Understanding Re-Financing

Understanding the process of re-financing can be quite dizzying. Homeowners who are considering re-financing might initially be overwhelmed by the number of options available to them. However, after taking some time to educate themselves about the process, they will likely find that the process is not nearly as daunting as they had imagined. In this post I will discuss some of the options available to those interested in re-financing as well as some of the important factors to consider in order to determine whether or not refinancing is worthwhile.

Consider the Options
Homeowners have quite a few options available to them when they are considering the possibility of re-financing their home. The most significant decision is the type of loan they will choose. Fixed rate mortgages and adjustable rate mortgages (ARMs) are the two main types of mortgages the homeowners will likely encounter. Additionally there are hybrid loan options available.

As the name implies, a fixed rate mortgage is one in which the interest rate remains constant throughout the duration of the loan period. This is an especially favorable type of loan when the homeowner has credit which is sufficient enough to lock in a low interest rate.

ARMs are mortgages where the interest rate varies during the course of the loan period. The interest rate is usually tied to an index such as the prime index and is subject to rises and falls in accordance with this index. This is considered a riskier type of loan and is therefore often offered to homeowners who have less favorable credit scores.

Although ARMs are considered somewhat risky there is usually a certain degree of protection written into the loan agreement. This may come in the form of a clause which limits the amount the interest rate can increase, in terms of percentage points, over a fixed period of time. This can protect the homeowner from sharp increases in the interest rates which would otherwise considerably raise the amount of their monthly payments.

Hybrid loans are mortgages which combine a fixed element with an adjustable element. An example of this type of loan is a situation where the lender may offer a fixed interest rate for the first five years of the loan and a variable interest rate for the remainder of the loan. Lenders typically offer a lower introductory interest rate for the fixed period to make the mortgage seem more enticing.

Consider the Closing Costs
The closing costs associated with re-financing should be carefully considered when deciding whether or not to re-finance the home. This is significant because when homeowners re-finance their home they are often subject to many of the same closing costs as when they originally purchased the home. These costs may include, but are not limited to appraisal fees, application fees, loan origination fees and a host of other expenses. These costs can be quite significant. The closing costs will be significant when the homeowner considers the overall savings associated with re-financing.

Consider the Overall Savings
When deciding whether or not to re-finance, the overall savings is one factor the homeowners should carefully consider. This is important because re-financing is typically not considered worthwhile unless it results in a financial savings. Although some homeowners refinance to lower monthly costs and are not concerned with the overall picture, most homeowners consider whether or not they will be saving money by refinancing.

The amount of money the homeowner will save when re-financing is largely dependent on the new interest rate in relation to the old interest rate. Other factors come into play such as the remaining balance of the existing loan as well as the amount of time the homeowner intends to stay in the home before selling the property. It is important to note that the amount of money saved by negotiating a lower interest rate is not equal to the entire savings. The homeowner must determine the closing costs associated with re-financing and subtract this sum from the potential savings. A negative number would indicate the new interest rate is not low enough to offset the closing costs. Conversely a positive number indicates an overall savings. With this information the homeowner can decide whether or not he wishes to re-finance.

Are You Considering Re-Financing?

Homeowners who are considering re-financing their home may have a wealth of options available to them. However, these same homeowners may find themselves feeling overwhelmed by this wealth of options. This process doesn’t have to be so difficult though. Homeowners can greatly assist themselves in the process by taking a few simple steps. First the homeowner should determine his refinancing goals. Next the homeowner should consult with a re-financing expert and finally the homeowner should be aware that re-financing is not always the best solution.

Determine Your Goals for Re-Financing
The first step in any re-financing process should be for the homeowner to determine his goals and why he is considering re-financing. There are many different answers to this question and none of the answers are necessarily right or wrong. The most important thing is that the homeowner is making a decision which helps him achieve his financial goals. While there are no right or wrong answer to why re-financing should be considered, there are, however, certain reasons for re-financing which are very common. These reasons include:
* Reducing monthly mortgage payments

* Consolidating existing debts

* Reducing the amount of interest paid over the course of the loan

* Repaying the loan quicker

* Gaining equity quicker

Although the reasons listed above are not the only reason homeowners might consider re-financing, they are some of the most popular reasons. They are included here for the purpose of getting the reader thinking. The reader may find their mortgage re-financing strategy fits into one of the above goals or they may have a completely different reason for wanting to re-finance. The reason for wanting to re-finance is not as important as determining this reason. This is because a homeowner, or even a financial advisor, will have a difficult time determining the best re-financing option for a homeowner if he does not know the goals of the homeowner.

