Adjustable Rate Mortgage Salvation Or Financial Trap Home Loans Can Be Found Cheaper Online Creating A Budget To Reducing Debt
If you are currently trying to buy a new home you’ve probably noticed the endless stream of numbers being tossed to and fro. Things like monthly payment, down payment, home price, affordability and a host of other fees and figures. This can be daunting but in a strange way all these requirements, in the form of numbers can be used to work for you.
It’s not easy to see but there is a wide mix of funding options available to home buyers today. Brokers, banks and other lending institutions have an amazing variety of mortgage options from traditional 30 year fixed to the less conventional but ever more popular 2 year adjustable rate mortgages.
How do you decide what option is best. Of course, that depends on your current circumstances. A few key factors will include your credit score, how long you plan on staying in your home and whether you have money for a down payment.
The traditional 30 year fixed rate mortgage will give you the peace of mind of knowing that the interest rate of your mortgage is not at the whim of the ever changing housing market. On the other hand, if interest rates drop it will cost you thousands in refinance charges to refinance your mortgage to a lower rate and if your financial or credit situation has changed you may no longer qualify at the best rates.
An alternative to the traditional 30 year fixed mortgage is the adjustable or variable rate mortgage – also known as an ARM. An ARM is different than a fixed mortgage because the interest rate is normally dependant upon some type of index (i.e. the 10 year Treasury Bill). ARMs come with an initial lower interest rate and monthly payment – that’s their appeal, but with the lower initial rate comes additional risk because the interest rate is based on index rates that are subject to change.
On the other hand, you also have the potential to benefit if interest rates fall but rates normally have to fall quite a bit for you to realize any savings due to a number of reasons beyond the scope of this article. Just be aware that the odds of your rate dropping, is very low regardless of what interest rates do.
There are advantages to obtaining an adjustable rate home mortgage other than the initial lower monthly payments. Factors include: if you intend to pay down a big portion of your mortgage principal early or if you anticipate higher income in the future or if you would like to completely payoff your mortgage as quickly as possible. The initial lower interest rate of an adjustable rate mortgage allows you to apply more of your monthly payment to the principal.
You should understand the risks associated with an adjustable rate mortgage before agreeing to one so be sure to ask your lender to explain the interest rate ceilings or caps associated with the loan so that you are not blindsided a few years down the road with a much higher mortgage payment because your interest rate just jumped 2 points.
A viable option if you have little income flexibility is to ask your lender about payment caps. Payment caps can help to stabilize your monthly payments during periods of interest rate fluctuations. However, on the down side, this option can result in negative amortization on your loan. Negative amortization occurs when the balance of your mortgage increases because your mortgage payments are not big enough to cover both interest and a portion of the outstanding principal.
Clearly there are both pros and cons of adjustable rate mortgages but one option you may want to seriously consider is an option that allow you to convert your mortgage to a fixed rate if interest rates go against you. In most instances, this option will cost you some money but the fee is much less than a full refinance and could potential save you thousands of dollars and bunch of stress.
For options in finding the best mortgage, new or refinance, check out the links below.
If you own your own home then the cheapest way to get a loan is to go for a home loan. A home loan requires you to put your home up as security against the borrowing and is one of the easiest types of loan to get.
However while home loans are the easiest type of borrowing to acquire, searching for the best deal with the lowest rate of interest can be time consuming and unless you understand loans in general they can be confusing. A far easier way to get a loan of any nature is to go to an online specialist and let them search through the UK’s top lenders on your behalf.
A home loan is also called a secured loan and with the home loan you can borrow more money than with a traditional personal loan as well as pay back the loan over a longer period of time. However, as you are putting your home at risk it is essential that you consider whether the reason for the loan is worth putting the roof over your head at risk for the number of years you have chosen to take the borrowing for.
Another factor you will have to consider is that the longer period of time you take the loan over, the more interest you will pay and of course the amount of interest that you will pay will be determined by the APR of the loan. The APR for home loans can vary greatly from lender to lender and a specialist will be able to get the cheapest rates and best deals for you loan and deliver them to you along with the key facts regarding the home loan.
It is essential that you do read the key facts as this is where the terms and conditions of the loan can be found along with the small print and as your home is at stake you should make sure that you understand the conditions and in particular the total amount you are going to be paying for the home loan.
Some very important factors, such as a grace period and subsidies, will also be part of the benefit package your consolidator can negotiate for you.
Many of these desperate consumers find themselves contemplating a bankruptcy filing, but bankruptcy can carry a legacy you will have to live with for years. A bankruptcy filing will stay on your record for a minimum of seven years, and you may find it difficult or impossible to obtain necessary credit in the interim. There are numerous types of debt, including basic loans, syndicated loans, bonds, and promissory notes. Debt, especially large sums of debt, can also be secured through a mortgage or other security interest over some of the debtor’s property, in which case the creditor will have some rights over that property in the event that the debtor becomes unable to repay the debt and defaults on the loan.
If your objective is to reduce interest rates and lower your monthly payments, avoid bankruptcy, consolidate your bills and have one monthly payment, or simply get out of debt the fastest way possible, then a debt consolidation loan could provide the answer.
