Re-Financing Considerations

Posted on June 12, 2009
Category: finance

Re-financing considerations must be taken into account whenever you decide to take on the spectre of re-financing at any level and these are generally common sense in nature, although it helps to have them laid out before you in an easy to read format. So that’s the point of this post, to give you that overview and make life a little easier to cope with.

The first consideration you should make before taking on any kind of credit is “Can you afford it?” This might seem like a dumb question to ask at first glance, but in reality it is easily the most important one that many people seem to ignore at their peril. Why is this?

When someone has made the decision that they need credit and are looking into the angles of re-financing, they have already got it into their heads that the money is already on the table, so they can worry about paying off later. This is a bad call, but it happens every single day. So you really do have to sit down and really work out your budget month by month and set out to cover annual payments that need to be met by breaking them down into 12 instalments and adding each instalment to your monthly budget. Take into account your day to day living expenses, such as food, travelling to and from work, clothes, sundry items like newspapers, magazines etc. Add it all up and then whatever you have left is what you can realistically afford to pay back on a loan.

That exercise often brings people down to earth with a nasty bump, but it is a dose of reality that is absolutely necessary before taking any further steps into researching the ins and outs of re-financing or other forms of credit. Once you can see what you have left to use for repaying any loan right there in black and white, then you will know at a glance whether you even can afford to take on a loan.

If you can afford to repay a loan, then you are in a position to take your researches further.

More in-depth information on re-financing considerations are covered in our more informed article at Refinancing Credit

Three Ways You and Your Partner Should Save Money

Posted on May 15, 2009
Category: economical

This is another great post on the many ways of being smart about finance. Most newly-married couples are having a hard time adjusting to a different way of life, especially when it comes to financial matters. As separate individuals, your spending habits will differ. This is why you both need to make certain adjustments to combine the household budget.

Here are some ways on how you and your partner can make the ‘financial aspect’ of your marriage harmonious and organized:

1. Understand the way that you both look at money.

If you and your spouse have different beliefs when it comes to money matters, sit down and discuss it. The key here is to be able to compromise. For some people, money is a security measure that needs to be saved. Other people spend it luxuriously and look at spending money as a means to reward themselves for their work. Still, other people are very thrifty that they hardly ever spend a cent of what they have earned.

Understand that the way that you both treat and spend money stems from how you were brought up by your parents. Think of everything that you need to discuss when it comes to your household budget. If possible, set rules on how you will spend your combined income on utility bills, food, mortgage, car maintenance, etc.

2. Set future financial goals.

If you are newly weds and you are planning to have a baby soon, consider this when organizing your finances. If you are a couple nearing the age of retirement, you can make plans on where you will spend your leisure years. Setting long-term and short-term goals will help you finalize your financial plans.

3. Share your money-saving skills with your partner.

If you have different family backgrounds, then you would have something to contribute towards organizing your joints assets. Make each other aware of your personal finances then think of ways on how you can further boost your money-handling tactics.

By following these tips, you will surely have your finances organized to lead a more comfortable lifestyle.

Smart About Finance

Knowing When Its a Mistake to Re-Finance

Posted on April 17, 2009
Category: refinancing

As there are many ways of being smart about finance, we’re taking a look at where you can be too. This article looks at whether or not it actually pays to re-finance.

Many homeowners make the mistake of thinking re-financing is always a viable option. However, this is not true and homeowners can actually make a significant financial mistake by re-financing at an inopportune time. There a couple of classic example of when re-financing is a mistake. This occurs when the homeowner does not stay in the property long enough to recoup the cost of re-financing and when the homeowner has had a credit score which has dropped since the original mortgage loan. Other examples are when the interest rate has not dropped enough to offset the closing costs associated with re-financing.

Recouping the Closing Costs

In determining whether or not re-financing is worthwhile the homeowner should determine how long they would have to retain the property to recoup the closing costs. This is significant especially in the case where the homeowner intends to sell the property in the near future. There are re-financing calculators readily available which will provide homeowners with the amount of time they will have to retain the property to make re-financing worthwhile. These calculators require the user to enter input such as the balance of the existing mortgage, the existing interest rate and the new interest rate and the calculator return results comparing the monthly payments on the old mortgage and the new mortgage and also supplies information about the amount of time required for the homeowner to recoup the closing costs.

When Credit Scores Drop

Most homeowners believe a drop in interest rates should immediately signal that it is time to re-finance the home. However, when these interest rates are combined with a drop in the credit score for the homeowner, the resulting re-financed mortgage may not be favorable to the homeowner. Therefore homeowners should carefully consider their credit score at the present time in comparison to the credit score at the time of the original mortgage. Depending on the amount interest rates have dropped, the homeowner may still benefit from re-financing even with a lower credit score but it is not likely. Homeowners may take advantage of free re-financing quotes to get an approximate understanding of whether or not they will benefit from re-financing.

Have the Interest Rates Dropped Enough?

Another common mistake homeowners often make in regard to re-financing is re-financing whenever there is a significant drop in interest rates. This can be a mistake because the homeowner must first carefully evaluate whether or not the interest rate has dropped enough to result in an overall cost savings for the homeowners. Homeowners often make this mistake because they neglect to consider the closing costs associated with re-financing the home. These costs may include application fees, origination fees, appraisal fees and a variety of other closing costs. These costs can add up quite quickly and may eat into the savings generated by the lower interest rate. In some cases the closing costs may even exceed the savings resulting from lower interest rates.

Re-Financing Can Be Beneficial Even When It is a “Mistake”

In reality re-financing is not always the ideal solution, but some homeowners may still opt for re-financing even when it is technically a mistake to do so. This classic example of this type of situation is when a homeowner re-finances to gain the benefit of lower interest rates even though the homeowner winds up paying more in the long run for this re-financing option. This may occur when either the interest rates drop slightly but not enough to result in an overall savings or when a homeowner consolidates a considerable amount of short term debt into a long term mortgage re-finance. Although most financial advisers may warn against this type of financial approach to re-financing, homeowners sometimes go against conventional wisdom to make a change which may increase their monthly cash flow by reducing their mortgage payments. In this situation the homeowner is making the best possible decision for his personal needs.

Smart About Finance

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