Kiplinger's experts take on the major dilemmas of your financial life -- where to invest now, how much insurance is enough, how to prepare for retirement, the best way to save for college -- and wrestle them to the ground.
Your Home and Cars FAQs appear below. Use the links in the box below to jump to more.
Spending
- What should I do with my old cell phone?
- Where can I get the best odds in Vegas?
- How can I make my next flight more comfortable?
Car
- When I buy a car, should I choose low-rate financing or take the cash-back rebate?
- Should I buy or lease my next car?
- Should I put premium gasoline in my new car?
Home
- How can I make my lender drop my private mortgage insurance?
- Does it make sense to pay ahead on our mortgage even though rates are at all-time lows?
- How much do interest rates need to fall before I should consider refinancing?
Spending
What should I do with my old cell phone?
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Instead of scrapping that old cell phone, and threatening the environment, consider giving it to a charity. According to a recent report by the environmental group Inform, cell phones contain lead and beryllium, which can seep into soil and drinking water when buried in landfills.
Recycling your old phone can help save the planet and someone in need:
- CharitableRecycling.com gives used phones to senior citizens and battered women for emergency 911 service, and to patients awaiting organ transplants.
- CollectiveGood.com refurbishes phones for use in developing countries.
- WirelessFoundation.org provides phones with free airtime for victims of domestic violence, and offers other programs.
Where can I get the best odds in Vegas?
Head for the blackjack tables. Spending a few hours studying when to take a card and when to stand pat will help you bump up the odds of winning to almost 50-50 (49% for you versus 51% for the house), which is as good as it gets.
How can I make my next flight more comfortable?
Ask the ticket agent about what's known in airline-speak as airport upgrade programs. They’re a cheap way for domestic fliers to buy a last-minute promotion to first class, if space is available. The programs are open to both business and leisure travelers, and to frequent and infrequent fliers. A few carriers won’t upgrade their cheapest fares.
Car
When I buy a car, should I choose low-rate financing or take the cash-back rebate?
With today's low interest rates, taking the money is likely to be the better deal. Consider a recent offer from Ford, which gave buyers a choice between zero-percent financing or a $3,000 rebate on a $21,000 Mercury Sable. If you put 20% down and financed the rest with a loan, you'd save more by choosing the rebate.
Here's how the numbers work: A down payment of $4,200 reduces the amount you have to finance to $16,800, and the $3,000 rebate reduces it further, to $13,800. If you financed that amount at 6% over four years, you would pay a total of $19,756 -- a savings of $1,244 over the $21,000 you would pay if you took the generous-sounding zero-percent financing deal.
The lower the interest rate you qualify for, the more attractive the rebate. As a good credit risk, you could qualify for a home-equity loan at the prime rate (currently 4.25%) and the interest would be tax-deductible.
To see whether you'd be better off with a rebate or low-rate financing, use the calculator at Kiplinger.com.
Should I buy or lease my next car?
Leasing isn't the indisputable deal it was a couple of years ago. Companies are no longer keeping lease payments artificially low by boosting a car's projected end-of-lease resale value. And today's low- or no-rate interest deals and rebates can bring monthly purchase payments close to payments on a lease.
Time is also of the essence. Leasing doesn't pay if you tend to hang on to a car until it's ready for the junkyard. In addition, lease deals are notoriously complex, with hard-to-decipher fees and terminology. And if you don't give an accurate estimate of your anticipated annual mileage, you'll pay dearly for extra miles at the end of the lease.
Having said all that, leasing can make sense in certain circumstances. For example, it can halve your payments on a pricey luxury car you wouldn't be able to afford otherwise. If the manufacturer is subsidizing the lease, you might also come out ahead by leasing -- assuming that, as a buyer, you'd finance the car and trade it in after the same amount of time as the lease term.
Should I put premium gasoline in my new car?
Not unless your owner's manual tells you to. Buying premium when the manufacturer doesn't recommend it is a waste of money, says Geoff Sundstrom of the American Automobile Association. Some vehicles with turbocharged or other high-performance engines are designed to operate with high-octane fuel, but 80% of vehicles on the road run on regular.
Home
How can I make my lender drop my private mortgage insurance?
Ask nicely, and in writing. Lenders want to see that you've made payments on time for at least two years. And they'll want an appraisal -- it will cost you $250 or so -- to prove that your steady payments -- plus rising property values and any home improvements -- have boosted your equity to at least 25%.
Does it make sense to pay ahead on our mortgage even though rates are at all-time lows?
It sure does. Paying ahead on a mortgage with a 5.6% interest rate is the equivalent of earning 5.6% on your money. That's not bad, considering your alternatives are a struggling stock market and anemically low interest rates for cash investments. Also, paying ahead lets you build equity faster and shorten the term of your mortgage -- a real boon if you're aiming to be mortgage-free by the time you're ready to retire.
You could achieve the same goal by refinancing to a 15-year mortgage, on which rates recently dipped to below 5%. But paying ahead offers more flexibility.
Suppose you replaced a $200,000, 30-year, fixed-rate loan at 7.5% with a new 30-year mortgage at 5.8%. You could apply the $225 monthly savings toward principal, cutting nearly ten years off the term of the loan and saving about $81,000. But you wouldn't be tied to a higher mortgage payment (as you would be with a 15-year loan) and would be free to reallocate the savings elsewhere, using it to pay college expenses, for example, or to invest in stocks when an opportunity arises.
How much do interest rates need to fall before I should consider refinancing?
Even a one-point drop can be worth your while. The real question is whether you'll stay in the house long enough to make refinancing pay off.
For example, cutting one percentage point from your 30-year, fixed-rate loan will save you about $63 per month for every $100,000 you borrow. Closing costs on a refinancing deal can total $2,000 or more, which you might choose to roll into your new loan amount. At that rate, it would take two and a half years for the refinancing to pay for itself. If you're planning to stay in the house longer than that, refinancing makes sense.
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