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Mortgages Explained

There are several types of mortgages that are available, notwithstanding the sub-prime mortgage crisis and its effect on homeowners.

1. Fixed rate mortgage – This is a mortgage where monthly payments remain the same throughout the entire term of the loan.

Note that there are two types of fixed rate mortgages: 15-year and 30-year. The benefits of both are described by Bankrate in this way:

“With 30-year loans, borrowers generally get lower monthly payments even though their rates are higher. That’s because the longer amortization schedule spreads the additional cost of the rate differential – which was roughly 30 basis points in mid-September – over twice as much time. People can buy larger houses or keep their payments on smaller homes affordable as a result.

Fifteen-year mortgages, on the other hand, help buyers own their homes sooner. Even though their payments are larger, they build equity faster because more of each payment goes toward principal rather than interest. The lower interest rate and shortened term make the loans cheaper by lowering the overall interest bill.”

2. Adjustable rate mortgage (ARM) – Unlike the fixed rate mortgage, the ARM rate changes based on the market.

3. Balloon mortgage – According to Bankrate, a balloon mortgage has a “payment schedule similar to that of a thirty year fixed rate loan, although the term of the balloon loan is shorter, most often spanning five to seven years. At the end of the loan term, the outstanding balance must be paid in one lump sum, either out of pocket or by refinancing the home.”

4. Interest only mortgage – In this case, the homeowner is allowed to pay only the interest for a specific period of time on the loan before the principal is paid. After the time has expired, the payments increase to include the principal. Note that this may not be a prudent way of paying a mortgage since higher payments overall will arise.

Given the fact that banks are still not lending, acquiring a mortgage that is right for you may be a daunting task.

However, try to stay away from predatory lenders who offer you a mortgage that seems too good to be true. Research many qualified and certified lenders to compare and contrast the different mortgage types before you sign on the dotted line.


Parental Tips on How to Teach Your Kids about Money

In these difficult economic times, now is a good time to begin teaching small children about money in a manner they can appreciate and absorb.

Here are some tips:

* Sit down with your children and talk about money and its value. Use coins to show examples of how money is earned and spent.

* Talk to your children about the importance of saving. Use tools such as a piggy bank or the family jug to illustrate the point.

* Explain to your children the difference between the items you need and the items you want.

* As they grow, show them how to use a checkbook. Explain what the checking account is for and then take them to the bank and explain its function. Let them see how you deposit money into a savings account.

* When they are old enough, take them to the bank to open a savings account of their own.

* When you take them grocery shopping with you, explain why you choose one item over another.

* Have weekly discussions about the family budget.

* Explain why it is important to save money, especially now. Give them a clear picture about the current crisis so they can understand why family spending has to be cut down.

* Take out the Monopoly money and use it to illustrate how the family budget works.

Experts from Family Education advise that it is never too early to teach children about money. From ages six through ten is a good time to begin discussing what money is, how it is used, and the importance of being responsible as well as understanding that everything costs money.

From ages eleven through thirteen, you can begin the process of opening up a savings account, how to shop in an appropriate manner, and the importance of giving to those less fortunate.

Teenagers from fourteen through eighteen will be learning about getting a job, saving for college, budgeting, the pitfalls of credit cards, and the meaning of taxes.

Allow young children to ask questions and answer them honestly. Utilize repetitive learning and give them small tasks they can perform to ascertain if they fully understand its meaning.

Finally, lead by example. Children learn from their parents and if they notice that the family is utilizing money in a responsible manner, they will begin to make the connection and become financially responsible as adults.


Which Savings Account Is the Right One for Me?

There are several types of savings accounts that anyone can open at their local bank. Let’s take a look at four of them.

1. The first is a regular passbook savings account. The bank may require an initial deposit in order to open the account. However, you can deposit and withdraw money at any time, as long as you keep the initial balance in the account. You can check the interest received on passbook savings by comparing banks either online or by visiting their location.

2. A money market account offers a higher rate of interest than the regular savings account.

3. A Certificate of Deposit or CD yields a high rate of interest. The difference between this and a savings account is that the money is held for a specific period of time, depending upon the type of interest rate. Moreover, unlike the savings account, you cannot withdraw funds at any time.

4. A holiday club is another form of savings. Although it does not offer a high rate of interest, it is nonetheless a good way to save money for the holidays. You can open a holiday club book for five, ten, or twenty dollars. A calendar accompanies the passbook delineating when the payments are due. If you do not reach the goal, that is, complete the required number of payments, you will still receive a check a few weeks after the last date of payment as noted on the passbook.

