Debt Archives - The Happy Homeowner

Home Loans Come in All Shapes and Sizes

Posted on September 7, 2013 by Jen

After selling my condo at a hefty profit last month, I have to say that it’s quite a liberating feeling to not have a mortgage hanging over my head right now. While it wasn’t ever a problem for me to pay the monthly payments (plus extra!), there was always a part of me that hated the idea of toting around a six-figure debt load thanks to the mortgage. That being said, a mortgage is a reality that I’ll be revisiting once I decide where/when to purchase my next property.

A few years ago when I decided to buy my condo and began to think about all of the different types of home loans available out there, I was surprised to learn about the various nuances that each kind of loan entails. It’s easy to think of the standard first-time buyer and refinancing loans, but what about those for investment properties, renovations, and bridging gaps between your current home and your next home’s purchase? The more I read and learned, the more I realized that there are virtually hundreds of options to finance homeownership needs.

First-Time Buyer Loans

Purchasing your first home can be a daunting task filled with many decisions and plenty of confusion. But it’s also an exciting time and one that can be quite enjoyable if you do your research before deciding on what type of mortgage you’ll apply for.

Before you submit a single home loan application, make sure you’ve thoroughly researched your options, have calculated all of the costs of your new home (including insurance and taxes!), and have money in the bank for a down payment.

Next Home Loans

If you’re looking to upgrade (or even downsize), you have the benefit of experience on your side. Use what you learned during your first home-buying process to ensure you’re making even better decisions the second or third time you buy a home.

Shop around for the best rates, find the terms that work for your unique situation, and use whatever equity you might have in your current home to your advantage. If you’ll have overlapping timelines for when your next house and old house close and you’re short on cash, you could always consider a bridge loan to cover any expenses in the interim.

Refinancing

I refinanced my mortgage last year, and I was fortunate enough to lock in a great rate, reduce my monthly payment, and recoup every penny of the closing costs in less than a year. Refinancing makes sense if you have built some equity, have excellent credit scores, and can live in your home long enough for the reduced monthly payments to payback any closing costs associated with the new loan.

It’s a great way to reduce your monthly payments, shorten the life of your loan, save boatloads on interest in the long run, and even consolidate debt.

Investment Properties

Before I decided to sell my home, I was considering the purchase of an investment property. While I decided to shelve that idea for now, I do see myself owning multiple properties as an income-generating option in the future. Once I have a new home, I’ll need to take out a special loan for any investment properties I purchase. While the process is fairly straightforward like that of a primary residence loan, there are requirements that are more strict such as a larger down payment (usually 25% or more) to take into consideration.

Regardless of which type of loan you eventually take out, never sign on the dotted line until you’re certain that you understand 100% of the terms and conditions of the loan. Look for hidden fees and any penalties that could be imposed, investigate traditional and non-traditional financing options, and choose a lender that you’re comfortable with!

What experience do you have with the various types of home loans?

4 Helpful Mortgage Tips

Posted on September 7, 2013 by Jen

Although there are pros to renting, renting is often compared to flushing money down the toilet. You don’t earn equity when you rent, and for the most part, landlords don’t permit too many property changes. This can create problems if the landlord’s style doesn’t match with your own.

Additionally, renting doesn’t offer much stability. The landlord can sell the house or cancel your lease, leaving you to look for another home.

However, buying a house doesn’t have to be a far off dream. Many families use mortgage lenders to make their dream a reality. And while getting a home loan is harder nowadays, lenders are eager to help you find the right loan program for your circumstances.

But with any type of loan, there are a few things to keep in mind:

Shop Around for the Best Loan

The biggest mistake you can make is putting your trust in a single lender. Maybe you feel comfortable with your personal bank. However, your bank may not offer the cheapest home loan rate. Shopping around can be a bit tedious, and it’s not the most exciting aspect of shopping for a home. But if you can score a cheaper interest rate, this reduces how much you pay over the life of the loan.

Pay off Your Home Loan Sooner

Don’t think that a 30-year term is your only option. And don’t think that a 15-year mortgage will double your home loan payment. In most cases, choosing a 15-year term will only increase your home loan payment by 1/3 – give or take.

Of course, everyone can’t do this. But if you have disposable cash, and you like the idea of paying off your home loan in less time, go with this option. You will build equity faster, plus a shorter term can help you snag a better rate.

Avoid Financial Changes

Being approved for a mortgage loan doesn’t mean that you’re guaranteed to close on the house. Here’s the thing, the lender will check your credit score again on the day of closing. They’ll also verify that your income hasn’t changed.

If your credit score drops before closing, or if you lose your job, this can affect whether you’re able to finalize the loan. Understandably, you can’t control all aspects of your finances. But don’t make any big purchases or change employers until after you’ve signed the loan documents and obtained your keys.

