Thursday, May 10, 2012

How To Pay Off A Mortgage Effectively

A lot of people end up with a mortgage that they are having extreme difficulties paying off, but it doesn’t have to be that hard. Provided that you have a good income and a steady job, you should be able to make a financial plan (otherwise known as a budget) and pay off your mortgage much sooner than the end term time.

How do you start budgeting if you’ve never done it?

It’s not important why you haven’t budgeted before, the real thing to worry about is why you are not doing it now? If you want to be serious about paying your mortgage off in a reasonable amount of time, there’s absolutely no reason to waste time without budgeting. But how do you go about doing it if you’ve never done a budget before? What if your money is usually all over the place and you are often in the red going for overdrafts, or you are finding that you are living month to month? What do you do to fix your situation and have a chance at actually paying that mortgage off before your retirement?

Step one: account for everything

The first step when you are making a budget is to record every single item that comes into the pot and every item that goes out. To make it easier on yourself, it’s recommended to buy software that does all the math for you, so all you have to do is plug numbers in. There are plenty of options available and many of them can be used on a variety of computers. There are even online versions that you can use from your browser or standalone software that you can buy. You can also simply use Excel or another spreadsheet program and make your own budget if you’re a bit tech-savvy with formulas.

But the trick is to record every bit of income you get and every expense you make. When you start doing this, you will have a clear idea of where your money is going and what your real value is. After just a few weeks of doing this, you will quickly realize some of the things that could be saved on. Let’s look at some of these in detail.

Saving on your budget to pay off your mortgage

There are quite a few items that often crop up in many people’s budgets and you can cut back on many of them to save, so you can pay your mortgage off faster.

Utilities — Every utility can have savings. You can save on gas and electricity by installing energy efficient devices in your home. You can save on the Internet, phone and the TV by using them less or not at all.

Food — While food should be the last thing you cut, you can certainly buy cheaper food. Incidentally, food that is healthier is also cheaper. Win-win.

Entertainment — If you are serious about paying your mortgage off in any reasonable amount of time, you should cut entertainment as much as possible.

These are just some of the things you can consider to pay off your mortgage faster!

Securing A Mortgage With Terrible Credit

A lot of people think that just because you have a terrible credit rating, you will never be able to get a mortgage. People who have gone bankrupt often believe that they are in the worst situation, as they think that they will never be able to fix their credit rating. The truth is that even if you have the lowest possible credit rating, no matter how irresponsible you were with your finances before, in time your rating can still be fixed. In fact, after a certain amount of years (which tends to vary state by state) even a bankruptcy will be removed from your permanent record.

So even after the worst experience, you may still be able to get a mortgage.

Fixing your credit rating

But how do you actually fix your credit rating so you are eligible for a mortgage? The banks will certainly not negotiate with you if your rating is very low, so the best advice is to just wait and to adopt safe and sound financial practices until then.

Even in just a few months, if you have a good job with a steady income and if you pay your bills on time, you can significantly improve your credit score to the point where you may be eligible for a smaller loan. Provided you have some money saved up for a down payment, you might be able to secure that mortgage in this way.

Improve your credit rating with loan repayments

In your quest to secure a mortgage, another great way to improve your credit rating is to take out small loans that you know you can pay back easily within a few months or even just a few weeks. Many banks now offer a service where you can specify what you want a loan for — such as a car, furniture for your apartment, appliances, computers and so on. Even studies can be financed. By taking out small loans like this and repaying them promptly and on time, you can drastically improve your credit rating to the point that you will be able to get a mortgage after just a year or two of doing this.

Improving your credit rating with bills

If you’re hunting for a mortgage and your credit rating is not very good, then there are other ways that you can improve your rating so that you can get a great mortgage. For instance, by paying your bills promptly and on time, you will improve your rating quickly. Many people like to set up automatic payments on their bills to assure they never miss a payment, but it’s actually better in terms of credit reporting to make the payments yourself and to do them all around the same time every month. Many banks report better scores if you keep a budget, know where the money is going and also show that you are saving significantly and as much as possible every month.

Securing a mortgage, even if you are coming from a terrible financial background is not that hard it just takes a bit of financial management.

Wednesday, May 9, 2012

Mortgage Tips - The Biggest Financial Tip To Help With Your Mortgage — Budget!

