Category: Budgeting Your Project

The Perfect Way to Spend Less Interest on a Mortgage

The payment on a mortgage is going to result in you paying more in interest compared to the price of the house. A mortgage with a 6.5 percent interest rate will cause interest payments of almost 1.3 times the initial mortgage amount. This implies that if you pay every payment on a $300,000 mortgage, the total payment will be over $680,000. Lowering the mortgage interest can result in thousands of dollars in savings.

Refinance for a Lower Rate

If the currently accessible rates for mortgages are considerably less than your existing pace, a refinance into a new lower rate can save a significant amount of interest. Utilizing our $300,000 example, if the rate is reduced from 6.5 percent to 5.5 percent, the total amount of interest paid on the mortgage drops from almost $70,000. The monthly payment on this mortgage also declines by $190. This option works great if your mortgage is fresh and rates have dropped quickly. If you have been paying on your mortgage for five decades and then refinance, you’ll extend the time to repay your house by 5 years if you get a second 30-year mortgage.

Refinance for another Term

A 30-year mortgage is not the only option to finance a house. Mortgages with 15-year provisions are widely accessible, and the rates of interest are lower compared to 30-year loans. The amount of interest paid on a 15-year mortgage is significantly less than on a 30-year loan. For a $300,000 mortgage at 6 percent, the total amount of interest paid drops from $347,500 to $155,700, a savings of over $190,000. The principal and interest payment of the 15-year loan is 2,531 compared to $1,798 for the 30-year mortgage.

Extra Principal Payments

If your mortgage is at a good rate and the loan has no prepayment penalties, the easiest solution is to create extra principal payments with your regular mortgage payment. The interest on account of every mortgage payment is based on the current loan balance. If you decrease the loan balance by making extra principal payments, you can reduce the total interest paid. Adding $500 a month into the 6 percent, $300,000, 30-year mortgage saves $160,000 in interest. The opportunity to pay back the mortgage can be decreased by more than 12 decades. You can add as little or as much as you want to your mortgage payment as extra principal.

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Define Conventional Mortgages

When purchasing a home, most buyers want third party financing to complete the purchase. Mortgages can either be government-backed or conventional. Certain government agencies like the FHA and VA guarantee or guarantee government-backed mortgages. The FHA insures mortgages provided by private creditors, and the VA guarantees loans made to members of the military. Conventional mortgages are such not insured or guaranteed by any government agency.


Conventional mortgages are available to anyone that satisfies the lending standards. It is more difficult to qualify for a conventional mortgage than a government-insured loan since the credit guidelines are far more stringent. Most conventional loans are usually bundled to together into investment packages and offered on the secondary market to institutional investors like insurance companies and government agencies such as Fannie Mae.


Lenders look at several variables to qualify you. Although you can qualify for a conventional mortgage with a minimum score of 620, to find the best speed, your score has to be at least in the low- to mid-700s. Additionally, many lenders require specific credit score ratios. Your housing ratio is your mortgage payment, which includes the principle, interest, insurance and taxes divided by your gross monthly income. Lenders like to see that this ratio at 28 percent. The next ratio is your total revolving debt, such as credit card and car payments, and your housing expense divided by your gross monthly income. This ratio should be about 36 percent.


Traditional mortgages usually have either a 15-year or 30-year term. Additionally, fixed interest rates are typically the standard. With a fixed interest rate, the interest rate on the mortgage is identical for the whole term. Some lenders also provide an adjustable interest rate using a conventional mortgage. Usually, with the flexible interest rate option, you are provided an initial lower interest for a set period, and the interest rate will adjust, usually upward, after that period. Additionally, with conventional mortgages, lenders require a 20 percent down payment. With conventional mortgages, lenders usually require borrowers with a down payment of less than 20% to pay private mortgage insurance, or PMI, which insures the mortgage against reduction.

Interest Rate

The interest rate that a lender offers you on a conventional mortgage depends on your credit score and what loan application you are eligible for. More than government-backed loans, conventional loan interest rates are closely tied to your borrower’s credit score. Conventional guidelines are put up so that a borrower with a FICO score of 720 and above can be eligible for the best interest rate. As your score drops below 720, the speed can increase by 1 to 2 percentage points, and assorted fees could be inserted, significantly increasing the cost of the mortgage.


