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EPISODE 15 ~ SAVE MORE: PMI: Petition To Drop Private Mortgage Insurance and Save BIG

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Private mortgage insurance isn’t for you.  It protects the lender in case you stop paying your mortgage.  Lenders are required by law to stop charging you for private mortgage insurance when you have 22% equity in your home, but some have been known to conveniently forget.

To complicate things, if you reach 22% equity not through payments, but because real estate prices have gone up, and your house is now more valuable, you’re going to have to prove your case.  The key is to ask your bank what proof it requires.  You may have to gather comparable sales figures for other homes sold recently in your neighborhood or you may need to hire an appraiser to determine the new value of your home.  Whatever it is, Do it! 

Dropping PMI is worth it.  PMI varies, but it often costs about 1 percent of the original loan amount —PER YEAR.   So if your total mortgage was $500,000, you could be paying $5-thousand dollars —a year— in private mortgage insurance.  Ouch.  Of course, dropping PMI in this example saves you 5-thousand dollars a year —And that’s EVERY year— for the rest of the years you have that loan.

But, there’s a way to roll this savings into another strategy that saves you even more money!  When your bank drops the PMI premium, keep paying that amount –but instead of paying it toward PMI, put it toward paying extra toward your mortgage principal. You are used to paying this amount anyway, so it’s a great painless strategy.  Paying extra toward the principal on your loan saves you money, because soon there’s less principal to charge you interest on.  You also end up paying your loan off early.

Let’s say your PMI payment was $100 a month on a $225,000 loan.  If you prepaid that $100 a month —just a hundred dollars— as extra toward your mortgage principal each month, you would save $24-thousand dollars over the rest of the loan.  That is the power of reverse compounding and it is one of my favorite save BIG strategies.

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EPISODE 13 ~ SAVE MORE: Home Appliances: Save Money By Knowing When to Repair Or Replace Your Appliances

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Get this: Other than houses and cars, home appliances can be the biggest investments we make. Not nearly as glamorous either. First, I’ll give you the over-arching rule of thumb: If the repair will cost more than 50 percent of the price of replacing the appliance, you should get a new one. I could end it there, but that would be a pretty lame segment. Plus, I know you may be in denial that you actually have to pay to replace one of these big machines in your house. I went through it myself with my dishwasher.

So here’s the other info that can help you say sayonara to old appliances: their average life span. That’s right, the National Association of Home Builders did a study and actually figured out how long most appliances typically last before they conk out for good. Here goes:

Air Conditioners 15 years
Dishwashers 9 years (mine lasted WAY less)
Dryers 13 years
Furnaces 15-20 years
Garbage Disposals 12 years
Microwaves 9 years
Refrigerators 13 years
Stoves 13-15 years
Washers 10 years
and
Water Heaters 10-20 years

Where your appliance falls in those ranges will depend on the brand and how well you maintain it. Think of your appliances like a car. They need tune ups. The number one steps you can take for a few key appliances are to: never overload your washer, remove lint from your dryer trap AND vent, keep your dishwasher drain and filter clear, and vacuum your refrigerator coils (I need to do that —or nag my husband to!)

OK, so you can save by biting the bullet and replacing instead of repairing.

And there are ways to save on the repair itself. First of all, be sure to check your warranty before paying for repairs. My furnace went out recently and the technician told me it was going to be a $600 repair. But I had this fuzzy memory that we had somehow extended our warranty just by registering the unit with the manufacturer when we bought it. I insisted that the local company check and, sure enough, we got the repair for free.

If you do need to pay for a repair, be the hunter, not the hunted. In other words, do business with a repair company you seek out, not one that goes door-to- door offering free inspections. That’s a come-on to get in your door and find expensive faux problems.

Next, insist on a written estimate. Reason being, some states require the company to get your permission if the cost is going to go up more than 10 percent.

Finally, pay little or nothing up front. Fly-by- night appliance contractors have been known to get their money in advance and then disappear without doing the work. Established firms will be happy to get paid at the end of the job.
Know these rules of thumb and you can avoid overpaying for appliance repairs or repairing them this year only replace them next year.

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EPISODE 12 ~ SAVE MORE: Cheap Hotels: A Secret Technique For Scoring Luxury Rooms At Deep Discounts

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Let’s talk about how to save big on hotel rooms —luxury hotel rooms. Consumers’ Checkbook, which studies services, has scrutinized online
travel booking services and says it has figured out THE strategy for scoring rock bottom rates on 4 and 5 star hotel rooms. The answer?
Priceline. But NOT using it the regular way. Checkbook’s editors spent years experimenting and Executive Editor Kevin Brasler is here to reveal their “system.”

OK, I’m going to name the step and you explain why it’s important, alright.

Number 1: Go to Priceline’s “Name your own price” tool.
With Priceline’s “Name Your Own Price” option, you don’t know which hotel you’re bidding on. Instead, you enter the city where you will be traveling and the dates for which you will need a hotel room plus the neighborhood you prefer and the star level. The system then tells you whether your bid was accepted and which hotel accepted it. It’s less expensive because you don’t get a choice.

Next you click the bubbles to only look at 4 and 5-star hotels. Why is that important?
If your price is accepted by any hotel that meets the conditions you set, that’s where you’re booked. Because you don’t get to choose, Priceline bidding works best if you bid only on four- or five-star hotels—so you can be reasonably sure of ending up at a nice place.

Third, step: Study the different neighborhoods in your destination city, called “geographic zones,” and choose your favorite one that DOES have 4 and 5 star hotels available. Why?
In order for our strategy to work, your preferred zone has to contain Priceline four- or five-star hotel options. Deselect all other zones, select only your preferred zone.

