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what is the hodrick prescott hp filter | the hodrick prescott hp filter refers to a data smoothing technique the hp filter is commonly applied during analysis to remove short term fluctuations associated with the business cycle removal of these short term fluctuations reveals long term trends this can help with economic or other forecasting associated with the business cycle understanding the hodrick prescott hp filterthe hodrick prescott hp filter is a tool commonly used in macroeconomics it is named after economists robert hodrick and edward prescott who first popularized this filter in economics in the 1990s hodrick was an economist who specialized in international finance prescott won the nobel memorial prize sharing it with another economist for their research in macroeconomics this filter determines the long term trend of a time series by discounting the importance of short term price fluctuations in practice the filter is used to smooth and detrend the conference board s help wanted index hwi so it can be benchmarked against the bureau of labor statistic s bls jolts an economic data series that may more accurately measure job vacancies in the u s the hp filter is a tool commonly used in macroeconomics special considerationsthe hp filter is one of the most widely used tools in macroeconomic analysis it tends to have favorable results if the noise is distributed normally and when the analysis being conducted is historical according to a paper published by economist and professor james hamilton which appears on the national bureau of economic research website there are several reasons why the hp filter should not be used hamilton first proposes that the filer produces outcomes that have no basis in the process of generating data he also states that the values that are filtered at the sample s end are totally different from those in the middle | |
what is holacracy | holacracy is a system of corporate governance whereby members of a team or business form distinct autonomous yet symbiotic teams to accomplish tasks and company goals the concept of a corporate hierarchy is discarded in favor of a fluid organizational structure where employees have the ability to make key decisions within their own area of authority | |
how holacracy works | holacracy seeks to replace the rigidity of a traditional command structure with a system of flexible roles each with wide authority within their specific area of responsibility instead of a traditional pyramid shaped structure a holacracy is described as a series of nested circles each representing autonomous teams with many roles rather than having fixed job responsibilities individuals functioning in a holacracy may occupy several roles each with a specific purpose and one or more domains and accountabilities since each individual has multiple roles it is possible for the ceo of a company to take a leadership role on one team and a subordinate role on another any conflicts that arise are resolved in periodic governance meetings within each circle 1role leads are empowered to make key decisions without having to defer to the management chain of command this gives rise to what is described as the golden rule of holacracy to fulfill your role you have the full authority to make any decision or take any action as long as there s no rule against it 2holacracy looks to do away with managing from the top down and gives individuals and teams more control over processes origin of holacracyarthur koestler author of the 1967 book the ghost in the machine coined the term holarchy as the organizational connections between holons from the greek word for whole which describes units that act independently but would not exist without the organization they operate within brian robertson then developed the concept and dynamics of holacracy while running a software development company named ternary software in the early 2000s 3 in 2007 he and tom thomison founded holacracyone and published the holacracy constitution three years later 4 companies that have publicly adopted holacracy in some form include zappos com 5zappos com with 1 500 employees is the largest company to adopt holacracy 6examples of holacracythe largest company to integrate holacracy into its management practices is zappos com an online retailer for clothing shoes handbags and other accessories that has over 1 500 employees according to zappos holacracy allows every employee to quickly surface and act on customer feedback 7holacracyone lists around 185 organizations that have publicly adopted holacracy principles besides zappos others include liip a digital agency in switzerland springest a dutch company that produces learning software and mercedes benz io the online arm of the auto manufacturer 8special considerationscritics have described holacracy as hype or the latest in a long series of tech sector buzzwords when zappos integrated holacracy into its management practices nearly one in five employees elected to receive a severance rather than continue with the company and many of them cited holacracy as their reason for leaving 9some tech companies that adopted holacracy later abandoned it for example medium a blogging site that adopted holacracy in 2013 ended its experiment three years later in a blog post the company said that holacracy was getting in the way of work 10correction june 18 2022 a previous version of this article incorrectly listed valve as an example of a holacracy based company | |
what is a hold | hold is an analyst s recommendation to neither buy nor sell a security a company with a hold recommendation generally is expected to perform with the market or at the same pace as comparable companies this rating is better than sell but worse than buy meaning that investors with existing long positions shouldn t sell but investors without a position shouldn t purchase either understanding hold recommendationsa hold recommendation can be thought of as hold what you have and hold off buying more of that particular stock a hold is one of the three basic investment recommendation given by financial institutions and professional financial analysts all stocks either have a buy sell or hold recommendation often a single stock may have two or more conflicting recommendations given by different financial institutions in these cases it s important for investors to look at the advice provided and decide which is more accurate for their specific situations if an investor decides that a stock is a hold she has two potential options if the investor already owns shares of the stock she should hold onto the equity and see how it performs over the short medium and long term if an investor does not own any shares of the equity she should wait to purchase until the future prospects become more clear a hold versus a buy and hold strategya hold is an analyst s call on a stock and distinct from the buy and hold strategy where an equity security is purchased with the understanding that it will be held for the long term the definition of long term depends on the specific investor but most people entering into a buy and hold strategy will own a stock for five years or more this type of strategy forces investors to stick with investments through market retractions and recessions so they don t sell during a dip instead they ride out volatility and sell at a peak benefits of holding a stock | |
when an investor holds onto a stock she is effectively initiating a long position in an equity investors who hold a stock for a long period of time can benefit from quarterly dividends and potential price appreciation over time even if a stock is given a hold recommendation and remains flat if it pays a dividend the investor can still profit a hold position is not a bad one and even stocks that are labelled as a hold can appreciate in price over time they are just not seen as likely to outperform other comparable stocks | risks of holdinghowever there are also risks of holding a stock all long positions are susceptible to market volatility and potential price declines sometimes investors predict a microeconomic or macroeconomic downturn but hold onto a stock because it was recommended by a leading financial institution if the price of the stock subsequently declines with the market the investor loses money that said the paper losses in a broad market dip only matter if the investor needs the money in the near term if however the fundamentals of a stock have degraded then the investor must reassess whether to continue to hold or not | |
what is a hold harmless clause | a hold harmless clause also known as a hold harmless agreement or hold harmless provision is a clause in a legal contract absolving one party of legal liability for any injuries or damages suffered by another party it ensures that one party cannot hold the other party legally responsible for any risks incurred from services provided hold harmless clauses can play a crucial role in business transactions this type of agreement is especially prevalent in industries like sports real estate construction and others where the potential for loss or injury is high for example in some real estate lease agreements a commercial tenant might agree not to sue the landlord for injuries resulting from the landlord s failure to maintain the property | |
how a hold harmless clause works | businesses that offer high risk activities such as skydiving sessions commonly use a hold harmless clause although a hold harmless clause is not an absolute protection from liability it indicates that the customer has acknowledged certain risks and agreed to take them this agreement if often in the form of a letter or a waiver that the participant must sign the hold harmless agreement may be unilateral or reciprocal with a unilateral agreement one party to the contract agrees not to hold the other party liable for injuries or damages incurred with a reciprocal agreement both parties to the contract agree to hold the other harmless a hold harmless clause does not always protect a company against lawsuit or liability the agreement must specifically state that the signee is waiving their right to sue for negligence 1 | |
what is a holdco | holdco is an abbreviation for holding company which is a firm that exercises control over one or more additional firm s the holdco accomplishes this through the acquisition of stock that is sufficient to control or influence the voting by shareholders the holding company earns money by collecting the dividends from the shares of firms in which it owns a controlling interest understanding a holdcoholdcos are businesses that own other entities of value which is usually accomplished through the acquisition of stock that is sufficient to control or influence voting by shareholders a holdco earns money by collecting the dividends from the shares of firms in which it owns a controlling interest the establishment of a holding company can be both less expensive and legally complicated than a merger or consolidation making it an attractive means of gaining control of another company a holdco is also known as a parent company the key purpose of a holdco is to hold i e own assets the holdco itself can be held by a single person or company or a group of individuals or companies the main purpose of holdcos is to limit liability example of holdcosholdcos can be used for a variety of things but they are more common in the real estate industry for example an investor looking to limit personal liability against legal action might use a holdco to own the real estate and then an operating company for the operations the operating company would lease the property land or assets from the holdco thus even if something happened with the operating company and it was sued the assets would be relatively insulated via the holdco beyond real estate other companies in the u s use holdcos for one reason or another banks for example use holdcos such as jpmorgan chase jpm and citigroup c both of which are holdcos utilities previously utilized holdcos although it s rarely seen today special considerationsthe internal revenue service irs says that a company is a personal holding company if it meets both the income test and the stock ownership test the income test requires that at least 60 of the corporation s adjusted ordinary gross income for the tax year is from rent royalties dividends interest and annuities the stock ownership test requires that at any time during the last six months of the tax year five or fewer individuals must directly or indirectly own more than 50 of the value of the corporation s outstanding stock 1 | |
what is holder of record | a holder of record is the name of the person who is the registered owner of a security and who has the rights benefits and responsibilities of ownership understanding holder of recordthe holder of record for a stock typically has shareholder voting rights and receives dividend payouts if there are any the holder of record for a bond owns the bond and receives the principal and interest payments when the owner sells the security they cease to be the holder of record holder of record may also correspond to the legitimate owner of other securities such as commodities and derivative contracts securities can be issued in either registered or bearer form registered form means the issuing firm itself keeps records of a security s owner and mails out payments to them bearer form means the security is traded without any record of ownership physical possession of the security is the sole evidence of ownership bearer form securities have largely been phased out due to their potential for misuse presently securities are mostly issued in registered form a registered holder is also distinct from a beneficial owner or holder whose holdings are held in a brokerage account or by a bank or nominee in street name but as shareholders of a company registered holders and beneficial owners will have the same rights with regard to voting receiving dividends and communications etc the only difference being the manner in which voting rights are exercised and dividends or communications received although holding securities in street name is the norm some investors still prefer to hold physical certificates in their own name because it is more expensive to transfer ownership this way brokers will charge a higher rate for the inconvenience the shareholder register is fundamental to the examination of the ownership of a company register of shareholdersholders of record may involve a shareholder register a list of active owners of a company s shares updated on an ongoing basis the shareholder register requires that every current shareholder be recorded and includes each person s name address and number of shares held in addition the register can even detail the holder s occupation and the price paid the shareholder register differs from a shareholder list in that the shareholder list is updated only once per year whereas the register keeps track of the current partial owners of a company | |
what is a holding company | a holding company is a business entity usually a corporation or limited liability company llc that typically doesn t manufacture anything sell any products or services or conduct any other business operations rather holding companies or holdcos hold the controlling stock in other companies although a holding company owns the assets of other companies it often maintains only oversight capacities so while it may oversee the company s management decisions it does not actively participate in running a business s day to day operations of these subsidiaries a holding company is also sometimes called an umbrella or parent company paige mclaughlin investopediaunderstanding holding companiesa holding company typically exists for the sole purpose of controlling other companies holding companies may also own property such as real estate patents trademarks stocks and other assets this structure serves to limit the financial and legal liability exposure of the holding company and of its various subsidiaries it may also depress a corporation s overall tax liability by strategically basing certain parts of its business in jurisdictions that have lower tax rates businesses that are completely owned by a holding company are referred to as wholly owned subsidiaries although a holding company can hire and fire managers of the companies it owns those managers are ultimately responsible for their own operations advantages and disadvantages of a holding companyholding companies enjoy the benefit of protection from losses if a subsidiary company goes bankrupt the holding company may experience a capital loss and a decline in net worth however the bankrupt company s creditors cannot legally pursue the holding company for remuneration consequently as an asset protection strategy a parent corporation might structure itself as a holding company while creating subsidiaries for each of its business lines for example one subsidiary may own the parent corporation s brand name and trademarks while another subsidiary may own its real estate holding companies are also relatively easy to create or change this makes it easy to take advantage of geographical differences in taxation regimes if a certain jurisdiction has high business taxes the holding company can simply relocate to a more business friendly environment while continuing operations in the original location if a holding company is set up correctly the debt liability of one subsidiary won t impact any others if one subsidiary were to declare bankruptcy it would not impact the others holding companies support their subsidiaries by using their resources to lower the cost of operating capital using a downstream guarantee the parent company can make a pledge on a loan on behalf of the subsidiary there are some disadvantages to owning subsidiaries through a holding company for investors and creditors it may be difficult to find an accurate picture of the overall financial health of the holding company it is also possible for unethical directors to hide their losses by moving debt among their subsidiaries holding companies can also exploit their subsidiaries by forcing them to appoint chosen directors or forcing the subsidiaries to buy products from one another at higher than market prices they may also force subsidiaries to sell products to one another at below market prices in some cases holding companies can even force their subsidiaries to lay off a large section of the workforce or plunder their acquisitions for saleable assets known as vulture capitalism these strategies can have the effect of inflating the holding company s overall numbers at the expense of the subsidiary they protect the parent company from losses by subsidiaries can provide cheaper operating capital to their subsidiaries parent companies can take advantage of regional taxation laws by moving the holding company and subsidiaries to different jurisdictions they can come with reduced transparency making it harder for investors and creditors to assess the health of the enterprise parent companies can abuse their subsidiaries by forcing them to trade with one another at non market prices parent companies can also force their subsidiaries to appoint chosen directors or change their policies types of holding companiesholding companies fall into different categories depending on their business operations some only exist to hold a single subsidiary while others may be engaged in other business operations the different types of holding companies are explained below | |
