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DEVELOP YOUR "EASY NO SWEAT" PLAN FOR PAYING FOR COLLEGE TODAY IN ORDER TO MAKE IT A REALITY IN THE FUTURE

It has been said "that if you fail to plan then you plan to fail".  This is true in all aspects of life in general and in particular to planning for college for your children.  With the escalation in college tuition, prices for books, lab fees, and accommodation expenses you had better be prepared to pay a small fortune each and every year if you want your child to go to college, let alone any postgraduate schooling.  You must start planning today in order to achieve this goal and to achieve this goal with the least financial impact on yourself.  If you do not plan today then you had better be prepared to either fork over upwards of $30,000 a year or better or be prepared to tell your children that they cannot go to college because you failed to plan and therefore cannot afford it.  But where is the money going to come from each and every year?  Perhaps you will hit the lottery every year or perhaps you are relying on a "bonus" from your employer.  If either of these two things seems improbable and even silly then you must decide today to develop and implement your "College Plan" to meet these future expenses.  At Benchmark Lending we have our trademarked "College Planning Program Series,©™" to help you achieve your goal.  A little planning now will save you a lot of money and stress  in the future. 

In today's world, a college education is more important than ever. Many of the jobs that do not require a college degree have been outsourced to workers in other countries, or replaced by a computer or machine.

In addition, according to Fed Chairman Ben Bernanke, the income disparity between college grads and non-grads is growing every year. In 1979, college grads earned 38% more than those with only a high school diploma. But today, college grads earn 75% more than those without degrees!

The Cost of Higher Education

Let's face it: college is expensive. And with the cost inflating approximately 5% annually, the cost will only rise.

The type of college your child attends can also have a big effect on the cost too. For example, just one year of tuition, room and board at an average private college runs just over $30,000. On the other hand, a public out-of-state college runs around $19,000 per year. Finally, even a public in-state college is close to $13,000 annually.

So as a parent who wants your child to have the chance to attend college, what can you do? The answer: plan early!

A Tale of Two Families

Let's look at a tale of two parents to illustrate how important it is to get started right away.

The preschool open house was in full swing, and two parents were chatting over the punchbowl, remarking on how they knew time would fly, and before you know it, their kids would be off to college.

Taylor's parents are prepared. They recently sat down with a mortgage professional and learned that completely funding Taylor's four-year education at the local college would cost either $300 per month in savings or—by using the equity in their home—only $133 per month after tax. "What a relief to know it's all taken care of!" they commented to Max's parents. But Max's parents replied, "Hey, what's the rush? Look, the kids are only knee-high right now...we'll worry about this later."

Seven years later, the kids are in 5th grade, and the parents meet up again at a birthday party. College comes up in the conversation, as Max's parents just learned that for him to attend the very same college as Taylor, it would now require them to save $835 per month to be ready on time, which is not something they are prepared to do. Taylor's parents recommend that they meet their trusted mortgage professional, who advises them that by using the mortgage wisely, it will only cost them $260 per month after tax. Much easier to swallow—but it's twice as much per month as Taylor's parents, who planned ahead and started earlier.

The Moral of the Story?

If you want to save for your child’s college expenses, start the investment early. The money you put away today will have more time to gain interest and multiply over time—which means you won’t have to struggle to save as much. Don’t be discouraged by the amount you think you can put away. I have a full array of financial tools at my disposal. Together, we can sit down and calculate a variety of scenarios that fit your budget and will help ensure that your child’s college costs are taken care of.

You should also encourage your children to invest and save too, with a portion of funds from their allowance or a side job like mowing the neighbors' lawn or babysitting. They will see how the value of their savings grows over time, and more importantly, will begin to understand importance of planning for the future.

Finally, as the college years approach, explore scholarships, financial aid, or federal direct aid, which is money that does not have to be repaid. Of course, when your children are young, you just don't know if they will be star athletes or straight “A” students—so it’s always better to plan ahead. If scholarship money does become available, then you’ll have more than enough money in savings, due to your good planning.

