Christmas Gifts for Babies and Toddlers

Christmas gifts for kids are a national pursuit in many western countries during the holiday season. It is all too familiar to hear of families spending upwards of 5% of their annual income on gifts during the holiday season. Many families allot a budget in order to curb spending, but inevitably the majority falls short, overspending mostly on toys and other white elephants.

Many websites suggest gift ideas for kids. One way to ensure a working budget is with the aid of lists. The first step is to create a couple of lists by scouting for potential gift ideas for kids – one for babies and the other for toddlers. Next, build a list of recipients and the count of items their way. Once the two lists are established, in a few iterations, purchases can be balanced without exceeding the budget.

Below is a list of frugal Christmas gift ideas suitable for babies’ up to two years of age:

Product	Thumbnail	Best Price	Description
Cloud b Sleep Sheep - Four Soothing Sounds From Nature		$18	The stuffed plush toy comes from the award winning Sleep, Sheep and Friends theme at Cloud b. The toy has four Soothing Sounds: Mother's Heartbeat, Spring Showers, Ocean Surf, and Whale Songs that automatically times out after 23 or 45 minutes. Ideal as a sleep companion, during traveling, and in unfamiliar environments.
Vulli Sophie the Giraffe Teether by Vulli		$16	Since its introduction in 1961, the popular product has gone on to be the ultimate teething toy. It is made of 100% natural rubber and food paint and is designed to stimulate multiple baby senses – contrasting spots for visual, squeaker for hearing, and aids for touch and smell sensations.
Razbaby RaZberry Teether		$5	Another teether toy that is much cheaper. We recommend going for the single-colored version rather than the multicolored ones as there is a minor risk of small pieces coming off and causing a choking hazard.
Baby Einstein Take Along Tunes		$9	7 classical melodies with colorful dancing lights across the screen. Promotes auditory development and music appreciation.
Lamaze Jacques the Peacock		$11	Plush toy peacock design with soft velour body, peek-a-boo mirror and squeaker. Included link can be used for hanging from other toys such as an activity gym or play mat.
Baby Einstein Bendy Ball		$6	An innovative rattle toy made of soft flexible plastic with a rattle ball inside which makes sounds as it is rolled.
Manhattan Toy Winkel		$13	A maze of safe, soft, continuous tubes for teething babies to chew on.
Fisher-Price Ocean Wonders Soothe & Glow Seahorse		$14	Similar to the traditional glowworm toy, this plush toy glows, plays soft music and soothing sounds of the ocean for 5 minutes.

Below is a list of frugal Christmas gift ideas for toddlers (2 to 4 years):

Product	Thumbnail	Best Price	Description
Cloud b Twilight Constellation Night Light		$28	Projects a starry night sky on to the walls and ceilings. It is made to help children get a peaceful night’s sleep. Comes in three colors/themes.
Fisher-Price Brilliant Basics Baby's First Blocks		$9	Sort, stack, and learn to identify and match shapes.
Munchkin Mozart Magic Cube		$18	An award winning toy that teaches how sounds combine to form true polyphonic music. Sounds from 5 instruments or combination – harp, French horn, piano, flute, and violin.
LeapFrog Spin and Sing Alphabet Zoo		$20	A learning toy for toddlers with three modes: Letter, Animal, and Music.
Melissa & Doug Cutting Food Box		$14	31 pieces including 8 food items that cut into 29 pieces. The pieces are fitted together using Velcro stickers. Cutting them up makes a fun if not realistic “crunch” sound. Introduces the concept of part, whole, and fractions.
Melissa & Doug Deluxe Magnetic Responsibility Chart		$12	Great value for a product that features 90 magnets depicting behaviors and rewards, and a Magnetic Calendar/Dry-erase board.
Green Toys Tea Set		$20	The best toy for the environmentally conscious gift giver – made out of recycled durable plastic. The set is brightly colored and light weight. 17 pieces.
Play-Doh 24-pack of Colors		$14	As one of the most used toys among toddlers, this is a no-brainer pick.

Related Posts:

1. Christmas Gifts for Babies and Toddlers.
2. Christmas Gifts for Kids Between 5 and 12.
3. Christmas Gift Ideas for Teenagers.
4. Christmas Gift Ideas for College Students.
5. Corporate Christmas Gift Ideas.
6. Christmas Gift Ideas for Adults.

Last Updated: 11/2011.

Stock Portfolio and Watch List Updates for October 2010

Following are the activity from the previous month:

1. Bought back the cash covered puts we wrote on VF Corporation (VFC Nov 70) at $3.20 (8/21/2010) for $0.10. VF Corporation shares vaulted 20% since our purchase lending the puts almost worthless.
2. Closed out our 100% loss position on Anthracite (ACPIQ). Closing out the position allows to neutralize some of the capital gains we will have to book this year at tax time.
3. Added NYSE Euronext (NYX) and Owens & Minor Inc. (OMI) from our watch-list to our portfolio at $30.38 and $28.11 respectively with around 2% of our portfolio value each.
4. Added slightly more than 3% of our total portfolio value in cash.

Carnival of Road to Financial Independence #24

Welcome to the October 19, 2010 edition of road to financial independence.

Beating Inflation

Ryan @ MFN presents Should You Invest In Gold And Precious Metals? posted at The Military Wallet, saying, "Gold and other precious metals are near record highs. Is now a good time to invest in them?"



Darwin presents 100 Year Bonds – Great Yield or Sucker’s Game? posted at Darwin's Money, saying, "100 Year Bonds are actually coming of age now in an era of low yields and income-starved investors. Learn about who's issuing 100 yeard bonds and what to watch for."