Go with the Highest Down Payment

Lenders are reasonable with regards to down payments, and you’re not required to put down 20 percent. But just because a lender only requires 3.5% or 5% down doesn’t mean you shouldn’t put down more. In fact, it’s beneficial to increase your down payment to 20%, if doable. This can help you negotiate a better rate, plus you will avoid private mortgage insurance and have instant equity in your house.

Are you ready to take the plunge? Yes, it can be scary – and if you’re a first time homebuyer, the process might be overwhelming. However, your lender and realtor are ready to assist and hold your hand through the process.

Life Lessons from Paying off $14K in Credit Card Debt in Less than a Year

Posted on May 22, 2013 by Jen

I’ve talked a lot about my efforts to live a more fiscally responsible life, from the bad habits I’ve kicked to the curb and how I manage a bare-bones budget when I need to cut back and/or save more to the steps I took to clear my debt quickly and how I saved my down payment fund for my house. I’ve also highlighted excuses that derail efforts to save and lies people tell themselves about money.

In all of these posts, there is a great deal of financial information swimming about, but there is also a wealth of knowledge about life lessons that I’ve picked up along the way.

After re-reading a few of these posts, I began to think about the lessons I learned while I was working my tail off to erase 6 years of bad spending habits. It’s been almost 5 years since the day that I made my final credit card debt payment, and I realized that I’ve learned a hell of a lot through the crazy experience of working so hard to pay it off quickly and the subsequent years that have followed.

Accepting Responsibility is the First Step

If there’s something you need to change or a mistake you need to make amends for, nobody can take the first step but you. Holding yourself responsible for your actions (and their ramifications) can be insanely difficult, but it’s a must-do when it comes to paying off debt, healing broken relationships, etc. In order to move forward, you must accept your personal accountability in the situation.

For me, this meant totaling up all of my debts, setting a budget that I’d stick to, and making a plan for how I’d get rid of the mountain of debt in front of me. I started to track every penny coming in and going out, and I learned how to say no when it came to mindless spending–to myself and to others. Gone were the days of ‘charge it and forget it.’

You Can Always Do More

In the initial phases of my debt payoff, I worked with what I had. But when I quickly realized that cutting back would only get me so far and that I could pay off the debt even faster if I earned more, I set out to do just that. In the height of my payoff frenzy, I was working 6-7 jobs at once. As long as they didn’t conflict with my morals or values, I turned down no opportunities to make money that came my way.

Working so much was hard. In fact, it was one of the hardest phases of my life in terms of keeping balanced. But it was a short-term sacrifice with one hell of a reward at the end: Debt freedom. To me, the ability to see a $0 balance on my credit cards was enough to motivate me to keep going, going, going.

Small Sacrifices Do Add Up

Once I began to cut back, I noticed that it became easier to turn down shopping trips, dinners out, and expensive bar tabs. With each month that rolled by where I managed to save more to throw at my debt, I realized that even the small sacrifices I was making (such as packing a lunch rather than going out) were making a large impact on my bottom line.

If you have meager means and a boatload of debt to tackle, don’t be discouraged. No matter if you pay your debt off in one year or ten years, the point is to keep moving forward towards that $0 goal. Chipping away little by little will get you there–no grand gestures or lump sums required!

Keep Your Eyes on the Prize

There were tough, rocky moments at many points during the year it took me to pay of my credit card debt. As I mentioned above, working so much and playing so little was not easy–it was far from what I had been accustomed to, and it left me discouraged at times. Luckily, those moments of frustration and doubt were fleeting.

The important thing to remember is that even if you have the resolve of an iron statue, there will still be times, people, places, and memories that tempt you to derail your progress. When I got to these decision-making moments, I had an easier time staying the course of my debt payoff because I had already prepared for temptation–I had various plans for what I could do to avoid being tempted to fall back into my old, nasty habits. Set yourself up for success from the beginning by having contingency plans!

Sometimes You Have to Find Your Rock Bottom

When you’ve reached your rock bottom, you’ll know it. Mine was being penniless and nearly homeless. The silver lining of rock bottom is that the only place to go is up. For me, having such a scary yet clarifying wake up call was exactly what I needed to kick my ass into gear. Had I not found myself in a financial abyss of such magnitude, I might still be making the same mistakes that dug myself into the hole in the first place.

You are Stronger than You Think

At the end of the day, we all know that change is difficult, even if it’s planned and welcomed. Life throws us lemons, knocks us down, and dictates that we get right back up again. When you’re up against the proverbial wall, don’t give up. There’s always hope; there’s always a way to fulfill your goals and dreams. You’re stronger than you think–you just have to remind yourself of that fact from time to time.

What life lessons have you learned from paying off debt or making financial changes?

