Friday, March 27, 2009

Tough times..but basic rules of Personal Finance still remains the same:

The most common discussions that you will come across today, are in some way related to the present financial scenario. Some are worried for their present financial status and some worried for their future. Everybody, in some way, is undergoing a phase of financial tension now.

Times are really tough. But irrespective of the economic condition, good or bad, the basic rules of personal finance still remains the same. Please don't get panicked by the term "rules", they are just some basic tips that will help you improve your personal finance at any point of time. It just takes little dedication to achieve financial abundance for future. Here are the few rules of personal finance:
  • Pay yourself first
Let me be more clear with what I meant by saying "pay yourself first". This means keep away something from your present income for your future. Do not barely depend for your retirement or the government to get there. You should always keep some away for emergency.
  • Live within your means
This is one of the most important rules of personal finance. One should always know his or her expense limitations. Try spending less than your income. Though this sounds very obvious yet very few of us follow this rule. Its hard to resist the lure of the new things that we can afford to buy. Think of the long term for a secured future. Savings plan is a good option. There is no doubt that effective cost cutting will result in big savings.
  • Pay off your debts
It is truly said that debt is financial cancer. From today itself make it a priority to pay off the debts. And also try to stay away from it as much as possible. Here's one of the most common example that I can think of : the use of credit cards. We often tend to forget that this is money after all. It might happen you have to pay your negative balance, which is really tough if you have not controlled your expenses.
  • Plan your budget properly
Proper planning of one's budget is an important criteria for personal finance. Depending on your earnings, you should plan your budget such that overall expenditure is less than your net income. If you succeed in this, you don't have to think for your future financial crisis anymore.

Of course there are many more advices and guidelines that you can follow. But I am sure if you are able to accomplish these few steps, you will be successful with your personal finance. So just don't stop think about it,start following the rules for a stress free life.

Thursday, March 19, 2009

What's the point with Mortgage Points?

Anybody having some knowledge on mortgage, or who has undergone the home purchase process, or has compared mortgage rates, must have come across the term 'Mortgage Points'. Though the term sounds a bit abstract but it's fairly a simple concept.

A mortgage point is nothing but a percentage of the loan amount that has to be paid to the lender. One point simply means 1% of your total amount of loan. For example, say your loan amount is $450,000 and the lender is charging 1%, so it'll be a cost of $4500.

We all know that the mortgage process differs with places all over the world. However the concept of paying mortgage points is quite common in United States. There are basically two types of mortgage points - Discount points and Originating points. Depending on the type, the lenders charge different amounts. So it's wise to choose the one that best suits you. Lets briefly discuss about these two kinds of points:

Discount points: These are prepaid and tax deductible interest that help you to lower your overall mortgage payments. The basic idea here is to pay little extra at the beginning, the interest rate gets decreased by 0.25% with purchase of each point and you can pay less over time.

Originating points: In this type, as the name suggests, you have to pay these points for launching your mortgage. They are not tax deductible and does not have much valued benefits.

Now the question arises, why should you pay mortgage points? Let me give you a simple example. Consider, in the first situation, your lender has offered you a mortgage at 8.75% interest and with no points. Whereas in the second case, say you are offered for 8% interest only if you pay 3 points. Now, over the time period of a 30 year mortgage, you would save money if you choose the second case. But keep in mind, if you plan to live in the home only for a shot span, then avoiding mortgage point is a better option.

In most cases, paying mortgage points has been effective in saving a lot, in the long run.

Friday, March 13, 2009

Refinance your Mortgage and Save Cash!

What is refinance mortgage?

Mortgage refinancing is the process of replacing the existing mortgage loan with another new loan using the same property as security. This is basically done to lower the interest rates and save money. Another reason may be due to change of mortgage rates from adjustable to fixed loan rate.

When and why refinance your mortgage?

There are several reasons why people opt for refinance mortgage, depending on their financial options and needs. The reasons could be lowering the monthly payments, cashing out home equity loan, consolidating two or more loans into a single loan, paying off the old credit card loans,etc. The process can prove as an asset if properly planned and executed.

Check out some of the benefits of refinancing your mortgage:

* Reduced interest rates resulting to lower monthly payments.
* The old debts can be paid by the borrower.
* The time period for paying the loan can be reduced.
* He can evade many tax liens.
* Getting rid of PMI.
* Improve your credit score.

However one should always remember refinancing mortgage loan can lead you to trouble if you overlook the terms and conditions properly and refinance at the wrong time. So it's better to consult a professional when you are willing to refinance and enjoy the benefit of saving more money.

Thursday, March 5, 2009

Bankruptcy myths - Can be misleading:

The term 'bankruptcy' leaves a negative impact on our minds, although its a very wrong concept. There are a number of myths about bankruptcy that prevail among the common people and they get circulated through word of mouth. These are false notions that prevent people from filing for bankruptcy even in time of crisis.

I am sharing some of the common bankruptcy myths here:

  • People filing for bankruptcy must have done something wrong: This is one the most common myths, which is 100% false and unfair to consumers. This is a baseless claim, anyone can fall upon hard times and needs to file bankruptcy.
  • People fear that they will lose all their possessions: In fact, many of the times, people filing for bankruptcy do not lose anything. The bankruptcy laws differ from state to state, and mostly they provide specific exemptions to protect your property. Although there are certain limits, but exemptions can allow you to retain a home, a car, and any other personal property.
  • The credit score will be badly hurt: It is true that a bankruptcy will be listed in your credit report, but it won't ruin your credit score for an extended time period. Bankruptcy helps you to eliminate all your previous debts and you can start afresh to rebuild your credit. Moreover, you must be surprised to know that if your credit score is below 600, filing for bankruptcy can actually build your score.
  • Both spouses will have to file bankruptcy: Not necessarily. In some cases both of you have to file when the debts are in both names, otherwise there is no compulsion. Its better to consult with your attorney and accordingly choose the better option.
  • Bankruptcy is a very difficult process: While it is possible to do the filing process yourself, there's no harm in consulting with an attorney. And now, with availability of resources on the internet, it has rather become an easy process. Just be aware of the frauds and scams.

The fact is: debt is the problem and bankruptcy is the solution. So, do not let such myths mislead you and prevent you from getting the financial help that you deserve.