Arjun Rudra presents Asset Allocation In A Rising Interest Rate Environment With Gaetan Ruest of Investors Group posted at Investing Thesis, saying, "Interest rates that are set by a country’s central bank have a large impact on the capital markets. Did you know that fixed-income investments such as bonds, that many use for capital preservation and to save for the future exhibit an inverse relationship to prevailing interest rates."

Frugal Living

FM presents First Steps: Teaching Toddlers About Money posted at Finance Mom.



nissim ziv presents Best Careers for Women per Skill Sets & Advantages posted at Job Interview Guide, saying, "This article discusses the statement that women have advantages over men on particular areas and thereby some careers fit them better. The article also provides list of best careers for women where they can better utilize their skills and advantages."



Carrie Oakley presents Recycled Reads: 50 Freegan Living Blog Posts We Can All Learn From posted at Online Colleges, saying, "The listed blog posts represent a broad spectrum of opinions from passionate freegans to ardent critics, hoping to present the most balanced glimpse possible of the practice. It is up to individual readers to formulate their own educated guess regarding what they make of the philosophy and what they hope to take away from their lessons."



Wenchypoo presents Food Stamp Challenge Cheats--Living on $30/Week (or less) Per Person (L-O-N-G) posted at Wisdom From Wenchypoo's Mental Wastebasket, saying, "We've been led astray in the food spending arena through clever marketing and convenience. Various Food Stamp Challenges in different states show people just how FAR astray we've been led. What counts for food nowadays wouldn't even be recognizable to our grandparents! Getting back to basics--substituting QUALITY for QUANTITY--will help get us back on track so we can take care of life's other business...like having extra money to save, and wealth to build."



Madison DuPaix presents 7 Frugal Moving Tips posted at My Dollar Plan, saying, "Great tips for those who are about to move. A new house or apartment is expensive as it is - save on the move!"


MoneyThinking presents Tips on Purchasing a New Car posted at Money Thinking, saying, "The economy is finally on the upswing, and most people watching the market are proclaiming that interest rates are the best they have been in years on many high-ticket items. One of those items is vehicles."



Susan Howe presents The 8 Biggest Mistakes People Make When Choosing Life Insurance posted at The Budget Life Blog, saying, "Before you commit yourself to a policy, consider these 8 pitfalls associated with life insurance."


Leave Debt Behind.com presents Don’t Scare Your Budget with Over The Top Halloween Expenses posted at Leave Debt Behind, saying, "Let not get crazy with spending tons of money on Halloween stuff this year. Here's how to do it."



Khaleef @ KNS Financial presents CVS Shopping for the Week of 10.03.10 ? Saved $116, Spent $1, Made $46 posted at Faithful With A Few, saying, "Check out how we took advantage of deals, coupons, and ECBs in order to have CVS pay us to shop! Learn how to find these deals and match up coupons without spending an afternoon clipping away!"



Kyle McNamara presents 20 Things You Can Do With Old T-Shirts posted at Web Design Schools Guide.



melissa tamura presents How to Lower the Cost of Your Cell Phone posted at Prepaid Cell Phones.net.


FMF presents Seven Things You Should Always Buy Generic posted at Free Money Finance, saying, "Tips on saving money by buying generic items."



NHE presents Make Your Own Laundry Detergent posted at Natural Health Ezine, saying, "Save some money by making your own laundry detergent! Bonus: it's natural too."



Joe Plemon presents How to Avoid Christmas Debt Without Becoming a Grinch … 12 Great Tips posted at Personal Finance By The Book, saying, "It is very possible to enjoy Christmas without creating debt. These tips will help."



The Saved Quarter presents Ways to Make or Save an Extra $1,000 in a Month, Part 4 posted at The Saved Quarter, saying, "This four part series is about how to make or save $1,000 in a month. The fourth part (linked) is mainly ways to cut current expenses."



freefrombroke presents Where To Find Cheap Fun Family Activities – 6 Places posted at Free From Broke, saying, "Going out with the family can get expensive quick! But there are places you can look to find cheap, or even free, activities to help you save money AND have fun with the family."

Passive Income

SoulRiser presents How To Make Money With Your Website (Part 1) posted at ShareNoesis, saying, "Part 1 of a series on how to make money online from a website (or multiple websites)."



Paul Horowitz presents From Crawling to Running: Building An Online Mini-Empire With Information posted at Biz Jewel, saying, "The key to real financial freedom when working a home business is to provide simple solutions which help others achieve their own success."


Mike Piper presents Using Annuities to Reduce Risk posted at The Oblivious Investor, saying, "If used properly, a fixed annuity can reduce a great deal of the uncertainty that's normally involved in retirement planning."



Peter Rise presents Dude I hate my job review posted at Grow Every Day.



passive family income presents What is a Certificate of Deposit? posted at Passive Family Income, saying, "Earning certificate of deposit interest is one of the easiest and safest ways to make passive income. While not the most glamorous investment option, a CD can provide a stable and guaranteed fixed rate of return in a troubled economy. So what exactly is a certificate of deposit and what does it do?"

Reducing Expenses

Praveen presents Is The Education Market The Next Credit Bubble? posted at My Simple Trading System.



Tim Chen presents Best Balance Transfer Card Just Got Better: 0% for 21 months posted at NerdWallet Blog - Credit Card Watch, saying, "Citibank’s Platinum Select credit card has been the standout balance transfer card for some time now, offering 0% rates for 18 months. Now the deal has gotten a bit sweeter with some customers able to get 0% for a full 21 months."



FIRE Getters presents Advantages of Online Banking posted at FIRE Finance.



Stephanie Christensen presents My Life on Less posted at The Wellness on Less Project, saying, "Explores the experience of going from two salaries to one."


Jeff Weber presents A Quick Tip to Improve Your Credit Score posted at Smart Balance Transfers, saying, "This article explains how paying your credit card bill before the due date can improve your credit score by creating the appearance you are carrying less debt at the end of the month. This can help people save money on everything from mortgages to insurance. Thanks for considering my entry."



