Budget Archives - Page 4 of 11 - The Happy Homeowner

What Could Refinancing Your Home Loan Mean for You?

Posted on February 3, 2013 by Jen

This is a guest post written by Betsy Fallwell

Looking for a quick, easy way to shave hundreds of dollars off your monthly budget? Then here’s the one word you need to remember: Refinance. Refinancing your home’s current mortgage – and taking advantage of today’s historically low rates – can help put more money back in your pocket.

Reasons to Refinance

For most people, the main reason to refinance is pretty simple – you’re looking to save money. But there are a plethora of legitimate reasons why refinancing could be a smart move for you. Consider a loan refinance if:

You’re looking to renovate your home. A cash-out refinance uses the equity you already have in your home to pay for upgrades or repairs, usually at a lower rate than a home equity line of credit.
You need to pay off debt. Not only can you save money to pay down debt by lowering your monthly mortgage payment following a refinance, but pulling cash out during the process can give your liquid assets a boost.
Getting out of a bad loan. Whether your current loan has a high interest rate or the introductory period on your adjustable rate mortgage is about to expire, refinancing permanently separates you from your old loan.

Researching Loan Products

There is a wide range of home loan products available on the market. One of the most popular loans is the fixed-rate mortgage, which comes with a stable interest rate for the duration of the loan’s term – typically between 5 and 40 years.

Adjustable-rate mortgages, called ARMs for short, have an introductory period that comes with an ultra-low interest rate; however, once that intro period – usually between three and ten years – ends, your interest rates will vary depending on market conditions, making your payments vulnerable to drastic changes.

Interest-only loans allow you to just pay the interest on your loan for a set introductory period, giving you very low monthly payments for a while; after that period ends, though, you’ll have to pay the interest as well as the principal on your mortgage, leading to far higher payments.

All three of these loan types are available to those looking to refinance, as well as those buying a new home.

How do you know which loan is right for you? A mortgage calculator can be an effective home loan comparison tool, helping you discern what your monthly payments will be at the start of the loan’s term, and throughout it as well. But having the right kind of professional help is crucial, too.

Working with a Pro

Before you head to your bank or credit union to refinance your home, consider working with a mortgage broker instead. These professionals act as a liaison between borrowers and lenders. Unlike a financial institution, which will push in-house mortgage products, a mortgage broker is free to show you a range of loans from a variety of lenders. This is one-stop shopping, saving you time and energy.

A mortgage broker won’t add to your costs, either. Federal law prevents brokers from collecting fees from lenders and borrowers, and since most mortgage companies pay brokers’ commissions on the products they sell, you can work with one of these pros for free, whether you ultimately buy a loan through them or not.

Caveats to Refinancing

Sure, a refinance can save you lots of money, but it’s not all clear sailing. If you’re not planning on staying in your home long-term, the closing costs you’ll pay on the refinance could outweigh the reduced monthly mortgage payments.

An even bigger problem amidst today’s housing market is depreciated home values. Lenders require borrowers to get an appraisal on their home during the approval process. If your home’s value has dipped because of the housing crisis, you may not have enough equity – at least 20%, typically – to avoid private mortgage insurance, or PMI, even if your original loan did not require it. This additional insurance can add to your monthly housing expenses, negating some of the savings from a lower interest rate.

Photo credit: james.thompson

Perks of Using a Payday Loan

Posted on January 30, 2013 by Jen

I’ve written about payday loans here before, and I highlighted easy ways to use payday loans responsibly. Today’s post will highlight the benefits of payday loans as there are some that may surprise you.

If you’re in a tight spot, are typically financially responsible (ie. You have the resolve to actually pay the loan back before interest or penalties kick in) and need money to cover a short-term deficit, payday loans could be a temporary solution to help you weather a financial storm.

The key is remembering that these are short-term loans, and they’re small sums that will help you avoid bounced check/late payment fees (you can read more about short-term loan options by clicking here). Payday loans should not be used repeatedly to cover shortages incurred from bad financial practices, nor should they be something you constantly rely on to get you from paycheck to paycheck.

Payday Loan Benefits

Easy Application. To qualify for a payday loan, you need proof of income and a clean history of paying back any previous payday loans you’ve taken out.
Fast Funds. Typically, the turnaround from application to money payout is less than 24 hours.
24/7 Opportunity. You don’t have to go to a payday loan shop or merchant–you can apply online at any time. Click here to learn more about same-day loans.
Funding Limits. You cannot borrow more than what you bring home in your paycheck for any single loan.
No credit check. This is key for those who are seriously struggling to manage their finances.

Have you ever used a payday loan before? Any tips or perks you’d list as well?

Photo credit: Chika

Frugality Gone Wrong: The Real Cost of Owning a BMW

Posted on January 29, 2013 by Jen

My new ride & I taking a pit stop in Switzerland–I get to keep the Euro plates

It’s no secret that I committed a PF sin back in the fall. After ~~months~~ years of contemplation, I pulled the trigger and ordered my first new car in over a decade.

When I placed the order in August, I made sure to detail my desire to take full advantage of the BMW European Delivery Program offered to any customers purchasing or leasing a new car. I also reserved a spot to take a re-delivery at the BMW Performance Center in South Carolina once the car arrived stateside (I’ve posted a full recap of the Welt portion of the experience…stay tuned for more!).

This weekend, I’m headed to SC for a full day of factory tours, race track driving and off-roading (yep, they give you a stock car to beat the snot out of on the track then take you off-roading in an X3 or X5). Can you tell I like my bimmers?

While the EDP and Performance Center re-delivery are free to me as a buyer, what happens when I drive my shiny new car back to Boston? Basically, the reality of the real cost of owning a BMW will most likely slap me in the face.

