Finance, The Simple Dollar

Yes, Blockchain Mortgages Are a Thing Now

Applying for a mortgage might be one of the hardest things about buying a home. It takes longer than, say, applying for a credit card, and it's a lot more expensive for homebuyers thanks to processing fees.

But according to a recent Moody's study, blockchain technology — the same encrypted record-keeping system behind Bitcoin — could save the mortgage industry $1 billion every year by cutting down on fees and redundant audits every time the application changes

Why does that matter for homeowners? It could also bring down the cost of applying for a mortgage.

What's blockchain again?

Blockchain is a record-keeping technology, most notably the one behind Bitcoin, that keeps digital information (the blocks) stored in a public database (the chain). It’s also referred to as distributed ledger technology (DLT). Each block stores information about the transaction, participants, and data to distinguish it from other blocks. A DLT offers users transparency and control of the data.

Because the information is distributed across a network of computers, it's very difficult to hack or change the system. Each time a new block of information is added, it's added to every user's ledger and tied to the following block. If a hacker wanted to tamper with one block in the chain, they would have to change every block across all distributed versions of the chain.

Typically, getting a mortgage loan is complicated

A mortgage application process typically involves a lot of paper, several third-party services, and a ton of time. Once a buyer agrees to buy a house, they have to apply for a mortgage. This usually requires bank statements, a credit report, existing loan information, and proof of income.

The lender will then have a surveyor do a preliminary property evaluation, confirm details about the property’s ownership, have a credit agency run a credit assessment, and conduct a final property valuation. If approved, the buyer will sign the mortgage loan agreement documents, and the lender will reach out to the registry offices to update the title deeds. In total, the process can take between 30 and 60 days to finish and has an average of 500-2,000 pages.

Blockchain would streamline the mortgage process

With blockchain, the data for the entire process will live in one digital document. When a home buyer completes a mortgage application, it becomes a block that each party has access to. Each step in the process is a new block of information, and the database is updated for the next party.

Rather than having to manually update each participant (lender, credit agency, government records, etc.) every time another step is progressed, the blockchain is collectively and automatically updated. Instead of every participant having their own separate paper copy of the data, it will all live in one place with instant access, a small error margin, and no redundancy in effort.

Ruslan Yusufov, a cybersecurity expert with MINDSMITH, told us that, "Banks and securitization organizers will be able to place orders for mortgages, and brokers and originators will automatically underwrite a borrower's application with all buyers of mortgages simultaneously.

This will allow the borrower to instantly receive all offers by submitting just one application. At the same time, any broker can immediately conclude a mortgage agreement and sell any mortgage security due to smart contracts algorithmization.”

Smart contracts can also be enabled in a blockchain, which would speed things up even further. For example, the lender can set funds to automatically transfer to the buyer once the mortgage loan agreement has been signed.

This model cuts down on processing time, makes verification simple, and can lower fees by eliminating some third-party middlemen. Even after the home purchase is complete, the blockchain can live on as a record of ownership.

Too long, didn't read?

Blockchain technology is an exciting new model for the mortgage lending process. It can save everyone involved a ton of time and money, will increase transparency, and simplify the process. Adoption of the technology may be a slow-going process — upfront investment in the technology isn't cheap, and because it's unregulated, there's no standard method for processing mortgages via blockchain vet. But companies like the online lending startup Figure are sparking more serious interest.

8 Money Mistakes to Avoid in Your 20’s

There's a lot to figure out in your 20s as you transition to independence, but we'd argue that money management is one of your top priorities. The education system doesn't always do a great job of preparing young adults to understand fiscal responsibility (and frankly, without the right teacher, finance can be pretty dull.)

As the COVID-19 pandemic tanks the economy into a recession, it's more important than ever to be financially aware at an early age. Don't stress too much — your 20s are all about slip-ups and going back to the drawing board. But in this economy, let's avoid these eight money mistakes if we can.

1. Sign up for way too many credit cards

Having a few credit cards can help you build up your credit score, but too many can lead to a cycle of compounding interest and debt. If you can't pay off the amount you spend every month, you'll be buried in the snowball effect. Financing vacations or a new wardrobe on a credit card is an unhealthy financial habit.

Amy Maliga, a financial educator with Take Charge America, told us, "Whether using credit cards to pay for everyday expenses or using them to finance a lifestyle beyond their means, carrying a balance on multiple credit cards can quickly spiral out of control. It's better to ease into using credit by making a few small purchases on a single credit card and paying off the balance in full each month."

