There are a lot of reasons for which homeowners choose to refinance. However there is a refinancing fees and a lot of paperwork involved in the process, so you must make sure that refinancing proves beneficial for you in the long run.
So before deciding to refinance, ask yourself:
• Why do you want to refinance?
• Will refinancing help you achieve your goal?
• And is it worth it?
Some of the common reasons for people to choose refinancing are: obtain low interest rate; get a shorter loan term; convert the loan type for ex. From ARM to fixed rate; cash the equity they own in their property.
Low interest rate
Even a one percentage point difference in rate can make a huge difference in terms of monthly payments. But the real bonus is what you save over a period of time because of those reduced interest payments. So this will make sense if you are planning to stay in your home for at least a couple of years.
Shorter loan term
If the interest rates fall drastically, this could be exactly what you want to better your financial situation. For ex. A $100,000 30-year fixed-rate loan availed at 9% can be converted to a 15-year fixed rate loan if the rate goes down to 5.5% without making any significant impact on monthly payments.
Convert loan type
Converting from a fixed-rate to ARM or ARM to fixed-rate may be wise depending upon a lot of factors. Your current rate, monthly payments, and most importantly market trends for mortgage rate. Also a tentative number of years you are planning to keep your current home should be kept in consideration.
Cash the equity
Although this seems like the easiest way to obtain cash for big expenses like college education or home remodeling, this decision should not be taken lightly. At the end of the day, it increases your debt and make sure you can afford it if you are refinancing to cash on the equity you’ve built in your home.
Before approaching a mortgage lender, it’s essential for you to decide how much money you are willing to spend. And even more importantly, how much can you afford to spend. In fact most lenders won’t take you seriously if you go to them without a mortgage pre-approval.
So how to decide your spending level?
For deciding how much you can afford to pay in terms of monthly mortgage payments, almost all mortgage lenders have a set limit for DTI ratio or ‘Debt to Income ratio’, and your DTI ratio must fall under this set limit to qualify for the loan. In simple terms, DTI ratio is obtained by dividing all your monthly liabilities by your gross monthly income. So for you to decide your spending level, all you need to do is follow the same technique.
Calculate your liabilities and gross monthly income
Anything you have to pay on a monthly basis will be considered as a liability. Include all the installment payments for any education loans, car loans, mortgage, and the minimum payment you have to make for any credit cards. Also consider flexible expenses like gardening services, pool services etc. into this.
Now suppose your annual gross income is $120,000 and your monthly liabilities add up to $3,500. Your debt-to-income ratio will be 35% in this case. Also known as back-end DTI ratio, its maximum limit is generally 43%.
But this should not be your only consideration while determining your spending level. Although your loan will get approved as long as your DTI ratio is below the maximum limit, think about other expenses you might want to make in future. Monthly saving, retirement fund, vacations are some of the other things to keep in mind. It should not be your goal to take the maximum mortgage that you can qualify for. Rather you should take a mortgage you are comfortable with.
If you are planning to buy a home, you are most probably thinking of obtaining a mortgage, and that inevitably must have made you think about credit score. Credit score is definitely one of the main things considered by lenders while deciding the terms of a mortgage. But there is a general misconception as well. A lot of people think that unless they have at least a decent credit score they cannot get a mortgage loan. Well, there are options available for people with imperfect scores as well.
But, before considering those options, what is an imperfect score? Are we talking about 400 or 550 or 660?
Normally, any score above 740 is considered excellent, and a score between 660- 740 is good. If your score is below 660 but above 600, it’s imperfect but still ok. Apart from factoring into the consideration if your loan will be approved or not, your credit score also plays a major role in determining the mortgage rate. A lender is much more likely to offer you low rate if your score is around 700 or above. Also, it may be enough for you to pay a down payment as low as 3.5%. And you’ll be able to qualify for a lot of loan options, so you can choose exactly what you want.