how holding companies make money | large holding companies may have several income streams depending on the companies in their portfolio the most straightforward way to make money is through equity in their subsidiaries holding companies can benefit from dividends in the subsidiary s share price as well as by selling equity in companies that gain value in addition holding companies can also profit from synergies between their subsidiaries rather than have separate information technology it human resources hr or administration teams for each company a holding company can centralize these services and then sell them to the subsidiaries holding companies can also centralize equipment or other assets for lease by all of their companies example of a holding companyan example of a well known holding company is berkshire hathaway which owns more than 70 companies including clayton homes duracell geico fruit of the loom rc willey home furnishings marmon holdings and kraft heinz berkshire hathaway also has stakes in large public companies such as coca cola 1 | |
what is the purpose of a holding company | a holding company is a financial vehicle for owning and controlling other assets such as real estate stocks or companies using a holding company creates legal separation between the assets and the owners and reduces the liability for the owners if one of the holdings encounters financial trouble | |
how do you create a holding company | to create a holding company you simply need to file the articles of incorporation in the state or jurisdiction where you want to register the company you will also need to identify the business agents managing the holding and operating companies this can be complicated so for companies with larger holdings it is worth engaging a lawyer | |
what is a personal holding company | a personal holding company is a company where five or fewer individuals control 50 of the ownership stake and at least 60 of the company s income comes from passive sources 2the bottom linea holding company is a type of business entity that has a single purpose owning other companies some holding companies are large conglomerates with arms in many different industries others only exist to manage a single subsidiary holding companies can help protect their owners from losses or they can also be used to reduce tax burdens | |
what was a holding company depository receipt holdr | a holding company depository receipt holdr was a security that allowed investors to buy and sell a basket of stocks in a single transaction like exchange traded funds etfs holdrs allowed investors to trade stocks in a specific industry sector or group etfs however provide a more efficient and flexible structure for investors and issuers as a result holdr securities were discontinued and some converted into etfs by the end of the year 2011 understanding holding company depository receipts holdrs a holding company depository receipt holdr referred to a fixed collection of publicly traded stocks packaged together as one security holdrs were created by merrill lynch and traded only on the new york stock exchange nyse holdrs enabled an investor to gain exposure to a market sector at a relatively low cost and diversify within that sector to gain the same level of diversification manually the investor would have needed to purchase each company individually thus increasing the amount paid in commissions 1holdrs covered a wide range of sectors and industries such as biotech pharmaceutical and retail but merrill lynch determined the composition of each holdr and holdrs can vary widely from each other a key difference between holdrs and etfs was that investors in holdrs had direct ownership in the underlying stocks which is not the case for etfs and as a result investors in holdrs had voting and dividend rights etfs and the demise of holdrsholdrs are often lumped in with exchange traded funds etfs and while both products share low cost low turnover and tax efficient characteristics they are different investment vehicles etfs are often preferable to investors and meet the same purpose as holdrs etfs invest in indexes that contain many components and regularly change in contrast a holdr was a static group of stocks selected from a particular industry and their components rarely change etfs also track some form of an underlying index whereas holdrs did not etf holdings are moreover managed and periodically adjusted to provide the best return possible within that index if a company was acquired and removed from a holdr its stock was not replaced which could result in more concentration and added risk holdrs were typically bought in round lots of 100 and could be quite capital intensive for smaller investors thus excluding some from participating in them holdrs however helped give rise to the popularity of etfs whose dominance eventually consumed some holdrs and caused others to be shut down and liquidated in december of 2011 six of the 17 remaining holdrs were converted into etf structures and the remaining 11 were liquidated 2 | |
what are holding costs | holding costs are those associated with storing inventory that remains unsold these costs are one component of total inventory costs along with ordering and shortage costs a firm s holding costs include the price of goods damaged or spoiled as well as that of storage space labor and insurance understanding holding costsminimizing inventory costs is an important supply chain management strategy inventory is an asset account that requires a large amount of cash outlay and decisions about inventory spending can reduce the amount of cash available for other purposes for example increasing the inventory balance by 10 000 means that less cash is available to operate the business each month this situation is considered an opportunity cost holding costs exampleassume that abc manufacturing produces furniture that is stored in a warehouse and then shipped to retailers abc must either lease or purchase warehouse space and pay for utilities insurance and security for the location the company must also pay staff to move inventory into the warehouse and then load the sold merchandise onto trucks for shipping the firm incurs some risk that the furniture may be damaged as it is moved into and out of the warehouse holding cost reduction methodsone way to ensure a company has sufficient cash to run its operations is to sell inventory and collect payments quickly the sooner cash is collected from customers and the less total cash the firm must come up with to continue operations businesses measure the frequency of cash collections using the inventory turnover ratio which is calculated as the cost of goods sold cogs divided by average inventory for example a company with 1 million in cost of goods sold and an inventory balance of 200 000 has a turnover ratio of five the goal is to increase sales and reduce the required amount of inventory so that the turnover ratio increases another important strategy to minimize holding costs and other inventory spending is to calculate a reorder point or the level of inventory that alerts the company to order more inventory from a supplier an accurate reorder point allows the firm to fill customer orders without overspending on storing inventory companies that use a reorder point avoid shortage costs which is the risk of losing a customer order due to low inventory levels the reorder point considers how long it takes to receive an order from a supplier as well as the weekly or monthly level of product sales a reorder point also helps the business compute the economic order quantity eoq or the ideal amount of inventory that should be ordered from a supplier eoq can be calculated using inventory software | |
what are holding costs | holding costs are those associated with storing inventory that remains unsold these costs are one component of total inventory costs along with ordering and shortage costs a firm s holding costs include the price of goods damaged or spoiled as well as that of storage space labor and insurance understanding holding costsminimizing inventory costs is an important supply chain management strategy inventory is an asset account that requires a large amount of cash outlay and decisions about inventory spending can reduce the amount of cash available for other purposes for example increasing the inventory balance by 10 000 means that less cash is available to operate the business each month this situation is considered an opportunity cost holding costs exampleassume that abc manufacturing produces furniture that is stored in a warehouse and then shipped to retailers abc must either lease or purchase warehouse space and pay for utilities insurance and security for the location the company must also pay staff to move inventory into the warehouse and then load the sold merchandise onto trucks for shipping the firm incurs some risk that the furniture may be damaged as it is moved into and out of the warehouse holding cost reduction methodsone way to ensure a company has sufficient cash to run its operations is to sell inventory and collect payments quickly the sooner cash is collected from customers and the less total cash the firm must come up with to continue operations businesses measure the frequency of cash collections using the inventory turnover ratio which is calculated as the cost of goods sold cogs divided by average inventory for example a company with 1 million in cost of goods sold and an inventory balance of 200 000 has a turnover ratio of five the goal is to increase sales and reduce the required amount of inventory so that the turnover ratio increases another important strategy to minimize holding costs and other inventory spending is to calculate a reorder point or the level of inventory that alerts the company to order more inventory from a supplier an accurate reorder point allows the firm to fill customer orders without overspending on storing inventory companies that use a reorder point avoid shortage costs which is the risk of losing a customer order due to low inventory levels the reorder point considers how long it takes to receive an order from a supplier as well as the weekly or monthly level of product sales a reorder point also helps the business compute the economic order quantity eoq or the ideal amount of inventory that should be ordered from a supplier eoq can be calculated using inventory software | |
what is the holding period return yield | holding period return is the total return received from holding an asset or portfolio of assets over a period of time known as the holding period it is generally expressed as a percentage and is particularly useful for comparing returns on investments purchased at different periods in time understanding holding period returnholding period return is calculated on the basis of total returns from the asset or portfolio income plus changes in value it is particularly useful for comparing returns between investments held for different periods of time starting on the day after the security s acquisition and continuing until the day of its disposal or sale the holding period determines tax implications for example sarah bought 100 shares of stock on jan 2 2023 when determining her holding period she begins counting on jan 3 2023 the third day of each month after that counts as the start of a new month regardless of how many days each month contains if sarah sold her stock on dec 23 2023 she would realize a short term capital gain or capital loss because her holding period is less than one year if she sells her stock on jan 3 2024 she would realize a long term capital gain or loss because her holding period is more than one year 1calculating holding period returnholding period return hpr and annualized hpr for returns over multiple years can be calculated as follows holding period return income end of period value initial value initial value begin aligned textit holding period return qquad frac textit income textit end of period value textit initial value textit initial value end aligned holding period return initial valueincome end of period value initial value returns computed for regular time periods such as quarters or years can be converted to a holding period return as well example of holding period return yieldthe following are some examples of calculating holding period return 1 what is the hpr for an investor who bought a stock a year ago at 50 and received 5 in dividends over the year if the stock is now trading at 60 h p r 5 60 50 50 30 begin aligned hpr frac 5 60 50 50 30 end aligned hpr 505 60 50 30 2 which investment performed better mutual fund x which was held for three years and appreciated from 100 to 150 providing 5 in distributions or mutual fund b which went from 200 to 320 and generated 10 in distributions over four years hpr for fund x 5 150 100 100 55 hpr for fund b 10 320 200 200 65 begin aligned textit hpr for fund x frac 5 150 100 100 55 010pt textit hpr for fund b frac 10 320 200 200 65 end aligned hpr for fund x 1005 150 100 55 hpr for fund b 20010 320 200 65 note fund b had the higher hpr but it was held for four years as opposed to the three years for which fund x was held since the time periods are different this requires annualized hpr to be calculated as shown below 3 calculation of annualized hpr annualized hpr for fund x 0 55 1 1 3 1 15 73 annualized hpr for fund b 0 65 1 1 4 1 13 34 begin aligned textit annualized hpr for fund x qquad 0 55 1 1 3 1 15 73 textit annualized hpr for fund b qquad 0 65 1 1 4 1 13 34 end aligned annualized hpr for fund x 0 55 1 1 3 1 15 73 annualized hpr for fund b 0 65 1 1 4 1 13 34 thus despite having the lower hpr fund x was the superior investment 4 your stock portfolio had the following returns in the four quarters of a given year 8 5 6 4 how did it compare against the benchmark index which had total returns of 12 over the year hpr for your stock portfolio 1 0 08 1 0 05 1 0 06 1 0 04 1 13 1 begin aligned textit hpr for your stock portfolio qquad 1 0 08 times 1 0 05 times 1 0 06 times 1 0 04 qquad quad 1 13 1 end aligned hpr for your stock portfolio 1 0 08 1 0 05 1 0 06 1 0 04 1 13 1 your portfolio therefore outperformed the index by more than a percentage point however the risk of the portfolio should also be compared to that of the index to evaluate if the added return was generated by taking significantly higher risk | |
is holding period return the same as rate of return | pretty much yes the rate of return tells us in percentage terms how much an investment made or lost the holding period return does the same thing telling us the return on an investment during the timeframe it was held | |
why do we need holding period return | holding period return is important for several reasons it considers not only appreciation but also income payments and is a great way to compare the performance of investments held over different timeframes | |
what does holding period mean | holding period means the time a security was held for it begins when the investment is purchased and ends when it is sold can holding period return be negative yes not all investments generate a profit even a stock that pays a dividend could deliver a negative holding period return if it depreciated in value the bottom linea holding period return is the total return you received from holding an asset or collection of assets you essentially subtract the price you initially paid from the price you sold the security add any income paid and then divide the sum by the initial value the holding period of return is usually expressed as a percentage meaning you then multiply the total by 100 knowing the holding period return makes it easier to compare returns between investments that s especially the case for investments held for different periods of time | |