NetBiz presents How To Save Money At The Bank posted at Banks That Do Not Use Chexsystems, saying, "Why not add the bank to the list of places where we diligently do our homework and save money?"



CardWisdom presents Airline Credit Cards with No Baggage Fees vs. Low Fee Cards posted at Card Wisdom, saying, "Discusses whether it is worthwhile to pay $100 a year in credit card fees to get free checked bags or to use a credit card with low or no annual fees that can be used on any airline."


MoneyNing presents 10 Hassle Reducing Tips for Dealing with Insurance on Medical Care posted at Money Ning, saying, "Who doesn't want to save some money and time dealing with health insurance?"


CreditShout Kevin presents How to Cancel Recurring Credit Card Payments posted at CreditShout.

Stock Investments

Walter W. Fouse presents Top Ten S&P 500 Index Funds: Large Cap Core Mutual Funds with Lowest Costs posted at Best No Load Funds, saying, "This table of low cost top 10 S&P 500 mutual funds has been organized with the lowest cost index fund first. Nevertheless, each of these S & P 500 index funds is among the least costly on the market."



Carlos Sera presents A Tale of Recovery; Financial Tales posted at Financial Tales, saying, "Today I releaseA Tale of Recovery

I think it should be required reading in every introductory investment class. It is a simple read but illustrates an important concept. It illustrates that a percentage loss hurts more than the equivalent percentage gain. It also introduces the concept of investing as a continuous process. We invest throughout our lives and so every day we start from the same point; all our money is invested."



Dan presents How to Short Treasuries: With Yields this Low, Trade of the Century? posted at ETF Base, saying, "The latest bubble appears to be forming - Bonds. With Treasury bonds at record lows, it's worth checking out the various ways you can short Treasuries to profit from the pending collapse."



Dividist presents Investors still love divided government. A lot. posted at Divided We Stand United We Fall, saying, "In the short term, if investors believe that divided government is good for markets, that expectation can become a self-fulfilling prophecy. This may be what we are seeing now in anticipation of the November election results. Apparently the investor class really believes that divided government is good for the market and that the GOP will take the majority in at least one house of congress."



Sun presents How Much Does It Take To Get To $1,000,000? posted at The Sun’s Financial Diary.



Sam presents NEW !! What Is a Mutual Fund? A Common Sense Guide to Mutual Funds posted at Surfer Sam and Friends, saying, "Thanks for including my article. Here's an excerpt..

Mutual funds are investment companies that pool your money with that of other investors to buy stocks, bonds or other securities. The managers of the mutual fund use the pooled funds to buy investments that match your goals. The fund manager determines which investments to buy for the fund, and keeps track of the value of the mutual fund. When you own shares in a mutual fund, you own part of a basket of securities. The more stocks you own, the lower your financial risk if one company fails. By owning shares in a mutual fund, you diversify your investment and reduce your risk.

what is a mutual fundThe Advantages of a Mutual Fund

Mutual funds make investing easier. That's the main advantage of mutual funds."




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Home Ownership - A Peek at Periodic Costs

The hidden advantage with renting is that the payment lets one off the hook from attending to the odds and ends inevitable with owning. The landlord picks up the tab on all the government charges and in some instances going the extra mile to include most utility payments as well as the ongoing maintenance. Many rental communities offer package deals that allows for cable TV and/or access to the community gym/swimming pool. For a homeowner, all of the afore-mentioned and much more is ones own responsibility. In the heels of handover, a number of these additional expenses arrive unannounced and many novice homeowners are caught unaware. The list below cites some common expenses homeowners have to cope with, in addition to the monthly mortgage payments:

1. Property Taxes:

Property taxes are familiar territory for most and the majority has an approximate idea of the cost involved per year as a percentage of the assessed value. While this quoted rate is a good starting point, a number of miscellaneous items are added to the annual property tax bill. Below is a sample of such items from a property tax bill from Alameda County during the 2009-10 year, assuming an accessed value of $500,000:

Taxing Agency/Special Assessments Source	Tax Rate	Tax Amount
Countywide Tax	1%	$5000.00
Debt Service: City of Alameda	0.0245%	$122.50
Debt Service: School Unified	0.0479%	$239.50
Debt Service: School Comm Coll	0.0362%	$181.00
Debt Service: Bay Area Rapid Transit	0.0090%	$45.00
Debt Service: East Bay Regional Park	0.0100%	$50.00
Debt Service: EBMUD Spec Dist 1	0.0064%	$32.00
Subtotal (Taxes)	1.1340%	$5670.00
City Sewer Service	NA	$177.48
Mosquito Abatement	NA	$1.74
CSA Vector Control	NA	$5.92
Healthcare District	NA	$298.00
School Measure A	NA	$189.00
School Measure H	NA	$120.00
CSA Vector Control B	NA	$4.08
Mosquito Assess 2	NA	$2.50
AC Transit Measure BB	NA	$48.00
EBMUD Wetweather	NA	$61.00
East Bay Trail LLD	NA	$5.44
EBRP Park Safety/M	NA	$12.00
Urban Runoff	NA	$56.14
Subtotal (Assessments)	NA	$981.30
Homeowners Exemptin	1.134% of $7000 MAX	($79.38)
Total Amount Due	NA	$6571.92

Although the base property tax rate is 1% of the assessed value, additional taxes and assessments add up to another 0.31%. Another type of taxes imposed on a lot of suburban communities in California is Mello-roos. Mello-roos is taxation by which the local governments can establish community facility districts (CFDs) as a means to fund community improvements – the law is outside the scope of Proposition 13. Some of these taxes are deductible (base property taxes) while others are not (some types of mello roos taxes and transfer taxes). Responsibilities also include state and city transfer taxes (due when buying/selling house) depending on the location – the state component is palatable at around 0.11% in California while the city component is a bitter pill – in Alameda, it was around 1.2%. Property tax relief is hard to come by although sometimes very minor concessions are possible.

