paying ability from the four major rating agencies (Moody’s, Standard & Poor’s, Fitch and A.M. Best).

Choose a representative you trust and like working with. This person should help you identify your personal and financial goals; recommend solutions to help you reach your goals; and review your insurance plan every year to be sure it continues to meet your changing needs.

Know what you’re buying. Make sure you are comfortable with and understand both the company and product(s) you are considering. If you’re only being shown a “best-case” scenario, ask for something less optimistic to see how various non-guaranteed assumptions can impact your premiums, cash values or coverage.

Be honest. Do not omit any part of your medical history on your life insurance application. If you do, the company may be able to refuse coverage, deny a claim or cancel the policy.

Pay less often and pay less. Save money by paying premiums annually rather than semiannually, quarterly or monthly, if possible.

Be prepared to wait. While most companies provide conditional coverage when you pay up front, you can expect delivery of the actual policy within approximately three months (it often takes time to get all the necessary medical records). If you don’t have it by then, contact the company.

Read the fine print. When you get the policy, read it carefully and ask your representative to explain anything you don’t understand. Remember you have a “free-look” period (10 days in most states) that entitles you to cancel and return the policy for a full refund, without penalty.

Tell those impacted. Inform your beneficiaries about the type, amount and location of any life insurance policies you own. Keep your policies in a safe place at home. Document the name and phone number of your representative and insurance company and all policy numbers in a safe deposit box. Get an annual check-up. Meet with your representative to review your life insurance coverage at least once a year to be sure it continues to meet your needs.

Be cautious if another representative suggests you cancel your current policy to buy a new one. Chances are you’ll be better off keeping your old policy – especially if it’s a “cash value” policy. Contact your original representative or company before making any decisions.

All things considered, when purchasing life insurance, shop carefully, ask questions and make sure you understand the answers. Keep in mind, as with most things in life, you get what you pay for.

Nitesh Patel is a financial representative with the Northwestern Mutual Financial Network based in Clearwater for The Northwestern Mutual Life Insurance Company, Milwaukee, Wisconsin). To reach Patel, call (727) 799-3007 or e-mail

Finance | Financial advice | Immigration | Special Needs | Accounting | Business | Labor Law | Asset Protection

Kamlesh Patel
CRUNCHING ‘EM NUMBERS: should you be making estimated tax payments?


During the tax year, you must prepay a substantial amount of the taxes you’ll owe for that year, or you risk being hit with an underpayment penalty. If you’re an employee, that’s usually not a problem. Your employer will withhold taxes from each paycheck. You can adjust the amount withheld so that it covers your total tax bill, even if you have extra income from moonlighting or investments. But if you’re self-employed or retired, you might need to make estimated tax payments.

To avoid a penalty, the total of your withholding and estimated tax payments must generally be at least 90 percent of your tax liability for the year, or 100 percent of your last year’s tax liability. There’s no penalty if your underpayment is less than $1,000. Special rules apply to farmers, fishermen and higher-income taxpayers.

You pay your estimated taxes by making four payments, due in April, June and September of the current year, and in January of the next year. You can’t just wait until the last date to pay what you owe. You must start paying estimated taxes as you earn taxable income. You can either pay all the tax you owe on each quarter’s earnings, or you can pay it in installments over the remaining periods. But you must be sure to pay enough to avoid an underpayment penalty for each period. Again, special rules apply to farmers and fishermen.

are you a fireman or a business manager?

In your business are you constantly putting out fires caused by cash shortages? How well you manage your cash flow affects your business’s profitability and longevity. Here are a few “fire prevention” suggestions.

Create a cash flow projection. A cash flow forecast should be one of the quarterly reports prepared in every small business. It consists of your beginning cash balance plus your expected receipts minus your expected disbursements. A forecast allows you to anticipate cash shortfalls in order to give you time to carefully consider all your financing options.