Many people are struggling to pay off their mortgage, car, insurance, furniture, utilities, groceries and other monthly expenses. Compound that with expenses on families such as education, medical and other surprise costs that always seem to come out of the blue at the wrong time, and it can be maddeningly difficult to climb the financial ladder. Worse, just when you think you are out of the frying pan, you often land right in the fire as another unexpected expense broadsides you out of nowhere.

But there is an easy and effective way to eliminate all these problems and stay current on your mortgage. It’s not a miracle fix and it’s not going to let you pay off your mortgage all at once. It’s also certainly not the latest “get rich quick” scheme, or advice to buy lottery tickets and pray to whatever god, force or power you believe in. No, it’s none of this nonsense! It’s as simple as keeping a budget.

But what exactly is a budget?

To be able to pay off your mortgage and other expenses in time which will reduce stress, you need to understand exactly what a budget is. Many people have some vague ideas about what a budget is, but they do not understand the fundamental principle behind it.

The first point of a budget that you need to understand is that you MUST give a task to every single dollar that comes into your house. You can make your life much simpler by searching and purchasing a budgeting software or if you’re good with Excel, then creating your own budget that does all the calculations for you. Either way, whatever software you use (even if you just use an accounts book and write down your mortgage payments, utilities and income by hand), you absolutely must record every dime and nickel that comes into the household.

Give the dollars a task!

The next crucial step to freeing yourself from mortgage miseries is to give every single dollar that you earn a task. For some people the equation is easy, because they get paid once a month. For people who run a business or work freelance, it can be tricky, but the point is to record everything you get and as soon as you get it give that money a job to do. The point of the budget is to allocate your resources in a way that there is a clear plan that you can stick to and in the long term — save.

The first goal

Your first goal with any budget you start is to get together at least three months living expenses as soon as possible. Therefore, for the first few months of your budget while making your mortgage payments, groceries and other expenses, try living a bit more frugally and put aside an amount every time you get money that slowly builds towards this three month buffer zone. Once you have your buffer zone of cash, dump it in a high savings interest account and forget about it.

By doing this, you will have taken the first step towards financial freedom from your mortgage and will not only have covered for future emergency expenses, but you can start spending your extra money elsewhere.

Financial Tips on Securing a Mortgage

Many people are on the lookout for a great mortgage, especially when they are just starting out in life. If you are new to the world of bills, credit, banks and finances because you’ve just finished college or you are settling down after having gotten married, then it can be quite difficult to secure credit for a mortgage. Banks and other lending institutions simply do not have enough of a credit record that they can look up to see whether they can trust you with a loan.

Even if you have a great job with a regular salary, if you do not have a credit history of paying bills that can be verified, you will find it difficult to secure a mortgage. And it’s not just people who are new to the world of credit that have difficulty with this, but in this day and age more and more people are becoming mobile and moving to different parts of the world. If you are just starting out as a migrant worker or a student living in another country, even if you have finances in the bank and a good income, you might need to wait for a while before you can successfully apply for a mortgage.

Time will help you

The fundamental piece of advice to keep in mind when looking to secure a mortgage that with time, even the worst credit rating (or no credit rating) can be fixed. At most, it should not take you longer than 1-2 years on average to prove to the banks that you are worth trusting with a mortgage and many people find that it can even take less than a year in some cases.

How to speed the process up?

That’s not to say that you should wait around hoping that it will sort it out by itself. There are fundamental things you can do, apart from the basics such as paying all your bills on time and having a regular salary, which will speed up the process of becoming eligible for a mortgage.

Perhaps the biggest step you can take is to open a high interest savings account at your bank (or at another bank to vary your financial portfolio — always a plus point) and to make regular and consistent deposits into it every month. Not only will you gain extra money as long as you do not touch this and let the interest keep growing, but you will increase your value and will be able to use it as a down payment on the mortgage later on.

Another good step you can take to speed up your credit rating improvement is to buy small things with your credit card and regularly pay the bill on time and promptly. Some people for instance designate that they will use their debit cards to pay for groceries and household items, while if they go out to restaurants or other entertainment they use their credit card. This will give you an extra bill to pay every month that you can use to boost your credit rating in the long run and allow you to qualify for a mortgage faster.