2. Insurance:

Home insurance options abound and in most areas home insurance companies are competing for business. The standard Home Owners Insurance (HOI) mandatory for a mortgage include coverage for losses occurring to the property, its contents, loss of its use (living expenses), loss of other personal possessions, liability coverage for accidents at the home or at the hands of the homeowner within the policy territory. The important exclusions include flood damage, earthquake, effects of war, termite damage, etc. Additional policy for these items are available – the costs vary depending on the risk to the insurer – for instance earth quake insurance expenses for our Alameda homes started around 0.35% of the covered value and during our period of ownership, the costs escalated to around 1%, which to us was exorbitant. The annual HOI cost hovered around 0.15% during our entire period of ownership. One probable reason for this discrepancy could be that unlike the general HOI, there is not that many home insurance companies writing earth quake protection policies.

For appliances and other electrical equipments around the house, extended warranties are offered. These coverages ward-off surprise expenses when things stop working unexpectedly. The cost is steep at upwards of 5% of the purchase price annually.

Home warranties allow insuring major appliances such as refrigerator, dishwasher, and oven, along with plumbing, electrical, and heating systems. Sometimes, one-year warranty coverage is offered as part of the deal when purchasing an older home. The well-publicized exclusions include clothes washer and dryer and for these coverage is offered at an additional cost. The relatively hidden exclusions include faucets and fixtures. We were offered a 1-year warranty through American Home Shield for our 2nd home. The service was decent for that first year – a local plumber under contract from American Home Shield fixed a problem with the dishwasher. We extended coverage for two more years at a premium of around $400 per year. It was then we realized home warranties are not worth the hype:

• The service is not prompt and the repair work can prolong for want of replacement parts.
• Per the contract, replacement for appliances is an option only when it is beyond repair. In our experience, when appliances get really worn out it is not energy efficient to get them functional, weighted credit towards a new purchase is a necessary alternative.
• Exclusions such as faucets, fixtures and the like are more prone to break.
• Furthermore the fee of around $60 per visit from a service provider is a deterent from using them for small repairs.

3. Home Owner’s Association (HOA) fees:

These are fees collected by the association (usually a non-profit corporation) to maintain common turf and protect common interests. Almost a quarter of homes in the US are under a Home Owner’s Association. Depending on the nature and square foot of the common property and facilities serviced, these fees can vary from a few tens of dollars to hundreds of dollars per month. For our newly constructed first home in Alameda, there was no HOA per se, but based on the agreement the builder had with the city around $60 per month was collected as part of the regular property tax payments. The city in turn took over the maintenance of the streets within the community and a small park-area was converted into a public park. For our 2nd home in Bay Farm Island in Alameda, there was an HOA of around $160 per month – the community is much larger (around 3000 homes) with private streets, beautiful landscaping, a large artificial meandering water-body etc.

4. Utilities & Miscellaneous Maintenance:

Water, Garbage, Electricity, Natural Gas, etc are all living expenses homeowners encounter periodically. Individually they easily average around $50 monthly with some kind of yearly inflation adjustment built-in.

Homeowners also have to contend with an assorted maintenance expenses such as front and backyard upkeep, house cleaning, and various fixes, which could be outsourced to a handyman. On the average, it is prudent to earmark around $1K for an older house under 2000 sqft.

Another set of expenses that require planning are those related to fixing and/or replacing major parts of the home. That will be the topic for the next article.

Related Posts:

• Home Owner Loans - Playing the Mortgage Game 
• Home Improvement Loans - A Primer
• Good Faith Estimates and Settlement Charges - An Introduction for Home Buyers
• HOA Management - A double-edged sword for homeowners
• Taxes, Laws, and Regulations - A Primer for New Homeowners
• Home Ownership - A Peek at Periodic Costs
• Mortgage Refinancing Decision - How To

Last Updated: 03/2012. 

Mortgage Refinancing Decision – How to

Saving money drove our mortgage refinancing decision, which is, but one from a myriad of reasons for refinancing. Some common causes are:

• Save Money.
• Reduce Interest Rate.
• Reduce monthly payment – sometimes even with a higher interest rate, refinancing could reduce the monthly payment, if the loan is spread over a longer term as compared to the old one.
• Reduce or Increase Risk – Refinancing from a 30-year fixed to an ARM mortgage increases risk while the other way around reduces risk.
• Changing the type of mortgage – Refinancing from a 30-year fixed to a 15-year fixed or vice-versa.
• Cash Withdrawal – This increases the outstanding loan balance and could increase the monthly payment as well. They are a good option if there is equity tied up in the house and cash is required at a comparatively low interest rate. The glaring fact is that a part of the house is essentially given away as collateral for the amount taken out.
• Consolidating other debt – again, the downside is that the collateral is your house.

The benefit reaped from refinancing is directly dependent on the motive and for most of the causes cited above it is an easy decision. For instance, if the objective is to reduce monthly payments, the primary parameter is whether the interest rates are lower than the current amount – the affordability of the closing costs, the time to recoup the closing costs, and the effect of any difference in terms between the two mortgages are secondary factors. It is refinancing to save money that is not a straightforward decision.

Mortgage refinancing for saving money is hard to quantify given the number of variables involved. The mortgage industry has a Rolodex of guidelines to help arrive at the mortgage refinancing decision, which is counterproductive for the most part:

• A popular ploy among lenders is to float a figure in the range of 1-2% as a threshold – largely flawed for such a simple formula is accurate only for a small minority.
• Another familiar industry tactic is the calculation that focuses solely on the time required to recoup closing costs and endorse refinancing if ownership of the house is expected to surpass the duration required to recoup the closing costs. The obvious, but overlooked faux pas with this approach is that it down plays to insignificant the effect of extending the mortgage era – refinancing a 30-year mortgage for a lower interest rate after 5 years results in a new 30 year mortgage essentially adding five more years of mortgage.