2. Skip saving

Building up a savings, emergency fund, and retirement fund is as essential as ever right now. Set aside a portion of your paycheck for your savings and retirement fund. The compound growth you'll see from starting your retirement fund in your 20s can turn into an extra million dollars in the long run. At the very least, put a small amount into a Roth IRA and take advantage of any 401(k) matching your company offers.

"People in their 20s should start saving for emergencies as soon as they begin earning a regular paycheck. We recommend an initial savings goal of $500, with the ultimate goal of having at least three months of living expenses saved. Even if money is tight, saving just $20 from every paycheck will begin to add up. Not saving for emergencies leaves people vulnerable to relying on credit cards or other high-interest lending to pay for an emergency," added Maligna.

3. Ignore the stock market

Investing in the stock market is an intimidating idea that often feels reserved for suits and full-fledged "adults." Elevating your wealth and securing your financial future may take more than just a good salary and an annual raise, and that's where investing can play a role.

Robert R. Johnson is an author and professor of finance at Creighton University and told us, "People in their 20s should begin investing in a low-fee, diversified equity index fund and continue to invest consistently whether the market is up, down, or sideways. Dollar-cost averaging into an index mutual fund or ETF is a terrific lifelong strategy. They should be 100% invested in stocks and have no bond exposure.”

Johnson advised us that starting early is the key to successfully building wealth and that time is the greatest ally for the investor because of compound interest. Take advantage of the time you have to build that wealth and learn about easy ways to begin your investment journey, but make sure you prioritize your expenses, debts, and an emergency savings fund before setting money aside for investing.

4. Brush off a budget

Budgeting is often branded as a necessity to manage essential expenses or pay off debt. But to its core, making a budget is about being aware of your financial habits. Without an awareness of the money going in and out, it's easy to spend frivolously. What feels like an occasional, twice-a-week Starbucks coffee can add up to $50 a month.

You'll notice how you can save money by changing small habits like skipping the 70-cent cascara topping on your cold brew, picking up your takeout instead of having it delivered (often adds at least $8 in fees and tips), or buying the generic brand of cereal. You can even use a budgeting app to do this work for you. Managing your money will only get more complicated as you get older, so it's best to start the habit young.

5. Impulse purchases and label chasing

Chasing a trendy lifestyle, especially one you can't afford, is an easy mistake to make in a world of Instagram gratification. Lisa Michaud, life coach and Goalden Girls podcast host, told us to avoid "trying to look rich instead of building wealth.

Nice cars, fancy dinners, designer clothing — that's what we think wealthy people do with their money. But if you focus on just looking rich without focusing on building actual wealth, you'll never have financial security or freedom. Think about spending your money first on saving and investing to build wealth. Then, you can spend the money you make through investments on the treats. But without the actual wealth and money in the bank when you're done spending, you're not rich. You're just broke wearing nicer shoes."

6. Buying a new car when you don't need it

Sometimes, buying a brand-new car is a waste of money. As soon as you drive the car off the lot, it depreciates 10% in value. If you paid $40,000 for the car, it loses $4,000 in value in that first month. Then 20% in the first year. Buying a used car instead — even a car just a year or two old — can help you increase your savings significantly.

"Cars are not an investment," says Kelan Kline, founder of finance blog The Savvy Couple. "New cars are one of the worst money mistakes you can make at any age. It's the triple whammy of bad financial decisions. You're financing a depreciating asset that also needs to be maintained. They are money pits through and through. Avoid buying a new car and instead buy a reliable, well-maintained 3-4-year-old car and save yourself thousands of dollars in headaches."

7. Not shopping around or comparing quotes

You can save a lot of money by shopping around for the best deal on purchases like a car, cell phone provider, cable, insurance, etc. Most big purchasing processes can be stressful and drawn out — you may not want to spend even more time comparing quotes and prices, but any recurring or big purchase is worth the upfront effort of finding (or negotiating) for the best deal. You can even snatch a deal you find elsewhere and use it as leverage for a better price with your preferred retailer.

8. Renting an apartment alone

Your 20s can feel like a rush to independence, and living alone is a big part of that. But don't knock spending a few years with a roommate. You may achieve financial freedom faster by splitting the rent. And you'll save even more if those roommates happen to be your parents. Not everyone has the opportunity to live at home, but if you do, a few post-grad years living with your family while you save up is nothing to scoff at.

Home & Products, Freshome, Reviews.com

7 Ways to Make Your Home Feel Bigger and Brighter

Thanks to nationwide stay-at-home orders, we're all suddenly spending a lot of time in the same small spaces. To combat the coronavirus cabin fever, we’ve talked to professional organizers, interior designers, and an organizational psychologist about ways to make your home feel more spacious.

