Sunday, December 12, 2010

Great Ways to Save Money-Lists


Here is an interesting exercise. Make a list of the 10 most important things in your life. Rank them in order of importance. The purpose of this is to help you see the things you consider the most important and to visually give you important reasons to save.


Here are a few things that some might put on their list.


A new home.
A new car.
A special trip.
Planning for retirement.
Stating an emergency fund
Starting a business.
Paying off your debts.
College fund for your children.
Buying your dream boat.
Planning the perfect wedding.


Making a list like this will help keep you focused. If you go off track you can take another look at your list to remind yourself why it is important that you stick with your savings plan.

Monday, December 6, 2010

An Introduction to Refinancing

Refinancing can get very confusing. It is easy to become overwhelmed by the large number of available options. However, a little education can make the process far less intimidating. This article will discuss some of the options for those interested in refinancing and some of the factors to consider when deciding if refinancing is a wise decision in your situation.

Consider the Options

There are many options for homeowners who are considering refinancing. The most important decision may be the type of loan. Fixed rate mortgages and adjustable rate mortgages (ARMs) are the two main types of mortgages that homeowners will likely encounter. There are also hybrid loan options available.

A fixed rate mortgage is one in which the interest rate remains constant throughout the loan period. This is especially favorable when the homeowner has a credit score which is good enough to lock in a low interest rate.

ARMs are mortgages where the interest rate varies over time. The interest rate is usually tied to an index such as the prime index. This is a riskier type of loan.

Although ARMs are considered riskier, 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 over a fixed period of time. This can provide some protection from sharp increases in the interest rates and correspondingly unmanageable mortgage payments.

Hybrid loans combine a fixed element with an adjustable element. An example is where the lender may offer a fixed interest rate for the first five years and a variable interest rate for the remainder of the loan. Lenders will sometimes offer a lower introductory interest rate for the fixed period to make the mortgage appear more desirable.

Consider the Closing Costs

The closing costs associated with refinancing should be carefully considered. This is important because when homeowners refinance their home they often pay many of the same fees they paid when they first purchased the home. These costs may include appraisal fees, application fees, loan origination fees and a many other expenses. These costs can become substantial and may make some refinancing options untenable.

Consider the Overall Savings

When deciding whether to refinance, the overall savings should be carefully considered. Although some homeowners refinance to simply lower their monthly expenses, most homeowners consider the amount of money saved over time from refinancing to be the primary concern.

The amount of money the homeowner will save is largely dependent on the new interest rate compared to the old interest rate. Other important factors are the remaining balance of the existing loan and the amount of time the homeowner plans on staying in the house before selling the property. It's good to remember that the amount of money saved by negotiating a lower interest rate is not the whole story. The homeowner must also subtract the closing costs and consider how a potential refinancing will affect his overall monetary situation and financial goals.