Creation of a Budget
No man is an island. We all need help once-in-a-while. We’re not only referring to personal matters. We’re talking about financial matters. We reach a point where we have to buy something out of necessity, but we can’t pay in full just yet. An example of this is a home. Now the time has come for you to repay on what you own. You must have the discipline to plan out how much you should have saved so when your time is up and you have to shell out the money you owed there and then (plus interest), you wouldn’t have a hard time doing so.
Prioritize which of the debts must be paid first. Prioritize your bills. Make a list so it would be more organized because you could see it right in front of you. This is what you call establishing goals. Establish first what must be prioritized over those you could schedule paying some other time.
The essential debts are debts that should be on top of your list. These are
– Rent or mortgage. Of course, who in his right mind won’t pay up as soon as possible. Paying your rent or mortgage bills on time helps you have a roof over your head.
– Child support. If you don’t pay on time, there’s a possibility you can be held behind bars.
– Utility bills. As much as possible, set aside a budget on gas, heating, water, electricity or telephone when you get your paycheck. In doing so, when the bill comes, then you have something prepared.
– Car payments. This also includes car maintenance.
– Other secured loans. If you don’t repay collaterals, the creditor takes the property even without court interference.
The non-essential debts can be set aside because when these aren’t paid, they don’t have that much of a side effect. It’s a desired goal but not really a priority. The only concern that can be considered when you don’t pay non-essentials debts for a long period of time is the negative image it could project on your credit report.
– Department store and gasoline charges. Failure to pay these charges may result in losing credit card privileges. If it’s too large, you might be sued.
For many who buy wisely, the equity could be substantial. A home equity loan can be used to pay off high dollar items, pay for college tuition, and be used to pay off those high-end credit card accounts. How to address Debt Collectors. There is a law that gives certain conditions for debt collectors as to when and how they should ask you to pay. The federal law, Fair Debt Collection Practices Act, clearly states that those collecting debts may not bug you, give false assertions, or do practices that are not fair when they are getting to collect money from you. Having trouble paying your bills? Getting dunning notices from creditors? Are your accounts being turned over to debt collectors? Are you worried about losing your home or your car?
The main reason for this risk is that in order to secure a lower interest rate (and thus a cheaper overall payment rate), you’ll need to present some sort of collatoral to back the loan. If you have an attorney, the debt collector must contact the attorney, rather than you. If you do not have an attorney, a collector may contact other people, but only to find out where you live, what your phone number is, and where you work. Collectors usually are prohibited from contacting such third parties more than once. In most cases, the collector may not tell anyone other than you and your attorney that you owe money.
– Loans from friends and relatives. Morally speaking, there is an obligation to pay but sometimes since they’re family, we think that they will understand if we can’t. Check with them if you can delay the payment and ask them for how long.
– Newspaper and magazine subscriptions. Little by little, if you haven’t paid, they’ll amount to so much.
– Legal and accounting bills. If these remain unpaid after a long period of time, then that’s when you might be sued.
– Other unsecured loans. In unsecured loans, there’s no collateral for the debt. This means that the creditor can sue and then collect the debt.
Here’s the confusing part. Some of the bills border between essential and non-essential. If you let these bills defer for a long period of time, it could have consequences in your personal life.
– Auto insurance. The consequence in some states is losing your driver’s license.
– Medical insurance of bills. If you have a tainted record, you might have a hard time getting new insurance in the future.
– Credit and charge cards. If you don’t pay your bills on time, you might lose your credit privileges and would have a hard time applying for a new credit card.
Now that we laid out the groundwork on how you can prioritize which bill to pay first, we move on to having a time frame. It’s best that you have a calendar in front of you. A palm pilot or the calendar in your Microsoft Office program will do. Mark the dates wherein you would have to pay the specific debt – be it essential or non-essential. Then what you can do is set aside the bill that is allotted for that debt.
As for the budget, prevention is always better than cure. You know how much you get in a month. That being in mind, you must allot how much percentage of your salary shall go to which. Then do your best to stick to that budget. If this is how much you should spend for leisure, then that’s how much you should spend for leisure. If at one point, it went overboard, then there would have to be a sacrifice on another aspect, such as food. That seems off, right?
Debt is a hard thing to live with, reduce debts today! So even in budget, you must also list down which is number one for you. Have the discipline to stick to your priority, your budget and your time frame. If you succeeded, paying the bills won’t be any problem. It may be more convenient to make one payment rather than several. Or you can improve your cash flow in the short term by reducing monthly outgoings. But this may cost you more over time because you are paying the debt off over a longer period of time. Interest rates for credit card debt consolidation loans through traditional lenders may be based on your credit score. If high, you are likely to get a credit card debt consolidation loan at a lower interest rate. Stop spending on things that aren’t absolutely necessary.
Each individual will have to define what “necessary” means, but it may mean taking a sack lunch to work, bringing your own coffee instead of stopping at Starbucks, and canceling that subscription to HBO. Debt is a hard thing to live with, but we all have it and deal with it everyday. Sometimes it is manageable, sometimes you feel like you can barely keep your head above water and unfortunately many times you feel like you are drowning in it!.
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