How to Choose the Right Mortgage for You

If you’re shopping for a home mortgage loan, you can definitely save time and money by choosing the right lender and loan terms. First, you need to spend time looking for that right lender.

The process of buying a house can be confusing to many first-time homeowners. It’s not only about choosing a good real estate agent, a pleasant neighborhood, and a home you’d enjoy. It’s also about securing a home loan that will give you a solid financial foundation.

Working with a reputable mortgage lender and getting good loan terms will make a big difference to your finances. It could also mean the difference between paying off and keeping your home or being trapped in a house you can’t afford.

In this post, we’ll look at how to choose the right mortgage before you look for a home, so you can make a smart loan decision and eventually become financially independent.

What is the Best Type of Mortgage Lender?

When you’re looking to borrow money to buy a home, one of the first things you should do is find the best people to loan you the money.

You have choices when you’re shopping for a home loan. Here is a general list of the types of companies to help with your loan:

  • Big Bank. The industry classifies banks like Chase, Wells Fargo, and Bank of America as direct lenders. Pros of dealing with a big bank are that there are plenty of people who can get your questions answered. Large direct lenders like these are also more likely to have resources and be a one-stop shop. However, working with a large staff isn’t always good. Your file could end up on several desks, and this could increase your closing time.
  • Small Local Lender. You may want to use this type of direct lender if your home purchase requires special attention. They may offer more flexible lending or approve an irregular income situation such as self-employment. A small local lender may be more willing to work with you if you have unusual needs.
  • Mortgage Broker. A mortgage broker acts as a middleman between you and the lender. He or she will gather information about your budget, credit score, how long you intend to own the house, and other details. A mortgage broker may be able to find you a lower rate than normal because they’re shopping for you with experience. The downside is that using a third party could mean that your file will get passed through several hands, and you may experience a lack of control. You might also find a less-than-reputable broker.

Ultimately, you want to choose a reliable lender who will give you the best rate. Contact each of these types of companies for a rate quote and to get a feeling of how they treat you as a customer. Make sure they’re organized and that they specialize in residential properties. You’ll want someone who can help you understand the application process and who won’t take longer than 45 days to close.

Should You Choose a Fixed or Adjustable Rate?

One of the first questions that will arise is whether you want a fixed or variable interest rate. The answer depends on how long you intend to live in the house.

Fixed rate mortgages have only one interest rate that will not change for as long as you have the loan. These loans are excellent for people who plan to live in the home long term. The fixed rate loan carries no surprises and is easy to work into a budget and retirement plan.

Variable rates can vary during the life of the loan. They may offer an attractive low rate at the beginning of the loan, but they could grow higher and leave you in financial distress. These types of loans are best for people who don’t intend to live in the house very long. If you think you’ll sell the house by the time the rate rises, this loan could be a good option for you.

Conclusion

The type of lender and the terms you choose have a major effect on your financial future. If you consider that the money you put toward your housing cost is about 30%, you’ll want to have the cheapest loan possible from the most reliable lender.

Having control over your house payment and getting terms that fit your budget is a major step to becoming financially secure. Signing a loan with the right terms can save you from being behind on bills and being able to save for other things like your children’s education.  It also means you can rest assured knowing you can make payments without risking repossession of the home you’ve worked hard to get.

Are you thinking about buying a home soon? Which kind of mortgage and lender will you choose to finance your home?

How to Find the Best Car Insurance Online

Finding car insurance can seem like the biggest hassle. It’s tempting to put it off, sign up for the first deal that you see, or even just sign up with the same insurers as your parents. However if you’re looking to get the best value for your money, then you actually have to do the looking yourself.

Back in the day if you wanted to find the best insurance, you needed to pound the pavement and wade through a pile of greasy insurance salesmen who wanted you to buy cover for more than just your car. Blink for a moment with these guys and you would find yourself signed up for life insurance, health insurance, and riot insurance (did you know you could get that?) on top of the most expensive car insurance policy out there.

Thankfully, we have the internet now and finding the right insurance isn’t such a gut-wrenching trial.

Google It

Before picking up insurance, google it! Type in some of the obvious phrases like “Best car insurance for under 25’s” and “car insurance traps.” Have a look at what’s out there and wrap your head around some of the traps to avoid.

For example, you might want to take out the cheapest insurance you can find – after all that leaves more in your pocket. However if you take out minimal cover, you might find yourself $17,000 out of pocket after your insurance has paid all they’ve covered you for.

Use an Insurance Comparison Site

Now that you’ve got an idea of the amount of cover you need, and the pitfalls to avoid, use an insurance comparison site to find a cover that suits you. There are several websites that will list and compare multitudes of insurance options, so you don’t have to wade through every individual website. Chances are, if you google car insurance, you will find these websites easily.

