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The Frugal Life News
June 10, 2005 Edition
www.thefrugallife.com

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A Note From Randal
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Hello Everyone,

Welcome new subscribers and thanks to all of you who have been sharing The Frugal Life News with others!

In this issue we have some great questions from the Gardening Forum and the Do-It-Yourself forum that need some input. Please do what you can to provide some answers. Your responses are what make the forum the great resource it has become.

As always, we appreciate your contributions.

Frugally yours,

Randal

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Frugal Finances
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Adjustable rate mortgages (ARMs)

October 30, 2004 – by Crown Financial Ministries

Adjustable rate mortgages (ARMs) are now being used by virtually every kind of mortgage lender. Although they are not the best financial instruments for borrowers, they are acceptable instruments and can be good for lenders. Lenders like the ARM because they have a low risk and they can qualify more borrowers for an ARM than conventional or Fannie Mae loans.

What are ARMs?
Adjustable rate mortgages are home mortgages whose interest rates can be adjusted—usually annually. AMRs have no limit on the upward movement of interest over the life of a loan (there is a limit of 2 percent annual increase of interest), unless a limit is negotiated at the time the loan is approved. This means that as interest rates rise your mortgage payment will rise accordingly. On the other hand, if interest rates drop your mortgage also may drop. Nevertheless, lenders don’t have to lower the monthly payments when interest rates drop. It is at the discretion of the lender whether to lower monthly payments.

Although the value of the mortgage may vary at any time and by any amount, the lender’s interest rates are controlled by government and public economic stability, rather than by the bank’s prime interest rate.

Lender disadvantages
• Some states have recently added to their banking laws limits on the amount and number of raises in a given year and the total amount that interest can be raised over the life of the loan.
• ARMs are very competitive, forcing lenders to “make the deal more attractive,” many times at the expense of interest received during the first year or two.

Borrower disadvantages
• With an ARM, a home purchase will not be as inflation proof as with a conventional fixed rate mortgage.
• Without a negotiated interest limit or an interest cap imposed by the state or lending association, interest rates could skyrocket, forcing monthly payments to follow.
• If interest rates rise, the lender has the option of increasing your interest rate but not your monthly payment, which in effect would extend your payment period to 40 years. The other option is to increase your monthly payment to coincide with the rise of interest.
• A severe swing in interest rates could result in negative amortization.
• Many ARMs have a prepayment penalty included in the contract.

Lender advantages
• Because ARMs usually do not have to qualify for Fannie Mae guarantees, ARMs have less stringent requirements. Therefore, more people can qualify for ARMs.
• Lenders are seldom at risk when interest rates rise. The interest they charge is allowed to rise with rising interest rates.
• The lender can raise interest, raise mortgage payments, or extend the length of the loan at their discretion, if interest rates rise. If interest rates drop, they don’t have to lower monthly payment requirements.

Borrower advantages
• ARMs usually have a lower interest rate than a conventional fixed rate for the first one to three years.
• The annual rise in interest rates is limited to 2 percent. Some states also have a maximum interest limit over the life of the loan.
• Some ARMs are assumable loans.
• Because ARMs’ qualifying standards are less stringent than conventional fixed rate mortgages, borrowers who have less than perfect credit but have a steady job usually can qualify.
• Some ARMs that do not have a prepayment penalty clause can be converted into fixed-rate conventional mortgages, if there have not been any late payments over the 12 previous months.
• If you know that you will be living in the house for five years or less, an ARM might be a wise choice because your monthly payments will be less.

Conclusion
If you plan to live in the house for more than five years, a fixed-rate mortgage is the best option, if you have good credit. If you have less than perfect credit but have a steady job or plan to live in the house less than five years, ARMs could be a logical option. However, before agreeing to any terms, investigate and shop around. ARMs are competitive, so choose the lender that gives the best deal. Preferably, try to find:

• an annual interest rate limit
• a life-of-the-loan limit
• no prepayment penalty
• monthly payment reduction if interest drops
• the right to convert to a fixed-rate mortgage.

Reprinted by permission: For more sound financial advice visit Crown’s website

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Frugal Home Communications
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Frugal Gardening
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Coloring The Garden

When we were scraping and painting our new/old house I noticed that most of the walls had been originally painted some variation of pink, from deep, deep mauve to pale. I also noticed that the view from every window looked out on flowering shrubs and plants of the same colors. Someone had obviously been really big on color coordination.