Although the calculations can be complex, there are ways to make an informed mortgage refinancing decision. One way is to add closing costs back into the loan amount and determine the point at which the loan balances overlap for the old mortgage compared to the new one. Please see below for a sample spreadsheet showing this calculation:

The spreadsheet indicates that it makes sense to refinance if you plan to stay in the house for six years or more. Another way involves determining the present value of the costs involved in a refinancing decision:

1. Closing costs
2. The net present value (NPV) of future cash flows for the difference in the remaining mortgage period. The NPV formula needs a discount rate which makes this value variable depending on your assumptions.

Once the present values of the costs are determined, in the amortization table for the new mortgage, determine the point at which the savings from each monthly payment add up to the present value. The sample spreadsheet below shows this calculation:

The spreadsheet indicates that it makes sense to refinance if you plan to stay in the house for six years or more. The former method is more intuitive and gives you an exact time period. The latter method allows for a little bit more flexibility (discount rate adjustments).

Be extremely wary of these two potentially huge pitfalls when making the mortgage refinancing decision:

1. Recourse vs non-Recourse Debt: Some states have a non-recourse provision whereby the bank cannot come after one’s other assets, should one decide to walk away from the home. In such states, most first mortgages are classified as non-recourse while refinanced mortgages are recourse. Should there be a chance that walking away is a possibility, then it might makes sense to not refinance at all, even at the cost of higher monthly payments. 
2. Prepayment Penalty: Many loans come with the dreaded prepayment penalty whereby the bank can collect a huge fee, if the loan is prepaid. This can be a huge deterrent when it comes time to refinance. The only way to avoid this situation is to ask and ensure that the loans do not have this penalty clause.

Related Posts:

• Home Owner Loans - Playing the Mortgage Game 
• Home Improvement Loans - A Primer
• Good Faith Estimates and Settlement Charges - An Introduction for Home Buyers
• HOA Management - A double-edged sword for homeowners
• Taxes, Laws, and Regulations - A Primer for New Homeowners
• Home Ownership - A Peek at Periodic Costs
• Mortgage Refinancing Decision - How To

Last Updated: 03/2012. 

Mortgage Refinancing - Our Experience

Twice we refinanced during our seven years of home-ownership in the US. The first mortgage in 2003 was for a 7-1 ARM at 5.25%. Mortgage refinancing offers below 5% started pouring in within a few months of signing the papers. We resisted initially for it was our impression that the closing costs would eat away whatever savings surfaced. The next solicitation for mortgage refinancing came a few more months later, at an unheard rate of 3.25% - an ARM product with an interest-only payment schedule for the first year, and adjustments every 6-months based on the MTA index with a 2% margin. The triple icing on this offer was no closing costs, fees, or points. Skepticism took this deal away for we expected it to have hidden clauses or caveats. A few months later we signed up for a 5-1 ARM at 4.5% offer brought forth by a mortgage broker with the same terms – no closing costs, fees, or points. A refinance mortgage broker sells mortgages on behalf of national lenders for a commission from the lender (typically 1-2% of the loan amount). Generally they abstain from seeking commission from the borrowers. These refinance mortgage brokers have the flexibility to package a mortgage product as a no cost, no fee, and no point one by quoting a slightly higher interest rate than otherwise possible. Below is a look at the average 5-1 ARM rates over the last decade:

A common misconception surrounding mortgage refinancing is the belief that refinancing favors only those with a protracted interest in a property. The basis for this impression is that the life of the mortgage may not be long enough to recoup the closing costs and NPV (Net Present Value) of future cash flows. But, as detailed above, mortgage refinancing options at no-cost, no-fee, no-points do exist – the downside is higher interest rate. This repacking by brokers can be manna for short-term owners provided the interest rate offered is lower than their current rate. Our brush with refinancing to a no cost, no fee, no point loan for 4.5% from 5.25% immediately reduced the monthly payments by a few hundred dollars! Ensure the “No Prepayment Penalties” clause is in place as otherwise the penalties can easily obliterate any savings realized.

When it was time to finance our 2nd home purchase, we approached the same mortgage refinance broker. This time around it was not smooth operation – the MTA 1-year ARM rate was adjusted upwards to 3.625% and a 0.25% “point” was charged in spite of the broker’s promise that the deal would be  no-cost, no-fee, no-point at 3.25%. Lesson learnt – even with the same mortgage refinance broker, our responsibility to double check the terms does not diminish. That aside, it was the golden period in terms of cost of ownership as the monthly interest-only payments (no negative amortization) was below what we paid as rent for an apartment half the size in a much less desirable neighborhood. The deal still came ahead when the equation was modified to include parameters like tax benefits and fixed costs like HOA, insurance, and property taxes. We held on to this deal for 12 months. The window of opportunity with these kinds of ARM mortgages was fast shrinking as their interest rates were catching up with the 5-1 ARM counterpart. Choosing to err on the side of caution, we refinanced with a 15-year fixed mortgage at 5.375%. This time we were careful to use the services of a different mortgage refinance broker who offered a no cost, no fee, and no point option. In retrospect, as mortgage refinancing rates would remain relatively low for years it would not have burnt us even if we had held on to the MTA 1-year ARM mortgage – the monthly payments would have fluctuated as the underlying index varied between a low of just 0.4% in May 2010 and a high of 5.03 in April 2007 (2.4% to 7.03% interest rate at the 2% margin). The risk that the mortgage refinancing rates for conventional rates would go up and then the only option would be to refinance at a higher rate never materialized during that period. Below is a look at the MTA index over the last ten years - the actual mortgage rate is around 2% more than this index value (margin):


Related Posts:

• First Time Home Buyer - Builder Upgrades vs Upgrading on Your Own - An Analysis.
• Home Improvement - Our Experience.
• Mortgage Refinancing - Our Experience.
• Home Maintenance Schedule - A Primer with a Focus on Costs.
• Flipping Houses in the Bay Area - An Experience.
• Bay Area Home Buying - A Bubble Period Experience.
• Home Ownership Experience in the Bay Area - Lessons Learned.

