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Financial Word of the Week: Loan-to-Value

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FWOTW

You’ve probably heard the scary terms “upside down” or “underwater” when it comes to mortgages, especially six years ago. That’s one way of saying a home’s Loan-to-Value (LTV) ratio is too high or the value of the home is less than the loan amount. This is another financial number where lower is better.

Calculating your LTV ratio

Take the amount left on your mortgage and divide by the appraised value of your home OR the selling price (whichever is less). For example, if you bought a $225,000 home, but it was appraised for $200,000 and you still owe $175,000, your LTV ratio is 175,000 ÷ 200,000 = 87.5%. Now take that same scenario, but with a positive twist. If you made improvements on your home or the housing market in your area improves, let’s say your home is appraised for MORE than what you paid for it, $250,000. So your LTV ratio would now be based on your purchase price (the lesser of appraisal or purchase price) and your LTV would be 175,000 ÷ 225,000 = 77.8%.  The ratio has been reduced, and it’ll keep going down as you pay more of your loan amount (assuming the value of your home doesn’t fall below your purchase price). A good ratio to aim for is 75% or less. The lower your ratio, the less risk for your lender.

Should you refinance?

It’s worth consideration, but only after an informative chat with your lender. If you have a high LTV ratio and your home’s value has increased, refinancing could be a wise step for you. Plug in a few scenarios in this calculator, and chat with your lender about whether or not refinancing would be positive for you.

Special assistance

If you need even more help and purchased your home before June 1, 2009, you may be eligible for Federal Housing Finance Agency’s Home Affordable Refinance (HARP) Program. If you think you may be eligible, talk to your lender about refinances with further assistance from that government program.

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When you click links marked with the “‡” symbol, you will leave UMB’s website and go to websites that are not controlled by or affiliated with UMB. We have provided these links for your convenience. However, we do not endorse or guarantee any products or services you may view on other sites. Other websites may not follow the same privacy policies and security procedures that UMB does, so please review their policies and procedures carefully.


UMB Financial Corporation (Nasdaq: UMBF) is a financial services holding company headquartered in Kansas City, Mo., offering complete banking, payment solutions, asset servicing and institutional investment management to customers. UMB operates banking and wealth management centers throughout Missouri, Illinois, Colorado, Kansas, Oklahoma, Nebraska and Arizona. It also has a loan production office in Texas. Subsidiaries of the holding company include mutual fund and alternative investment services groups, single-purpose companies that deal with brokerage services and insurance, and a registered investment advisor that manages the company's proprietary mutual funds and investment advisory accounts for institutional customers.



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Enduring Quality

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Doing what is right, not what is popular. That is one of the values our organization has stuck with from the beginning, more than 100 years ago. Our business and community partners share these values, and we hope that by watching this short video, you will be inspired by these same sustaining values.

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Mr. Kemper is the chairman and chief executive officer of UMB Financial Corporation and UMB Bank, n.a. He joined UMB in 1997. Mr. Kemper is active in both civic and philanthropic endeavors. One of the causes he is most passionate about is the arts. He currently serves as a trustee and executive committee member for the Denver Art Museum and is a past board member for The Arts Council of Metropolitan Kansas City.



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How to Overspend on a Country Club Membership

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A lot of us have golf and swimming pools on the mind now that it’s the middle of summer. If you’re thinking of joining or renewing membership at a country club, take a look at this list to see how NOT to go about it.

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Mr. Fee serves as president of UMB’s Texas region and is responsible for designing and executing a strategy to establish UMB Bank in the Texas market, initially by way of Dallas. He joined UMB in 2002 and has also served as the community bank president of the UMB South Kansas City region. Fee earned Bachelor of Science with a major in Business Administration and Accounting from the University of Kansas in Lawrence, Kan.



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Financial Words of the Week: Delinquency and Derogatory

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FWOTW

Have you ever missed a credit card bill or a loan payment? You may know that missing a bill can hurt your credit, but do you know how much? What should you do about it?

What does a late payment mean for my credit?

Missing a loan or credit card payment is known as a delinquency. Delinquencies may  negatively affect your credit history and credit score. If you miss a payment, the best thing you can do is to make that payment as soon as possible. The longer you wait, the more interest will build up.

In terms of your credit score, you need to make the original payment before the next payment is due as well as that next payment. Generally, delinquencies are measured in months, rounding up to the nearest month. The day after the missed due date, an account could be counted as one month late, depending on the lender. One month and one day after the missed due date, that account may be considered two months late and is now a major derogatory.

What is a derogatory, and what makes it major or minor?

Any negative information on your credit history is a derogatory. When a lender reviews your credit, they look at what derogatories show up and how recent they are. Derogatories (or your lack of derogatory information) also make up an important chunk of your credit score. A debt two months late or more counts as a major derogatory. Major derogatories hurt your credit score more because of their serious nature. Other examples include bankruptcies, foreclosures and many debts that go to collections. If you have already missed one month, the best thing you can do is not let it become two.