It makes sense. Cut a bouquet to bring in and it will be tailor-made for your interior. Gaze out a window from inside the room and you get a perfect picture.

Decorating the garden with your favorite colors is something to consider rather than just adding plants. Read this article by Carol Wallace for some ideas.

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Frugal How-To
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Saving on Dryer Sheets
As soon as I buy a new box of fabric softener sheets, I immediately take them all out and cut them in half. Then, return them to the box. I see no difference in softness whether I use a half sheet or a whole one, and they last for twice as many loads of laundry! Ruth

Make Your Own Home, Bath and Beauty Products

Essential oil kits allow you to make your own safe non-chemical home and beauty products. Making your home less toxic for yourself, children and pets.
Make Your Own Home and Beauty Products

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Frugal Pets
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Herbal Heartworm Program and Prevention

Robin Sockness works with pet owners with an individualized program and has currently worked with over 700 dogs. Herbs are safer and less expensive so it’s a win-win situation for all. Prevention programs available.
Herbal Heartworm Program & Prevention

Pet Information, Links and Natural Foods

Healthy Pet Corner provides lots of information and links for dogs, cats, birds, horses, rabbits, and reptiles.
Healthy Pet Corner

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Frugal Tips From Our Subscribers
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Remove Stubborn Burnt-on-Food From Pots and Pans

Add a drop or two of dish soap and enough water to cover the bottom of the pan. Bring it to a boil on your stove.

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Frugal Learning
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Singing Success At-Home Study Course

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What’s Going On In The Forum
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Maybe you can help these folks out with a few suggestions? Or post some of your own questions. LOG-IN TO POST Here’s the link: Forum

Questions Needing Answers At The Forum

Do-It-Yourself Forum

Can a grill be painted by an auto paint shop. I was thinking the paint shop is experienced and would provide an excellent paint for the grill. Any suggestions? I have severe allergies, and could not paint it myself.

Gardening Forum

We have a long, thin property, and a field behind. A developer has bought the field…. We’d like to plant bamboo as a screen/fence. I know often folks are very anxious to get rid of bamboo, and we realize that it can be quite invasive. But then, so can developers.

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Home Based Business Ideas
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Nature’s Sunshine Products – Herbs and Supplements

Earn an income selling over 500 natural health products, beverages, essential oils, skin care systems, water filters, and more. Websites for $11.95/month.
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Home Spa Party Plan – Make Bath and Body Products

Have you noticed how popular bath and pampering products have become? The HomeSpa Party Plan taps into that craze. Guests at HomeSpa parties learn how to make bath salts, personalized perfumes, body spritzers and more using essential oils, while you make a nice income.
Home Spa Party

Flint River Ranch – Oven Baked Pet Foods

Make additional income providing healthy pet foods and bones to friends, neighbors and family. Pets keep eating, so customers keep buying. If you love animals, this is a very rewarding home-based business. With only $100.00 volume a month you earn 19% on all sales.
Flint River Ranch

Life’s Abundance Foods and Supplements

Formulated by Dr. Jane Bicks and Dr. Barry Sears who developed the Zone Diet for Overweight Dogs. Besides dog, cat and horse products, they have a non-toxic line of cleaning products – safe for pets and children. Websites available for $8.50/month.
Healthy Pet Net

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Copyright, Legal Disclaimer and Reprint Information

© 2005 Randal J. Watkins

Information in The Frugal Life News (TFL) has been derived from sources believed accurate and reliable. In no event shall *The Frugal Life,* Randal Watkins, or the TFL staff be liable for any damages whatsoever resulting from any action arising in connection with the use of information herein.

TFL does not knowingly accept ads from advertisers deemed detrimental to TFL’s readers, however, publication of an ad in TFL does not constitute an endorsement for such product or service.

There is no remuneration for suggestions, tips, or ideas submitted by readers. All suggestions, tips, and ideas, submitted for publication in The Frugal Life, become the property of The Frugal Life, notwithstanding similar rights of the reader submitting such suggestions, tips, or ideas. TFL publishes readers’ names with their suggestions, tips, and ideas unless a reader requests otherwise at the time of the submission.

Forwarding and Use of This Newsletter

You may forward or use this copyrighted newsletter on a website if you include the following credit:

Editor, Randal J. Watkins, of TheFrugalLife.com, provides this free
newsletter to subscribers. The Frugal Life is sponsored by TheHerbsPlace.com
which provides quality Nature’s Sunshine Products at wholesale prices. Visit
now to shop or view the list of free newsletters available.
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The Herbs Place

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