Last Updated: 03/2012.

Home Owner Loans - Playing the Mortgage Game

Back in the 1997-98 days when we we first scouted for houses, the mantra regarding home owner loans (mortgages) was to try and lock-in a standard 30-year mortgage at the historically low interest rate of around 8%. Five years later (2002) when we signed papers for our first house, the only difference in the mantra was that the historical low had slid to 6%. Two years later (2004), the variation for the story was that the average 30-year fixed interest rates for home owner loans had dipped below 6% for the first time. The story gets better when comparing with the current interest rate average of below 5% for home owner loans – historical low does not always imply an upward tick is imminent. In fact the reverse held true for the past decade and then some. The graph below detailing average 30-year fixed rates for home owner loans over the last thirty years is an indication of the wide-range possible:




Locking-in a fixed rate home owner loan involves a premium to be paid upfront. Opting for low interest home loans such as an ARM mortgage would make more financial sense should the going trend indicate mortgage rates staying low for an extended period of time or if home ownership is planned only for a few years. This was the popular mindset in place among home-buyers around the time we shook hands on our first house. We opted for 7-1 ARM at 5.25% with a lifetime cap of 10.25% at 1% annual cap set-up from the eighth year onwards – we considered it a safe bet for we did not anticipate residing in that house much beyond 7 years. However, our ownership of that house lasted only two years making a 3-1 ARM at below 5% a better choice. Then again, hindsight is 20-20. Below is a graph that shows average 1-year adjustable ARM mortgage rates over the last twenty five years. It shows the large variance as well as consistently lower rates and correlation when compared to the classic 30-year fixed mortgage rates:




Another category of ARM mortgages that could offer even lower rates for home owner loans are the low interest home loans tied to the rates of less commonly used underlying indexes with very short fixed rate duration (1-month to a year). Based on the underlying index, the rates can be lower during certain time intervals and higher at other times when compared with the classic 15-year and 30-year fixed rates. There are times when the discount can be very significant even when pitted against the best rates regular (3-1, 5-1, etc) ARM mortgages can offer. Some of these also possess the vital feature in that they are slow moving, allowing nimble homeowners to make huge strides, during certain opportune periods – specifically, when rates are following a steady to slow-rising trend, these mortgages allow “capturing” the lag built into the index. All else being equal, the best bet is the one with the highest fixed rate duration – initial 1-year fixed duration with a adjustment every 6-months is a prudent and popular choice with these mortgages. The best options among such indexes for ARM mortgages for home owner loans are:

1. COFI (11th District Cost-of-Funds Index): It is the weighted-average rate paid by 11th Federal Home Loan Bank District savings institutions for savings and checking accounts, advances from the FHLB, etc. The prime component is the interest paid on savings accounts which lag market rates in both uptrend and downtrend, thereby ensuring the index slow moving, and
2. MTA (12-month treasury average index): 12 month average of the monthly average yields of U.S. Treasury securities adjusted to a constant maturity of one year. Being an average of the previous twelve months, the index is slow moving.

It is very common for first-time home buyers to be confused between these home owner loans and what are termed exotic home owner loans which typically offer a teaser-rate and/or home owner loans with very low down payment. Such mortgages have higher overall costs associated with them and are very risky for the lender – it is all too easy to be lured into these rates and end up with a home that is not affordable. Option-ARMs are another choice that promises flexibility with respect to the monthly amount to be paid, but the downside risk is negative amortization. Nevertheless, these mortgages serve speculative real-estate buyers allowing them to enter deals at a relatively low on-going cost in the initial months – ideally, the turnaround of the property occurs in that time-frame as well.

To summarize, some ideas are clear from our experience:

1. Low interest rates on home owner loans are relative. Locking in by opting for a 15-year of 30-year fixed rate is good provided you are relatively certain that rates will not slide further.
2. Home owner loans categorized as regular ARM mortgages are a safe bet if you can foresee how long you anticipate staying in that house.
3. ARM mortgages with short fixed rate duration tied to MTA, COFI, and other slow moving indexes work well when home owner loan rates are steady with an upward bias.
4. Exotic home owner loans with teaser rates and/or low down payments along with option-ARMs are geared for speculative buyers in the real estate.

Related Posts:

• Home Owner Loans - Playing the Mortgage Game 
• Home Improvement Loans - A Primer
• Good Faith Estimates and Settlement Charges - An Introduction for Home Buyers
• HOA Management - A double-edged sword for homeowners
• Taxes, Laws, and Regulations - A Primer for New Homeowners
• Home Ownership - A Peek at Periodic Costs
• Mortgage Refinancing Decision - How To

Last Updated: 03/2012. 