Before applying for a mortgage, make sure that you realize the differences between government-backed mortgages and conventional mortgages. Since conventional mortgage interest rates are driven by credit scores, so make certain your credit is very good to excellent, so you are eligible for an inexpensive rate. Also, it’s important to make certain you have access to cash for a sizable down payment.

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Short Refinance Options

If you owe more on your mortgage than what your house is worth, your alternatives to refinance this loan are limited. And that is unfortunate, as a mortgage refinance to a loan with a lower interest rate can save you significant money every month. If you have a $250,000 mortgage loan, then you can save more than $320 a month by refinancing that loan from one having an interest rate of 7 percent to one having a speed of 5 percent. Fortunately, there are some steps you can take to refinance even when your house value is short.

Home Affordable Refinance

The federal government last year launched its Home Affordable Refinance Program. This program is intended to help homeowners obtain refinancing even when they owe more on their homes than what they are worth, something that traditional mortgage lenders seldom will allow. The Home Affordable Refinance is open to homeowners who owe up to 125 percent of the home’s values. This means that a homeowner who owns a home valued at $100,000 can owe up to $125,000 on their mortgage loan. To qualify for your program, homeowners should be refinancing a loan on a house of one to four units, possess a loan owned or guaranteed by Fannie Mae or Freddie Mac and be current on their mortgage obligations.

Call Your Bank

Not all lenders are participating in the government’s refinance program. That doesn’t mean, though, they won’t refinance your house loan even if your home’s worth is short of what you owe. Lenders’ policies on refinances vary. While most traditional lenders require homeowners to get 80 percent equity before approving a refinance, others may have laxer standards. The key is for customers to shop around.

Loan Modification

Those homeowners who can’t qualify for a refinance, either through the government program or private lenders, can apply for a mortgage loan modification. Under a modification, creditors will waive homeowners’ loans so they pay less every month. This is an alternative that lenders book for homeowners who are struggling to pay their house loan payments every month and are at risk of losing their homes to foreclosure if they don’t nab a lesser monthly payment. The federal government is even encouraging lenders to modify more loans. Through its Home Affordable Modification Program, the government is providing financial incentives to lenders who modify home loans either through interest-rate discounts, by modifying loan terms or by repaying some of loans’ main balances. To see if you can be eligible for a mortgage loan alteration, if your house worth precludes you from refinancing your loan, then call your mortgage lender and explain that you can no longer manage your monthly payment.

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What Does a Real Estate Lease With an Option to Purchase Mean?

In tough financial times, house sellers begin to look for creative ways to attract buyers and buyers begin searching for unique ways to buy a house. One method that seems to work for many people is lease with an choice to purchase. While there are possible pitfalls with this kind of financing arrangement, they may be avoided with preparation and a well-worded contract.


The benefits to a seller would be that he immediately begins to receive income on his house, and if all goes well, he understands that by the end of the contract he will have a house sale. A buyer may benefit by negotiating a sales price he thinks that he will have the ability to take care of. In case he’s credit issues, a lease with an choice to purchase gives him time to clean them up. Due to the way that this arrangement is organised, the buyer also builds equity in the house as he leases it, giving him less to come up with in the time of purchase.


A lease to purchase is an agreement between a landlord and tenant stating that during a particular period of time, the renter has the choice to buy the rented property. The landlord and tenant agree on the sales cost and the length of time the contract will last. The tenant pays the landlord a consideration fee of between 3% and 7 percent of their sales cost in exchange for maintaining the house off the market. They determine how much of their monthly rental will be credited toward an eventual buy, with the average amount being from 30 to 50 percent. In addition, the 2 parties determine who will be liable for ordinary maintenance issues and whether the tenant is required to carry renter’s insurance on his possessions.

Time Frame

The average lease to purchase option lasts three to five years, but the purpose is negotiable. A longer period may be necessary for a renter who wants to repair his charge before attempting to secure a mortgage loan. Generally, the tenant has the right to buy the property at any time during the term of this contract.