According to the rules, you can get an FHA loan even with a credit score of only 500, but in reality, lenders are less likely to offer you a mortgage in such a scenario. USDA and VA loans are some of the other options which can be considered if your score is low. A score of minimum 550 is probably safe bet for an FHA loan, but you’ll have to come up with a sizable down payment, maybe more than 10% and rates offered will be high.
It is best to check your credit score and records before you start shopping for a mortgage loan. And always remember, there are other factors as well which influence mortgage. Your income, assets, and employment history are some of the other things which are given due consideration.
It might take a little time and effort on your part to understand various mortgage loan options available in today’s market, but in the long run, you will be glad that you invested in this research. A mortgage loan is probably one of the largest debt you’ll ever take on, and in most cases, your interest payments sum up to a bigger total than the principal you availed. So it becomes essential that you choose the option which will be a best fit for your financial situation.
Some of the common loan types are:
Fixed rate
As the name suggests, the mortgage rate remains fixed for these loans. The duration of the loan may vary from 10, 20, 15, to 30 years.
For those who want predictable monthly payments, and are comfortable even if it means paying a little extra, this is a good choice.
Adjustable rate
The rate for this type of loan can change after an initial period of fixed rate. Normally, the change occurs yearly and there is a cap included. For example, if initial rate is 6.5%, annual cap is 2% and a 6% cap over the lifetime of the loan, the rate will stop changing after it reaches 12.5%.
This is a good option if you want to buy more on a lower current income, and are sure that your income will significantly increase with time.
Reverse mortgage
Using reverse mortgage, you can convert your owned home equity into cash. This allows the homeowner to borrow cash against their home, and no repayment is required until the borrower dies or the home is sold.
This is a suitable way to generate extra income for people in their late sixties or older, who own their home and are planning to live there for a long time, and are worried about future expenses.
Mortgage refinance
Do you think your current monthly mortgage payments are a little too much? Or are you looking for a way to convert the equity you have earned in your house into cash? Well refinancing may be a good option for you then.
Refinancing basically means taking a new loan at better terms to satisfy previous loan. But make sure you are planning to stay in your home for at least a few years to make the paperwork and refinancing costs worth it.
There are various debates surrounding reverse mortgage. Some might tell you that it’s one of the best retirement plans, and others may say that there’s no bigger mistake you could make. But the thing is, reverse mortgage may be good or bad depending upon your requirements.
Reverse mortgage is simply a way of converting your home into cash. But obviously, there are various nitty-gritties attached to it, and you need to consider all of it before you opt for it. So how do you know if reverse mortgage is right for you?
You can start by asking yourself some basic questions.
Do you understand all the rules?
Make sure that you are not taking a reverse mortgage because someone coaxed you by making big promises. Check all the information out for yourself and U.S. Department of Housing and Urban Development is the best place to get all the info.
Are you eligible?
You must be at least 62 years old and either own your home completely, or have sufficient equity in it. Also it is required for you to receive information from an approved HECM counsellor.
Do you live in your home?
First of all, to avail the mortgage, it is required for that property to be your primary residence. Also it is an ideal condition if you want to live the rest of your life in same place.
It is not same as selling the place!
You will still own the place, and will be required to pay property taxes and insurance and will be responsible for maintaining the property.
Ideal if:
You are in late sixties or older, are worried about future expenses and have equity in your home.
Make sure you talk to other members living in the home about this. A reverse mortgage becomes payable if the last surviving borrower of the loan moves out, or dies. In that situation, lender sells the property to pay off the loan. If you want to keep your house, you will have to pay off the mortgage.
The first thing to know about mortgage rates is that they are highly flexible. If the rate is 5% today, it might become 5.5% in just a few days. But what difference does a small change of .5 will create? Actually, it can significantly impact your monthly mortgage payments and consequently alter your whole financial situation.