what is holding the market | holding the market is the deliberate practice of placing active or pending orders for a security in a market where the price is dropping in an attempt to hold the price of the security steady or to create an artificial floor in the security this practice is outlawed in most instances except when a broker or other party is mandated to keep the price of a security steady this is only done in rare cases where there isn t enough market depth to hold the price holding the market may also refer to the practice of owning a broad market index such as the s p 500 or wilshire 5000 total market understanding holding the marketnot only is holding the market often a violation of securities regulations and exchange rules but holding the market is hard to pull off these days because someone would have to have very deep pockets to make a significant impact on a security s price one factor that keeps the practice of holding the market from occurring more frequently is that it is rarely profitable and can often lead to severe losses if prices do not rebound however if an investor with very deep pockets is considering a holding the market strategy it behooves them to first try and understand why the price of the security is dropping stocks that are declining in price often have recurring themes that once identified can help an investor decide if a holding the market strategy is the right course of action these themes are typically related to one of three things considerations for a holding the market strategymost stocks react to market sentiment in predictable ways therefore if negative news is released and the price of a stock remains steady or even rises especially with above average trading volume further investigation may be warranted if a company s fundamentals have not dramatically changed for the better it could be the case that a group of individuals or firms is trying to artificially keep the price up using a series of bid orders many of which may be spoofed fake orders that do not intend to trade of course not every anomalous or unexpected price movement is nefarious there may be legitimate buy orders of large blocks placed by institutional investors for several reasonable and allowable purposes such as rebalancing hedging or addition to a large portfolio | |
what are holdings | the term holdings refers to the contents of an investment portfolio held by an individual or an entity such as a mutual fund holdings can be any type of investment product including stocks bonds mutual funds options futures and exchange traded funds etfs having multiple holdings or asset classes can help diversify an investor s investment portfolio holdings are acquired and disposed of by making trades notably by buying and selling them understanding holdingsas noted above holdings are assets that an investor buys and holds in their investment portfolio investors may be individuals or organizations such as mutual funds or pension funds assets that are classified as holdings can include stocks bonds mutual funds etfs options and derivatives among others the number and types of holdings within a portfolio contribute to its diversification diversification is a risk management strategy that mixes a wide variety of investments within a portfolio a portfolio constructed of different assets on average yields higher long term returns and lowers the risk of any individual holding or security a well diversified portfolio contains a mix of distinct asset types and investment vehicles this may include a mix of stocks across different sectors bonds with different maturities and other investments a portfolio with concentrated holdings in a handful of stocks within a single sector is considered to be of very limited diversification the proportion of holdings within a portfolio has a significant impact on its overall return the performance of the largest holdings within the portfolio has a bigger influence on the overall portfolio return than any small or medium sized holdings in the portfolio an investor s investment strategy risk tolerance and goals often determine what holdings they have in their financial portfolio special considerationsretail investors routinely scour the lists of the holdings of top money managers to piggyback on their trades and hopefully their success investors may seek to replicate the trading activity of the most successful portfolio managers by buying stocks where the manager has initiated a long position or added significantly to an existing position and selling positions when the manager has exited a stake this strategy may not always be successful for the average investor given the considerable time lag between the time when the manager completes the trades and the time when the fund s holdings are made available to the general public the holdings of famous and smaller fund managers are published quarterly through a securities and exchange commission sec filing known as a 13f investors have 45 days until the end of the quarter to report their holdings for the previous quarter this requirement applies only to long stock positions however which means other holdings such as short positions options and foreign holdings are not disclosed holdings vs holding companiesinvestment holdings are different from holding companies a holding company holds the outstanding shares of other companies but doesn t provide other services such as the production of goods or services or engage in business directly rather it only serves as an ownership vehicle of other companies or investments sometimes when it is intended to be a pure holding company it identifies itself as such by adding the word holding or holdings at the end of its name berkshire hathaway is a famous example it started as a textile manufacturing company in the early nineteenth century while the company was successful in its first decades it suffered with the decline of the textile industry after world war i warren buffett began buying the company s stock in the 1960s with enough to take control and oust the owner since the company s last textile operation was shut down in 1985 berkshire hathaway became a holding company used to acquire hold and sell investments in other companies some of berkshire hathaway s key holdings include benjamin moore and geico 1in some cases investors may choose to create a limited liability company llc that can then own all of their investments they may do so to reduce their own exposure to risk minimize their taxes or pool their investments with other people such as business associates or family members | |
how do i locate the holdings of a mutual fund | most mutual funds disclose their holdings you can find them by going to the fund company s website you can also see the holdings on the fund s prospectus or by asking the fund manager for a list | |
what are top holdings in an investment | top holdings are any assets with the highest weighting in an investment portfolio you can determine the top holdings in your investment portfolio by determining which assets have the highest dollar value mutual funds commonly list their top holdings based on the percentage invested for example the top equity holding of the growth fund of america was microsoft as of march 31 2024 according to the prospectus 6 2 of the fund was invested in the company 2 | |
what does buy and hold mean | buy and hold is an investment strategy this is a long term passive strategy where an investor buys assets and holds onto them even when the market shows signs of short term fluctuations this is contrasted with active investing which involves constantly shifting holdings by regularly buying and selling financial instruments the bottom lineevery asset you buy and keep in your portfolio contributes to your holdings these include any stocks bonds etfs mutual funds and even cash if you want to minimize your risk market currency economic etc it s important to diversify your holdings this means not only investing in and holding different asset classes but also spreading your holdings across different sectors and industries speak to a financial professional if you re unsure about how to make your holdings work for you | |
what is a holdover tenant | a holdover tenant is a renter who remains in a property after the expiration of the lease if the landlord continues to accept rent payments the holdover tenant can continue to legally occupy the property and state laws and court rulings determine the length of the holdover tenant s new rental term if the landlord does not accept further rent payments the tenant is considered to be trespassing and if they do not promptly move out an eviction may be necessary understanding holdover tenantslandlords who want to avoid the mistake of winding up with a holdover tenant should always include a clause in the original lease stating what happens at the end of the lease period in order to protect their property and interests a year long apartment rental lease for example might specify that when the lease expires it converts to a month to month lease if a landlord accepts rent from a holdover tenant the implications vary based on state and local laws in some cases accepting payment resets the lease term to illustrate if the original lease was for a year a new year long lease starts when the landlord accepts a rent payment after the first lease has expired in other cases accepting payment from a holdover tenant triggers a month to month lease to remove a tenant from a property a landlord must initiate a holdover proceeding which essentially is an eviction case that is not based on missed rent payments this is a process that is usually handled in eviction or small claims courts if a landlord wants a holdover tenant to vacate a property the landlord must not accept rent from the tenant and must treat them as a trespasser holdover tenant rightsholdover tenants have a tenancy at sufferance the term sufferance means the absence of objection without genuine approval and a tenancy at sufferance is the opposite of a tenancy at will where a tenant occupies the property with the consent of the owner but generally without a written contract or lease tenancy at sufferance on the other hand refers to holdover tenants of an expired lease who no longer have the landlord s permission to remain in the property but have not yet been evicted 1 | |
when a landlord wishes to evict you as a holdover tenant they generally must serve you with a notice of termination though as noted above this is regulated by the state and so can vary from state to state the notice precipitates the holdover proceeding in new york state a notice of termination must be served in the following circumstances 2 | the notice must tell you the reason for the termination the date on which you must move and that the landlord will begin legal action if you don t comply by the deadline reasons can include the expiration of a lease bad behavior as a tenant being too noisy for example or having an unapproved pet being a subtenant without the landlord s knowledge being a squatter moving in without the landlord s knowledge unreasonably refusing the landlord access to the property and having made unapproved physical changes to the premises such as putting up a wall 2 however you are not entitled to receive a notice of termination if your lease has expired but you have remained in the property without paying rent in that case a landlord can begin a holdover proceeding without notice 2 | |
what are holdovers | in finance the term holdovers refers to transactions usually checks that have not yet been processed in most cases today the period of time in which checks are held as holdovers typically does not exceed one business day a holdover may also refer to a tenant who remains in a property after the expiration of the lease and is subject to eviction understanding holdoversholdovers usually occur when a bank does not have enough time to process all of the payments it has received before the end of a business day they are typically found in large clearinghouse banks and they are different from the holds placed by banks on out of state or third party checks in this case the check is usually held over simply because it was received too late in the day for same day processing for instance a customer might bring in a large number of checks to be deposited near the end of a business day such a situation might produce holdover checks if the bank is unable to process them during that same day those holdover checks would then be bundled together and deposited during the following business day special considerations | |
when a bank has holdovers it will provide the depositor with a deposit ticket processed on the date that it received the instruments nevertheless this situation can give rise to holdover float whereby the money represented by the holdover checks briefly exists in duplicate once in the account against which the holdover checks are drawn and a second time in the account into which they are deposited | to avoid holdover float some banks will post a debit to the account in which the holdover checks are to be deposited when the holdover items are processed the next day this debit will be zeroed out additionally some banks will require customers who frequently cause holdovers to sign an agreement specifying the conditions of the holdover other banks on the other hand address this issue by refusing to allow holdovers at all instead they simply instruct customers that holdover items will be processed on the next business day banks will typically only permit holdovers on behalf of customers with good credit ratings when bank examiners see holdovers occurring they typically take care to ensure that the holdovers are processed the next business day and that holdover debits are zeroed out regularly holdover timingalthough holdovers are generally rare at individual banks they are relatively common if viewed at the level of the overall financial system for instance the federal reserve has observed increased levels of holdover float on tuesdays due to the backlog of checks that were deposited but not processed over the preceding weekend similarly holdover float is generally highest in december and january due to unprocessed checks deposited during the holiday season temporary disruptions to banking hours such as severe weather events can also leave holdover floats in their wake 1scammers can take advantage of holdovers on check clearing to commit fraud check kiting for example targets banks or retailers through writing a series of bad checks sometimes drawn on multiple accounts reducing holdoverswhile holdovers allow for checks to properly clear they also provide banks with essentially free funds in order to keep banks from misusing these funds the monetary control act of 1980 specified several provisions to prevent or minimize holdovers some of these measures included having the federal reserve charge banks for certain activities like manual check processing and encouraged the use of electronic payments networks and computer readable check account routing information these allowed for much quicker and more efficient processing of checks and other payments reducing holdovers and shortening float time | |
what does floating mean in banking | in banking float refers to payments that have not yet cleared and so is essentially money that is counted twice bank float is highly regulated today and manipulations or misuse of it can amount to fraud | |
what are the risks of a floating check | a floating check is one that has been written but has not yet cleared today many banks immediately advance money from deposited checks to their customers but if the check is fraudulent or does not have enough money to draw from i e a bounced check bad actors can use the float interval to make fraudulent purchases or withdraw cash they do not actually have such as in check kiting floating checks can defraud the economy of millions of dollars a year by scammers | |
is floating a check illegal | yes floating a check is illegal in most u s states while writing a check with insufficient funds can result in a bounced check this is not illegal however using the time it takes to clear or detect a bounced check to commit fraud is | |
what is concentration banking | a concentration bank is a main branch of a bank that aggregates funds from satellite branches of that bank in order to facilitate payments and transfers | |
what is hollowing out | hollowing out is the deterioration of a country s manufacturing sector when producers opt for low cost facilities overseas taking away these jobs has helped to concentrate wealth among the very wealthy hollow out the middle class and increase the number of working class and lower class households understanding hollowing outover the past few decades many of the world s leading economies have experienced hollowing out as manufacturing jobs were sent to regions with lower labor costs such as china or bangladesh after peaking in 1979 at more than 19 million the number of u s manufacturing jobs shrank to fewer than 12 million by 2020 1other advanced economies have experienced a similar trend in japan for example the percentage of employment in manufacturing has plummeted since reaching nearly 28 in the 1970s by 2012 16 6 of people were said to be employed in the sector and there hasn t been much change since 23 this has had a disproportionate impact on cities and rural communities that relied heavily on nearby plants for employment 4not all economists believe that outsourcing of manufacturing and the subsequent hollowing out of jobs hurts society on net however some argue that it presents the domestic economy with an opportunity to pivot toward high skill high wage jobs such as product design and marketing they also argue that consumers benefit from the products they buy being made overseas as it leads to lower prices robots and other labor saving technologies are likely to cause a further hollowing out of middle class jobs this has been quantified into something known as moravec s paradox in the 1980s artificial intelligence ai experts discovered that robots find difficult things easy and easy things difficult hans moravec one of these ai researchers said it is comparatively easy to make computers exhibit adult level performance on intelligence tests or playing checkers and difficult or impossible to give them the skills of a one year old when it comes to perception and mobility 5put another way if you wanted to beat magnus carlsen the world chess champion you would choose a computer if you wanted to clean the chess pieces after the game you would choose a human being hollowing out dataincome inequality is becoming a growing issue in the u s and many other places in the world everywhere you look there s research illustrating that middle class disposable incomes are declining as the rich get richer from 1970 to 2018 the share of aggregate income going to middle class households in the u s fell from 62 to 43 while the share held by upper income households increased from 29 to 48 according to the pew research center this has led the american middle class population to shrink from 61 in 1971 to 51 in 2019 6while the middle class is indeed hollowing out the pew research center notes that the dynamic is complex some families dropped into the lower income bracket whereas others climbed into the upper income bracket 6the organization for economic co operation and development oecd came to a similar conclusion when looking at most of the globe according to its findings from the mid 1980s to the mid 2010s middle incomes barely grew in oecd countries and increased a third less than the average income of the richest 10 as labor markets changed and the cost of living skyrocketed 7 | |