Fourth, Make an opening bid of $60 for any 4 and 5 star hotels in that neighborhood. Why $60?
We found that’s about the lowest rate Priceline will accept for high end hotel rooms. Ignore the warnings that your bid is probably too low and wait to see if it’s accepted. Sometimes it is.

If your bid isn’t accepted you go to step 5 and this is the REAL beauty of your system: you raise your bid. But Priceline doesn’t usually let you try again for 24 hours. How do you get around that?
Priceline DOES let you try again if you add another geographic zone to your search. But — and this is key– you add a zone that does NOT have any 4 or 5 star hotels. Then you increase your bid by $5. Since your search is still limited to only 4 and 5 star hotels, Priceline will search your original target destination again, not the added destination!

And the final step is?
You repeat the process as long as you need to. Each time you bid, request your preferred zone and a different combinations of secondary zones that do NOT have 4 or 5 star hotels. Then add another $5. In this way, $5 at a time, you will identify the very lowest rate you can get for a room.

How many tries does it usually take?
We find that we usually have to rebid only two or three times to obtain a great price from Priceline.

Does this ALWAYS work?
Almost always, but In some scenarios, Priceline’s “Name Your Own Price” won’t generate lower rates than other sites. For events such as the Super Bowl, the NCAA Final Four, New Orleans’ Jazz Festival, and other times when hotels expect to be almost completely booked, you’re very unlikely to find a deal on Priceline. But it’s still worth a shot.

These are Priceline’s own star ratings. Do you find them reliable? You might disagree with Priceline’s hotel-rating system. For example,
Priceline gives three or four stars to Crowne Plaza properties; in our experience, that often seems a bit generous. Since you can’t exclude specific hotels from the Priceline bidding process, you might get stuck in a hotel for which a four-star rating is a stretch. If you’re truly worried about that, you could use our method and just search for 5-star properties.

Give me some examples of the savings Checkbook has been able to snag.
Boston: Hyatt Regency Boston Normal: $169 Checkbook: $99 New York Roosevelt Hotel Normal: $159 Checkbook: $88 Minneapolis Radisson Plaza Normal: $188 Checkbook: $98 Orlando Marriott World Resort Normal: $194 Checkbook: $97

Checkbook’s Priceline method is a lot to absorb, especially if you’re driving or jogging as you listen to Easy Money, so Checkbook has provided a guest blog post to walk you through its Strategy in detail. Be sure to check it out at EasyMoneyShow.com/12.

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EPISODE 11 ~ SAVE MORE: Diminished Value On Your Vehicle: Get Compensated For Car Accident Damages

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Here’s something I wish I had known about when another driver plowed into my five-month- old car: it’s called diminished value. The other driver’s insurance company paid to fix my vehicle, but just the fact that it had been in an accident diminished its value and I—and you—should be compensated for that loss.

After all, your car is no longer as sound. One former car dealer says he used to automatically offer thirty percent less for a trade-in if it had frame damage.

Many people don’t think about the new, lower value of their vehicle in the aftermath of an accident. Instead, we just worry about how long it’s going to take for the body shop to fix the car so we can get back to our lives.

If you have a newer vehicle or an expensive one, you must ask to be compensated for diminished value. The other driver’s insurance company won’t offer. It’s important to pursue a diminished value claim right away, because most states have a statute of limitations on property damage claims, often three years.

If the other driver’s company resists, consider small claims court to collect diminished value. It should be a fairly easy case to prove: What was your car worth before the crash? How much less is it worth now because it was in an accident? You can also find a bunch of law firms online that specialize in getting people paid for diminished value.

Some of those firms estimate that the average value lost when a vehicle is in an accident is 33 percent. So let’s say you owned a car that was worth just 15-thousand dollars. If you were able to win a 33% diminished value claim, you’d get a check for $5 grand. That’s real money. And, more importantly, it’s money you deserve to put toward your next car.

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EPISODE 10 ~ SAVE MORE: When To Refinance: Learn the Refinancing Rule of Thumb That Can Save You Six Figures

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Refinancing to get a lower interest rate is one of the rare times that you
can save 5 or even 6 figures! But people always ask me how to know if the time is right. Should they refinance now? Or wait? Or… refinance all over again?

That’s why I created something that I call the “Refinancing Rule of 5’s.” It helps answer this question simply and finally. Here it is: You should refinance IF:

1. Your new interest rate will be at least .5 percent —half a percent— lower
than your current rate.

2. You will add 5 years or less to the length of your loan. Reducing the years would be even better.

3. You will be able to recover your closing costs in 5 years or less — preferably much less. Now let me quickly repeat and explain each part of the rule.

First, Your new interest rate will be at least .5 percent lower than your current rate. People used to say you should only refinance if you could snag an interest rate that was at least 1 percentage point lower. But since rates have been hovering at such low numbers for years now, a half a percent is actually a big deal and a good minimum goal.

Second, You will add 5 years or less to the length of your loan. Reducing
the years would be even better. Often when people refinance, they focus
solely on getting a great new rate and leave everything else the same. If they originally went with a 30-year fixed rate mortgage, they do so again out of habit.

Depending how many years there are left on your loan that can defeat the entire purpose because even if you get a lower interest rate, stretching out those interest payments over additional years will eventually cost more.
Third, You will be able to recover your closing costs in 5 years or less —
preferably much less. Closing costs are the fees you have to pay to get
the new loan, like the appraisal and title fees and so on. Most of all you
should make sure you will be in this house long enough to recoup the closing
costs required to refinance. To figure this out, all you do is divide the cost of closing by your monthly savings to see how long it’s going to take for the new loan to pay for itself. Let’s say your closing costs were $1300 dollars and your monthly savings from refinancing was $132. $1300 divided by $132 is 10 months. That is far less than 5 years, so you’re good to go.

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