Consult with a Re-Financing Expert
Once a homeowner has figured out why they want to re-finance, the homeowner should consider meeting with a re-financing expert to determine the best refinancing strategy. This will likely be a strategy which is financially sound but is also still geared to meeting the needs of the homeowner.

Homeowners who feel as though they are particularly well versed in the subject of re-financing might consider skipping the option of consulting with a re-financing expert. However, this is not recommended because even the most educated homeowner may not be aware of the newest re-financing options being offered by lenders.

While not understanding all the options may not seem like a big deal, it can have a significant impact. Homeowners may not even be aware of mistakes they are making but they may hear of friends who re-financed under similar conditions and receive more favorable terms. Hearing these scenarios can be quite disheartening for some homeowners especially if they could have saved considerably more while re-financing.

Consider Not Re-Financing as a Viable Option
Homeowners who are considering re-financing may realize the importance of evaluating a number of different re-financing options to determine which option is best but these same homeowners may not realize they should also carefully consider not re-financing as an option.

This is often referred to as the “do nothing” option because it refers to the conditions which will exist if the homeowner does not make a change in their mortgage situation.

For each re-financing option considered, the homeowner should determine the estimated monthly payment, amount of interest paid during the course of the loan, year in which the loan will be fully repaid and the amount of time the homeowner will have to remain in the home to recoup closing costs associated with re-financing. Homeowners should also determine these values for the current mortgage. This can be very helpful for comparison purposes. Homeowners can compare these results and often the best option is quite clear from these numeric calculations. However, if the analysis does not yield a clear cut answer, the homeowner may have to evaluate secondary characteristics to make the best possible decision.

Experiencing Debt-Free Living Today

Have you experienced being up to your neck with debt? How about a life without debt? Have you experienced that too? If you have, you must know the big difference. And for sure, you will choose the latter.

But don’t worry. Even if you are in a sea of debts right now, you can still come out of it victorious. It is still possible to lead a debt-free life. Just follow these simple steps:

1. Prioritize paying your debts.
Yes. In order for you to be free of debt, you have to pay for it in full. There’s no other way about it. This is the main solution, the only solution.

2. Get professional help.
If you feel that you can’t possibly get out of your debts on your own, there are many companies out there which offer debt management services and consolidation. Try talking to them and select the system that will work for you.

3. Prioritize accordingly.
Before you spend on anything, think twice about it. You also have to make sure that your monthly debt obligations are always met. Don't pass up payments. You wouldn't want to recede into debt further.

4. Control your money.
Control means you aren't going to spend on the spur of the moment. You will be more conscious on how your earnings are spent. You won’t focus on the luxuries. Instead, you will dwell more on the necessities of life.

5. Use your credit card sparingly.
A credit card is something so powerful it can help you or break you. Choose not to be broken by a credit card. Use it wisely. Don't use it for unnecessary and small purchases. Always pay with cash when you have it.

6. Stay out of debt.
In cases where you can put off applying for a loan, do it. If you can save instead of calling your loan agent, settle for that. Loans are simply excess baggage in the long run. Don’t apply for one unless you really have to.

7. Save.
Not just for rainy days but always. Your savings is going to be important in times of emergencies and times where you want to make a big purchase. Save as much as you can in any way you can.

Here are the basic things to do to be free of debt and stay out of it for the rest of your life. Follow these simple tips and you are sure to live a happier, fuller life!

Starting Young: Teaching Teens to Save Money

Parents mostly complain that teenagers do not listen to them. The opposite is true when it comes to advice regarding 'money matters'. Teens actually welcome their parent’s input about their finances.

In the past few years, teenagers have earned billions of dollars with part-time and summer jobs.

Some have spent most of what they earned, while others saved most or even all of it for a big purchase, or for their college education.

Kids these days are becoming more and more aware of their family's source of income and financial status. They apply these money-spending principles when they venture out on their own.

Thus, it becomes more of a parent’s responsibility to start “training” their teenage kids to use their money wisely.

Here are some ways on how you, as a parent, can teach your teens to save those hard-earned bucks:

1. Lead by example.
With your lifestyle, the children will see how you spend your money.

If they see you allotting a certain amount for a specific household need, they will eventually do the same when they get to earn their own keep.