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UMB Financial Corporation (Nasdaq: UMBF) is a financial services holding company headquartered in Kansas City, Mo., offering complete banking, payment solutions, asset servicing and institutional investment management to customers. UMB operates banking and wealth management centers throughout Missouri, Illinois, Colorado, Kansas, Oklahoma, Nebraska and Arizona. It also has a loan production office in Texas. Subsidiaries of the holding company include mutual fund and alternative investment services groups, single-purpose companies that deal with brokerage services and insurance, and a registered investment advisor that manages the company's proprietary mutual funds and investment advisory accounts for institutional customers.



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HGTV’s House Hunters features Kansas City UMB associates

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Do you love the show House Hunters? A couple of our associates were featured recently and plan to share some insider house-hunting tips on the blog later this month to continue our “Steps to Buying a Home” series. In the meantime, catch their episode tonight on HGTV at 10 p.m. CST.
061017UMB Unit Finance Managers Josh Cummings and Natalie Crumpton with their realtor, Monte Boultinghouse

 

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When you click links marked with the “‡” symbol, you will leave UMB’s website and go to websites that are not controlled by or affiliated with UMB. We have provided these links for your convenience. However, we do not endorse or guarantee any products or services you may view on other sites. Other websites may not follow the same privacy policies and security procedures that UMB does, so please review their policies and procedures carefully.


UMB Financial Corporation (Nasdaq: UMBF) is a financial services holding company headquartered in Kansas City, Mo., offering complete banking, payment solutions, asset servicing and institutional investment management to customers. UMB operates banking and wealth management centers throughout Missouri, Illinois, Colorado, Kansas, Oklahoma, Nebraska and Arizona. It also has a loan production office in Texas. Subsidiaries of the holding company include mutual fund and alternative investment services groups, single-purpose companies that deal with brokerage services and insurance, and a registered investment advisor that manages the company's proprietary mutual funds and investment advisory accounts for institutional customers.



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How saving money differs in your 20s and 30s

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Have you noticed that your eating, sleeping and entertainment habits changed after high school and again after college? The same is true of your financial situation. With a different lifestyle comes different financial needs, which is why we’re bringing you a few dos and don’ts for these crucial decades.

generations

Things to DO in your 20s…

Do contribute to a 401(k), one of the 9 financial habits we told you about earlier. How much should you save? At least as much as it takes to receive what your employer is willing to match. Beyond that, 10 to 15 percent of your pre-tax income is a great start.

Do lay a sound financial foundation by developing good habits. Contrary to what you may hear, how MUCH you save for retirement when you’re young isn’t as important as saving consistently starting as soon as possible.

Do find inspiration in growth charts / calculators like these. It’s hard to focus on something that is decades in the future, such as retirement, so calculate how dramatically your goals can be reached if you start early. For example, if you start saving $300/month in your 20s, you could have nearly $100,000 by the time you’re 50 (and that’s only factoring a less than 1 percent annual interest rate).

And one thing to avoid in your 20s…

Don’t ONLY save for your retirement. Many people in their 20s make this mistake. Since you can’t touch this money until you’re 59½  (with limited exceptions), you’ll need to make sure you have separate savings for emergencies and non-retirement goals.

 

Things to DO in your 30s…

Do ask yourself if you should buy a home. The median age of first time home buyers is 31*. While that doesn’t mean that age will be the right time for you, it does indicate that your 30s are a great time to start considering home ownership during this decade. If you’re a star student and are reading this section as a 20-something, good job. Because the money you save in your 20s will come in handy when it’s time to buy a home in your 30s. The down payment, closing costs and inevitable home repairs that pop up as soon as the home becomes yours add up quickly.

Do get life insurance if you now have dependents. It’s a bummer to dwell on, so don’t over think it. You and your family will appreciate the financial peace of mind it gives.

And one thing to avoid in your 30s…

Don’t be afraid to talk to your children about money. If you are among the 30-somethings with children, you can start teaching them as young as pre-school or early elementary school the concept of spending and saving. Playing imaginary restaurant or store with them is a great learning tool.

Update: check out how to save in your 40s, 50s and 60s!

 

 

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Reference: *2012 National Association of REALTORS® Profile of Home Buyers and Sellers

Inspiration for article from Daily Finance

When you click links marked with the “‡” symbol, you will leave UMB’s website and go to websites that are not controlled by or affiliated with UMB. We have provided these links for your convenience. However, we do not endorse or guarantee any products or services you may view on other sites. Other websites may not follow the same privacy policies and security procedures that UMB does, so please review their policies and procedures carefully.


Mr. Johnson is a VP/Financial Center Manager for UMB Kansas City. He is responsible for driving sales and relationship activities within the Walnut Lobby Financial Center. He joined UMB in 2007 and has 11 years of experience in the financial services industry. Mr. Johnson earned an Associate’s Degree from MCC. He is currently pursuing a Bachelor’s of Science Degree majoring in Management and Finance from Park University.