what caused the decline of the middle class | the squeezing of the middle class has been blamed on several different factors including the outsourcing of jobs abroad the arrival of labor saving technologies and the rising costs of education healthcare and housing | |
how much has the middle class shrunk | various studies have been published on the shrinking middle class results vary depending on the country being analyzed the timeframe being examined and the criteria of the study in 2020 the pew research center claimed that the share of american adults living in middle income households decreased from 61 in 1971 to 51 in 2019 the oecd meanwhile said in 2019 that the share of people in middle income households defined as households earning between 75 and 200 of the median national income across oecd countries fell from 64 in the mid 1980s to 61 in the mid 2010s 76 | |
how does a shrinking middle class affect the economy | there are valid reasons to believe that a shrinking middle class is bad for economic growth this group has historically been responsible for a large chunk of spending fueling demand for goods and services and keeping the economy ticking well | |
what is the hollywood stock exchange hsx | the hollywood stock exchange hsx is an online prediction market in which investors bet on the performance of various components of the entertainment industry the bets are made using credits called moviestocks starbonds celebstocks tvstocks movie funds and various derivatives trades are made in hollywood dollars which players receive when they open an account make successful trades and participate in the website s quizzes each investment has a ticker like symbol for example the symbol for the movie iron man 3 is irnm3 understanding the hollywood stock exchange hsx the hollywood stock exchange game uses virtual specialist technology invented by hollywood stock exchange co founders and creators max keiser and michael r burns the exchange has been in operation since 1996 and is owned by brokerage firm cantor fitzgerald which launched a real world exchange similar to hsx called the cantor exchange in 2010 previous incarnations of the game included a music market for purchasing musical artists prizes for top gainers and briefly a buyout program in which the hollywood stock exchange would reward top players by purchasing their portfolios at a price of 1 per 1 million of exchange currency if the player listed the portfolio for sale on ebay these features have been discontinued the now discontinued practice of selling portfolios on ebay was inaugurated by curtis edmonds a former texas lawyer the hollywood stock exchange attracted some private investment during the dotcom boom and ran tv ads on cable channels in an effort to attract players after the dotcom crash the exchange was acquired by units of cantor fitzgerald cantor fitzgerald has used the exchange s moviestock prices to assist its gambling operations in the united kingdom in which bettors can place wagers on how much money u s films will gross new users who sign up receive h 2 000 000 of virtual hollywood dollars to get started playing the hollywood stock exchange game the hollywood stock exchange and prediction marketsthe hollywood stock exchange is a prediction market in the form of a game prediction markets are those created to trade on the outcome of events the market prices generally indicate what the majority of players or crowd thinks is the probability of a particular event occurring a prediction market contract will trade between 0 and 100 it is a binary option that will expire at the price of 0 or 100 prediction markets can be thought of as belonging to the more general concept of crowdsourcing which is specifically designed to aggregate information on particular topics of interest prediction markets which tend to be quite accurate exist for a wide range of subjects some like the iowa electronic markets trade in real money lately prediction markets have become quite popular for elections the website fivethirtyeight com which analyzes the likely outcome of elections among other events factors in prediction markets advantages and disadvantages of the hsxthe trading in moviestocks and starbonds serves to predict the box office in the first four weeks of a film s wide release depending on the number of investors at any given time the hsx should be relatively easy to manipulate in contrast to the regular shares however there are special warrants issued around holidays and the summer blockbuster season that have specific prices at issue these make money if the box office exceeds the face amount and expire worthless if they do not few barriers to entryprovides valuable market information to predict movie successes and failures far in advance of openingsmall markets are relatively easy to manipulate prices highly vulnerable to events like casting announcementsexample of the hsxlet s say that you think al pacino getting renewed interest because of the re release of the godfather films still has a great film left in him and you want the opportunity to make money from that you can place a trade with hollywood dollars to buy go long an al pacino starbond at a particular price or if you think for example that the world has seen enough of pacino you could sell his starbond short which allows you to profit from the downward movements in the overall price of mr pacino s starbonds with both the long and short positions when the market moves enough in your direction for you to make enough money to make you happy with your purchase you sell your long position or buy back your short position and the extra hollywood dollars you receive are your profit the bottom linethe hollywood stock exchange allows you an exciting way to participate in predicting the success or failure of upcoming films and movie star careers you receive two million hollywood dollars when you join that let you trade at will winning trades give you more hollywood dollars and start you on the road to mogul status hollywood stock exchange faqs | |
how do i place a trade on the hsx | once you have opened an account you can purchase and sell films and stars in the movie market stars are denominated in starbonds while movies are traded in moviestocks trading which can be long or short is executed in hollywood dollars you receive two million hollywood dollars when you open your account | |
are there initial public offerings on the hsx | yes the first time a star or a movie is added to the hsx it is called an initial public offering or ipo most of the time the price of an ipo moviestock or starbond will remain the same for the first day of trading can i lose hollywood dollars on a trade yes if the value of a moviestock or starbond you own goes down and you sell it you will have lost money however the really risky way to lose is where you sold or shorted a moviestock or starbond because you thought the value was going to go down as the bond or stock goes up in value your paper loss will increase until you liquidate that trade or the bond or stock expires so if you sorted a moviestock at h 10 and it eventually closes out at h 100 you will have lost h 90 | |
what is a holographic will | a holographic will is a handwritten and testator signed document and is an alternative to a will produced by a lawyer some states do not recognize holographic wills states that do permit holographic wills require the document meet specific requirements to be valid the minimal requirements for most states are proof that the testator wrote the will and evidence that the testator had the mental capacity to write the will 1 | |
how a holographic will works | holographic wills do not need to be witnessed or notarized which can lead to some issues during will validation in probate court to avoid fraud the testator must sign the will and the court will determine whether the will and signature were by the testator s hand 1handwriting experts or people familiar with the decedent s handwriting must convince the court that the signature was indeed that of the deceased problems arise when the handwriting is vague or illegible as with any will a testator to a holographic will must be explicit as to named beneficiaries and the receipt of property or assets such as stocks bonds and fund accounts the testator may also detail circumstances for recipients to meet to receive named assets holographic wills are not accepted in all states and are subject to each state s laws some lawyers recommend that explaining why specific property or other assets such as securities would be left to which beneficiaries would indicate that the testator was of sound mind being of sound mind is a crucial provision in determining the validity of a holographic will 2also a holographic will argued in probate court may not contain the testator s final wishes the decedent may have written the holographic will as a draft or may have utterly forgotten to update it these questions may be brought up in court today there are a variety of software books and websites with detailed instructions on how to create and print a valid will and avoid some probate court problems if a will is printed as opposed to being handwritten it requires the witness of at least two people 3 | |
where are holographic wills accepted | it s important to note that state probate law ultimately decides the treatment of all wills within its borders some states will accept holographic wills to varying degrees these states include alaska arizona arkansas california colorado hawaii idaho kentucky louisiana maine michigan mississippi montana nebraska nevada new jersey north carolina north dakota oklahoma pennsylvania south dakota tennessee texas utah virginia west virginia and wyoming in some states holographic wills made within the state are not recognized but such wills that are made within jurisdictions where holographic wills are recognized are accepted under foreign wills provisions in order for a holographic will to be recognized as valid under a foreign wills provision where this practice is legal the holographic will must have been made in a jurisdiction that recognizes holographic wills states with foreign wills or foreign testament provisions are alabama connecticut indiana iowa kansas massachusetts minnesota missouri new hampshire new mexico oregon rhode island south carolina vermont washington and wisconsin 3in new york and maryland holographic wills are only recognized if they are made by a member of the armed forces in maryland these wills remain valid only for one year after the testator leaves the armed forces unless they are no longer of sound mind under the law at that time 4 in new york such a will is valid for one year after the testator is discharged from the armed forces or for one year after they regain a testamentary capacity whichever happens last 5 | |
what is a home | a home is a physical domicile or structure in which a person or household resides in a legal sense a home is the place of permanent residency where one lives or intends to return to live 1understanding a homewhile it is full of emotional connotations a home has specific legal connotations as it is used to determine many things from tax liability to a person s status in the country they reside in it can also be used to determine which state s probate laws are followed a state s rights when it comes to collecting taxes and citizenship when a person resides in a different country than where they were born 234if a person owns more than one dwelling like a vacation home or an investment property for example their primary residence is the location that will be considered their legal home this legal status will impact how their taxes are paid on that property as opposed to their responsibility for taxes on their other properties there are certain write offs and deductions that can only be used on a person s primary residence 2the type of homeowner s insurance or hazard insurance that a person carries on their home will also vary based on the type of occupancy since a home is an owner occupied property certain additional coverages apply as opposed to a non owner occupied property which may only carry a policy that covers the building and not the contents the latter would be the case with a property that is occupied by someone other than the owner like a rental property a renter may choose to carry their own renter s insurance to protect their belongings within the rented unit but it is the building s landlord who can carry homeowners insurance or a commercial version thereof which would generally cover only the building and its infrastructure 5although a home may be vacant if a person is traveling for an extended period or has been hospitalized the location is still legally considered their home if there is an intention to return and they have not claimed someplace else as their legal place of permanent or principal residence an example of a homefor example imagine mary smith owns three properties the first is a beach house in new jersey she uses this property during the summer months with her children in the wintertime the property remains empty this is her vacation home her second property is a condominium in new york city she rents the condominium out to kate jones who lives there full time and pays her 1 500 a month in rent this is her investment property her third and final property is a two story house in a suburb just outside of philadelphia it is where she lives with her spouse and three children her kids go to school within the local district and she pays her state and local income taxes based on pennsylvania s rates this is her home or primary residence now consider that mary s oldest child is ready to graduate from high school and is applying to colleges new york state offers free college tuition to residents that is people who live in the state of new york although mary owns a condominium in new york neither she nor her kids call the state home they will be unable to take advantage of new york s free college tuition program however kate jones her new york condo tenant is eligible to take advantage of the state s free tuition even though she doesn t own the property she resides in it is her legal residence and she calls new york city within the state of new york home | |
what is the home affordable modification program hamp | the home affordable modification program hamp was a loan modification program introduced by the federal government in 2009 to help struggling homeowners avoid foreclosure the program s focus was to help homeowners who paid more than 31 of their gross income toward mortgage payments the program expired at the end of 2016 understanding the home affordable modification program hamp hamp was created under the troubled asset relief program tarp in response to the subprime mortgage crisis of 2008 2 during this period many american homeowners found themselves unable to sell or refinance their homes after the market crashed because of tighter credit markets monthly payments became unaffordable when higher market rates kicked in on adjustable rate mortgages arms leaving plenty of people at risk of foreclosure although taxpayers subsidized some of the loan modifications arguably the most significant contribution of hamp was standardizing what had been a haphazard loan modification system in order to qualify mortgagors needed to make more than 31 of their gross income on their monthly payments property requirements were also enforced they had to pass the net present value npv test along with other eligibility standards 3a property became eligible if the analysis showed a lender or investor currently holding the loan would make more money by modifying the loan rather than foreclosing other than the requirement that a homeowner prove financial hardship the home had to be habitable and have an unpaid principal balance under 729 750 456relief took several forms all of which would have the effect of reducing monthly payments for instance eligible homeowners could receive reductions in their mortgage principal and interest rates there was also the possibility of a temporary postponement of mortgage payments also known as forbearance and if favorable a homeowner was able to extend their existing loan terms in many cases an already modified loan was eligible for hamp modification too reducing a homeowner s payment even further families in the program decreased their monthly payments by an average of more than 530 7special considerationsthe government refers to the ratio of payments to gross income as the front end debt to income ratio dti the hamp program working in conjunction with mortgage lenders helped provide incentives for banks to reduce the debt to income ratio to less than or equal to 38 the treasury would then step in to minimize the dti ratio to 31 or less 8hamp incentivized private lenders and investors to fund their loan adjustments mortgage servicers received an up front payment of 1 000 for each eligible modification they performed these lenders were also eligible to receive up to 1 000 per year for each borrower in the program for up to five years and a 5 000 one time payment at the end of year six 9the original hamp was limited to principal residences in 2012 the program was then revised to include homes not occupied by the owner households with multiple mortgages and homeowners whose dti ratio was either lower or higher than the original requirement of 31 10the home affordable modification program hamp vs the home affordable refinance program harp hamp was complemented by another initiative called the home affordable refinance program harp like hamp harp was offered by the federal government but there were a subtle few differences while hamp helped people who were on the verge of foreclosure homeowners needed to be underwater or close to that point to qualify for harp the program allowed people with homes worth less than the outstanding balance on their mortgages to refinance their loans as well as homeowners with a loan to value ratio ltv of more than 80 11only those whose loans were guaranteed or acquired by fannie mae or freddie mac prior to may 31 2009 were eligible eligibility was also contingent on whether the homeowner was up to date on their mortgage payments in addition mortgagors should have been able to benefit from lower payments or from switching to a more stable mortgage product 11the deadline for harp was originally intended for dec 31 2017 however that date was extended pushing the program s expiration date to december 2018 11 | |
