How does a mortgage refinancing work?

A home loan is a long term commitment. For most people, signing on the dotted line is a 30-year contract. In this amount of time, many things can change. Many people will outgrow their home and sell their house. Sometimes, people also outgrow their mortgage. In this instance, mortgage refinancing can be useful.

Benefits of a Mortgage Refinance

There are many reasons why people decide to refinance their home. As you pay off your home loan, the principle of your loan reduces while the value of your property increases. The difference between these two figures is known as equity. When you refinance your home, the bank may give you a home equity loan. You can use this money to improve or enlarge your home, pay for tuition, or even take a holiday.

Sometimes, as a home loan decreases, home owners decide to refinance in order to lower their monthly repayments. This is a good option if you are struggling with difficult financial times or are just looking to free up cash flow for other projects.

Refinancing your home also gives you a chance to renegotiate your loan terms with your bank or lender. This means that you may be able to achieve a lower interest rate and also lessen the fees and charges which are attached to your home loan.

The Refinancing Process

When you refinance your loan, you can stay with your current lender or shop around for a new one. The refinancing process is similar to the one when you originally bought your house and applied for a mortgage, although sticking with the same lender will require less paperwork.

The bank or lender will most likely go ahead with the usual checks, such as employment and identity checks. They will also require a valuation of your home, which they will arrange. Once this has all been finalized, your old mortgage will be discharged and your new loan will come into effect.

There are usually some fees attached to a refinance loan. These can include a loan establishment fee, a valuation fee, and the possibility of ongoing fees. There is a chance that there may be a fee from your lender for the early discharge of your loan.

Home Loan Research

Finding out as much mortgage information as possible before you sign up for any loan is a good idea. Being aware of not only the interest rate, but the fees and charges attached to the loan product, is essential. Reading the small print now can save a lot of heartache later.

 
Credits to Paul Dabb for this article.

While inflation has pushed the prices of most products to a sky-high level over the past decade, it has been enough to drain off the wallets of the middle-class consumers in the US. In fact, if you look back, you’ll find many inventions in the last decade that were made to help consumers save more money so that the national debt level could be brought into control.

Unfortunately, all such inventions have already been misused and irrespective of the money-saving technologies, the US has yet incurred the highest amount of national debt. With the debate over the raising of the debt ceiling hovering around the US government, it has become a necessity for all Americans to save money religiously and boost the US economy.

Though the debt relief services in America are trying their best to assist the consumers in reducing their debt burden, yet there is no such havoc response in the riding debt profile in US.

For more information on debt & credit please visit : http://www.creditmagic.org/

Tips for a fatter piggy bank this year

Have a look at the 5 sneaky money saving strategies that’ll help you secure a safe financial future.

1) Start a savings account, a high yield one

The biggest hindrance that bars you from saving money is not being into the habit of saving money. The best and the most effective way of getting into the habit of saving money, is to open a savings account with a reputable bank. As you deposit money from your salary into the savings account, you can gradually create a dedicated savings account. This is a certain way of achieving your financial goals and paying down your financial obligations as soon as possible.

2) Create a budget to restrain your expenses

Your very next step towards your money-saving endeavor would be creating a perfect, strict and frugal budget. Though it is a fact that Americans hate following a budget, yet it is a pre-requisite to leading a debt-free life. Rather than seeking help from legal debt relief services who’ll charge you hefty fees for their services, it’s better to follow a budget and keep a track on your expenses. Always try to keep a balance between what you make each month and what you spend. Make sure that every month, your income is more than your expenses.

3) Start contributing to your 401 (k) account

If your employer provides you with a 401 (k) account, make sure you contribute a portion of your gross monthly income to it. Not only is it a great way of saving money, it will also provide you tax benefits after retirement. This is the best way you can secure a safe financial future and lead a happy retired life. In case of a financial emergency, you may also withdraw money from the 401 (k) account and utilize it in meeting your emergency financial needs.

4) Reconsider your insurance coverage

You must be having your insurance policies and when you’re going through a credit crunch and are looking for ways to save money, stop to reconsider your insurance coverage. While you had taken your insurance policies, you might have been in a particular financial condition. Now, if your financial state has deteriorated, you must abort some coverage that you do not need. Review all your policies and check where you’re paying more or for no reason. Speak to your insurance lender and get that particular coverage cancelled to value your dollars.

5) Look for free stuff

If you’re an entertainment buff and you’ve misused your cards in buying tickets of concerts, you need to become a bit more responsible, now that you’re in danger. To cut down entertainment expenses, look for free shows in theatres; hunt for free events in your localities. This will help you satisfy your quest for entertainment and will also help you save your dollars at the same time.

Making minor but consistent changes in your everyday life will certainly help you boost your savings. Stop using your car, try carpooling instead. Stop eating out, make your own dinner and save those extra dollars to utilize them in paying off your financial obligations. If you think you can’t manage your debt on your own, get help from the legal debt relief services so that you do not find yourself buried in debt in 2011.

Thanks to grace for this guest post.

Ok, so Christmas is just round the corner, and if you haven’t already started your shopping…then what are you waiting for? But just before you get your wallet out… have a think – could you save yourself some money?