If you want to discuss options and strategies on saving for your child's college education, contact me. I’ll make sure the entire process is convenient and, more importantly, that we design a plan that fits your specific goals.

Call me today to make your child’s education a reality.

Terrence Tormey - Benchmark Lending - Office: (732) 993-3639, Fax: (732) 280-6240

terry.tormey@benchmarklends.com

In a move to create uniformity will Fannie Mae follow the lead of FreddieMac and implement a rule that will mandate that in order to refinance a residential property that property must not have been held in the name of an LLC in the last six (6) months?  We'll see, but all signs say "Yes."  If this comes to pass then Real Estate Investors across the country will have an additional challenge when there is a need to refinance their real estate investment properties held in an LLC for liability protection...

Changes in Freddie Mac lending policy: Freddie Mac will not refinance a property that has been held in an LLC at any time in the previous 6 months. Fannie Mae is expected to follow suit. And in turn, this may require your lender to do the same.

For some of you this is may be no big deal - another change in policy to be dealt with. But for others this could cause a big problem.  So what are your options?  Well there appear to be six scenarios to consider. 

• If you are not planning to refinance your property in the next year, you can stand pat and leave the title to the property as it is. The LLC will continue to give you the benefits you expected when you set it up. Unless you have an ARM that really needs to be refinanced, you can stay with the same mortgage until you sell the property.
• Do not title new property acquisitions in the name of an LLC.
  
  
• You can retitle an existing property into your individual name and out of the LLC seven months before you set out to refinance it. Yes, you will have liability exposure during those seven months, so make sure your insurance is paid up and get an umbrella policy
• You can retitle an existing property into your individual name and out of the LLC seven months before you set out to refinance it, and put the property back into an LLC after the refinance is complete, assuming that this does not trigger the "due on sale clause" in your new Note because you have transferred a "beneficial interest" in the property to a party that was not a party to the original lending transaction and Note. Again, yes, you will have liability exposure during those seven months, so make sure your insurance is paid up and get an umbrella policy.
  
  
• You could find a lender that is willing to refinance the property inside an LLC and pay the higher interest rate.
  
  
• Or you could consider transferring the title to the property from your LLC to a trust, with the beneficial interest in the trust held by your LLC. You must, however, consult with your attorney to see if this will provide you with the same level of protection.  If you act before you consult your attorney and you are wrong this could cost you big time.  Better to be safe than sorry - so consult with your attorney!

Please note that in general real property held in trusts does not have court proven liability protection in the event of litigation and there is a risk of personal liability exposure to the real estate investor with this fourth option.

Questions remain as to whether this new rule applies to both owner-occupied and investor properties in the same way and manner.  Clearly there appears to be a difference between the two property types.  With regard to a true investment property that is designated as such on the 1003 Application it would seem to be an acceptable and prudent business practice to hold title in an LLC because this is in fact a business asset and there has been "true" and complete disclosure.  By contrast, and more problematic, a property identified as "owner-occupied" on the 1003 may in fact actually be an investment property where the owner is seeking to obtain the better financing rates for owner-occupied properties as opposed to non owner-occupied investment properties.  This is not to say that there are no legitimate reasons to title owner-occupied property in an LLC, but rather to highlight the possibility of an investor sham.  Necessarily, it seems that this new rule may well be intended to root out mortgage fraud. 

At this point in time the watch word is "be careful, be prudent and move slowly."  Consult with an attorney and make certain that you are on solid legal ground with whatever action you take.  Please note that nothing in this article is intended to be or is offered as advice of any kind, including legal advice.  Consult with your attorney and other professionals.

Terrence Tormey - Benchmark Lending - Office: (732) 993-3639 - Fax: (732) 280-6240 - terry.tormey@benchmarklending.com - www.BenchmarkLendingSolutionsUSA.com