If you are interested in opening any one of these savings account, it is a good idea to talk with the bank personnel to determine the appropriate account for you.

For example, if you have a large sum of money you can open a CD account and a regular savings and checking account. In this way you can utilize both the savings and checking accounts to cover whatever expenses you have on a monthly basis, while at the same time keep the bulk of the money in a CD account to obtain higher interest.

When the CD account reaches the expiration date, you can take all the money earned in this account and renew it. You can also take the interest earned and add it to your checking and savings accounts.

Keep in mind that all savings accounts are insured by the FDIC for $250,000. Check with your bank and ask about their


Rate Lock Basics: What Everyone Should Know

What is a rate lock? According to the Consumer’s Guide to Mortgage Lock-ins, a rate lock is a lender’s promise to hold a certain interest rate and a certain number of points for you, usually for a specified period of time, while your loan application is being processed.

Establishing a rate lock will depend upon the lender. It may take weeks before all of the paperwork is prepared, so locking in a rate during this time benefits you, the consumer.

There is a disadvantage, however to a rate lock. Let’s assume that your lender has given you a rate lock and is now processing the paperwork. Let’s also assume that the interest rate has gone down. The question then becomes whether or not the lender will offer you that lower rate.

It is important that the rate lock is given to you in writing. The Consumer Guide asserts that some lenders have pre-printed forms that set out the exact terms of the lock-in agreement, while others may only offer an oral agreement. It is prudent course of action to seek out only those lenders who offer the former, rather than the latter.

Will you be charged for a rate lock? Some lenders do assess a fee at the outset for a rate lock. Also be aware that some may also keep that fee if, for whatever reason, your application is withdrawn.

How much is the fee? That depends entirely on the lender. They may charge you a flat fee, a percentage of the mortgage amount, or a fraction of a percentage point added to the rate you lock in. It varies among lenders.

How long will the rate lock be available? Although the normal lock-in time is from 30-60 days, there are some lenders who may only offer the rate lock for 7 days, while others may offer you a 120-day rate lock. Keep in mind that the longer the time given, the more money you will pay for this service.

Here are some questions you can ask each lender you visit regarding rate locks, as posed by the Consumer Guide:

* Does the lender offer a lock-in of the interest rate and points?

* When will the lender let you lock in the interest rate and points? When you apply? When the loan is approved?

* Will the lock-in be in writing? If the lock-in is not in writing, you will have no record of the lender’s agreement with you in case of a dispute.

* Does the lender charge a fee to lock in your interest rate? Does the fee increase for longer lock-in periods? If so, how much?

* If you have locked in a rate, and the lender’s rate drops, can you lock in at the lower rate? Does the lender charge you an additional fee to lock in the lower rate?

* Can you float your interest rate and points for now, and lock them in later?


Save Money By Cooking at Home

Making dinner every night can be difficult, especially if both you and your partner work. But there is a way you can save both time and money, and prepare delicious and healthy meals in the bargain.

Here is an example of how you can prepare a simple meal at home and save a fortune in the process.

First, check the Sunday papers to find out what’s on sale at the supermarket. Clip coupons then go online and print out more coupons.

The following Friday, after work, take a trip to the supermarket and buy only those items you need for the meals you are going to prepare for the following week.

The next morning, Saturday, spend the entire day cooking. Place the meals into containers, label them, and put into the freezer – ready for the upcoming week or, in some cases, the next two weeks.

Regardless of whether you work at home or outside the home, the meals are prepared and there is much less stress placed upon you.

The beauty of cooking meals at home is that not only can you save quite a bit of money, but you are also creating healthy and nutritious meals for the family.

No matter whether you prepare soups, stews, poultry, meat, or vegetable dishes, you would be surprised at how little effort it takes to prepare simple meals and save money by not eating out. Think about how much you spend on parking, tips, and taxes plus the cost of the meal at the restaurant. Compare it to how much it costs to cook comparable meals at home. It’s a substantial difference.

Moreover, there are wonderful and easy recipes you can print out from FoodTV.com, as well as tuning into the food channel and watching as a favorite personality prepares simple meals in 30 minutes.

Here’s another example: Instead of ordering a pizza pie that may cost around $15.00, you can make little English muffin pizzas for a third of the cost. Besides, they taste great and the kids will love them.

As each of us prepares to make sacrifices during this recession, what better way can you think of to save money than to prepare meals at home?