Christmas is going to cost you a lot this year, and finding things ‘on the cheap’ can be quite hard.

So that’s why I’ve put this short guide together, to help you reduce the cost of Christmas the easy way.

1) Use price checkers to lower the cost of presents

There are plenty of websites that provide free ‘price-checking’ facilities, so you can compare the price of your desired item from several retailers, and find out which one offers it the cheapest.

Price-checking facilities can help you save some serious cash at Christmas. For example, last year – I used a price-checker to find the cheapest retailer of the latest computer game for my son, and found that one retailer was offering it $20 cheaper than another one!

So, just do a search for ‘price-checker’ on a search engine and take a look at the results!

2) Use discount vouchers

Shopping for food, drinks and presents can be a real drag, and before you know it, you’ve spend $100s. So, to help you reduce the cost of your shopping, you should take a look at the selection of discount vouchers on the internet.

Just search for ‘discount vouchers’ on a search engine and you should be provided with plenty of links.

Some vouchers will offer you the chance to get 50% off at your favourite retailers, while others will allow you to buy cheaper food, drinks and other items.

Discount vouchers aren’t just available online, you can find them in your local paper and some retailers may even give them out once you have shopped there.

3) Shop online

This is the easiest way to do your Christmas shopping – you can order everything you need online and have it delivered straight to your door.

Online shopping tends to be cheaper than shopping in your local store. The demand for products can be much higher online, and retailers lower their prices to compete with each other – so look out for the cheapest online stores, and like the first point in the guide…check the prices using a price checker to make sure you’re getting the best deal.

So, there you have it, a short but sweet guide on how to reduce the cost of Christmas and stay out of debt… the easy way. (for more debt information visit ThinkMoney)

Of course, there are many other ways in which you can save yourself money over the festive period, but the ones mentioned above are certainly worth a try!

Thanks to hannah for this guest post.

Unsecured debt consolidation loans have become very common these days. And if you have a good credit rating, you stand a better chance to get one.  
 

What is the difference between a debt consolidation loan that is secured and one that is unsecured?

In case of the former, there is a security that is attached to the loan. In most of the cases, it is your home. Just as there is an advantage of availing secured debt consolidation loans, there is a major disadvantage too.

 
The benefit you avail in case of secured debt consolidation loans is that they attract lower rate of interest. The disadvantage is if you fall behind on payments, you may lose your home as creditors will not hesitate to take away your home in case of non-payment.

Unsecured debt consolidation loans on the other hand do not require any security. And you don’t put your home at stake. Unsecured debt consolidation loans can be used for making payments for anything under the sun. But the rate of interest, unsecured debt consolidation loans attract is very high.

You can take out unsecured debt consolidation loans if you have a good credit rating. It doesn’t mean that you will not get access to one if you do not have a good credit rating. Unsecured debt consolidation loans are also meant for people with bad credit but the rate of interest will be very high. Nevertheless, it is difficult to find a lender that will extend a loan if you have a bad credit rating because following the credit crunch; lending institutions have adopted very stringent lending norms. So, shop around for the deal that will serve your purpose.

Unsecured debt consolidation loans can also be taken out online. If you are planning to take out unsecured debt consolidation loans online, you get the benefit of comparing the rates that are offered by the different lenders. Many online lenders will also answer to your queries if you have any related to unsecured debt consolidation loans. The eligibility criteria for qualifying for unsecured debt consolidation loans may vary from one lender to another. In majority of the cases, you need to have a sound employment history and you need to provide evidence that your income is enough to make repayments.

Thanks to adamsmith for this guest post.

When I sat down and took a hard look at the debt I was facing, I wondered to myself if there was an optimal way to pay off all my loans and credit cards. It was not enough throwing every last cent I had to pay everything off in its entirety as the interest charges that were being added to my principal was not helping me eliminate my debt faster. At one point, my $9,000 balance on my Mastercard at more than 18.5% APR was charging me almost $200 as minimum payment. More than 3/4 of that payment was to cover interest only!

I immediately go to my local bank for a consultation to see how they can help me. I was looking to consolidate my debt at possibly a lower interest rate. That way I thought, there will only be one payment made every month and it will be easier to keep track of my progress. Now the lady I had my appointment with wasn’t very helpful. She advised that with my current credit rating, job history, and credit history, the best I can hope for was a personal loan at 12.5% and the chances of getting this was very slim. I politely declined and walked away. Most of the interest rates I had for most of my loans were far below 12.5%.

In comes MBNA in my life and I was saved. I was browsing around a popular forum, RedFlagDeals, and found out about a 0% balance transfer promotion when you open a Platinum Plus Mastercard. Being the Money Monkey that I am, I applied online, and followed up on the phone a week after. The approval process was quick and painless and upon approval, the balance transfer was setup over the phone. I had it deposited to my chequing account and used it to pay off one of my higher interest loans (the Mastercard was already paid off at the time I applied for the MBNA card).

What’s the catch?

