Should You Choose a Fixed or Variable?
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WEEKLY EDUCATIONAL UPDATE - JULY 24, 2019
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Buying a home is the single largest financial commitment most people ever make. And sorting through mortgages involves a lot of critical choices. One of these is choosing between a fixed- or variable-interest-rate mortgage.
True to its name, fixed-rate mortgage interest is fixed throughout the life of the loan. In contrast, the interest rate on a variable-interest-rate loan can change over time. The mortgage interest rate charged by a variable loan is usually based on an index, which means payments could move up or down depending on prevailing interest rates.[1]
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Fixed-rate mortgages have advantages and disadvantages. For example, rates and payments remain constant despite the interest-rate climate. But fixed-rate loans generally have higher initial interest rates than variable-rate mortgages; the financial institution may charge more because if rates go higher, it may lose out.
If prevailing interest rates trend lower, a fixed-rate mortgage holder would have to refinance, and that may involve closing costs, additional paperwork, and more.
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With variable-rate mortgages, the initial interest rates are often lower because the lender is able to transfer some of the risk to the borrower; if prevailing rates go higher, the interest rate on the variable mortgage may adjust upward as well. Variable-rate mortgages may allow borrowers to take advantage of falling interest rates without refinancing.
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One of the biggest advantages variable-rate mortgages offer can be one of their biggest disadvantages as well. Rates and payments are subject to change, and they can rise over the life of the loan.
Should you choose a fixed or variable mortgage? Here are four broad considerations:
First, how long do you plan to stay in the home? If you plan on living in the home a short time before selling it, you may want to consider a variable-rate mortgage. With a shorter time frame, the loan will have less time to move up or down.
Second, what's happening with interest rates? If interest rates are below historic averages, it may make sense to consider a fixed rate. On the other hand, if interest rates are above historic averages, it may make sense to consider a variable rate loan. Then if interest rates decline, your interest rate may fall as well.
Third, under what conditions can the lender adjust the rate and payment? How frequently can it be adjusted? Is there a limit on how much it can be adjusted in each period? Is there a lifetime limit on how high the interest rate and payment can be raised?
And fourth, could you still afford your monthly payment if interest rates were to rise significantly? How would it affect your finances if your payment were to rise to its lifetime limit and stay there for an extended period?
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"
A vacation is having nothing to do and all day to do it in."
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Robert Orben
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One-Pan, Cheesy Potato Casserole
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[6 to 8 servings]
Ingredients:
- 1 lb. of uncooked breakfast sausage without casings
- 1 onion
- 1 bell pepper
- 1 tsp. of salt
- 20 oz. of frozen hash browns
- 10 eggs
- 1 cup milk
- 2 cups of cheddar cheese, shredded
- A sprinkle of pepper
- Optional: other toppings such as chives, mushrooms, spinach, etc.
Directions:
This recipe is great when you're on vacation and want to make breakfast for the whole family, but have a limited kitchen. In addition, this simple casserole can be baked ahead of time and stored overnight, making it the perfect, go-to breakfast on busy vacation mornings.
- Preheat the oven to 375° F. Lightly grease a 9" x 13" baking dish (or whatever you can find in your hotel kitchen!).
- Cook the sausage in a large skillet.
- Add the toppings, stirring occasionally. Cook until softened, but not overdone.
- Transfer the sausage and veggie mix to the baking dish, then add the hash browns and combine. Spread into an even layer.
- Whisk the eggs, milk, salt, and pepper, then pour over the veggie and meat layer.
- Bake until the top is golden brown, about 45 minutes.
Recipe adapted from Kitchn
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Short-Term Rentals, Long-Term Income Tax Deductions
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If you have a short-term vacation rental, you may be bringing in some extra income this summer season. By following a few easy tips, you can reduce your income taxes and keep more of what you make (some of which might go into a savings account for a vacation of your own!). Here are some helpful tips that short-term rental owners should consider:
- You don't have to pay income tax on what you earn from your short-term rental, but only if you don't rent it out for more than 14 days throughout the year, and also, if you live in it as your primary residence for at least 14 days out of the year.
- Keep thorough records as well as separate business and personal expenses. You may be able to deduct all ordinary and necessary expenses to operate the rental home.
- If you rent out a room in your home rather than the entire property, you may still be able to deduct a portion of the mortgage interest and property taxes of the property. But you still need to delineate between personal and business use of the residence.
Renting out an extra property or an extra space in your house is a great way to make some extra cash, and the tax laws may work in your favor.
* This information is not intended to be a substitute for specific individualized tax advice. We suggest that you discuss your specific tax issues with a qualified tax professional.
Tip adapted from TurboTax
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How to Pack for the Perfect Golf Vacation
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Planning a golf trip this summer? What (and how) you pack will make a big difference in how well your trip goes. While you can't always control the course or the conditions, you can control what you have handy on your trip. Here are some packing tips to consider for that ultimate golf vacation:
- Make sure you have the perfect travel bag to hold your clubs.
- Be ready for any weather with a waterproof golf bag, waterproof gloves, a rain jacket, and your favorite, moisture-wicking clothing. And don't forget an extra pair of shoes!
- Have plenty of things to help you recover during your trip, including foam rollers, pressure point balls, and back massagers. Those 36-hole days will wear you out if you don't properly rest and recharge.
A golf vacation is every golf enthusiast's dream, so make sure you're prepared for your adventure with these tips.
Tip adapted from Golf.com[4]
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Rest, Relaxation, and Healthy Nutrition
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Between the junk food at airports, room service, and the love of lounging, vacations can be where healthy habits meet their match. But you can make healthy choices while on vacation and still have fun. Here are some tips on how to stay healthy, even on the road:
- Before heading to the airport, pack your own snack box with fruits, veggies, nuts, lean proteins, and healthy bars. That way, you won't be tempted by the chips and soda while you wait for your flight.
- Get plenty of sleep. Just like at home, it's really important to get a good night's sleep while traveling. Sleep helps your body reset for the next day and will help you maintain your weight.
- Hydrate often. Our bodies don't function as well when we're thirsty, so make sure you always bring your reusable water bottle with you on vacation. And no, margaritas on the beach don't count as hydration.
- Take your vitamins to make sure you feel your best. A daily pill holder can help you remember to take them, even while traveling.
There's no reason why you have to sacrifice all your hard work and healthy habits while on vacation. If anything, continuing a healthy lifestyle while traveling will help you have even more fun!
Tip adapted from Travel & Leisure
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Be an Environmentally Friendly Traveler
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There are lots of ways to live green on the go. Here are some of our favorite ways to be an environmentally friendly traveler on your next vacation:
- Use public transport whenever you can in order to reduce carbon emissions. Plus, public transportation is a great way to explore a new city.
- Travel by land instead of air when possible. One five-hour flight increases your carbon footprint by one ton! Take a train, bus, car, or boat to see more during your trip.
- If you're staying in a hotel, avoid getting clean towels or sheets every single day. You want to pamper yourself, but by reusing your towels and sheets for a day or two, you will help save water and energy.
- Avoid bottled water when possible. Bring a reusable water bottle along with you, and use water filters to refill your bottles with safe water.
Never take a vacation from green living with these easy tips while traveling!
Tip adapted from World Nomads
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