when was the home affordable modification program hamp active | the home affordable modification program hamp was a loan modification program introduced in 2009 to help mitigate the impact of the 2008 subprime mortgage crisis it expired in 2016 who qualified for hamp initially between 2009 and 2011 only principal residences could qualify but starting in 2012 the program was opened up to include second homes homes that an owner was renting out households with multiple mortgages and homeowners who didn t initially qualify for the program based on certain financial eligibility standards | |
how much money could you save on your mortgage under hamp | under the home affordable modification program hamp a homeowner was able to receive up to 10 000 in principal reduction as an acknowledgment of having made mortgage payments in full and on time that broke down to 1 000 per year for the first five years and a one time payment of 5 000 at the end of year six 9 | |
what is the home affordable refinance program harp | the home affordable refinance program harp was a program offered by the federal housing finance agency to homeowners who own homes that are worth less than the outstanding balance on the loan 1the program has since ended but it was intended to provide relief after the financial crisis of 2008 harp was created to help underwater and near underwater homeowners refinance their mortgages due to falling home prices while harp ended in december 2018 there are still options for borrowers who are underwater on their mortgages a homeowner who is underwater on their mortgage owes more on their home than it is worth understanding the home affordable refinance program harp the home affordable refinance program harp refinance was only available for mortgages that were guaranteed by either freddie mac or fannie mae the program was created in coordination with these entities in order to be eligible for harp homeowners must have been in possession of mortgages that were sold to either of those entities prior to may 31 2009 1due to the impact of the 2008 financial crisis and its effect on real estate values throughout the united states many homeowners found themselves upside down or underwater on their home loans upside down or underwater is used to describe instances when a borrower owes more on a loan than the current value of the collateral it is secured against in the case of a mortgage the collateral is the property the federal government launched harp in 2009 to attempt to slow the rate of foreclosures and help borrowers that had been taken advantage of by subprime lending practices the program was only available to borrowers who qualified borrowers were required to be current on their mortgage payments and the property had to be in good condition borrowers who had already defaulted or had vacated their properties were not eligible for the program any participating lender was eligible to aid a borrower in a harp refinance borrowers did not have to go through their current lender the program ended on december 31 2018 home affordable refinance program harp vs home affordable modification programanother program that was rolled out to stem the flow of foreclosures after the market crashed was called a mortgage modification the home affordable modification program expired before harp in 2016 2 unlike harp refinances these programs were for borrowers that had already defaulted on their loan or for whom default was imminent a modification could only be secured through the existing lender and each lender had its own requirements for qualification although the process to modify a mortgage changes the terms of a mortgage note it is not the same as a refinance sometimes modifications can report on the borrower s credit report as having the terms of the mortgage altered in some cases modifications can impact future creditworthiness some borrowers may also be faced with an additional tax liability as the terms of their modification may include writing off a portion of the debt that is owed which the internal revenue service irs may count as earned income | |
what is home banking | home banking is the practice of conducting banking transactions from home rather than at branch locations home banking generally refers to mobile banking web banking banking over the telephone or banking by mail the first experiments with online banking started in the early 1980s however it did not become popular until the rise of the internet in the mid 1990s many internet banks maintain few if any physical branches understanding home bankingthe increasing popularity of home banking has fundamentally changed the character of the banking industry many people can arrange their affairs so that they seldom need to visit a physical branch online only banks have profited from this shift in the industry the absence of brick and mortar locations allows many online banks to offer favorable interest rates lower service charges and other incentives for those willing to bank online many of the limits on home banking revolve around initiating large transactions requiring a personal appearance reduces and even prevents some forms of fraud although there is an increasing trend toward offering more services online many banks normally require that some transactions occur in person for instance applying for a personal or business loan often calls for an appearance at a branch office applying for a mortgage is another financial transaction where the applicant historically had to visit the bank at some point types of home bankingbanking via mobile phone apps has become increasingly popular most mobile apps are easier to use than websites and they have some security benefits in particular banking apps can provide protection from phishing attacks mobile apps also often allow users to access features that are not available via websites for example it is frequently possible to scan paper checks with an app while this feature is less common on websites web banking via the internet is still fairly common nearly all banks have websites that allow access to checking accounts and savings accounts web banking is generally available for both individuals and small businesses some users may be more comfortable with web banking than new apps for mobile phones the vast majority of web browsers are also open source and thoroughly tested which makes them more secure than most mobile apps banking over the telephone is one of the oldest forms of home banking and it still has some uses some of the earliest home banking services were automated systems for obtaining account balances over the phone while the internet has mostly taken over that function banking by phone remains a useful fallback phone calls are a way for banks to verify if customers actually made suspicious looking transactions phone calls also help customers to resolve issues when errors occur banking by mail continues to enjoy some popularity depositing paper checks via mail is simple and intuitive for people who usually do their banking in person furthermore banking by mail does not introduce the cybersecurity risks associated with online banking banking by mail is a good alternative for customers with a temporary need for home banking advantages of home bankingsaving time and reducing physical risks are the main benefits of home banking financial transactions can often be completed in minutes at home at best banking in person requires walking over to a small branch office in a convenient location such as a grocery store at worst traditional banking demands a separate trip and waiting in a long line upon arrival home banking also eliminates the need to take physical risks car accidents killed tens of thousands of americans every year in the early 21st century furthermore many people are afraid of being robbed at atms disadvantages of home bankingwith the increased shift to online banking new security threats have arisen all online information such as account numbers and recent transactions is vulnerable to malicious hackers and other thieves commercial banks with online arms have put into place cybersecurity measures to prevent such thefts from occurring cybersecurity has become essential as the world becomes more reliant on computers than ever before although there are cybersecurity risks related to home banking they are generally less serious than the physical risks of banking in person there are two main types of threats to online banking customers black hat hackers and computer viruses professional hackers usually focus on servers where they can compromise many accounts at once user defenses against these attacks are limited to using unique passwords for each site and some forms of two factor authentication viruses often automatically harvest banking credentials from the systems that they infect antivirus software and firewalls usually stop most of these attacks however using a separate device or live boot media for sensitive financial transactions can offer even better protection | |
what is home bias | the term home bias refers to the tendency for investors to invest the majority of their portfolio in domestic equities ignoring the benefits of diversifying into foreign equities this bias was originally believed to have arisen as a result of the extra difficulties associated with investing in foreign equities such as legal restrictions and additional transaction costs other investors may simply exhibit home bias due to a preference for investing in what they are already familiar with rather than moving into the unknown understanding home biashome bias is a phenomenon that generally occurs within equity markets it is commonly believed to be driven by emotions rather than objectivity investors with home bias tend to stick with investments with which they re familiar as such they ll invest in the stocks of domestic companies rather than those in foreign markets that s because these investors have a greater degree of comfort in choosing investments in their own country there are a number of factors that can lead an investor to favor domestic investments including u s equities represent about 60 of the global market according to charles schwab americans invest 85 of their portfolios in domestic equities research shows that some generations are more likely to experience home bias than others for instance as many as 45 of baby boomers have some form of home bias the largest group among those researched by charles schwab millennials were the least likely with only 24 of investors primarily focusing on u s markets 1home bias doesn t just apply to individual investors in fact some professional u s mutual fund managers are also likely to demonstrate the same behavioral biases in their portfolio decisions as individual investors in fact the study showed that the average fund tends to be overweight in stocks from its managers home states one important point to note is that the researchers found the bias to be stronger among managers who are less experienced 2home bias isn t restricted to american investors in fact investors from all over the world tend to be biased toward investing in their particular domestic equities including finland japan and germany and it s also common among investors who are more experienced and sophisticated 3special considerationssystemic risk is any risk that is associated with the entire segment of a market which means it doesn t impact one specific stock or sector while systematic risk is broadly believed to be non diversifiable in nature some investors hold a country specific view of systematic risk for them investments in foreign equities tend to lower the amount of systematic risk in a portfolio because foreign investments are less likely to be affected by domestic market changes home bias is also called country bias or familiarity bias home bias vs diversificationhome bias has historically been fuelled by the lack of available options and greater barriers to entering foreign markets mutual funds and exchange traded funds etfs now provide a relatively easy and low cost way to diversify across international investments that may otherwise be more difficult to access on their own moreover an internationally focussed financial media and the free flow of information make owning and monitoring foreign stocks much easier diversification reduces risk by allocating investments among various asset types geographic regions and industries it aims to maximize returns by investing across different areas to lessen the chance that a market event can have a debilitating effect on an entire portfolio some foreign markets tend to be less closely correlated with domestic performance for example an economic downturn in the u s economy may not negatively affect the economy in another country too dramatically holding equity investments in that country protects investors against losses that arise because of changes in the u s economy that being said the economies of different countries are becoming more intertwined because of globalization as such a downturn in one economy can impact others consider the impact of the subprime meltdown in the u s on other economies a large reason of course is that the u s economy is the largest in the world and touches most countries but it is important to pay attention to these factors when investing in foreign equities to determine if true diversification is being achieved investing in foreign markets can also be tax beneficial depending on the tax laws of the country that is being invested in many countries create beneficial tax laws for foreign investors particularly for investors in developed nations this is a common practice in emerging markets to attract investment and spur growth u s investors would still have to pay taxes on their profits earned abroad but may be able to benefit from the foreign tax credit the foreign tax credit avoids double taxation which is when the foreign country taxes the investments and so does the u s the foreign tax credit can reduce your tax liability on a dollar for dollar basis by the lower of the amount taxed in the foreign nation or the u s tax liability | |
what is the home buyers plan hbp | the home buyers plan hbp is a canadian program that allows individuals with registered retirement savings plans rrsps to use up to cad 35 000 of retirement plan holdings as a loan for a home purchase an rrsp is a retirement savings and investing vehicle for employees and the self employed in canada pre tax money is placed into an rrsp and grows tax free until withdrawal at which time it is taxed at the marginal rate registered retirement savings plans have many features in common with 401 k plans in the united states but also some key differences understanding the home buyers plan hbp the home buyers plan is open to first time homebuyers with a written agreement to buy or build a qualifying home for themselves individuals with a disability or those helping a relative with a disability also qualify canada defines first time home buyers as those who have not owned and occupied a home over a four year period beginning on jan 1 of the fourth year prior to the withdrawal for example funds withdrawn in june of 2021 would yield an eligibility period beginning jan 1 2017 for purposes of determining whether or not an individual qualifies as a first time homebuyer spouses or common law partners may qualify singly as long as they have not occupied a home owned in their name or in the name of their current partner or spouse to take advantage of the program homebuyers must withdraw no more than 35 000 and must make all withdrawals within a single calendar year homebuyers also must withdraw the funds no later than 30 days after they begin living in the home after the second anniversary of the withdrawal homebuyers have 15 years to repay the loan by making deposits back into their rrsp accounts with at least level minimum payments required annually required repayment amounts that remain unpaid at the end of a given year become taxed as income lifelong learning plan llp in addition to the hbp canada offers citizens the opportunity to withdraw tax free funds from rrsps to pay for educational expenses via the lifelong learning plan llp these benefits extend to payments for training or educational expenses for an individual or for a spouse or common law partner individuals may not use llps to pay for children s education however using retirement funds to buy a home in the u s the u s offers a similar program for qualifying first time homebuyers under the taxpayer relief act of 1997 u s citizens may withdraw up to 10 000 from an individual retirement account ira to cover the cost of building or buying a home while the hbp allows a tax free loan the u s requires first time homebuyers to take the withdrawal as income subject to tax if it comes out of a traditional ira in the case of roth iras which require post tax contributions first time homebuyers do not pay taxes on the withdrawal of their contributions in either case the irs waives the 10 premature withdrawal penalty that would otherwise apply when an individual takes a retirement distribution before the age of 59 1 | |
