Budgeting for First Time Mortgagees

Congratulations on buying your first home! This is surely a great achievement for you and the rewards can be very exciting. As a homeowner, you have equity that’s solid. There’s so much you can accomplish now that you have this asset under your belt.

What you’ll now realize, however, is that your bank account has started to behave erratically! You’re seeing money moving out of your account faster than ever before. Or so it seems.

What you’re experiencing is a clear case of a budgeting dilemma for a first time mortgagee. It’s completely normal to feel like you’ve lost some control over your finances now that you’re a home owner.

The good news is that you can learn how to budget all over again. It’s certainly going to be necessary for a positive mortgaging experience.

1. Make your mortgage payment first. If you want to continue to hold on to your home, ensure you pay your mortgage on time! Remember the home is yours and you want to keep it that way. As soon as you get your pay check, withdraw the amount you need for your mortgage.

* A great idea is to set up an automatic payment to the mortgage lender from your bank account. That way, you won’t have to worry about remembering to make the payment each month.

* Sure, things come up, but defaulting on your mortgage payment could mean not having a roof over your head!

* Avoid using the equity in your home as a cash advance. Stay as far from additional debt as possible.

2. Prioritize other expenses. With the mortgage payment out of the way, you now have to manage all the other expenses. Now that you have a mortgage, your priorities may likely shift.

* All expenses related to the new home are important. However, you need to ask yourself if all of them are necessary right now. Focus on the recurring monthly expenses that contribute to a comfortable dwelling.

* Social time is certainly important, especially when it comes to maintaining your sanity! But try to cut down on entertainment expenses. Instead of going to the movies 3 times per week, go out once and rent a movie twice.

3. Schedule home improvement. As a new homeowner, you’ll have the ongoing desire to make the home more beautiful. While your pride of place is admirable, it’s important to let better senses rule!

* Make a list of all your home improvement needs and wants.

* Prioritize them, with the ones that make the home safe and livable taking precedence over the others.

* Put a schedule in place for accomplishing everything, and tie that into the associated expenses. Your aim should be to commit the same amount of money each month to home improvement.

* If there’s something you aren’t able to afford this month, simply leave the rest until next month.

4. Make saving a priority. With all that can happen as a new homeowner, it’s more important than ever to set aside money in your savings account. Major repairs sometimes need to be taken care of immediately.

* Have the discipline to put aside untouchable savings. That way, there’ll be something for rainy days!

Mortgaging a home for the first time can leave you jaded if you aren’t able to budget effectively. Pay close attention to the spending of every dollar. Once you’ve mastered that, you can feel comfortable knowing the financial responsibilities related to your home are well taken care of!

6 Ways to Minimize the Cost of Your Auto Loan

Let’s face it, cars are expensive. It’s not only the price of the car, but also the gas, insurance, maintenance, car washes, and more. For most of us, there are also considerable costs associated with the auto loan. With the economy as it is, every expense is worth examining.

Use these strategies to save money on your next auto loan

1. Improve your credit. Nothing has more impact on the terms of your loan than your credit score: the better your score, the lower the interest rate. If your credit history is sketchy, it’s going to cost you. So if you have credit problems, put off buying that new car until you’ve done some work on your credit.

2. Avoid small loans. In many cases, interest rates tend to be higher on small loans. If the car costs less than $5,000, then it’s best to simply save up ahead of time and pay cash for the car. If you’re desperate for a vehicle, however, this may not be an option.

3. Refinance. You can refinance an automobile at a lower interest rate if interest rates have fallen since you bought the car. This especially makes sense if you’ve also been able to improve your credit since you obtained your loan. You could easily save $100 per month by refinancing.

* With the subsequent reduced payment schedule, you can apply the extra you’re saving toward other investments or you can pay off your car sooner.

4. Shop around for financing. It might be easiest to get your financing at the dealership, but it’s rarely the best place. Finding a better financing offer means extra money that could be in your pocket instead of the dealer’s.

* Check out what the dealer has to offer, but get some other financing quotes and see what makes the most sense.

5. Consider leasing. While leasing is usually considered to be more expensive in the end than purchasing, it can make sense if you never own a car long enough to get it paid off.

* Your monthly payment will likely be less and the taxes are less, since you usually only pay tax on your payments, not on the value of the car.

6. Find a less expensive vehicle. Cars today are almost universally quite reliable. There’s almost no practical difference between a modern $10,000 car and a $100,000 car. All the extra cost has little to do with how reliably or safely the car will get you from point A to point B.

* Consider purchasing a slightly used automobile to really save some money. If you can find a car that’s almost new with low mileage, you get all the advantages of a new car, including the warranty, without the new car cost.

There are several ways to save money on your next auto loan. If you have the luxury of time on your side, fix any credit challenges you may have and shop around for the best financing terms. Where there’s a will, there’s a way. Do what you can to keep as much of your money as possible.

Debt Consolidation Pros And Cons

A debt consolidation loan can be great, if you avoid the disadvantages. You can pay off many debts at once, leaving you with just the one loan payment each month. If you use a home equity loan to consolidate those debts, your interest rate will also be lower. Depending on the length of the loan, you could save a lot of time and money as a result.