There are potentially serious consequences to the renter that decides not to buy the house or is not able to procure a loan in a timely way. Not only does he lose the whole amount he gave the landlord as a consideration charge but he also loses all of the rental credits which were paid ahead of the loan each month. On the flip side, if the renter does exercise his right to buy the property, 100 percent of their consideration fee he paid at the beginning of the contract and 100 percent of his rental credits will be deducted from the sales price, providing him less to borrow from an outside lender.


Many landlords do not own their property outright, but instead continue to make monthly mortgage payments as they lease it out. The renter runs the risk of having a landlord who doesn’t make his monthly payments to the mortgage company and who enables the house to enter foreclosure. One remedy for this could be written into the contract. It should say that the tenant will pay the mortgage payment directly to the mortgage company each month, with any lease overages being sent to the landlord. The renter will offer the landlord with evidence he gets paid the mortgage note before its monthly due date.

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How do I Rebuild Credit After Repossesion & Foreclosure?

No one wishes to have to face losing anything, even less a home or automobile. Once the inevitable foreclosure or repossession has really happened, you are going to need to arrange your finances, stabilize your life style and habits to live within your means and begin rebuilding your credit score. Give yourself time, as poor debt can remain on your credit report anywhere from seven to ten decades.

Form a budget that contains all of your living expenses and outstanding debts. If you think there is not enough money to pay everything on your budget, either reduce more in the flexible debts or pick up a part-time job to meet the need. Till you’re able to stop spending more than you are bringing in, you will not be able to reconstruct your finances.

Make all of your payments on time for your existing accounts. There are lots of approaches to remain organized, such as your bank’s bill pay service, an internet calendar with monthly obligations of payments for the account, or possibly a list stored on the fridge door or a spreadsheet on your computer. Locate a plan and stick with it to stay on track with all of your accounts.

Maintain a couple of credit cards open. Do not add any more debt to their equilibrium. If you lost them through the time your home was going into foreclosure, apply for a secured credit card once a few weeks have passed following the date. You’ll be required to make a deposit of a few hundred bucks which you will get back following a year of good credit history.

Order your credit report once a year from each of the three major credit reporting bureaus and proceed over each listed account to make sure all of the info is correct and current. You do not want to do it more often than that or it is going to actually drop your score a little due to a lot of requests. If you notice an error, make certain to dispute it with each of the bureaus rather than just one. Keep all your communications well organized.

Buy a car on credit once you have about half a year of organized finances. Many times, car companies provide financing for people that are struggling with their credit ratings. But you need to make certain you are only buying a car that you could readily manage, even if it means getting a used car. Make each payment on time.

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How to Purchase Real Estate With Poor Credit

Purchasing a house with poor credit is quite difficult because the mortgage process is very credit driven. In powerful economic times, buying a house with poor credit is possible as many lenders offer subprime loans, but at an economic downturn many lenders stop offering subprime possibilities, and people with bad credit are the first to be turned off when applying for a mortgage.

Obtain a copy of your credit report. You are qualified to receive one free copy every year from each of the three credit reporting agencies: Experian, Equifax and Transunion. Contact them directly for your free annual report; it doesn’t affect your score. Keeping tabs on your credit report can help you catch mistakes and will provide you a good idea about what has to be enhanced. You do have to cover if you would like to see exactly what your credit score, or FICO score, is.

Talk to a loan advisor or mortgage agent. They’ll help give you pointers and action steps that can help you improve your score. Do not wait until the final minute to do this, since it will take some time for your credit rating to change. They’ll want to pull your credit report for you which will have your credit rating on the report. They may or may not bill for this up front.

Research your options. With a poor credit rating you’ll require a subprime loan, which isn’t offered by all lenders. Locate the lenders that offer subprime loan options and make sure that you read the terms and conditions carefully. Ensure that you also look into federal and local government loan programs because some may have more lenient credit restrictions.

Get pre-approved for a loan. You can do it through a bank, a mortgage broker or a credit union. They’ll take your credit rating, debt to income ratio and down payment into account and will explain to you just how much you’ll qualify for with regard to a mortgage. They’ll also tell you exactly what interest rate you qualify for. A poor credit score will only be eligible for a high interest rate.