These sites will also alert you to any deals that are currently on, such as a first month free, or a cash back offer. Just keep an eye out for the ‘sponsored’ links. These people pay to be pushed higher up in the search rankings, so while they might appear at the top of the list, they aren’t always a good deal.

Google It Again

Once you’ve reviewed the policies available and narrowed it down to two or three options, google those companies and see what people are saying about them.

Remember that no one likes insurance companies, are you aren’t likely to find many positive reviews. People mostly take to the internet to review a company when they’ve had a bad experience, so take their feedback with a grain of salt.

However, people also don’t complain without a reason. If a company has a string of complaints noting that they didn’t pay out when they should of, or that their customer service is impossible to deal with consider skipping them. It might cost you a few extra dollars a month, but insurance is pointless if it won’t pay when you need it.

How to Prioritize Which Debt to Pay Off First

If you’re buried deep in debt, you might be confused as to which creditor you should pay off first. Being in debt can be an overwhelming and discouraging experience, but you can turn it around once you begin to take control of your financial situation.

In this article, we’ll look at which debt to pay off first and how to create a plan.

How to Take Control Over Your Debt

Being burdened with massive debt usually brings feelings of depression and gloom. You regret the financial decisions you made, you feel hopeless about your future, and you suffer in despair about not having enough cash flow to survive. You might even feel a sense of isolation when you see others having fun with their money.

The truth is, many Americans carry heavy debt, so you’re not alone. And many financial decisions you might regret come from the increasing costs of housing, tuition, and medical care.

When you gain control over your debt, you’ll be able to build a solid foundation and slowly prepare for rising costs and unexpected expenses.

Part of the despair you feel is not from the debt itself, but from having a lack of control over money. A first sense of relief will come from pulling out your account statements and making a strategy on how to overcome it.

The First Two Steps to Tackling Debt

  1. Know the terms. Read your statement to see balances, interest rates, and any other terms like details on expiring promo balances. Dive in deep and become familiar with your cards and accounts. Having clarity will help you gain a sense of power.
  2. Make a list of all debt. Don’t worry about which creditor to place at the top just yet. For now, list the debt on a piece of paper or an Excel spreadsheet. Write the most important information next to each debt: interest rate, balance, and minimum payments.

You might have two or three different interest rates listed in your statement. Most cards keep track of how much you’ve borrowed for lower-rate promo offers and cash advances. You can split the balances on your list and make two lines if you’ve borrowed money at various rates.

Which Debt Should You Pay First?

You’ve probably heard conflicting information about whether to pay down smaller amounts or work on higher interest rates first.

Paying off high-interest rate loans first is the best way to keep money in your pocket and pay loans off quicker. You’ll save the most money by paying higher interest debt off first because you are getting rid of the debt that costs the most to maintain.

Break Down Large Balances into Smaller Chunks

Both credit cards and student loans have balances that you can split into separate amounts. You may have gotten a special promo balance on your credit card that made your interest rate drop to zero on part of the total. If the interest rate is low on a portion of the card, you should place the low-interest part further down the list.

You can pay your student loan debt this way too. Many people take out both federal and private student loans with different terms. You could have 4 or more student loans, all at different rates by the time of graduation. It’s best to break down the loans into smaller chunks and pay the highest interest loans first.

Another tip? Check out student loan refinancing if you have good credit. It could save you thousands!

Breaking down large balances into bite-sized pieces will make it easier to get rid of high-interest debt that may be weighing the total balance down. It’s also a good way to examine the entire loan and make a  strategy for tackling it.

Make a budget and make sure you have enough to cover the minimum payments for each of your different kinds of debt. Then, put any extra money you have towards your highest interest debt.

Conclusion

If you are buried under a mountain of debt, it can be overwhelming and frustrating. But becoming aware of your total balances and interest rates is the first step to paying them off.

Once you’ve paid off the highest interest creditor first, you’ll feel better knowing that they’re not getting a penny more of your hard-earned dollars. Why give them more money than necessary?

After you pay off the first debt on your list, apply the money you were paying toward the second debt on the list. If you keep using this tactic, it won’t be long before you’re down to the very last debt on the list.

Are you working on paying off debt? What is your favorite way to prioritize which creditor to pay off first?

Student Loan Income-Driven Repayment Programs Explained

Many student loans are based on income driven repayments – that is you don’t have a set payment based on the size of you loan, but a payment amount that varies with your income. This is designed to make sure your repayments are comfortable for you and your lifestyle, but it means that calculating your required repayments can be confusing!