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Hometown Perspective: Kansas

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You know you can count on us to provide insights into national and global economic outlook, but what about the business outlook where you live? Gil Trout, Chairman & CEO of Kansas and Oklahoma, gives us some perspective on how Kansas is looking this year. Hint: it’s good news.

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Mr. Trout joined UMB in 1988. As Regional CEO for Kansas and Oklahoma, he is responsible for the profitability, leadership development and commercial banking oversight of his regions. Mr. Trout has over 25 years of experience in the financial industry. He earned his MBA from Avila University, and his Executive Leadership Certificate from Washington University.



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Financial Words of the Week: Fixed Rate / ARM

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FWOTW
Previously, we defined interest  as the cost of borrowing money. You have a range of options when it comes to interest rates. Before you take out a new loan or credit card, be sure you understand those options.

When looking at mortgages, you will likely see fixed rate and adjustable rate mortgages. With a fixed rate mortgage, your lender sets the interest rate during the application process, and it does not change for the life of the loan. With an adjustable rate mortgage, your interest rate will change regularly, based on a published reference rate. The frequency of this change depends on your mortgage.

Loans other than mortgages can be either fixed rate or variable rate. The definition of a fixed rate loan is the same as a fixed rate mortgage, but variable rate loans differ from adjustable rate mortgages in how frequently the rate can change. If the reference rate changes frequently, the interest rate on a variable rate could change monthly. Many car loans have fixed rates, while most credit cards have variable rates.

If you are unsure what your interest rate is on an existing loan, you can look at the terms and disclosures on your monthly statement or your loan paperwork. If you are applying for a new loan or line of credit, the application disclosure should tell you how the interest rate is set.

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UMB Financial Corporation (Nasdaq: UMBF) is a financial services holding company headquartered in Kansas City, Mo., offering complete banking, payment solutions, asset servicing and institutional investment management to customers. UMB operates banking and wealth management centers throughout Missouri, Illinois, Colorado, Kansas, Oklahoma, Nebraska and Arizona. It also has a loan production office in Texas. Subsidiaries of the holding company include mutual fund and alternative investment services groups, single-purpose companies that deal with brokerage services and insurance, and a registered investment advisor that manages the company's proprietary mutual funds and investment advisory accounts for institutional customers.



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Happy Independence Day!

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How does your patriotic pocketbook compare to the rest of America’s?

07-04 (1)

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UMB Financial Corporation (Nasdaq: UMBF) is a financial services holding company headquartered in Kansas City, Mo., offering complete banking, payment solutions, asset servicing and institutional investment management to customers. UMB operates banking and wealth management centers throughout Missouri, Illinois, Colorado, Kansas, Oklahoma, Nebraska and Arizona. It also has a loan production office in Texas. Subsidiaries of the holding company include mutual fund and alternative investment services groups, single-purpose companies that deal with brokerage services and insurance, and a registered investment advisor that manages the company's proprietary mutual funds and investment advisory accounts for institutional customers.



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Industry Insights: Manufacturing…3 ways to become more efficient

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For manufacturers, finding more ways to increase cost-savings continues to be a top priority. Looking at the rise in lean standards shows this trend. And while many are making great strides in maximizing their physical operations, administrative areas should be considered as well. Specifically, consider these time and money savers in your company’s financial processes:

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1) Plan for large investments – Evaluate and properly plan for equipment guidance line needs. As technology continues to evolve, many manufacturers are purchasing more equipment to support their operations. As businesses expand their work, make repairs or replace units, they may find themselves making multiple purchases throughout the year. Rather than go through the process of taking out a separate loan for each investment, manufacturers should map out their anticipated needs for the year and take out a line that will cover all potential investments. Not only will this save time, but it also provides flexibility for manufacturers to buy new or used equipment and to proactively plan for capital expenditures they may want to make during the year.

2) Streamline purchasing processesPurchasing cards are another item to consider from a processing standpoint. Not only does the right program provide valuable rewards, but it also cuts down on check writing, and provides increased flexibility in cash flow. Additionally, it creates a more streamlined tracking system for accounting departments. By allowing job numbers to be attached to specific expenses, companies can easily allocate costs to the appropriate projects, which results in more effective planning and budgeting.

3) Use payment technology – Remote deposit is a great service to incorporate into business operations as well. For manufacturers that have not yet made the jump, this is an easy, and extremely valuable, component to incorporate into the payments process. In addition to being very easy to use, it provides a safe and secure way to process incoming funds and also saves valuable time by eliminating the need for deposit trips to the bank.

As the saying goes, time is money, so implementing ways to become more efficient is a great way to positively affect the bottom line.

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Mr. Nohavec is a SVP/Business Development Officer for UMB Bank Colorado. He is responsible for Colorado. He joined UMB in 2005 and has 20 years of experience in the financial services industry.



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