what is home country bias | home country bias refers to investors tendency to favor companies from their own country over those from other countries or regions the tendency to invest in our own backyard is not unusual or surprising it is a worldwide phenomenon and certainly not unique to u s investors this bias is also understandable because we are inclined to recognize and value domestic brands understanding home country biasinvestors who exhibit home country bias with their investments tend to be optimistic about their domestic markets and are either pessimistic or indifferent toward foreign markets in fact some investors likely would continue to invest in a favorite home country company even if a similar foreign company had demonstrated better upside potential home country bias occurs when people include a large percentage of stock from their own countries in their portfolios if you look at the average person s asset allocation you will see that investors of all sizes have a strong propensity to overweight their exposure to domestic stocks the united states for example represents less than 50 of the total world market capitalization yet the average u s investor still allocates more than 70 of their portfolio to u s equities this bias is one reason that building a powerful brand in today s interdependent global market is so important coca cola google and toyota for example all are well known international brands and most people no matter where they live are inclined to buy their stocks home country bias can cause an investor to build an unbalanced portfolio that lacks diversification and is subject to unnecessary risk | |
is home country bias detrimental | naturally people take comfort in the familiar thus it follows that investors select companies they know and trust however investors who do not recognize this bias in themselves may end up with unbalanced portfolios and ignoring one of the cardinal tenets of investing diversification by not diversifying with international securities an investor could create weakness in their portfolio if their home country suffers a serious economic decline or the investor could simply miss out on foreign investment opportunities there are significant diversification benefits to a well constructed international portfolio special considerations for home country biasas with many investing prejudices overcoming home country bias requires thoughtful intention and determined discipline the first step is to recognize it and the second step is to do something about it this is particularly difficult if an investor s home market is the largest equity market in the world and has been singularly rewarding however there are benefits that come with international investing it is a critical ingredient in wealth generation strategies for portfolios with long term investment horizons and can be a fruitful and enlightening adventure | |
what is home equity | home equity is the difference between the amount you owe on a mortgage and what the home is worth it s essentially what you own in a home the amount of equity in a house can grow over time as you make payments and the property s value increases more technically home equity is the property s current market value minus any liens such as a mortgage that are attached to that property home equity is an asset that you can borrow against to meet important financial needs such as paying off high cost debt or paying college tuition learn more about how home equity works how to calculate it and how you can use it | |
how home equity works | if all or part of your home is funded with a mortgage loan the mortgage lender has an interest in the home until you pay off the loan home equity is the portion of a home s current value that you own outright 1you can have immediate equity in a house when you make a down payment after that the equity continues to grow as you make mortgage payments a portion of each payment includes interest and an amount that reduces the outstanding principal that you still owe another way equity can grow is from the appreciation of your property s value if your property declines in value you can lose equity you can also lose equity if you take out a second mortgage using your equity as collateral equity is the difference between what a home is worth and what s owed on a mortgage loan 2to calculate your home equity first get an estimate of your home s value by researching the value of homes like yours in your neighborhood that have recently sold say that figure is 350 000 and assume the balance of your loan which you can get from your mortgage lender is 150 000 with those figures here s how to calculate your home equity example of home equityif you buy a home for 300 000 with a 20 down payment covering the remaining 240 000 with a mortgage you ll have equity of 60 000 in the house if the house s market value remains constant over the next two years and 15 000 of mortgage payments are applied to the principal you would have 75 000 in home equity at the end of the two years if the home s market value had also increased by 100 000 over those two years you would then have 175 000 in home equity home equity is an asset and is considered part of your net worth however it is not a liquid asset | |
how to borrow against home equity | the interest rate on home equity based borrowing is typically lower than that on credit cards and personal loans because the funds are secured by the equity so the equity in your home can be a source of funds the interest on borrowing with your home equity is generally tax deductible if funds are used to improve the home 3unlike some investments home equity cannot be quickly converted into cash that s because the equity calculation is based on a current market value appraisal of your property that appraisal is no guarantee that the property would sell at that price however you can leverage your home equity as collateral in a variety of ways to secure low cost funds for your financial needs including with home equity loans home equity lines of credit and cash out refinance a home equity loan sometimes referred to as a second mortgage usually allows you to borrow a lump sum against your current home equity for a fixed rate over a fixed period many home equity loans are used to finance large expenditures such as home repairs or college tuition 4a home equity line of credit heloc is a revolving line of credit usually with an adjustable interest rate which allows you to borrow up to a certain amount over a period of time helocs work like credit cards where you can continuously borrow up to an approved limit while paying off the balance 5 | |
when a borrower converts any or all of the funds secured through a home equity line of credit to a fixed rate they have what s called a fixed rate heloc 6 the borrower will then pay off the fixed rate amount over a specific period of time be sure to do your due diligence on this option because lenders may have different rules about how you can use it | a cash out refinance refers to using your equity to get a new mortgage that s larger than the amount owed on your existing mortgage 7 then you pay off the existing mortgage and use the remaining money as needed the money can be used in any way you choose as with home equity loans and lines of credit the funds are tax free because they re viewed as debt by the irs not income 8mortgage lending discrimination is illegal if you think you ve been discriminated against based on race religion sex marital status use of public assistance national origin disability or age there are steps you can take one such step is to file a report to the consumer financial protection bureau cfpb or with the u s department of housing and urban development hud | |
how to use home equity | you can use your home equity and the funds you borrow to your financial benefit | |
how to increase your home equity | once you understand the benefits of home equity you may want to focus on building it to do that you could pros and cons of borrowing on home equitylower requirementslower interest ratestax deductible interestadded debtpotential feesrestricted use | |
what is a home equity loan | a home equity loan is money that is borrowed against the appraised value of your home you receive the funds in a lump sum and you are require to make monthly payments as with any other type of loan basically a home equity loan is a second mortgage on your house | |
how can i get a home equity loan | you can get a home equity loan by contacting a lender who offers these types of loans the first step is to get a professional appraisal of your home to find out its market value if you have enough equity in your home to take out this type of loan a lender will also check your credit and debt to income ratio if you qualify for a home equity loan your loan funds are usually delivered in a lump sum after the closing home equity loans are essentially a second mortgage on your house with fixed rate monthly payments | |
what is a home equity line of credit | a home equity line of credit heloc is similar to a credit card acting as a revolving line of credit based on your home s equity heloc funds can be used when you need them paid back and used again often there is a 10 year draw period where you can access your credit as needed with interest only payments after the draw period you enter the repayment period where you must repay all the money you borrowed plus interest | |
how much equity do i have in my home | you gain equity in your home by paying down the principal in your mortgage over time if you used a down payment to purchase your home you likely have some equity in it with each mortgage payment your equity grows to figure out how much equity you have in your home divide your current mortgage balance by the market or recently appraised value of your home the bottom linehome equity refers to how much of the value of a home you control compared to that controlled by the lender of the mortgage loan it consists of any down payment made the portion of the mortgage payment made that pays down the principal and any appreciation of the value of the home the benefit of building equity in your home is both the asset that you build and the ability to borrow money against it | |
what is a home equity conversion mortgage hecm | a home equity conversion mortgage hecm is a type of reverse mortgage that is insured by the federal housing administration fha home equity conversion mortgages allow seniors to convert the equity in their homes into cash 1the amount that may be borrowed is based on the appraised value of the home and is subject to fha limits borrowers must also be at least 62 years old money is advanced against the value of the equity in the home interest accrues on the outstanding loan balance but no payments must be made until the home is sold the borrower s dies or the borrower s moves out of the property at which point the loan must be repaid entirely 2 | |
how a home equity conversion mortgage works | home equity conversion mortgages are a popular type of reverse mortgage in fact they make up the bulk of the reverse mortgage market generally reverse mortgage terms can vary with privately sponsored reverse mortgage products officially known as proprietary reverse mortgages potentially allowing for higher borrowing amounts with lower costs than hecms hecms however will typically offer lower interest rates for borrowers the economics of a hecm versus a privately sponsored reverse mortgage will depend on the borrower s age and how long the borrower expects to live in or own the home many types of reverse mortgages will exclusively target seniors with no requirements for repayment until the borrower sells their home or dies 1a hecm can also be considered in comparison to a home equity loan a home equity loan is not dissimilar to a reverse mortgage since borrowers are issued a cash advance based on the equity value of their home which acts as collateral however with a home equity loan the funds have to be paid back usually in steady monthly interest payments shortly after the funds are disbursed 3the maximum hecm loan limit in 2023 up from 970 800 in 2022 45while hecm loans do not require borrowers to make monthly payments certain fees are associated with the closing and servicing of the loan borrowers also have to pay mortgage insurance premiums although these premiums and fees can be rolled into the loan this lowers the amount of equity a borrower can tap referred to as the net principal limit 2who is eligible for a home equity conversion mortgage hecm the federal housing administration sponsors the home equity conversion mortgage and provides insurance on the products the fha also sets the guidelines and eligibility for these loans borrowers can only obtain hecms from banks where the fha sponsors the product 1 to obtain a home equity conversion mortgage a borrower must complete a standard application to obtain approval a borrower must meet all of the requirements set by the fha they must mortgage lending discrimination is illegal if you think you ve been discriminated against based on race religion sex marital status use of public assistance national origin disability or age there are steps you can take one such step is to file a report to the consumer financial protection bureau or with the u s department of housing and urban development hud 6in addition the property must be one of the following | |
what is the difference between a hecm and a reverse mortgage | all hecms are reverse mortgages but not all reverse mortgages are hecms hecms are reverse mortgages backed by the fha and issued by an fha approved lender 1can you lose your home with a hecm yes you can lose your home several ways with a hecm reverse mortgage if you fail to keep the property in good repair or pay property taxes and insurance your hecm balance becomes due if the property stops being your primary residence for more than 12 consecutive months the balance becomes due even if you leave your home involuntarily because of a lengthy stay in a hospital nursing home or assisted living facility you could lose your home if you can t afford to pay the balance on your reverse mortgage 7 | |
are hecms expensive | yes hecms carry very high origination mortgage insurance premiums and maintenance fees 2 | |
what are good alternatives to an hecm | there are several good alternatives to an hecm depending on your situation if you can qualify for a single purpose reverse mortgage through a local nonprofit those are usually much cheaper if you can downsize your home you may not need the extra income from a hecm and will then be able to pass on your home to your heirs or leave it to the charity of your choice when you pass the bottom linea home equity conversion mortgage hecm is the most common type of reverse mortgage it allows older borrowers to tap the equity in their homes without having to pay it back until they pass or move if borrowers don t need to borrow above the hud limits for a proprietary reverse mortgage and they don t qualify for a single purpose reverse mortgage through a local nonprofit or government entity then the hecm is their most logical choice | |
what is a home equity loan | a home equity loan also known as an equity loan home equity installment loan or second mortgage is a type of consumer debt home equity loans allow homeowners to borrow against the equity in their homes the loan amount is based on the difference between the home s current market value and the homeowner s mortgage balance due home equity loans tend to be fixed rate while the typical alternative home equity lines of credit helocs generally have variable rates investopedia zoe hansen | |
how a home equity loan works | essentially a home equity loan is akin to a mortgage hence the name second mortgage the equity in the home serves as collateral for the lender the amount that a homeowner is allowed to borrow will be based partially on a combined loan to value cltv ratio of 80 to 90 of the home s appraised value of course the amount of the loan and the rate of interest charged also depend on the borrower s credit score and payment history mortgage lending discrimination is illegal if you think that you ve been discriminated against based on race religion sex marital status use of public assistance national origin disability or age there are steps that you can take one such step is to file a report with the consumer financial protection bureau or the u s department of housing and urban development traditional home equity loans have a set repayment term just like conventional mortgages the borrower makes regular fixed payments covering both principal and interest as with any mortgage if the loan is not paid off the home could be sold to satisfy the remaining debt a home equity loan can be a good way to convert the equity you ve built up in your home into cash especially if you invest that cash in home renovations that increase the value of your home however always remember that you re putting your home on the line if real estate values decrease you could end up owing more than your home is worth | |