Collect your money as fast as possible. Send invoices as soon as you ship goods instead of billing at the end of the month. Your invoices should clearly show the payment due date and any penalty for late payment. Follow up on delinquent receivables. The longer an account remains unpaid, the greater the chances are that you’ll never see your money. Once an account becomes delinquent, make no more credit sales to that customer until the account is brought up to date.

Postpone paying your bills. Take early payment discounts when it makes sense, but otherwise use the full grace period to pay your bills.

Kamlesh H. Patel, CPA, can be reached at (813) 289-5512 or (813) 846-5687 or e-mail or

Finance | Financial advice | Immigration | Special Needs | Accounting | Business | Labor Law | Asset Protection

Satya Shaw

A successful retirement does not just happen; you have got to plan for it. The long ramp toward retirement focuses on saving and investing, but once retirement starts emphasis shifts to spending and safeguarding. Even though the greatest challenge in retirement, and probably your greatest fear, is outliving your money, most people spend less time planning their retirement than they do planning a vacation.

What does retirement planning involve? Here are the steps: First, determine what you would ideally like to do in retirement, and then discuss it with your spouse and other loved ones. Will you spend your time traveling, enjoying hobbies, helping others, working part time, or what? Second, estimate the retirement income you'll have from savings, Social Security, pension and all other sources. Third, estimate your expenses making sure to take account of inflation, taxes and health care costs, which are likely to be an increasing part of your budget.

Steps two and three should be done for each five-year period of your retirement and then revised annually. Fourth, if you have more income than needed, you only need to safeguard your investments to make sure they're not lost or shrunk by bad decisions. If you have insufficient money for retirement (expenses exceed income), then you'll need to postpone retirement, work part-time or possibly use a Reverse Mortgage to access the equity in your home. Either way, it is highly recommended that you minimize your exposure to loss and maximize the full potential of your financial resources by working with a financial adviser. They can help you determine the risk you can afford, investment options and how to position your money for best results without sacrificing safety. Retirement is going to be long, filled with uncertainties, including emergencies, and going it alone is one of the greatest risks you can take.

Be realistic in your planning. For example, be aware that for a couple age 65, there is a 50 percent probability that one will live beyond age 90. Acknowledge that even a low rate of inflation can make a big difference in prices over the 20 to 30 years you'll be in retirement. For example, average inflation of 3 percent means $1 today will be worth only 55 cents in 20 years and 41 cents in 30 years. Since 78 million boomers are entering retirement over the next two decades, the price of everything related to retirement, especially health care, is likely to rise faster than overall inflation. Inflation is a cruel tax for those on fixed incomes, and chances are your income in retirement will increase a lot slower than prices.

The boomer explosion is going to overwhelm government-provided services and benefits. This means that the relative benefits of Social Security and Medicare are going to shrink under the pressure of increased retirees. There will simply be more people receiving entitlement benefits than workers paying the bills. Every study, government and private, indicates there will be a shortage of money to support these programs. To pay for this shortfall, the government must raise taxes of all types. The increased taxes, inflation, relative decrease of benefits combined with escalating medical care costs will be especially burdensome for those in retirement without rising incomes from wages and salaries.

If you haven't evaluated it yet, investigate the risk you're taking with your retirement money. Would you have a loss if the stock market lost ground? You might if your money is still in your ex-employers 401(k) plan, or if you own securities, even mutual funds, whose value is determined by the market. Generally, investments in stock have done well long term, but you may need your money before a long time. From November 1973 to October 1974, the S&P stock market index fell 48 percent, and it took over six years to recover. The last bust in the stock market was 2000-2002, and we have yet to fully recover. In the meantime, inflation marches forward with the shrinking dollar purchasing less. Much of your income in retirement is likely to be derived from your savings and investments, and you simply can not afford risk of loss and the compounding of inflation. If you lose some or all of your retirement money to bad investments, you'll increase dramatically your chances of realizing your greatest fear: outliving your money.

How do you safeguard against the challenge of too many years and not enough money? Like law and medicine, financial planning is best left to professionals. Your job in retirement is to enjoy life free of investment worries.

Satya B. Shaw, CPA, can be reached at (813) 842-0345.

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