What is ‘Discretionary income’?

The first confusion is that repayments aren’t based on your actual income, but your discretionary income. Theoretically, this is the income you have left over after you pay for the bare necessities, but what does that actually mean? Studentaid.ed.gov defines discretionary income as:

“For Income-Based Repayment, Pay As You Earn, and loan rehabilitation, discretionary income is the difference between your income and 150 percent of the poverty guideline for your family size and state of residence. For Income-Contingent Repayment, discretionary income is the difference between your income and 100 percent of the poverty guideline for your family size and state of residence.”

Poverty guidelines are defined by the U.S. Department of Health & Human Services and vary based on your location and family size.

Repayment Plans

There are four different income-driven repayment plans, and they all come with slightly different payments terms.

REPAYE (Revised Pay As You Earn) Plan

A REPAYE loan repayment will generally be worth 10% of your discretionary income. For an undergraduate loan this will generally take 20 years to pay off, though for a graduate loan or professional studies it can take 25 years.

PAYE (Pay As You Earn) Plan

A PAYE loan will be 10% of your discretionary income, but under this plan your will never pay more than the 10-year Standard Repayment plan. This loan will also take 20 years to pay when making minimum repayments.

IBR (Income Based Repayment) Plan

Income based repayment plans have change in the last few years. If you were a new borrower on or after July 1 2014 then your repayments are 10% of your discretionary income, and will take 20 years to repay. If you had borrowed before July 1 2014, then your repayments were 15% of your income (never more than the standard 10-year repayment rates) but would take 5years longer to pay the full amount.

ICR (Income Contingent Repayment) Plan

Income contingent repayment plans have 2 options, either 20% of your discretionary income, or the same payment as a fixed 12-year loan, adjusted for your income. You will pay on whichever rate is less and it generally takes 25 years to pay your loan.

So which is best?

Great question! Tthe answer is – how long is a piece of string? Different loan types have differing requirements, and in some cases, you can only apply if you can clearly demonstrate that regular repayment plans are outside of your affordability.

Rather than jump through a million hoops and read all the eligibility criteria statements, you can crunch the numbers a student loans calculator. Enter either your loan requirements or take an estimate based on your study length and whether you are going to private or public schooling. Once you add in your income, family size and state of residence, the calculator will return your monthly repayments, total payment over the life of the loan and let you know what type of loan you are eligible for. You should note that if you have refinanced your student loans, you are not eligible for income-driven repayment plans.

 

The Importance of Managing your Finances in Marriage

Relationships are a pivotal part of society. From a young age, we go looking for a soul mate to spend our hearts, our dreams and our futures. We think about sharing our homes and our day-to-day lives; we think about having children and pets together, but many people forget to think about sharing their wallets.

We often think that love conquers all, but money is the leading cause of relationship divorce and breakdown. While love is powerful, the hip pocket is mightier than the heart.

Love and Money, Where to Start?

While dating is a whirlwind and falling in love can be intoxicating, it is important to consider money early on in your relationship. While entering a relationship with equal finance is not necessary, entering a relationship with shared ideals is important.

In a relationship, money can quickly become a taboo conversation if it’s not handled from the beginning. Once you have been living together for a while patterns become established whether you had agreed on them or not. It is important to set up the structure around who is paying for what before the bills hit your doorstep, otherwise you may find an inequality in who pays for what.

What’s Mine Is Yours

Different countries and states have different laws about when couples are merely dating and when they are in a relationship for finance’s sake. After moving in together, you can start claiming the benefits of marriage such a shared tax returns and shared health insurance.

While there are many benefits, that are also risks. Once you are in a relationship, sharing a home, bills and supporting one another then your things become shared. Challenges are shared, furniture is shared, victories are shared and assets are shared. Both in your eyes, and possibly in the eyes of the law. Even if you aren’t married, if your relationship falls apart you may have to split your assets with your ex-partner, even without a wedding ring.

Developing Goals as a Couple

The strongest way to keep your finances on track and to protect your relationship is to make shared goals. Sharing money goals and discussing them regularly can be the quickest way to ensure that you and your partner are open about your spending habits.

Without shared targets, it can be easy to start spending ‘your’ money without considering how it affects the relationship. At first this can be okay – after all, no relationship ever broke down because of one extra beer at happy hour, or a new pair of shoes. However, when couples don’t have shared goals and one is saving heavily while the other is bulking out their wardrobe.

While relationship breakdown isn’t likely from a slight mismatch in spending habits, hiding those habits can become an issue. Especially when one partner is in debt (perhaps student loan debt), or brings debt to a relationship.

Without shared financial goals, and open communication money can tear apart even the most loving relationship.