Chile Stamps Profile

Chile is a country in South America covering a long (4000 miles) narrow (110 miles average) stretch of land in the South bordered by Peru to the North, Bolivia to the North East. The pacific islands of Juan Fernandez, Salas y Gomez, Desventuradas, and Easter Island are part of Chilean territory. Chile covers a land area of a little less than 300,000 square miles with a population of over 17 million people making it a sparsely populated country at around 22 per square mile. Human presence dates back 10,000 years when Native Americans began settling in the fertile areas. The first European to reach Chile was Ferdinand Magellan in 1520 while attempting to circumnavigate the earth. The Spanish conquest of Chile started around 1535. The native Mapuche resistance along with the threats from European enemies helped make Chile one of the most militarized of the Spanish possessions. Chile gained Independence on February 12, 1818. The first century following independence was a tumultuous period of wars – the suppression of Mapuche in the South followed by incorporation of those areas along with expansion in the North as a result of the successful War of the Pacific (1879-83) and the Chilean Civil War (1891) were the main historic events of the period. A series of military dictatorships and coups occurred until a clear democratic government was established in 1988 to follow General Pinochet. The small central area of Chile dominates in terms of population. The area enjoys Mediterranean climate with the driest desert on earth to the North (Atacama) and rainy temperate climate to the South. Chile’s Northern desert areas contain great mineral wealth which has successfully been exploited since the mid-nineteenth century. Chile is one of the wealthiest countries in South America with a GDP (ppp) of over $14,000. Chilean economy is primarily focused on foreign trade with copper at the top of the ladder followed by wine, forestry & wood products, fresh fruit and processed food. Chileans enjoy a private pension system.

The first Chile stamps showed a portrait of Christopher Columbus released in 1853. The set of two stamps were printed in London. The stamps (Scott #1 and #2) catalogs for around $800 MNH and around $200 for Used. Many varieties exist with vertical, diagonal, and horizontal halves of the 10c stamp used as 5c on cover. Santiago prints of the same design appeared the next year and varieties of the same issue in different single colors dominated Chile stamps through 1865. Many of those issues (Scott #3 to #14) fetch into the 100s of dollars while some can be had for as little as $5 (fiscal cancellations). Certain error water marks fetch into the 1000s as well. The Columbus theme in different designs continued all through the century. Many short and long sets along with certain overprints were issued during the period. Chief among them was a set of twelve stamps (Scott #25 to #36) released in the 1878-79 time-frame in two different designs. The set catalogs for around $100 MNH and $40 Used.

The first Chile stamps outside the Columbus theme was a set of ten stamps (Scott #58 to #76) released in 1904. The set consists of telegraph stamps overprinted and/or surcharged in black. It consists of two designs – one showing Pedro de Valdivia and the other Coat of Arms. The Coat of Arms design comes in two different types – one with the animal on the left of the design showing a mane and tail while the other showing neither mane nor tail. The set catalogs for around $65 MNH and $55 Used. Certain overprints on Columbus issues resumed and they dominated the Chilean stamp issues till around 1910 when they issued a set of stamps (Scott #83 to #97) as their independence centenary issue. The designs show oath of independence, battle of Chacabuco, Battle of Roble, Battle of Maipu, Naval Engagement of Lautaro and Esmeralda, capturing the Maia Isabel, first sortie of liberating forces, abdication of O’Higgins, Chile’s First Congress, Monument to O’Higgins, Monument to Jose M. Carrera, Monument to San Martin, General Jose Ignacio Zenteno, Admiral Lord Thomas Cochrane, and General Manuel Blanco Encalada. A set of fifteen stamps (Scott #98 to #112) showing great men soon followed in 1911. The designs show Columbus, De Valdivia, Mateo de Toro Zambrano, Bernardo O’Higgins, Ramon Freire, F.A. Pinto, Joaquin Prieto, Manuel Bulnes, Manuel Montt, Jose Joaquin, Federico Errazuriz Zanartu, Jose de Balmaceda, Anibal Pinto, Domingo Santa Maria, and Federico Errazuriz Echaurren. The set catalogs for around $120 MNH. The Used set is very affordable at under $20. The Great Men theme in Chile stamps continued until 1936 with only a few other issues in other themes. A set of twelve stamps (Scott #186 to #197) showing local scenes was issued in 1936 to commemorate the 400th anniversary of the discovery of Chile by Diego de Almagro. The set catalogs for around $20 MNH and $10 Used. The designs show Atacama Desert, fishing boats, Coquito palms, sheep, mining, lonquimay forest, Colliery at Port Lota, shipping at Valparaiso, Puntiagudo volcano, Diego de Almagro, cattle, and mining saltpeter. A sister set in the industrial theme soon followed in 1938. That set (Scott #198 to #209) is very affordable at around $4 MNH and $3 for Used. It features Laja waterfall, agriculture, boldo tree, nitrate industry, mineral spas, copper mine, mining, fishing in Chiloe, Osorno volcano, mercantile marine, lake Villarrica, and state railways.

Below are other relevant Chile stamps over the years:

1. A set of six stamps (Scott #331 to #336) released in 1960 to mark the 150th anniversary for the formation of the first National government. The set catalogs for around $5 MNH and around half that for Used. The themes show a beautiful Arms of Chile design and Jose M. Carrera.
2. A set of twelve stamps (Scott #461 to #462) released in 1975 to mark the thirtieth anniversary of the training frigate Lautaro. The set catalogs for around $10 MNH and $4 Used.
3. A set of four stamps (Scott #679 to #682) released in July 1985 in the Endangered Species theme. The set catalogs for around $25 MNH and $4 for Used. The Used set in a block of four commands a higher premium at around $12. The designs show Chinchilla, Blue Whale, Sea Lions, and Chilean Huemuls. A block of four stamps (Scott #693a-d) soon followed in the endangered wildlife theme. The set catalogs for around $10 MNH and $4 Used. The designs show Canis Fulvipes, Phoenicoparrus Jamesi, Fulica Gigantea, and Lutra Provocax.
4. A sheet of four stamps (Scott #1185a-d) released in September 1996 in the Ecotourism in National Parks theme. The set catalogs for around $2 MNH or Used. The designs show river rafting, horseback riding, snow skiing, and hiking around cacti.

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Last Updated: 07/2011. 