Monthly mortgage payment normally has two main components: 1) interest owed on remaining loan balance and 2) a part of principal loan amount. Now for a loan of $20,000 with 5% fixed rate and 30-year term, monthly payment will be $1074. However for a 5.5% rate it would be $1135. A mere difference of $61 will compound to $21,960 over a span of 30 years, which you could have otherwise put to a better use. So it’s very essential that you keep yourself updated about mortgage rates and lock in to a rate if you think it’s good for you. Locking in is pretty simple. All you need to do is let your lender know that you accept the offered rate, and then it will neither go up or down for you between the offer and the closing period.
But at the end of the day, for a first time buyer, mortgage rate is just a contributing factor. While deciding to avail a mortgage loan, you have to give due consideration to other things like down payments, other future plans, and your overall financial situation.
In case of refinancing loans, mortgage rate becomes much more significant. Suppose rate on your current loan is 5.5%, and there comes a low in mortgage rates, and you get a 4%. Depending upon how much outstanding loan balance you have, all the paperwork and refinancing fees might actually be worth it.
Now, how to get the best rate? A lot of factors like economy, government policies etc. influence mortgage rates. And there’s nothing that you can do about any of these. However one factor which you can control is your credit score. Lenders are usually more likely to offer you a low rate if you have a good credit score. Obviously credit score cannot be changed overnight, but if you have a mind to avail a mortgage loan, you can at least check up your credit and make sure that you don’t reach the maximum credit limit or make any defaults in payments.
In simplest of terms, mortgage refers to a loan availed by putting up a real estate property as security. This is one of the most common means of acquiring required finances for home purchase for a lot of people. But considering the numerous options for mortgages available in today’s scenario, and the fact that this is probably one of the biggest debt taken on by most people, it can get pretty overwhelming. And trouble in understanding financial jargon just adds on to the heap of various other problems. But it reality, the whole process of getting a mortgage is not that difficult. Once some basic concepts are clear, almost anyone can easily navigate through it all and convert their dream home into reality.
Acquiring real estate for personal or commercial usage is the primary goal of a mortgage loan in most cases. It’s a way for buyer to not pay the whole value of the property upfront.
Some of the important terms associated with mortgage are:
Collateral: The property purchased is kept as security in the whole procedure, and is also called collateral. If the borrower fails to repay the loan including interest and other costs, the lender has a right to sell the property to cover debt.
Down Payment: The amount of money payed upfront for property purchase. Percentage of required down payment varies from case to case, ranging from 0% to as high as more than 20%.
Mortgage Rate: It simply refers to the rate of interest charged by the mortgage lender. Although borrower’s credit score may play a major role in determining rate, at the end of the day it’s decided by the lender. Rates may be fixed or variable.
PMI: Private mortgage insurance is required when down payment is less than 20%, and it basically protects the lender in case the borrower defaults in mortgage payment.
Taxes: Apart from principal, interest, and insurance, monthly mortgage payments usually also include taxes.
The process of acquiring a mortgage loan is over in just 6 simple steps.
1. Determine the amount of loan you can afford
2. Choose the best loan option for your needs
3. Apply for the loan
4. Get your property appraised
5. Underwriting, which basically means an expert determining if the loan should be approved or not and suggesting required changes.
6. Closing of the loan
Vacations are an excellent way to get away from the stress of everyday life and recharge your batteries. Though the idea of getting out of town is great, certain unplanned incidents can convert your trip into an upsetting situation for all the people involved. Such events are unavoidable, and it is important to take them in your stride.
It is counterproductive to be constantly worried about how the vacation will turn out. Do not get stressed out about trivial matters like the timing of the flight, the availability of rooms at the hotel, budgeting and packing. Rest assured, it is not impossible to have a relaxing vacation.
Below are some tips that can help you plan ahead and have a stress-free vacation.
Take the pressure off When you have fewer vacation days and a hectic work schedule, an upcoming trip might be the only thing that you look forward to for months. But, your plan can backfire when there is massive pressure to make the vacation perfect. At times, the best memories of your vacation are the ones that come from engaging conversations, wonderful people, or tasty meals. While it is important to have a plan, keep this flexible and allow yourself to be spontaneous to really experience the place.