Shameful Things I’ve Done to Save Money

Posted on May 8, 2013 by Jen

The other day, I was ~~trolling~~ reading through the FinCon13 Facebook page, and I saw a post from Stephanie at The Empowered Dollar where she was asking people to share the most embarrassing things they’ve done to save money for her upcoming Confessions of a PF Blogger post.

This first made me think of my own Confessions of a PF Blogger series I started over two years ago to chronicle my financial past. Then I began to think of all of the wonky things I’ve done over the years to save a few bucks. From the cringe-worthy to the surprisingly common, here’s where my bad behaviors fall on the shame scale when it comes to saving money/pinching my pennies:

Loading up on Freebies

A lot of people responding to the FinCon FB thread mentioned loading up on free food samples while grocery shopping in lieu of paying for a meal (so have been there, done that). Some also mentioned swiping extra condiments and disposable silverware/napkins from fast-food places (yep, totally have done that before!), while others mentioned taking full advantage of buffets to line their purses or backpacks with snacks for later (what, I can’t take 5 bananas with me?!).

While I’ve done most of these, I think my mecca of free comes in part from the various sporting events I participate in. Race expos can be a gold mine of great stuff for free if you’re savvy and not shy. I’ve flat out asked for free, full-sized samples and products–and I’ve usually been rewarded for my boldness! The most shameful haul I ever pulled in? 5 pairs of brand-new Asics athletic socks that retailed for $13/each.

I was at a race and afterwards a woman put out a few cases of merchandise for the runners who were left to take home with them. I politely took my one pair but as I was turning to walk away, she grabbed my bag and stuffed in a few more pairs, saying, “Go ahead honey, take more!” I sheepishly accepted (feeling a bit odd yet elated because I really needed new socks), and I scurried my way back to the parking lot.

Estimated savings on socks, goo, drink mixes, energy bars, and even apparel: $1,000 and counting.

Milk the Student Discount

It’s no secret that I love to learn and that I’ve been pretty savvy with finding creative ways to finance my education. What’s been a bit of a secret is that I was flashing my student ID card for discounts years after graduating. I’ll admit that it’s still quite tempting to do even today, but I resist that urge because I don’t want to abuse the very programs that allowed me to have a social life when I had no money. That being said, I did get into some museums in Europe for free within the past 3 years thanks to my grad school ID. Oops!

Estimated savings on museums, concerts, travel, meals out, and other fab student-only freebies: $600+

Postpone Gift-Giving Plans

Now we’re starting to enter the real realm of shameful. Back when I was in debt up to my eyeballs, I spent two years delaying my Christmas gift giving until after the holiday had passed. Why? Because I couldn’t afford much of anything that I was used to giving people, so I waited for the after-Christmas sales, I combined the sale items with any gift cards I had received, and I bought everyone’s presents on the cheap.

Looking back, I could have just made things or given my time or even cooked/baked/cleaned for my family members. I now realize that it doesn’t matter what you give as long as you’re doing it with good, loving intentions. I no longer tie my own self worth to the extravagant gifts I can shower people with–I’d much rather just have a conversation or spend some much-need Quality Time with them!

Estimated savings after two Christmas seasons of belated gift-giving: At least $500.

Hitting the Gym for Free

In the past, I was a master of utilizing the “try before you buy” incentives at local gyms, yoga studios, and bootcamps. I was a serial gym goer…but only if it was free to me. I’d happily give out my name and spam email address, and I eagerly listened to the salesperson’s script for however long it took me to get that week-long (or even month-long) pass. Granted, this was years ago and today I don’t even go to the gym because I prefer to run/workout outside, but I shudder to think of how many places I’ve skipped out on when it came time to enroll in a paying membership.

Estimated savings through 3 years of gym hopping for free passes: $800+

Returning Clothes After I’ve Worn Them

OK, I did this once. But in my current book of financial security, once is too much. Now we are knee-deep in the arena of shame. Back when I was interviewing for grad schools and new jobs in Boston, I needed a new suit. With a pile of maxed out credit cards and only a few dollars to my name, there was no way I could buy a suit no matter how bad the need was–even if it came from a thrift store.

So what did I do? I marched into the local mall, picked out a gorgeous suit, pinned up all the tags, wore it for my interviews (all in one day thankfully), then returned it the next week. Graceful? Certainly not. Shameful? Absofreakinlutely.

Estimated savings on new suit: $350

Turning a New Page

Thankfully, I’ve come a long way since my days of ridiculous debt and living as a financially clueless wonder. I’m proud to say that I don’t do any of this stuff anymore, but I certainly wouldn’t judge someone who needs to because I understand firsthand how rough it can be to make changes in your financial world.

That being said, it’s a lot easier on your pride if you simply plan for expenses, save up for them in advance, or have an e-fund for those little surprises that can wreak havoc on your budget!

The Happy Homeowner

Living a Healthy, Balanced Life One Cent at a Time…

Category Archives: Debt