Atlantic City Hotel Deals and Casino Offers

With its prime real-estate location, the Atlantic City (AC) in Absecon Island on the Atlantic coast was developed as a tourist town. On this South New Jersey city a boardwalk was erected as early as 1870 and periodically several extensions and modifications were done. Currently the boardwalk, which is almost six miles reigns as the world’s longest boardwalk. Until around 1900 smaller hotels dotted the area and in the construction boom touched off in the early 1900s, these gave way to larger resort hotels. Disinvestment following the two World Wars and the stock market crash of 1929 resulted in the decline of Atlantic City. By 1960 most of the resort hotels of that era were demolished. The tide began to turn with the legalization of casino gambling in 1976. Today, Atlantic City has eleven Casino Hotels to its credit, most of which are located along the boardwalk.

Atlantic City is regarded as the Gambling Capital of the East Coast with revenues second only to Las Vegas. The current recession coupled with the competition from casinos in neighboring states has resulted in revenue decline for the local casinos. The table below lists the casino options along with the best available rate and the entertainment options they provide:

Property	Thumbnail	Best Rate Including Taxes and Resort Fees (if any)	Room Type	Description	Entertainment options
Atlantic City Hilton (Resorts International)		$75	Deluxe Room - Two Double Beds.	Opened in 1980 in the Beach Resort theme with 800 rooms on the Boardwalk.	Live shows at the Atlantic City Hilton Theater. Many restaurant options.
Bally’s (Harrah’s)		$88	Classic Room – Two Double Beds	Opened in the 1979 in the American Old West theme with over 1750 rooms.	The Main Ballroom and the nearby Boardwalk Hall hosts several events such as heavy weight boxing and Top 40 concerts.
The Borgata (Marina district development Corp)		$99	Classic Room – Two Queen Beds	Opened in 2003 in the Tuscany theme with over 2800 rooms as part of “The Tunnel Project”.	Poker room is largest in AC and features dialing tournaments with the World Poker Tour. “The Water Club” a boutique hotel-within-a-hotel with 800 rooms. 2400 seat Borgata Event Center hosts live shows. The 1000-seat Music Box theater hosts the nightly Borgata’s Comedy Club.
Caesars Atlantic City (Harrah’s Entertainment)		$134	Deluxe Room – Two Double Beds	Opened in 1979 in the Roman Empire theme with over 1150 rooms	Pier Shops at Caesar’s boutique shopping mall. Pool open to families from 8AM to 1PM. Dusk Night Club. QUA Baths and Spa.
Harrah’s Atlantic City (Harrah’s Entertainment)		$97	Marina Deluxe – Two Queen Beds	Opened in 1980 in the Marina Waterfront theme with close 2600 rooms.	The Pool (over 21 only), Waterfront shops.
Resorts (Resorts Casino & Hotel)		$65	Ocean Tower Room – two double beds	Opened as a Casino in 1978 in the Art Deco theme with close to 950 rooms. Originally built in 1929, it became the first legal casino in the Eastern US in 1978.	Theater and Comedy Club.
Showboat (Atlantic City Showboat, Inc.)		$88	Deluxe – Two Queen Beds	Opened in 1987 in the Lousiana Mardi Gras theme with around 1330 rooms.	House of Blues – Live Music shows by touring bands.
Tropicana (Tropicana Entertainment)		$80	West Tower Standard – Two Queen Beds	Opened in 1981 in the Old Havana theme with around 2130 rooms.	The Quarter at Tropicana – a giant entertainment complex with a 2000 seat showroom featuring live entertainment, IMAX theater, shops, and restaurants.
Trump Marina (Trump Entertainment Resorts)		$78	Deluxe Room – Two Queen Beds	Opened in 1985 in the Marina theme with around 725 rooms.	460-seat showroom, nightclub, pool, tennis, basketball, restaurants, and the Frank S. Farley 640-seat public state marina.
Trump Plaza (Trump Entertainment Resorts)		$95	Deluxe Room – Two Queen Beds	Opened in 1984 with over 900 rooms.	Rainforest Café. Seasonal Beach Bar.
Trump Taj Mahal (Trump Entertainment Resorts)		$129	Taj Tower Room – Two Queen Beds.	Opened in 1990 in the Taj Mahal theme with close 2250 rooms.	Great location at the Boardwalk adjacent to the Steel Pier, with rides and attractions for the whole family. Luxury Shopping.

In addition to Casino gambling, Atlantic City has several other entertainment options. Below are the major ones:

Event	Thumbnail	Cost	Description
Aquarium – Ocean Life Center		Adult - $8, Children 4-12 - $5, Seniors 62+ - $6	Open 10-5 daily. Location: 800 N. New Hampshire Ave. Great Location with a good view of the inlet from the 3rd floor. Smallish place – two floors – Great place to fill-in 1-2 hours. Kids love the Touch Tanks.
Absecon Lighthouse		Adults - $7, Children 4-12 - $4, Active Military – FREE	July-August Open Daily 10-5, Rest of the year – closed Tuesdays & Wednesdays, Open 11-4. 228 steps to the top. Fresnel Lens circa 1857. Breathtaking views of Atlantic City Skyline.
Lucy the Elephant		FREE	A six-story Asian Elephant built with over a million pieces of wood and tin sheeting in 1882. Location: 9200 Atlantic Ave, Margate, NJ two miles from AC.
Historical Museum		FREE	Open Daily 10-4 except for major holidays. Location: At the Boardwalk, at New Jersey Avenue adjacent to Showboat. Free parking in dirt lot till 4PM. 20-minute historical video "Boardwalk Ballyhoo: The Magic of Atlantic City,"

Related Posts:

1. Atlantic City Hotel Deals and Casino Offers.
2. Vegas Hotel Deals and Casino Offers.
3. Reno Hotel Deals and Casino Offers.

Last Updated: 02/2011.