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Why Do Homeowners Get a Home Equity Line of Credit (HELOC)?

A home equity line of credit, or HELOC, might be a good option for homeowners shopping for credit. To locate the terms you are comfortable with, compare the advantages and disadvantages of each credit offer. Start looking for a lender with the best terms, the fewest financial risks, and the lowest cost to you. Since your home is used as collateral on a HELOC, you ought to have the ability to satisfy the terms. Otherwise, you risk losing your property.


A HELOC provides a homeowner having a line of credit using the equity in his home as collateral. The lender approves a line of credit which you get as needed for major expenditures. Typically, you must utilize the line of charge within a fixed period of time, and the prices are usually variable instead of fixed. There can be other rules too, such as a minimal sum required when obtaining the charge line or different transaction fees.


Homeowners normally use a HELOC for things like debt consolidation and home repairs and improvements. Additional uses include medical bills and college tuition for a family member. The interest charged on a HELOC is generally tax deductible. Other advantages homeowners have using a HELOC are lower closing costs and lifetime interest rate caps.

Credit Line

With a HELOC, you are approved for a certain amount of credit after the lender considers the value of your home and your ability to settle. Additionally, the lender examines your credit history to find out whether you are a good credit risk. The credit line is generally based on a percentage of the home’s appraised value minus the balance owed. At the end of the period you've been granted to get the line of credit, some lenders will let you rekindle the HELOC and some will not.


Most HELOCs utilize variable interest rates, with the rate generally based on a renowned index such as the prime rate or Treasury bill rate. So your interest rate varies depending on the index. Research how far the rate has changed in the past to determine what your potential prices may be. All HELOCs demand a cap on a limitation on how much they could grow, but the caps vary depending upon the lending company. Ultimately, some lenders allow you to convert your variable-rate plan to some fixed-rate plan over the duration of the loan. Examine these factors when choosing a HELOC.


Although the closing prices are reduced using a home equity line of credit, many lenders still need them for things such as the appraisal on your home and attorney fees. Consider these prices when determining if a HELOC is ideal for you. Also, some HELOCs charge transaction fees or maintenance charges on the programs. Factor in these types of prices, if applicable, when searching for the ideal plan for you.

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Can You Still Get a Home Loan With a Divorce?

Owning a home still signifies the American dream; if you've had to file for Chapter 7 or Chapter 13 bankruptcy, even though, it might feel like that dream is out of reach. By filing for bankruptcy, your credit rating can be devastated. When mortgage lenders visit a low score and a bankruptcy on your credit reports, they're much less inclined to approve you for a home mortgage. Lenders view you as a high risk to default on their loans. You may be eligible for a house loan, even if you have a bankruptcy in your past. It simply needs a bit of work.

Wait at least three years after filing for bankruptcy. Bankruptcies will dramatically decrease your credit score as soon as you file. However, their impact lessens over time. The longer you wait after a bankruptcy to apply for a house loan, the negative pull the bankruptcy will exert in your credit rating. Bear in mind, Chapter 7 bankruptcy filings remain on your credit report for a decade, while Chapter 13 filings remain on it for seven days.

Rebuild your credit rating, beginning immediately after you declare bankruptcy. You rebuild poor credit by paying all your bills on time each month. It is also possible to boost your credit scores by opening new credit card balances or carrying out auto loansif you may get approval for themand making your payments in time.

Write a letter describing to mortgage lenders the reason why you dropped into bankruptcy and how you't because mended your financial manners. If you dropped into bankruptcy as a child suffered a serious illness that brought huge medical bills, explain this. For those who have not missed a credit or credit card payment, mention this, too.

Telephone a few mortgage lenders. Lenders throughout the country vary in their willingness to take on riskier borrowers. Explain to the lenders that you contact that you do have a bankruptcy in your past. Explain, too, the circumstances that contributed to it and the measures you't since taken to rebuild your credit.

Send your correspondence to the mortgage lender with whom you feel most comfortable working. Your lender will think about it while underwriting your loan program.