The unsecured loan options are the offers you usually get in the mail from various finance companies. In most cases, they advertise a low rate which shoots up to a rate that’s even higher than most of your current debts’ rates if you’re ever late on a payment. It’s best to avoid this type of consolidation loan if at all possible.

For this reason, our discussion will be limited to the secured options, like home equity loans.

Debt Consolidation Pros

1. A single payment. It’s certainly a lot simpler and more convenient to make a single monthly debt payment. You can even easily arrange to have the funds deducted from your bank account each month. This can be a real advantage if you struggle to stay organized.

2. A lower interest rate. If the loan is being used to pay credit card debt, the interest rate can be much, much lower. Since a home equity loan is secured by your home, the interest rate is about the best you’re ever going to find.

3. Lower payments. The lower interest rates coupled with the typically longer loan period will result in lower payments, possibly much lower. For your best long-term savings, though, set up the loan payback period to as short a time as you can.

4. A single creditor. If you ever run into challenges with making your payment, there is only one creditor to deal with. You no longer have to get on the phone and call many different creditors to try and straighten things out.

5. Taxes. In most cases, your home equity interest is tax deductible. Do your research to see if this tax break applies to your situation. This is much better than paying interest on your credit cards.

Debt Consolidation Cons

1. The potential for greater debt. It can be hard to avoid the temptation to start charging items to your credit cards once the balances are paid off with the consolidation loan. As you can imagine, this can be a serious challenge as your balances climb again. Don’t make your situation even worse.

2. The length of the loan. This is manageable, but people frequently take out a loan that is anywhere from 10 to 25 years. This dramatically increases the total amount you’ll pay in interest. Avoid getting a loan for a longer period of time than you really need; you can really negate a lot of the advantage of the loan.

3. Your house is at risk. Do you know what happens when you don’t pay your credit cards? You get a lot of phone calls, nasty mail, and there is a very slight chance you’ll be sued a few years down the road.

* Do you know what happens when you don’t make your payments on your home equity loan? They come after your house. You got that great interest rate because your house served as collateral for the loan. Your house is truly at risk if you don’t live up to your loan obligations.

Home equity debt consolidation loans can be wonderful, if you have the self-discipline to:

* Borrow only what you really need.
* Avoid incurring more debt.
* Keep the payment period as short as you possibly can.
* Make your payments on time.

If you can do all these things, a debt consolidation loan can save you a lot of money and grief in paying off your debts. As with any financial service, be sure to look around for the best rates before you take the plunge.

MONEY MATTERS – Trouble With Credit Card Debt

Q: My husband, Todd, and I have gotten into some trouble with credit card debt. We owe over $6,000 on one credit card and about $18,000 on another card. We were barely able to keep paying the minimum monthly payments, and then Todd’s company closed down 2 months ago.

Since then, we paid the monthly minimums for both of them the first month he had no job. The second month just passed and we were unable to pay. I don’t see any hope that we can ever pay even one of these minimum payments until Todd finds another job, and that’s not looking good right now.

I guess we were hoping that, since so many people out there are in the same fix as we are, that no one would notice that we were no longer paying these bills. We’d like to just walk away from these debts. We’re sorry we charged these cards up so high. We’d intended to pay it at the time, but now, we most likely never will.

What exactly will happen to us because we stopped paying these two credit card bills?

A: Unfortunately, many people are in the same boat as you and Todd. Even so, there’s no real chance that you’ll get away from nonpayment for these two bills scot-free. After your 30 days past due, most debtors will make efforts to contact you by phone or mail and ask you to pay your bill.

Your best course of action would be to contact your debtor before the company contacts you and let them know your situation. In fact, if you call them before the payment you’re about to not pay is due, that’s the best plan of all.

Your goal should be to try to work out a reduced payment plan that you can realistically stick with.

Collections

When you’re 2 months overdue: calls and contacts from the debt company will be less pleasant. It’s likely the company will turn your account over to Collections. This isn’t good news. Collections will try to pressure you to pay your bill.

Plus, more fees will be piled on to what you owe (such as late fees and additional interest costs). If there’s good news, it’s that you can still directly contact the debt company and try to work out a payment plan.

Once you’re past due by 90 days: the account will most likely be shut down and collectors will be quite aggressive in their efforts to get you to pay. Some experts actually recommend never paying the collections companies and insist you go back to the original debt company.

The 90 day mark tends to be the window during which the debtor will report your non-payment to the credit bureau. Still more late fees and interest fees are being added at this time.

After this stage, you can try to negotiate a reduced amount to pay back. For example, for the $6,000 bill, you can offer to pay back in total $3,000. If the company accepts your offer, you must pay it off right away.

Lawsuits

In the event you continue not to do anything about the bills, the credit card companies can sue you for non-payment. Then you’ll end up in court and the creditors may win judgments against you and even put liens on your home if you’re the owner.

Depending on the laws for your state, you may want to file bankruptcy to protect your home. At that point, the judge can order you to give up your property or other possessions as payment toward your debt, based on the type of bankruptcy you pursue.

Your Best Bet

In essence, your very best plan is to contact the individual debt companies immediately and work something out. Otherwise, these companies are simply going to keep piling on fees making it more difficult for you to ever pay off the quickly-rising balances and preserve your good credit. Good luck!