Do a background check on the place You will never deliberately write a major exam without preparation of some sort. Similarly, you need to do some research on the place you are visiting. Find out about the best tourist spots, restaurants offering local specialities, beaches, sights and comfortable hotels to stay in. This will give you an idea of what to expect, where to go, and any dangers or risks that you must be aware of.
For example, If you like fireworks and massive parades, visit Paris on Bastille Day. This is an annual festival held in France during the month of June. It celebrates the storming of the Bastille and beginning of the French Revolution. Also, you can check out the La Tomatina festival in Spain. Every year in the month of August, thousands of people gather at the town of Bunol in Valencia to throw tomatoes at each other in the name of tradition and fun.
Besides fun and excitement, you need to think about other factors that can impact your travel plans. Do you plan on travelling during the stormy or rainy season? Are the crime rates significant in the places you are visiting? Will you have access to emergency funds if required? These are some of the things you must consider.
Have a flexible itinerary Keep in mind that unplanned events will take up a lot of your vacation time. A cancelled tour, delayed flight, and slight snooze must not throw your whole itinerary off. You can plan activities on specific days but make sure to leave some days open or free.
If your schedule is flexible, you shouldn’t rush into getting everything on your travel wish list completed. You can do various unplanned activities like catching a few hours of sleep at the beach, visiting and exploring hidden streets, or relaxing at a café and watching life pass by, over an espresso.
This way you will learn to enjoy your down time, which is the major reason why you went on the vacation in the first place.
Take copies of your important documents You don’t have a choice when it comes to carrying your visa, passport or insurance papers while crossing borders. But, you can limit the number of times you take these out in foreign places. Make sure to carry photocopies of important documents with you before you leave.
This way you can keep the originals along with some extra cash safely locked in the hotel room safe. This ensures that even if you become the victim of theft or misplace the copies, your original travel documents will be secured and safe.
Have a collective goal for the trip No doubt travelling with other people can be quite stressful at times. Often each person will have their own set of preferences. Sometimes your partner will want a beach day, and you may want to explore the market. Your friends may be expecting a party weekend while you are looking forward to watching movies in bed or taking a bubble bath.
Before going on a holiday with other people, it is important to have a discussion and create a set of collective goals for the upcoming trip. People go to exotic places for adventure, relaxation, celebration or romance. Doing a mix of these activities will help in avoiding any awkward moments especially when you find out that your expectations are different from others in the group.
Wrapping Up Always keep in mind that vacations must be relaxing. They must not consist of a constant stream of stressful activities. Remember that you booked the getaway to escape the stresses of everyday life and not trade them in for new ones.
When unplanned events occur, it is important to go with the flow and not feel overwhelmed. Sometimes the best travel memories stem from unexpected adventures. Follow the tips mentioned in this article, to make your vacation stress-free and memorable.
Have you ever seen some miserable backpackers, on the road, hauling around monstrous, overweight, oversized and over-packed bags on their backs that make it look like it’s difficult to walk?
They’re sweating and swearing and vowing that they’ll never pack that much stuff again!
I have been one of those people. And I’m sure you probably have been too, at some point.
But, no longer! That stops today!
You see…
Life on the road becomes much easier when you pack correctly, by taking only what you need and leaving the rest at home. It’s more comfortable, first and foremost. You’re a lot more mobile so it’s easier to get around. Also – if you live out of a small enough backpack – you’ll save yourself a fair bit of money on airline baggage fees.
THE BENEFITS OF LIVING OUT OF A BACKPACK
There are plenty of reasons why one should live out of a backpack while traveling. Here are just a few:
Less time wasted at airports, waiting for your luggage, or (worst-case scenario) trying to track it down if it gets lost! Yes, this does happen (more than you think).
Save money on flights.