Save Money through Comparison Shopping

How many times have you made a purchase online and then found it cheaper on another website? How many times have you shopped at a department store only to find that the same item cost less at another store?

Comparison shopping is probably the best way to save money on items, unless you have coupons or belong to an online discount site. There are many ways to comparison shop utilizing some terrific websites.

Cnet.com is great for comparing computers, software, and other electronics. Trip Advisor, for comparing travel information, offers five comparison sites when you enter your destination and travel dates.

There is no reason not to compare prices these days.

Considering the current economic crisis, many companies are offering discounts every day. The key is to find them. Bizrate, Pricegrabber, NexTag, Best Buy, Shopzilla, shopping.com, and Pricing Central, to name a few, offer you the opportunity to comparison shop for just about any item.

Another website, comparisonshop.com, allows you to enter the item in question, and then brings up nine different websites and their prices. All you have to do is click on “see results” and you can check each item to determine the best price for you.

Comparison shopping for groceries is still a great way to save money as well, as long as you are not driving long distances to save a few pennies.

There are some websites that will offer a product and, if you find it cheaper at another online store, will give you the product for the cheaper price. This is also true for retail stores in your area.

Gone are the days when the first item you find that you think is well-priced is actually purchased. More and more shoppers are comparing prices because that is the nature of retail competition.

The next time you look for a product, check out the online sites so that you can compare prices. The time is well spent and the savings can be substantial. Why pay more when you don’t have to?


Save Money while Cleaning around the House

If you take inventory of all of the cleaning agents you have in your home and add up the price of each, you may surprised to learn that you are spending a small fortune on cleaning supplies alone.

There is a general consensus among consumers that there are only three or four items that you actually need in your home. These are just as effective but, more to the point, safer than most of the cleaning agents used today.

They are: Vinegar, baking soda, lemon, and your favorite brand of dish soap detergent.

Given the state of the economy, any savings we can incur as a result of using alternative cleaning supplies is welcome. Therefore, here are a few money-saving tips posted on a wide variety of home cleaning websites.

For microwave cleaning, one website had this suggestion: Add vinegar and water to a bowl and place it in the microwave until it comes to a boil. Remove the bowl and wipe the inside with a damp cloth. This is a steaming process that, according to one user, is effective in cleaning any sticky residue from the inside of the microwave.

Another consumer recommends that if your microwave oven is quite dirty, take a lemon slice and add it to a bowl of water. Also add a tablespoon of baking soda. Place the bowl in the microwave, uncovered, for approximately five minutes. Afterward, you will find it much easier to remove the grease from the inside.

Vinegar appears to be an all-inclusive cleaning agent. Used with water and dish-washing detergent, it can be utilized as an all-purpose cleaner. It is recommended that you pour the liquid into an empty spray bottle, shake it up, and you’re ready to go.

Vinegar is also known to effectively clean windows. However, there are some consumers who assert that using water and rubbing alcohol yields much better results.

Baking soda also has many uses other than placing a box in the refrigerator. Proponents of baking soda add vinegar, water, and dish-washing liquid as a tile and tub cleaner.

Others state that baking soda and water is great for cleaning the top of the stove.  For inside the oven, baking soda is the only cleaning agent needed. Just sprinkle it on any stains or grease, then wipe clean using a wet cloth.

For drain cleaning, baking soda combined with vinegar seems to do the trick.

At a time when we are all watching how we spend every penny, these tips could save time and money. The suggestions are environmentally sound as well.


Tips for Savvy Shoppers

It seems that most of us became savvy shoppers during the holidays, as is shown by the decline in revenue for most department stores. This is not a bad thing, but it seems clear that we have been forced into becoming smarter purchasers in lieu of the current economic crisis.

With so much uncertainty about our economic future, here are some tips to help you trim down the costs of shopping regardless of whether it is for groceries, clothing, or other essential items on your list.

1. Use coupons whenever possible. There are a myriad of online coupon sites that offer discounts and printable coupons. The Sunday circulars have a variety of grocery coupons as well. Get the scissors out – it’s time to start clipping.

2. Before making any purchase online, sign up free with Ebates. They have a comprehensive list of stores where you can save up to 8% on clothing, electronics, and other items.

3. Prepare a list before you go to the supermarket. There’s an old saying, “Never shop on an empty stomach!” It is a fact that when you shop without having a bite before you go, you tend to buy more than on a full stomach. Only buy those items on your grocery list. Take inventory of your pantry closet to ensure you are not buying that which you already have.

