We all know that lower interest rates can save us lots of money.
The cost of a mortgage depends on the amount you borrow, the interest you pay and how long you take to repay. The amount you actually borrow after the fees and points are deducted is the loan amount or the principal. It is what will be used to figure the real interest or APR (annual percentage rate); on the money you are borrowing.
The interest of finance charge is what you pay to borrow the money. The amount repaid along with part of the principal in regular installments, is determined by the interest rate and the term of the loan.
Interest that you repay at the closing are called points. Each point is 1% of the loan amount. For example, on an $80,000 loan with 3 points, you would prepay $2,400.
Fees include application fees, loan origination fees, and other initial costs imposed by the lender. This equals the total cost of your home.
The term is the length of time you want to borrow the money. The longer the term, the lower the monthly payments, but the more you will pay in the end.
The interest rate may be fixed for the length of the loan or adjusted periodically to reflect prevailing interest rates. Over time, a lower interest rate will have the greatest impact on overall cost.
To reduce your mortgage expenses, consider a shorter mortgage with a shorter term. Your monthly payments will be somewhat larger, but you will pay less interest overall. A 15-year mortgage as opposed to a 30-year mortgage for the same amount can cut your costs by more than 55%.
Mortgages can have either fixed or adjustable rates, or sometimes a mixture of the two.
A fixed-rate mortgage is when the total interest and monthly payments are set at the closing. You repay the principal and interest in monthly installments over a 15, 20, or 30 year period. You know from the beginning what you will pay and for how long. You can choose to pay your mortgage more quickly, which means you will owe less interest. Or when interest rates go down, you may want to refinance your mortgage to get a lower rate or a different term.
An adjustable rate mortgage has a variable interest rate. The rate changes on a regular schedule-such as once a year-to reflect fluctuations in the cost of borrowing. Unlike fixed-rate mortgages, the total cost can’t be figured in advance, and monthly payments may rise or fall over the term of the loan. The rates are determined by using the index and the margin for the new rate.
All adjustable rate mortgages have caps or limits on the amount the interest rate can change. An annual cap limits the rate change each year, while a lifetime cap limits the change over the life of the loan.
Many states provide mortgages at below market rates for first-time buyers, provided that your income and the price of the home meet their guidelines. To locate mortgage sources in your community, you can contact the U.S. Department of Housing and Urban Development (HUD) at www.hud.gov.
Monday, March 15, 2010
Comparing mortgage interest rates
How to check your credit score
Your credit score is a snapshot of your credit report at a particular point in time. It is a number – usually between 300 and 850 – that says how likely you are to make your credit payments on time. Depending on how good your credit score is financial institutions like banks and different credit card companies decide whether you are eligible for a loan and a credit card (with a good credit limit) or not.
How does information about me get into a credit report?
When you enter into most credit relationships, you give the creditor the right to provide information about you and your bill paying history to any credit bureau by you’re signing the credit application. The information also comes from public record sources such as tax and court records, your employer (if a credit report is used for employment purposes), utility companies and debt collectors.
There are five ingredients of a Credit Score
1. Your payment history – about 35% of your score. Paying your bills on time can help build your score. Late payments, bankruptcies and other negative information pull your score down.
Friday, February 26, 2010
How to define your insurance needs
Its conventional wisdom that you need life insurance equal to five or seven times your annual income. That’s okay as a general rule, but following it too closely can be costly. The danger of over or underinsuring is especially great as your asset base changes.
Before deciding how much life insurance to carry, look at:
1. Cash needs for settling the estate and paying uninsured medical costs and funeral expenses.
2. Outstanding debts. It’s nice to give the family greater financial freedom by paying off the mortgage, car loans, outstanding installment debt and credit card balances.
3. Educational goals for children.
4. Surviving family income fund. The amount of insurance needed is the difference between expenses and income, including Social Security. Always include a cushion for emergencies.
5. Inflation protection. Figure 9% inflation a year to protect current purchasing power. Be prepared to alter your coverage as inflation expectations change.
6. Accumulated assets. The same assets that can provide income for your heirs can be wiped out unless you have adequate liability coverage.
7. Present age. Insurance is most essential for people who haven’t yet accumulated substantial assets. It’s important to start young, even if you can afford only term insurance. The danger with term insurance is that as it becomes more expensive with age, it’s increasingly tempting to drop it.
8. Instead of a raise, ask the company for more disability insurance. It’s deductible for the company, and the premiums aren’t considered income to you for tax purposes. But unless the company plan is adequate, be prepared to buy substantially more disability coverage.
9. Set a definite time each year-preferably twice a year-to review your financial plan and insurance coverage. Change your financial plan and insurance coverage to reflect the current situation.
While so many people worry about being under-insured, we should all be concerned instead about having too much insurance. The most common insurance mistakes are wasting money on the wrong kind of insurance, and on insurance that duplicates coverage already provided by another policy.
The biggest insurance trap is being sold insurance you don’t need. Many people buy flight insurance as a kind of good luck charm, but it is grossly over-priced. Take the money you would spend to buy insurance on a two-hour flight and use it, instead, to but more term life insurance that covers you 365 days a year, around the clock, wherever you are.
If you are being charged premiums for life insurance to cover your unpaid credit-card balance, ask that it be eliminated or switch to a credit card company that doesn’t burden you with insurance that is only for the benefit of the credit card company.
Volunteer Medical Professionals Offer Free Basic Health Care
All of the country, many cities are getting hit hard with brutal weather of snow storms, and freezing temperatures. Have anyone thought about the homeless- how they are surviving in the midst of it? It has been reported that on any given night, over 2000 homeless people are on the cold freezing streets of Cincinnati.
The Drop Inn Center doors are open 24 hours a day, 365 days a year to anyone in need of its services. On average, they provide shelter to 250 men and women each and every day. During the winter months, the Center usually reaches its capacity to sleep 300 people each night. In a typical year, they serve more than 130,000 meals and distribute toiletries, towels, blankets and clothes to thousands of homeless residents. Volunteer medical professionals provide basic health care at no cost to residents six days a week.
One such medical professional is University of Cincinnati Dr. Joe Kiesler a philanthropist who makes regular visits at the Drop Inn Center with a mobile medical center.
Dr. Kiesler, physicians, med students and nurses go to the different health centers in Cincinnati to serve the homeless in a mobile van that's a community health center on wheels.
Friday, February 12, 2010
Book for Wealth
Make Your Money Grow
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