Before you begin, think about spaces that have made you feel calm and how they were arranged. Shalae Price, a professional organizer, gives hotel rooms as an example. "Most hotel rooms are designed to feel much bigger than they actually are. The furniture placement is well thought-out, and the decor (in most cases) would be considered minimalist.”

1. Declutter, declutter, declutter

Decluttering is an obvious first step to clearing up your space. Anyone can do it and with few resources. Walk from room to room and put things away, clear up random papers or cardboard boxes, and collect together small things that don't have a home. If an item isn't for decor and isn’t used regularly, consider storing it out of sight or donating it to your donation centers.

Craig Anderson, Editor at Appliance Analysts, says you have to earn your free space. "Any good minimalist will tell you that free surface space makes you freer. It's also the first thing to go when we get lazy and leave clutter around. Having unused surfaces (desks, tables, counters) makes a room feel MUCH larger."

2. Clear the floors and the walls

The more floor space, the bigger the room will feel. 

"The floor is not a storage space, but we often create piles in corners that grow and expand over time. These piles tend to be delayed decisions, items that have no home, so they get set aside on the floor. As these piles encroach on our living space, we feel weighted down. Our actual physical living space shrinks. Tackling these piles and freeing up your space will immediately create lighter, brighter spaces. In our experience, if you haven't looked at items in these piles for a long time, they are often items that can be let go.”

- Andrea Walker, Certified Professional Organizer, Smartly Organized

This applies to the floor space between furniture and walls, too. When all your furniture is set against the walls, it really outlines the boundaries of your room and highlights how small that space is. By making sure some of your furniture has a little air between the walls, you create a better sense of roominess.

3. Store smartly

Get creative with the way you store things and be more critical with what you choose to have out. You can keep it simple by folding blankets into a chest or basket, having a dedicated basket for pet toys, and hanging photos instead of resting them on furniture.

Multi-functional furniture that doubles as storage is a great way to optimize your space. Seats, coffee tables, and ottomans with hidden storage can help keep blankets, movies, games, or clutter off of furniture and the floors. You can also install floating shelves to elongate the walls and store things away from the floor.

Anderson advocated for putting away the things you don't use every day. "There are SO many things we own that we use maybe once or twice a year. These should be kept well-hidden in a chest under the bed or in a DIY cupboard.”

4. Mirrors are magic

Debra Newell, owner and president of Amrbosia Home, told us that "large mirrors are a must. You want to reflect back into the room and give the illusion that you have more space."

Mirrors will bounce more light around, give a sense of movement, and visually double the size of your space. You can use floor-length mirrors, mirrored closet doors, or hang smaller mirrors on the walls.

5. Be deliberate with your decor

Decorate your space with intention and don't be afraid of some dead space. A bunch of small things scattered around can feel more like clutter than a few larger statement pieces. Walls, shelves, dressers, countertops, and computer desks can all benefit from a critical "do I need this?" scan.

Price advised us to "Pick one room at a time, then look at your walls and surfaces. Do you really LOVE everything you see? Remove the items that you don't love, and of course, keep the items that mean something to you or define your style."

Concentrate that decor in a few spaces, like an accent wall, rather than spreading it out all over. Leaving some surfaces and walls open will visually elongate the room. 

6. Keep the furniture low

If you're in a position to buy new furniture, keep it low. Furniture that is generally lower can help an area feel much bigger simply because it leaves more open space above. This applies to the leg style of furniture too; open or post-style legs will show more space and appear to be floating, compared to large furniture that rests directly on the floor.

Newell advises: “Keep the arms and backs of chairs and sofas low, even legs on a sofa are important. Add ottomans for seating. No floating large furniture in the middle of the room." She also recommends dining chairs that you can push all the way under a table to store when you're not using them.

7. Utilize lighting

Light is a simple and powerful tool that can completely transform a room. Lighting up dark corners and having multiple sources around the room will create space. 

“Spread out your lighting. It may be more cost-efficient to just use one large light in the center of the room, but it's a sure way to make everything seem smaller. Cultivate an atmosphere using 2 or 3 ambient lamps around your space. By spreading out the lighting, you’ll also be metaphorically stretching out the room.”

- Craig Anderson, Editor at Applicance Analysts

Now is the perfect time to rearrange your space. Use what you have at home, order online, and minimize trips out. You can also use this time to prepare and plan bigger projects for when stores are open, and it's recommended to go out again.