4. Utilize consignment shops in two ways – bring your new or used clothes to them to sell and collect a commission, and shop there as well. You can be assured their clothing is of the finest quality. Use the commission earned to buy what you need.

5. Before taking trip to a particular department store, check out their online sales. Ascertain what discounts are being offered first. Then move on to comparison shop that same item with other online stores. You can save quite a bit of money shopping online instead of wasting gas trying to find a parking space at the mall.

6. If you do decide to head out to a department store on a sale day, go early in the morning before the crowds descend on the place. Go directly to the department where the item is located, buy it and then leave. Don’t waste time looking around; the temptation to buy something else is always there.

7. Just as you made a holiday list with a budget attached, utilize the same philosophy when shopping during the year. Stick to the budget. If you can’t pay for an item with cash, you can’t afford it.

8. Leave the credit cards at home. With interest rates climbing, the last thing you need is to add more debt to your expenditures.

9. If you are an online shopper and want to save money, become an Amazon Prime member. For $79.00 a year, you will not have to pay shipping for purchases of $25.00 or more. It is worth the savings.

10. Buy in bulk. But, ensure that the items you do buy will be used and are not purchased just because the price is attractive.


Self-Accounting: How to Get a Grip on Spending

This recession has turned most of us into accountants. With family budgets, keeping track of daily expenditures, ensuring there is enough money set aside for that very rainy day – yes, we are all becoming well-versed in how to better handle our finances.

Perhaps you have your own accounting system that works for you. Here is one example of how you can keep track of your daily expenses and work hard to keep the family budget balanced.

It’s a good idea to keep all your receipts in an accordion folder. Label the inserts accordingly, such as Food, Utility, Clothes, Credit Card Bills, Health Insurance, Car Insurance, Car Loan or Lease Payments, and Gas Receipts. You might also want to add Incidentals, Home Repair, Pharmacy Receipts, Doctor Bills, etc. You get the idea.

You can then check the receipts each month against the budget and determine if you are on track or overspending.

Or if it’s easier, you may simply want to keep the bills in their own monthly pockets in the folder. Then you can easily check how much you spend each month and compare it to the family budget to ensure you are on track.

It’s a daunting task and statistics show that most families give up after two months of tracking their spending. But with the current recession affecting the global community, it is so important to keep some type of record so that you know where you are financially at any given time.

Perhaps you prefer to use one of the many software applications that allow you to track your expenses on a weekly basis.

Whatever method you decide upon, most experts recommend that you save every receipt. This is especially true when filing your taxes. These days, every dollar you receive back is worth the trouble of holding on to those receipts.

But, more importantly, it is a good exercise in discipline. It allows you to see exactly how each dollar is spent and if there needs to be some tweaking of the budget, you will be able to pinpoint the area.

For those who worked hard and saved, they may have lost a substantial sum of money during this economic crisis. Others may be facing unemployment.

These are difficult times and becoming more financially responsible is not only required, but the alternative can bring about unhealthy stress levels and even illness. Our mindset needs to change. The way we think about money needs to change as well.


Take a Realistic Look at Your Spending Habits

Recently, there was a TV program about people who are having problems paying there debts. One woman was chosen to receive advice from a financial counselor. The result of this encounter was enlightening.

The financial counselor went over the woman’s credit report, income, and debts. After a while, she looked at the woman and told her she was in debt for $108,000. There was instant shock on the woman’s face. She hadn’t realized that she owed that much money.

The financial counselor asked the woman to call several credit card companies, beginning with the company which had the highest interest rate. After several calls and definitive tones, the woman was able to lower most of her credit card interest rates. This example is just one of many scenarios that most people are facing during this recession.

Most would suggest she should have known how much money she owed. While the general consensus would agree, the truth is the woman was fearful of what she might find. Instead, she paid the minimum balance on her cards and it wasn’t until she found herself in a position where she might lose her home that she finally faced reality.

This story is analogous to someone with a weight problem, for example. Perhaps the doctor has been telling the patient for years that he needs to lose weight or he will face serious consequences.

The patient listens to what the doctor is saying, but the subconscious mind is not accepting the reality. Instead, the patient is justifying his actions by giving the doctor excuses.

In both examples, fear is the catalyst that prevents each of these people to face the truth. Denial also plays a role in their inability to accept the reality that they are on a precipice and, unless and until they change their mindset, they are doomed to repeat the same mistakes over and over.

We all have our own financial realities to face; the question is: Are we strong enough to meet the challenges and make the changes needed to find the path to financial freedom?


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