Less back and shoulder pain.
Easier to travel on buses, trains and other forms of domestic transportation.
More energy to enjoy the backpack life.
Living out of a backpack is all about eliminating the non-essentials so you can focus more energy on what’s really important; the trip or adventure that you are embarking on. And this may be the greatest benefit of all.
In a deeper sense, living out of a backpack – and backpacker culture in general – is about rejecting widely accepted social norms.
We are told to shop and buy and consume and own stuff. And this stuff is never enough. We always need more stuff.
No wonder so many of us are not content or happy. No wonder the world is suffering due to our gross consumption habits.
What we need to do is take a step back, assess our priorities and adjust our life accordingly.
Instead of chasing possessions, we should chase experiences.
Instead of acquiring more stuff, we should simplify and live with only what is of most value to us.
This is what living out of a backpack is all about. It’s what it embodies.
Most people end up happier and more satisfied with their life when they get rid of unnecessary excess, declutter and simplify their lives.
So, if we apply the same principle to travel and backpacking, shouldn’t we expect the same results; a more fulfilling, rewarding and enjoyable travel experience?
RULES FOR LIVING OUT OF A BACKPACK
Contrary to what you might first think, living out of a backpack doesn’t necessarily have to be a challenge.
Yeah, there may be difficulties in the beginning, but soon, you’ll be looking back at your previous, multiple bag, suitcase self and wonder what the hell was wrong with you.
In order to make the transition process as simple and stress-free as possible, here are a few simple guidelines to remember…
STICK TO THE ESSENTIALS
Whenever you’re packing or planning your trip, always make sure you ask these questions:
Do I need this?
How useful is this?
Would it make more sense to save the space in my bag now and buy this when I’m out there?
The goal here is to weed out everything you want to take or think you need to take with you that you actually don’t.
If you find yourself debating whether or not to pack something or thinking “what if I need this”, chances are you’re not going to need it at all.
Stick to the essentials, and you’ll be amazed at the size of the load that’s taken off your back.
Both physically and mentally!
LESS IS MORE
Less weight, more effectiveness.
Less weight more mobility.
Less weight, less physical strain.
You get the idea!
The point is, travelling with less is almost always more beneficial to you.
Having less doesn’t make you unprepared or anything. Because it’s not just about how much you pack, but also what you pack.
Let me explain…
By focusing more on multi-purpose, versatile items(these can include gadgets, clothes or anything else) you’ll be able to be just as prepared for your trip, using only a fraction of the space you’d use otherwise.
Oh, and while I’m talking about space…
There seems to be this common misconception in life that if we have space we must fill that space.
Travel is a perfect example of this.
In fact, this is often the root cause of many of our overpacking problems.
The simple solution?
Give yourself less space.
By downsizing to a smaller backpack (more on this in a little bit), you will inevitably force yourself into being more selective and honest when it comes to what stuff to bring and what stuff gets left behind.
PACK ENOUGH CLOTHES FOR 1 WEEK
Whether you’re travelling for a week or a year, this will almost always be enough clothes.
With the abundance of laundry services you’ll have access to, it’s not difficult at all to make do with a smaller wardrobe.
If you’re a full-on budget backpacker, it may seem more appealing to wear the same clothes over and over again to avoid laundry costs. And when it does finally get to the point where clothes just need to be cleaned, the shower seems like a better option than any washing machine.
LEAVE SPACE
Remember what I said earlier about getting a smaller backpack?
Well, if you don’t want to do that, keep the same pack but make a concerted effort not to fill it to the brim. Stop once it’s half full or maybe two-thirds of the way.
The point of leaving this extra space is to primarily, teach you to pack light and travel with essentials only.
But, it’s also so that you can pick up the odd gift or souvenir. It’s so that you can get those additional clothes or toiletries that you needed. It’s essentially helping you stay prepared for any unexpected expense or purchase on the road.Posted by : travel360 On December 31, 2019 | 0 Comments