2. Help your teens get a bank account.
Establishing a bank account under their name would give them an instant financial responsibility.
Sit down and explain to them how to manage their own account, and the “rewards” that they get once they save enough.

Their savings could go to their college tuition, or a big purchase like a car.

Additionally, it gives them a sense of accomplishment once they have saved up, with something concrete to show for it.

You may check out the special benefits that banks offer for teens who open their accounts at such an early age.

3. Construct a “spending plan”.
Once they hear the word 'budget', teens tend to cringe at the mere thought of having to restrict the spending of their money.

Instead, you and your teen son or daughter could build a “spending plan”. This would get them excited, and think of ways on how they can wisely spend their savings.

Also, have them list down their earnings versus their expenses.

Let them know the difference between the items that they need and the luxury items that they want, which they can actually do without.

4. Make a “mock” investment in the stock market.
Make them aware of the options that they have financially.

Casually introduce to them the business part of your daily newspapers and have them make “mock” investments for companies who manufactures products that they like.

Monitor the stocks together and this would give them another option of investing their money in the future.

Save Money With Coupons

When people go to the grocery, the merchandise is paid for either in cash or through a credit card. Many of these customers just go through this weekly routine since the prices of these goods may just be slightly higher or lower from the other establishments operating in the same area.

But what if there was a way to save a few dollars for the same amount of goods purchased every week? Will the person change the habit and shop somewhere else? Definitely. This is the reason that some have begun offering coupons to attract more traffic in the store.

Coupons have been around since the 1940’s. They was first used to ration the amount of gasoline an individual could purchase when much of this was used in the war effort. The government used this later on as a way to give food to the unemployed and the homeless.

Supermarkets issue coupons to give discounts and other freebies on selected items. The style entices the customer to buy one or more of a certain item which is cheaper by a dollar when purchased in singles.

Some establishments that practice this approach are Wal-Mart, Ralph’s and Costco. These coupons can be cut from magazines or the newspaper. Those who miss it wont have a problem because the customer can find a copy of what is on promo at the entrance of the store.

Lately, there are others who have also followed this marketing gimmick. Some of these are Staples, Home Depot and Best Buy. These companies have raised the bar a little higher by also offering these online so that they can be printed and redeemed at the nearest store.

There are many reasons why coupons are being used more frequently than before. Some want to get rid of slow moving items while others are introducing a new brand or product into the market. This just goes to show that there are many competitors and these companies have to be on top in order to survive the onslaught.

Will there ever be a time that people can give up cash and credit and merely rely on coupons? The answer is no because each of these firms has to pay the supplier for cost of making these goods.

The best people can do then is just use the coupons to its fullest and enjoy those hard earned dollars in getting other items off the shelf.

How To Ultimately Save Money

Everybody wants to get rich. However, not everyone will get rich because of the simple fact that not too many people know how to save. Being able to gain riches is all depends on how you can build wealth. And building wealth all depends on how much you can save.

If you're looking for tips on how to save money, and build wealth, then here are a few tips to help you on your way.

1. Get more of what you need and less of what you want.
Being able to differentiate between needs and wants is very important in your quest to save money. All too often, people purchase what they want more than what they need. Unfortunately, wants tend to be more expensive than needs.

So next time you see that sparkling jewel that costs a few thousand dollars, think hard and deep if you really need that thing. You will need a whole deal of self-control; but in the end, it's all worth it when you're trying to save up.

Don't worry; buying your wants isn't against the law. You however have to be able to control yourself and curtail your wants and spend for them wisely.

2. Buy generic.
Branded items cost twice as much as generic items. However, this doesn't mean that they are necessarily better in quality. Your goal now is to reduce the number of branded items you purchase and increase the number of generic brands on your list.

Generic brands aren't that bad. In fact, some generic brands are better than branded ones. This should make your decision on purchasing items much easier.

3. Spend within your means.
Building wealth is equivalent to being able to spend less than you earn. No one builds wealth by spending more than they are capable of earning. It doesn’t matter if you earn $10,000 or if you earn $5,000, if you spent more than you earn you are still a poor person.

Even if you don't earn as much, if you are able to set aside some amount from what you earn, you are well on your way to building wealth.

4. Try it before you buy it.
Before taking something home for good, make sure you try it and understand the implications of owning such a thing. Don't forget to factor in maintenance costs, insurance, and operating costs before making your decision. This way you are able to consider all the implications of your purchase before you regret your decision.