The real cost of owning a BMW

I ordered a 3-series, a 328i, which is the mid-range vehicle BMW offers. Despite a fairly reasonable starting price (for a luxury car), the final tally including the options I opted for brought the final figure to….wait for it….just around $50K. Holy.shitballs.

Luckily, with all new cars, BMW offers free service for the first 4 years or 50,000 miles. This includes all oil changes, brake pads, fluids and discs, inspection services, engine drive belts, wiper blades, etc. You’re also afforded free BMW Roadside Assistance for the first 4 years (no mileage restrictions) as well as BMW ConnectedDrive/Assist for 1 year.

But what about the other costs?

What about insurance, gasoline, parking and all the other miscellaneous expenses I’ll incur as penance for my sin? Obviously, if I spent this much money to buy the car, I’ll definitely be trying to take very, very good care of it. Unfortunately, that may mean more money being eaten up:

Insurance: My car insurance has gone up $53/month or $636 for the year.

Gasoline: Luxury vehicles require “luxury” gas (haha). Gone are my days of filling ‘er up with regular–I’ll now need to foot the bill for Plus or Super Plus. I’ll estimate that my gas expenditures will rise a modest $40/month (because we all know how much I love riding my bike to/from work!).

Depreciation: As with all new cars, the moment you drive that sucker off the lot (or out of the factory in my case), the depreciation clock begins to tick. It’s estimated that in the first year alone, my new 3 series will depreciate about $7,600.

Parking: I’ve added a new line-item to my budget for parking expenses. I won’t be paying to park in a garage on a regular basis (I have ample, free street parking in front of my house), but I will be paying to park in a garage whenever I venture into the city as I don’t trust anyone with my new bumpers. I’m budgeting $30/month for parking fees.

Total: Not including my monthly payment, I’m increasing my car-related expenses by at least $123/month or $1,476 for the year.

The fine print

Overall, this could be far worse–especially if you consider the potential costs had I chosen a luxury car that doesn’t include free maintenance services (costs estimated for first 4 years of ownership):

bmw-maintenance-plan

As any good PF blogger would do, I made sure to budget for these expenses (and practice living like I had to pay for them) BEFORE buying the car. I also ensured that I could still fund my retirement accounts, save, travel and basically keep my lifestyle the same as it is now.

Yes, this is a frivolous purchase. Yes, I could have purchased another car for far less money.

But with all that said, I’m still happier than ever about making this purchase because I love cars, love BMW and have planned/worked hard to make this a reality. Then again, talk to me a in a few years to see if it’s still worth it.

What’s the most frivolous purchase you’ve recently made?

Personal Finance and Lance Armstrong: What You Can Learn from Lance’s Fall from Grace

Posted on January 23, 2013 by Jen

A few months ago, mentioning the name ‘Lance Armstrong’ invoked the following thoughts: strong, courageous, survivor; role model.

These days? The name might as well be synonymous with liar and cheat.

When faced with such outrageous news of a national hero’s veritable fall from grace, it’s only natural to feel some sort of betrayal; especially if you are an endurance athlete or cancer survivor.

But rather than harp on Lance Armstrong’s apparent shortcomings, why not learn from his mistakes?

For a man who has amassed a fortune from multi-million-dollar endorsement deals and six-figure event/speech appearances, Lance’s current situation illustrates that he can actually offer the average person a wealth of personal finance tips and advice.

Understand Your Limits

There clearly is a time when enough is enough. Whether it’s overspending, not paying your bills or simply (temporarily) resolving yourself to a lifetime of financial apathy when faced with a money-related challenge, there comes a time when you need to cut your losses and get yourself on a better path.

Clearly, Lance’s lies have caught up with him. What he chooses to do in the coming months could be anyone’s best guess, but it’s a great reminder that you need to gain control of the situation you’re in before the situation completely ruins you and the people/things you love most.

Get Your Head Out of the Sand

Any time there is foul play or bad behavior involved, there’s also a hefty dose of denial involved. Don’t follow Lance’s lead–do yourself a favor and face those debt balances, track your spending and/or set yourself a budget (and adhere to it!). There’s no amount of ego that can save your credit score or overdrawn bank account from entering the throes of despair after you make terrible financial decisions time and time again.

Get Over Yourself

This is probably one of the hardest financial pills to swallow: If you’re in serious debt or are living beyond your means, you have nothing to prove to anyone; you’re not winning at anything other than setting yourself up for future failure. No matter if you’ll do anything to “win,” you’ll be stuck in a maelstrom of mess if you continue to make the same financial mistakes over and over.

What you need to do is eat a gigantic piece of humble pie and realize that keeping up with the Jones’ isn’t all it’s cracked up to be. Just as Lance Armstrong’s endorsement deals, a fat bank account can disappear in an instant if you’re not careful. Being full of yourself to the point of arrogance with decision making is a sure-fire way to destroy your chances at a stable, sufficient financial future.

Think Creatively

Despite the drama surrounding Lance, he’ll continue to live a comfortable lifestyle that most low and middle-class Americans can only dream of.

Why?

Because he’s savvy in his ability to parlay his life experiences into sources of capital. While we’ve already heard how J.J. Abrams snapped up the rights to a film about Lance Armstrong, it’s only a matter of time before Lance begins to rake in money for speaking appearances, book deals, etc.

So whether you’re looking to cut back on your expenses or find a way to bring in extra income, there’s one page from Lance’s story you can steal without guilt: Be creative. Pursue options that are unique, applicable and enjoyable for your situation.

After all, you never know when a current opportunity may turn out to be the key to your future success.

What else can we learn from Lance Armstrong’s fall from grace?

Photo credit:DonkeyHotey

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