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How Do You Refinance Your Home and Your Car Payment at Precisely the Exact Same Closing?

Combining your mortgage and your car loan into a single payment can free up hundreds of dollars a month. Typically, mortgage interest rates are significantly somewhat lower than auto loan interest rates. But if coupled, if your mortgage is for 30 years, so is the auto loan. Mortgage lenders think about any loan which pays for any additional loan–other than a loan used to buy the home–a cash-out refinance.

Determine what loan amount that your loan will have to be to unite the car loan and the mortgage. Add some extra funds to cover closing costs–$3,000 or more. Compare this to the value of your house. Your lender may need the new loan be no more than 75 or 80% of your home’s worth.

Contact three to five lenders in your area and request quotes for a cash-out refinance. Explain you want to refinance your mortgage and auto loans into a single loan. Decide if you want to pull any extra equity out of your house in precisely the same moment. Considering that the loan is currently a cash-out refinance, you likely can access some extra equity in money.

Work with your chosen lender to fulfill all of the loan conditions and get complete loan approval. Most importantly, the lender will require you to provide income documentation and asset documentation, and also have an appraisal completed on the house to confirm its value. When you obtain full loan approval, the lender will set an appointment with the title company or real estate attorney to close your loan. If the home is your primary residence, you’ll have to wait three business days before the budget will be available. That is a faked right of recession period. Should you change your thoughts, you can cancel the loan in this period.

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The Advantages & Disadvantages of purchasing a Second Home

Owning a second home is a dream for many and also a reality to get a relative few. It’s easy to visualize yourself enjoying holidays whenever you want, retiring to a place you love or even generating revenue for a landlord. There are loads of reasons why purchasing a second house is a good idea. However there are also some considerations that should make you think carefully before making your move.

Create a Family Home Away From Home

Second-home buyers are normally within their mid-40s and 50s — the ages where many of their parents perish and their children venture out in their own to start their families. Absent and far-flung family members mean disruptions to long-held family customs. A second house produces a gathering place where fresh conferences are born. And, like Mark Patterson notes on the “U.S. News & World Report” site, that family holiday home may eventually become your family legacy.

Prepare for Retirement

Purchasing a second home in the place where you wish to retire decades from today provides you amazing vacation opportunities and lets you set up community ties that make for a smooth transition later. It may also persuade you to retire elsewhere. Think about it a trial run that gives you a chance to build friendships, get involved in neighborhood activities and decide for sure whether that’s really where you wish to spend your golden years.

Financial Benefits

Though some blanch at the cite of real estate as an investment after the housing crash in the first decade of the 21st century, there is no reason to believe your second house won’t value over time, especially if you purchase in a resort area likely to keep its popularity. Even small appreciation over several years of ownership may be acceptable, especially because the other benefits of second-home ownership are so attractive. However, if you want more bang for your buck, then you can make investment income by renting the property when you are not using it. And, whether your second house is an investment property or strictly for private use, it’ll provide you some tax write-offs.

Tougher Financing Standards

Although many second-home buyers pay cash, there is a good chance you’ll have to fund your purchaseprice. You’ll likely require a bigger down payment, perhaps up to 35 percent, than on a loan to your principal house, and you’re going to pay more in interest compared to a primary-home mortgage. You’ll also require a higher credit score and substantial income to qualify. New rules often prevent investment real estate buyers from using anticipated rental income as qualifying income for their loans. These days, you must claim at least a year’s worth of rental income in your tax return before lenders believe it.

Items Change

Changing family and work situations keep some second-home owners from their holiday places for many years, and sometimes years, at a time. Common reasons for protracted vacancies include inability to take time off from work, waning interest among almost-grown children and the death of a spouse. Additionally, a job relocation or a change in financing due to a job loss may compel the sale at an inopportune time or direct one to convert the house to a investment property to cover expenses.


Second homes require maintenance. If yours is situated in a spot with extreme circumstances, such as the beach or the mountains, or you rent it when you are not using it, then it may require a good deal of maintenance — generally at the most inconvenient times. You’ll also have to prepare for raising property tax and, in case you’ve got a condo or homeowners association, fees and assessments.

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