• The 0% interest rate only applies to balance transfers made in the first month or two
• The 0% interest rate is only in effect for one year starting on the day the card was approved
• There is a balance transfer fee between 1% and 2% of the total amount transferred but the folks at MBNA were able to cut it down to half of that if you ask politely (this was last year, October 2008, so things might have changed)

Now these guys at MBNA are not crazy. They are banking on the fact that most people are not diligent enough to pay the balance off by the time the promotion is due. After a year from approval, the interest kicks in at 18% up to 24% on the entire balance!

Who do you recommend this for?

• Newly grads with high levels of debt from school (assuming these grads have income to pay off the balance by the time the promotion ends)
• Investors
• Anyone who can and will pay off the debt before the promotion ends (use the money to purchase big-ticket items, or earn a return > 1% for one year)

Who is this not for?

• Anyone else who wants the money but can not foresee having enough cash to pay it off before it’s due will be eaten alive by the high interest rate – do not fall in to the trap!

In my case, I used the$10,000 to pay off some loans and as I save up money from my primary income to accumulate $10,000 by the due date (which is this November), I put the funds into an ING savings account that earns me money while it’s parked. I have calculated the total interest saved and total interest earned by using this 0% promotion to be almost $900 for the year. Not too shabby!

In my previous post, I mentioned a common debt reduction strategy called the debt-snowball. The main idea is to throw every last cent you have to pay off the lowest balance account while paying off the minimums due for the rest. As accounts are being paid off, more money will be available to aggressively snowball payments and accelerate debt reduction.

Here’s a very useful tool that anyone can use to keep track of their debts and keep track of each payment period, snowball amounts, and time left to eliminate all debt. You can even choose a payment policy to pay either the lowest balances first, highest interest first, or define your own custom order. Download this tool from Vertex42.

I started real life out with $45,000 in debt and now, I’m down to less than half of that in just a little over a year. How did I do it? It’s called actively attacking debt and employing a debt repayment strategy commonly known as the debt-snowball.

According to Wikipedia:

The debt-snowball method of debt repayment is a form of debt management that is most often applied to repaying revolving credit — such as credit cards. Under the method, extra cash is dedicated to paying debts with the smallest amount owed.

Methodology

1. Write down all the debt you owe, be it revolving credit or personal loans
2. Don’t forget to write down the balance owed and effective annual interest rate (EAR)
3. Always pay the minimum amounts due for all debts
4. Set a maximum amount of cash you can devote to service debt every month
5. After paying all the minimum amounts, determine how much money is left over
6. Use the extra money to pay off the account with the lowest balance account first
7. Another method is to pay off the account with the highest interest (EAR) first but for some people, seeing accounts being paid off is more motivating (technically, you save more money paying off high interest accounts first)
8. Once the account has been completely paid off, use the extra money used to pay that account and its old minimum payment to pay off the next highest balance or highest interest account
9. Rinse and repeat until all debts have been eliminated

In my case for example, I had the following debt with the following interest rates:

• TD Student Line of Credit – ($8,000) @ 8.00% variable
• OSAP Student Loan – ($12,000) @ 6.50% variable
• TD Secured Auto Loan – ($16,000) @5.65% fixed
• Citi Mastercard - ($9,000) @ 18.50% fixed

Now I chose to attack the highest interest account first so I paid all the minimum amounts due and funneled all the extra money to paying off the Mastercard. The Mastercard account has now been completely paid off and theoretically, all the extra money + the Mastercard minimum payment should now be applied against the TD Student Line of Credit at 8.00%.  Rinse and repeat until all debts have been paid off. This method is very simple and extremely motivating as you can keep track of closing each account as a milestone towards a debt-free life.

So this is my first post on The Money Monkey! Cheers to a brand new theme (courtesy of squarefour), a brand new domain, and a brand new bookmark for all of you readers to add to your favorites.

First and foremost, The Money Monkey welcomes you. I’d like to use this first post to give my readers a snapshot of my financial position last year when I finally graduated and received my undergraduate degree, so you all can see my undocumented progress from back then to where I am today.

School is expensive. However, I was very fortunate to have attended the University of Waterloo because of their internship or co-op program. What that meant was I was able to secure placements and earn money during co-op terms to supplement the high costs of living away from home, tuition fees, and other school related miscellaneous. At the same time, I earned invaluable work experience that I was able to leverage and add to my resume to secure a job right after graduation. Now enough of the school talk as it makes some people miserable. Show me the finances!

Okay, now it’s not as bad as some people may have exiting university in terms of debt load but I exited school with more than $45,000 in debt. Let me outline where that $45,000 in debt came from, as it’s not all related to school. Here are rounded approximations:

• TD Student Line of Credit – ($8,000)
• OSAP Student Loan – ($12,000)
• TD Secured Auto Loan – ($16,000)
• Citi Mastercard - ($9,000)

That’s a whole lot of money! A lot of it is also what we  consider “bad debt”. Hint: It’s the one that starts with an “M” and ends with “astercard”. So that’s the whole picture. Now I realized after school and getting my first job that I feel restricted – almost trapped – by this almost unsurmountable amount of debt. In my next post, I will detail my action plan to get rid of it and start building positive net worth. Now I’m not even at $0 net worth yet, but I’m getting there. I’m actually reaching my next milestone in less than two months so that is definitely something to look forward to.