should you want to relocate you might end up losing money on the sale of the home or be unable to move and if you re getting the loan to pay off credit card debt resist the temptation to run up those credit card bills again before doing something that puts your house in jeopardy weigh all of your options | marguerita cheng certified financial planner blue ocean global wealthspecial considerationshome equity loans exploded in popularity after the tax reform act of 1986 because they provided a way for consumers to get around one of its main provisions the elimination of deductions for the interest on most consumer purchases the act left in place one big exception interest in the service of residence based debt 1however the tax cuts and jobs act of 2017 suspended the deduction for interest paid on home equity loans and helocs until 2026 unless according to the internal revenue service irs they are used to buy build or substantially improve the taxpayer s home that secures the loan for example the interest on a home equity loan used to consolidate debts or pay for a child s college expenses is not tax deductible 2as with a mortgage you can ask for a good faith estimate but before you do make your own honest estimate of your finances you should have a good sense of where your credit and home value are before applying in order to save money says casey fleming branch manager at fairway independent mortgage corp and author of the loan guide how to get the best possible mortgage especially on the appraisal of your home which is a major expense if your appraisal comes in too low to support the loan the money is already spent and there are no refunds for not qualifying before signing especially if you re using the home equity loan for debt consolidation run the numbers with your bank and make sure that the loan s monthly payments will indeed be lower than the combined payments of all your current obligations even though home equity loans have lower interest rates your term on the new loan could be longer than that of your existing debts the interest on a home equity loan is only tax deductible if the loan is used to buy build or substantially improve the home that secures the loan 2home equity loans vs helocshome equity loans provide a single lump sum payment to the borrower which is repaid over a set period of time generally five to 15 years at an agreed upon interest rate the payment and interest rate remain the same over the lifetime of the loan the loan must be repaid in full if the home on which it is based is sold a heloc is a revolving line of credit much like a credit card that you can draw on as needed pay back and then draw on again for a term determined by the lender the draw period five to 10 years is followed by a repayment period when draws are no longer allowed 10 to 20 years helocs typically have a variable interest rate but some lenders offer heloc fixed rate options advantages and disadvantages of a home equity loanthere are a number of key benefits to home equity loans including cost but there are also drawbacks home equity loans provide an easy source of cash and can be valuable tools for responsible borrowers if you have a steady reliable source of income and know that you will be able to repay the loan then low interest rates and possible tax deductions make home equity loans a sensible choice obtaining a home equity loan is quite simple for many consumers because it is a secured debt the lender runs a credit check and orders an appraisal of your home to determine your creditworthiness and the cltv the interest rate on a home equity loan although higher than that of a first mortgage is much lower than that of credit cards and other consumer loans that helps explain why a primary reason that consumers borrow against the value of their homes via a fixed rate home equity loan is to pay off credit card balances home equity loans are generally a good choice if you know exactly how much you need to borrow and for what you re guaranteed a certain amount which you receive in full at closing home equity loans are generally preferred for larger more expensive goals such as remodeling paying for higher education or even debt consolidation because the funds are received in one lump sum says richard airey senior loan officer with integrity mortgage llc in portland maine the main problem with home equity loans is that they can seem an all too easy solution for a borrower who may have fallen into a perpetual cycle of spending borrowing spending and sinking deeper into debt unfortunately this scenario is so common that lenders have a term for it reloading which is basically the habit of taking out a loan to pay off existing debt and free up additional credit which the borrower then uses to make additional purchases reloading leads to a spiraling cycle of debt that often convinces borrowers to turn to home equity loans offering an amount worth 125 of the equity in the borrower s house this type of loan often comes with higher fees because the borrower has taken out more money than the house is worth the loan is not fully secured by collateral also know that the interest paid on the portion of the loan that is above the value of the home is never tax deductible 3 | |
when applying for a home equity loan there can be some temptation to borrow more than you immediately need because you only get the payout once and don t know if you ll qualify for another loan in the future | if you are contemplating a loan worth more than your home it might be time for a reality check were you unable to live within your means when you owed only 100 of the equity in your home if so then it likely will be unrealistic to expect to be better off when you increase your debt by 25 plus interest and fees this could become a slippery slope to bankruptcy and foreclosure sabrina jiang investopediahome equity loan requirementseach lender has its own requirements but to get approved for a home equity loan most borrowers will generally need though it is possible to get approved for a home equity loan without meeting these requirements expect to pay a much higher interest rate through a lender that specializes in high risk borrowers determine the current balance of your mortgage and any existing second mortgages helocs or home equity loans by finding a statement or logging on to your lender s website estimate your home s current value by comparing it with recent sales in your area or using an estimate from a site like zillow or redfin be aware that their value estimates are not always accurate so adjust your estimate as needed considering the current condition of your home then divide the current balance of all loans on your property by your current property value estimate to get your current equity percentage in your home rates assume a loan amount of 25 000 and a loan to value ratio of 80 heloc rates assume the interest rate during credit line initiation after which rates can change based on market conditions say you have an auto loan with a balance of 10 000 at an interest rate of 9 with two years remaining on the term consolidating that debt to a home equity loan at a rate of 4 with a term of five years would actually cost you more money if you took all five years to pay off the home equity loan also remember that your home is now collateral for the loan instead of your car defaulting could result in its loss and losing your home would be significantly more catastrophic than surrendering a car | |
how does a home equity loan work | a home equity loan is a loan for a set amount of money repaid over a set period of time that uses the equity you have in your home as collateral for the loan if you are unable to pay back the loan you may lose your home to foreclosure 4 | |
are home equity loans tax deductible | the interest paid on a home equity loan can be tax deductible if the proceeds from the loan are used to buy build or substantially improve your home however with the passage of the tax cuts and jobs act and the increased standard deduction itemizing to deduct the interest paid on a home equity loan may not lead to savings for most filers 2 | |
how much home equity loan can i get | for well qualified borrowers the limit of a home equity loan is the amount that gets the borrower to a combined loan to value cltv of 90 or less this means that the total of the balances on the mortgage any existing helocs any existing home equity loans and the new home equity loan cannot be more than 90 of the appraised value of the home for example someone with a home that appraised for 500 000 with an existing mortgage balance of 200 000 could take out a home equity loan for up to 250 000 if they are approved can you have a heloc and a home equity loan simultaneously yes you can have both a heloc and a home equity loan at the same time provided you have enough equity in your home as well as the income and credit to get approved for both | |
what is a heloc loan | a heloc loan doesn t exist the term is a combination of two existing different loan products a home equity line of credit heloc and a home equity loan the bottom linea home equity loan can be a better choice financially than a heloc for those who know exactly how much equity they need to pull out and want the security of a fixed interest rate borrowers should take out home equity loans with caution when consolidating debt or financing home repairs it is easy to end up underwater on a mortgage if too much equity is pulled out leaving a borrower with ruined credit and a home in foreclosure | |
what is a home inspection | a home inspection is an examination of the condition and safety of a piece of real estate often conducted when the home is being sold a qualified home inspector will assess the heating and cooling system water and sewage systems other plumbing and electrical work and look for any potential fire or safety hazards in addition the home inspector may check for evidence of insect water fire damage or any other issue that can affect the property s value | |
how a home inspection works | potential home buyers often hire home inspectors to visit a property and produce a written report that details its condition including any necessary or recommended repairs maintenance concerns and any other potentially costly or hazardous issues the home inspector will assess the physical structure of the home from the foundation to the roof and the home s systems this assessment will determine whether the home is up to current housing codes a home inspection can tell a home buyer a lot about a newly constructed home or an existing one and save them money and aggravation for sellers meanwhile having an inspection done before putting their home on the market can afford them the chance to make any necessary structural repairs or upgrade and replace systems that may help increase the likelihood of a sale typically a home inspection is done after a sales contract or purchase agreement between a buyer and a seller has been signed for this reason it s important that the contract include an inspection contingency also known as a due diligence contingency which allows a buyer time to find an inspector schedule and attend if they wish an inspection receive the inspector s report and decide how to proceed based on the information they ve obtained an inspection report can include everything from material defects that negatively impact a home s value to minor cosmetic issues based on the report the buyer may decide to proceed with the sale schedule additional inspections renegotiate the sale price with the homeowner ask that certain repairs be made and paid for by the seller or cancel the contract if the buyer requests major repairs they may also ask for a re inspection with the original inspector to verify that the original problem that was identified has been remedied other more specialized inspections may be conducted for problems such as asbestos mold or mildew termites pests radon or lead or to check sewer lines chimneys or other structural components these may involve additional fees | |
when a homeowner s mortgage goes into delinquency the lender may require the loan servicer to have a home inspection performed on a monthly basis typically charging the homeowner a fee of 10 to 50 each time a march 2023 report from the consumer financial protection bureau cfpb however noted that some servicers were charging such fees even if the home inspector went to an address that it knew to be incorrect that the cfpb said represented an unlawful junk fee 1 | home inspection vs appraisala home inspection focuses on the home s condition and should not be confused with a home appraisal which is intended to determine the property s current market value both are essential steps in a typical home sale but are done for different reasons the buyer sets up a home inspection and can then attend it to become educated about the condition and safety of the home and its systems in contrast an appraisal performed by a certified or licensed appraiser is required and scheduled by a lender when a buyer applies for a mortgage to purchase a home an appraisal can affect the amount that can be borrowed and is typically done behind closed doors without the buyer s presence the appraiser uses several valuation methods including comparable home prices the size and quality of the home lot size and more | |
do you need a home inspection | because a home inspection can provide a thorough assessment of the home s safety and condition it is always a good idea to have a one before purchase | |
what happens when a home inspector finds something wrong | if a home inspector finds any unsafe materials defective systems or costly cosmetic defects a buyer can decide not to proceed with the home purchase renegotiate the sale price or ask the homeowner to make repairs before the sale goes through | |
is a home appraisal the same as an inspection | a home appraisal and a home inspection are two different things conducted for different purposes and by people with different kinds of expertise a mortgage lender sets up an appraisal and the appraiser will use various valuation methods including the recent sales prices of comparable homes to assess its value this helps the lender determine how large a loan it might be willing to offer on the property a home inspector only evaluates the home s condition for overall safety or potential trouble spots like a leaking roof peeling paint or anything that s not up to the local building code | |
what does a home inspection cost | the cost of a home inspection can vary by location and by the size and age of the home among other factors the real estate website redfin says that inspections generally cost between 200 and 500 with the average being 336 2the bottom linehome inspections are often optional but relatively inexpensive compared to the overall cost of buying a home the cost of an inspection can be money well spent alerting the would be home buyer to necessary repairs or other potentially expensive problems that they might not have noticed on their own | |
what is the home market effect | the home market effect was originally hypothesized by staffan linder in 1961 and formalized by paul krugman in 1980 the central tenet of the hypothesis is that countries with larger sales of some products at home will tend to have larger sales of those same products abroad understanding the home market effectthe home market effect is part of new trade theory which is predicated on economies of scale and network effects rather than more traditional trade models based on comparative advantage the home market effect describes the tendency for large countries to be net exporters of goods with high transport costs and strong economies of scale it posits that in the presence of fixed costs which would yield economies of scale when increasing production it makes sense to concentrate production of a good in a single geographic location furthermore in the presence of transport costs it makes sense to locate that production in a location with a high demand for the goods because richer countries and or those with large populations would tend to have a higher demand for products and because these countries will also have higher gross domestic products gdps the consequence of the home market effect is that it is larger countries that tend to be those with large bases of production the home market effect thus explains a link between market size and exports that would not be explained by comparative advantage trade models it also helps explain why manufacturing activity tends to agglomerate at particular locations even within countries much empirical research has been done on the topic and generally finds that there is evidence of a home market effect by the mid 20th century previous models of international trade based on comparative advantage and countries endowments of capital and labor were called into question based on evidence that some capital rich countries such as the u s mostly exported labor intensive products the home market effect was initially developed as an explanation for this observation after krugman formalized the theory of the home market effect subsequent studies were able to directly test this explanation against real world data these studies have found that the home market effects do occur and the direction of returns to scale that is whether returns to scale increase decrease or are constant and how high transport costs are will accentuate or moderate the extent to which home market effects are observed in a particular country or industry implications for business and investmentthe home market effect predicts that production of high economy of scale high transport cost goods can be more efficiently done in geographic locations with high local demand rather than high comparative advantage businesses should take this into account when choosing where to locate their production facilities the benefits of proximity to large local markets may outweigh other costs associated with the location investors should also keep this in mind when considering the current and planned future location of businesses that they may invest in | |
what is a home modification | a home modification is any alteration made to a home to meet the needs of people who have different physical abilities often to specifications outlined by the americans with disabilities act ada these alternations are made so that disabled or differently abled people can live independently and safely examples of home modifications include simple measures like removing throw rugs to prevent slips and falls to more permanent fixtures like installing wheelchair accessible ramps or grab bars in the bathrooms for stability | |
how a home modification works | a home modification can refer to a range of changes alterations and repairs that make a home more livable for individuals with different physical abilities the price of home modifications can be as little as a few hundred dollars although more extensive renovations can cost many thousands of dollars for larger projects some financing options may be available some contractors even offer reduced rates and charge sliding scale fees based on a senior s income and ability to pay the national resource center on supportive housing and home modifications is one of the best resources in the u s it offers training education courses and technical assistance 1because of the breadth of the term some people may think that home modifications include any type of home improvement or home renovation while in some cases home modifications might also be considered a home improvement or renovation home modifications specifically refer to alterations made to a home in order to make it more accessible for people with different physical abilities including elderly people the ada established standards for accessible design for public accommodations that include creating automatic doorways ramps and elevators to accommodate wheelchairs water fountains must be made available at heights that individuals with disabilities can reach 2home modifications for the elderlymany homes may not be equipped to house individuals as they age there are structural barriers that can impinge upon an older individual s independence and make it so they are unable to go about their daily routines without assistance many older adults live in single family homes that were built in a time when physical accessibility was not a consideration even now there are few building requirements concerning physical accessibility in single family homes the structural incompatibility can make it impossible for an individual to stay in their own home as they grow older sometimes forcing them to move into a retirement home if the individual decides to stay in their home they may need to hire a caretaker an ongoing expense many people cannot afford examples of home modificationshome modifications range in price and project scope some examples of home modifications include re arranging furniture widening external pathways or installing any of the following | |
how much are home modifications | here is the cost range of some common modifications according to homeadvisor | |
what is a home mortgage | a home mortgage is a loan given by a bank mortgage company or other financial institution for the purchase of a residence a primary residence a secondary residence or an investment residence in contrast to a piece of commercial or industrial property in a home mortgage the owner of the property the borrower transfers the title to the lender on the condition that the title will be transferred back to the owner once the final loan payment has been made and other terms of the mortgage have been met a home mortgage is one of the most common forms of debt and it is also one of the most recommended because they are secured debt an asset the residence acts as backing for the loan mortgages come with lower interest rates than almost any other kind of loan that an individual consumer can find | |
how a home mortgage works | home mortgages allow a much broader group of citizens the chance to own real estate as the entire purchase price of the house doesn t have to be provided up front but because the lender actually holds the title for as long as the mortgage is in effect it has the right to foreclose on the home seize it from the homeowner and sell it on the open market if the borrower can t make the payments a home mortgage will have either a fixed or floating interest rate which is paid monthly along with a contribution to the principal loan amount in a fixed rate mortgage the interest rate and the periodic payment are generally the same each period in an adjustable rate home mortgage the interest rate and periodic payment vary interest rates on adjustable rate home mortgages are generally lower than fixed rate home mortgages because the borrower bears the risk of an increase in interest rates either way the mortgage works the same way as the homeowner pays down the principal over time the interest is calculated on a smaller base so that future mortgage payments apply more toward principal reduction than just paying the interest charges in a mortgage transaction the lender is known as the mortgagee and the borrower is known as the mortgagor types of mortgagesthere are different types of mortgage loans that a borrower may use to purchase a home generally speaking they can be grouped into three broad categories conventional loans federal home administration fha loans and specialty loans conventional mortgage loans are not part of a specific government loan program these loans can be conforming meaning that they adhere to mortgage rules set by fannie mae and freddie mac or nonconforming private mortgage insurance may be required for conventional loans when the borrower puts less than 20 down upfront fees on fannie mae and freddie mac home loans changed in may 2023 fees were increased for homebuyers with higher credit scores such as 740 or higher while they were decreased for homebuyers with lower credit scores such as those below 640 another change your down payment will influence what your fee is the higher your down payment the lower your fees though it will still depend on your credit score fannie mae provides the loan level price adjustments on its website fha loans are mortgage loans issued by private lenders and backed by the federal government key characteristics of fha loans include lower credit score requirements and lower down payment requirements it s possible to get approved for an fha loan with a credit score as low as 580 and a down payment of 3 5 or a credit score as low as 500 and a 10 down payment specialty mortgage loans are loans that don t fit into the conventional or fha loan categories this includes u s department of veterans affairs va loans which are designed for veterans and their families and u s department of agriculture usda loans which allow borrowers in eligible rural areas to purchase homes with no down payment the va loan program and usda loan program don t specify minimum credit score requirements but generally lenders look for scores of 620 or higher | |
what s included in a mortgage payment | a typical mortgage payment can include four costs these costs are separate from upfront fees that you may have to pay to purchase a home those include your earnest money down payment appraisal and inspection fees prepaid fees and closing costs if you have to pay homeowners association fees or condo owners association fees those also may be escrowed into your monthly mortgage payment | |
how to get a home mortgage | to obtain a mortgage the person seeking the loan must submit an application and information about their financial history to a lender which is done to demonstrate that the borrower is capable of repaying the loan sometimes borrowers look to a mortgage broker for help in choosing a lender the process has several steps first borrowers might seek to get pre qualified getting pre qualified involves supplying a bank or lender with your overall financial picture including your debt income and assets the lender reviews everything and gives you an estimate of how much you can expect to borrow pre qualification can be done over the phone or online and there s usually no cost involved getting pre approved is the next step you must complete an official mortgage application to be pre approved and you must supply the lender with all the necessary documentation to perform an extensive check on your financial background and current credit rating you ll receive a conditional commitment in writing for an exact loan amount allowing you to look for a home at or below that price level using an online mortgage calculator can help you estimate your monthly and lifetime costs of buying a home after you ve found a residence that you want the final step in the process is a loan commitment which is only issued by a bank when it has approved you as the borrower as well as the home in question meaning that the property is appraised at or above the sales price | |
when the borrower and the lender have agreed on the terms of the home mortgage the lender puts a lien on the home as collateral for the loan this lien gives the lender the right to take possession of the house if the borrower defaults on the repayments | example of mortgage termsyour mortgage terms are the terms under which you agree to repay the loan to your lender a typical mortgage term is 30 years though some mortgage loans may have terms ranging from 10 to 25 years instead a home equity loan that s used to draw out your equity for example might have a 10 year repayment term mortgage terms also include the interest rate that you pay for the loan say you borrow 300 000 to buy a home you opt for a conventional 30 year loan based on your credit scores and other financial details your lender offers you a 3 5 interest rate on the loan you put 60 000 down and pay 200 per month for property taxes and 100 per month for homeowners insurance the interest rate and length of repayment determine how much you ll pay in total for the home using this example you would pay 1 377 71 per month for the loan over a period of 30 years you would pay 147 974 61 in interest 72 000 in taxes and 36 000 for insurance for a total cost of 495 974 61 this doesn t include the down payment | |
what is a mortgage for a house | a home mortgage is a mortgage loan that s used to buy a house the house acts as collateral for the loan if the buyer defaults on the loan the lender can initiate foreclosure proceedings to take possession of the property | |
is a mortgage the same as a home loan | the terms mortgage and home loan are often used interchangeably but they don t exactly mean the same thing a mortgage is a loan that s used to buy a piece of property that s secured by the property itself a home loan is a type of mortgage that s used specifically to purchase a house | |
what credit score do you need to buy a house | the exact answer for what credit score you need to buy a house can depend on the type of loan and the lender s requirements for example it s possible to get a federal housing administration loan with a credit score as low as 500 but if you re applying for a conventional loan the lender might require a credit score of 620 or higher the bottom linea home mortgage may be the largest loan you ever take out but it could be a necessity if you would like to buy a house or a rental property understanding the different types of mortgage loans how monthly mortgage payments break down home loan terms and how to apply for a loan can make the home buying process easier | |
what is the home mortgage disclosure act hmda | the home mortgage disclosure act hmda is a federal law that requires mortgage lenders to keep records of key pieces of information regarding their lending practices lenders must submit these records to regulatory authorities established in 1975 the hmda was implemented by the federal reserve through regulation c 1 in 2011 the rule writing authority of regulation c was transferred to the consumer financial protection bureau cfpb 2understanding the home mortgage disclosure act hmda the home mortgage disclosure act was passed by congress in 1975 and went into effect under the fed s regulation c it was developed to address concerns and monitor the geographic targets of mortgage lenders by providing a way to identify predatory or discriminatory lending practices and to report statistics on the mortgage market to the government 1in 1980 the federal financial institutions examination council ffiec was given the responsibility of facilitating public access to mortgage information from financial institutions in accordance with the hmda 3 amendments were made to the act following the passage of the dodd frank wall street reform and consumer protection act which included the requirement of additional data points and the transfer of responsibility from the fed to the cfpb 1the entire home mortgage disclosure act can be found in title 12 chapter 29 of the united states code 4 regulation c is also an important component of the act regulation c was created by the federal reserve to overlay the requirements of the act and designate certain additional requirements that banks must follow the hmda asks lenders to identify the sex race and income of those applying for or obtaining mortgages but the data is anonymized in record keeping government agencies consumer groups and bank examiners use the data to determine compliance with various federal fair housing and credit laws including the equal credit opportunity act the fair housing act the community reinvestment act cra and state laws 5the hmda also helps support government sponsored community investment initiatives by providing a means for analyzing the allocation of resources 5hmda reportingin april 2020 the cfpb issued a final rule raising the data reporting thresholds for collecting and reporting data about closed end mortgage loans under the hmda from 25 to 100 loans effective july 1 2020 6in accordance with the hmda lenders must submit the following data lenders must submit a reason why a loan was denied 7under hmda and regulation c certain mortgage lenders are required to maintain records of specified mortgage lending information for reporting purposes in 2021 4 338 lenders reported 15 million loan originations under the hmda 8hmda reporting allows regulators to analyze information on mortgage loans and mortgage lending trends in a number of categories such as the number of pre approvals made the number of mortgages granted loan amounts and the purposes of individual loans the federal reporting also greatly details the approvals of various types of government sponsored loans including the federal housing administration fha farm service agency rural housing services and veterans affairs loans while these statistics are of natural interest to potential borrowers they can also be an important research tool for investors researching banking and lending stocks by comparing the most recent few years statistics an investor can easily identify whether or not a lender is growing its core business federal regulation c requires lenders to prominently display a poster in every branch office lobby that provides information on requesting their unique hmda statistics 9 these statistics can also be viewed by the public online for free at the cfpb data repository | |
what is the purpose of the home mortgage disclosure act | the home mortgage disclosure act is a law passed by congress in 1975 the purpose of the act is to promote transparency within the mortgage lending market it also aims to protect consumers from predatory and discriminatory lending practices this is done through the collection of data from lenders about different types of mortgage loan applications lenders must submit their data each year about information on residential mortgage applications originations and refinances this includes information about applicants collateral details the types of applications and the status of each | |
how often do lenders have to submit hmda reports | lenders are required to submit information each year in accordance with the hmda information reported must include data about their applications originations and purchases of home purchase loans home improvement loans and refinancings this includes information about applications that were approved denied or withdrawn along with any that were incomplete and closed reports for the calendar year must be submitted by march 1 of the following year 10 | |
what is the regulation letter for the hmda | the home mortgage disclosure act falls under the federal reserve s regulation c this regulation requires the annual disclosures of residential mortgage loan data from financial institutions data reported includes details about applicants and loan types among others the data is used by different entities including regulators and watchdogs who ensure that lenders are meeting the needs of the communities they serve the bottom linemany consumers probably aren t familiar with the home mortgage disclosure act this law was passed and approved by congress to help bring transparency to the mortgage lending market the government also enacted the law to help ensure that lenders approve or deny different types of mortgage applications fairly and justly data is collected from financial institutions each year and compiled for review it includes application and applicant details |
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