Interest rates are still at extremely low levels, and while that’s bad for savers, individuals looking to borrow money are finding that the costs of doing so continue to be relatively affordable. Loans for new cars and other types of consumer products have certainly become more affordable due to these low interest rate conditions. But there’s perhaps nothing that has received a greater benefit than the home mortgage market.

Low rates on new and refinance home loans continue to be extremely attractive. But the choice of whether or not to refinance your existing mortgage is not necessarily an easy one.

Here are some factors to consider when making the choice between refinancing or not:

• What is the Rate of Your Current Loan? The starting point for any refinance analysis is the prevailing rate of your current mortgage. The closer your current rate is to the rate for a new mortgage, the less you stand to gain by refinancing.
• What are the Terms of Your Current Loan? But it’s not enough to look only at your current interest rate. It’s also important to consider how long that rate will be in effect for. For instance, if you have an adjustable rate mortgage that’s set to reset soon, then you want to take a look at what your new rate will be.

• How Long Do You Plan to Stay in Your Home? Obviously you can’t predict the future, but if you know you’re likely to want to sell your current home within the next three to five years, then refinancing may not make financial sense. If you’re fairly certain that you’ll be staying, then refinancing could save you a significant amount of money.
• How Much Will Refinancing Cost? There are closing costs with any home mortgage, including a refinancing. Ask your local lenders for estimates of these costs, and analyze whether the amounts you’ll saving in a lower interest rate are offset by the fees you need to pay in order to refinance.
• How Much Time is Left on Your Current Mortgage? All other factors being equal, the longer you have remaining on your current mortgage, the more you stand to gain by refinancing.

Finally, you need to make your own estimate of where you think interest rates are headed. If you believe that the current low interest rate environment will not last long, then there may be more of an incentive to refinance soon.

The post Should You Refinance Your Mortgage? first appeared on Borrowing Advice | BorrowingAdvice.com.

When it’s used as a personal finance term, “debt burden” refers to your cost of borrowing money. Each of the ways you borrow money – credit cards, home mortgages, car loans and student loans are the most common – will incur some type of finance charge, and sometimes a given debt or credit account will incur multiple types of charges.

In addition to an interest charge, there may also be account servicing fees, transactional fees, as well as late fees if you don’t make payments as required by the terms of your loan.

It’s important to distinguish between your debt and your debt burden, because different types of debt impose a different level of burden on the borrower. Here is some additional insight:

Debt vs. Debt Burden. For example, if you own your home then your mortgage is likely to be the single biggest debt you have. However, home mortgage interest rates are currently at or near record lows. Furthermore, the interest you pay may be tax deductible, which reduces the actual cost of borrowing for your home even further. In contrast, the interest rate you pay on credit card debt is likely to be five times greater than your mortgage interest rate, perhaps even more. So if you carry significant balances on your credit cards, it’s quite possible that the debt burden of those cards is greater than your home mortgage, even though the debt on the home mortgage is larger.

Bad vs. “Not So Bad” Debt Burdens. While it’s preferable to have not outstanding debt at all, not all debt is created equal. Some types of debt are almost always bad, and should be avoided, whereas incurring other types of debt may end up helping you in the long run.

• Credit card debt, for example, is almost always bad. The interest rates are likely to be the highest you’ll pay for any common type of debt, and credit card spending usually doesn’t benefit you enough to justify the interest expense – far too much credit card spending is for purchasing items that the individual couldn’t otherwise afford.
• The debt burden for an automobile loan could be beneficial if having a car allows you to safely and reliably get to and from your job. But if you’re taking out car loans every year or two so that you can always drive the latest model, then that debt isn’t quite so beneficial.
• Your student loan debt burden my very well be a beneficial type of debt, provided that the education you receive will enable you to move into a higher paying job or profession.
• Finally, borrowing for your primary residence may be the most beneficial debt burden you’ll have. Provided that your home mortgage terms are reasonable, owning your own home will provide you with stability as well as the opportunity to build long term equity in the home. In addition, the interest you pay on your home mortgage may be tax deductible.

What to Do About Your Debt Burden. A cornerstone of your financial plan should be reducing your debt and your debt burden, because spending your money on interest and fees prevents you from saving for more important things, such as your retirement. As you decide on which debt burdens to reduce first, make sure to prioritize them based on their overall costs, as well as the benefit that you may receive from that debt.

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Even if you’ve done a great job in coming up with a solid budget and are sticking to it, there may still be times when you find yourself in a financial bind. Perhaps it’s because of an unexpected expense that exceeds what you have in your emergency fund. Or perhaps it’s simply something else for which you don’t want to use your emergency savings.

In these cases, you may need to borrow money quickly. As you might expect, you’ll end up paying more for a quick notice loan than you would for other types of borrowing.

But if you follow the steps below you’ll stand a better chance of keeping these costs as low as possible.

• Minimize the Amount You Need to Borrow. Before you do any actual borrowing, make sure you’re only trying to borrow the absolute minimum amount. Depending on your situation you might not have any flexibility, but if you do then work to reduce the amount of your borrowing as low as you can.
• Come Up With a Repayment Plan. It’s a good idea to know how you’re going to repay the money before you borrow it. You don’t necessarily have to have a repayment plan that accounts for every last penny, but you should probably be as close to that as possible. Don’t just tell yourself that you’ll “figure it out later.” Instead, try to know how you’ll pay the money back before you go.
• Don’t Give Up Too Much. Instant loan shops and pawn shops are a very quick source of funds, but you have to give up something in return. A growing trend is for loans to be made with your automobile title as collateral. If possible you should avoid these types of loans. If something prevents you from fully repaying on time, you don’t want to you’re your automobile.
• Consider Your Credit Card. Taking a cash advance against your credit card is one of the easiest methods for any small and virtually instant loan. Chances are your credit card company even allows you to withdraw money from a participating ATM network. The downside to this convenience is that the loans are generally rather expensive (though still probably less expensive and pawn shops or payday loan centers). You can expect to pay a flat fee plus a fee based on the amount of the loan. In addition, the interest rate on this amount will often be significantly higher than the rate on purchases you make with the card.
• Avoid Borrowing From Your Retirement Accounts. Finally, you should avoid borrowing from your retirement accounts. Your 401(k) account through your employer may offer the option of borrowing against your 401(k) balance. The process of getting the loan is sometimes time consuming. Furthermore, even though the repayment terms are generally favorable if you leave your job or are laid off before repaying the loan, the entire balance of the loan will immediately come due.

Having to borrow money quickly is never an ideal situation. By doing a little planning beforehand you’ll be able to minimize the damage that’s done to your overall financial situation.

The post What To Do When You Need To Borrow Money Quickly first appeared on Borrowing Advice | BorrowingAdvice.com.

Buying a home is the biggest single financial transaction that most people will make over the course of their lives. Even if you’ve never gone through the process before, many of the steps are going to make sense right away; you figure out how much you can afford, look for homes in your price range and negotiate an acceptable price with the seller.

But what should you expect on the “closing day” – the day on which the home actually becomes yours and you put yourself on the hook for your mortgage? While the closing process isn’t particularly complicated it can be a bit overwhelming for people who aren’t familiar with some of the steps.

Here’s an overview of what you should expect on mortgage closing day for your new home.

• Have All Outstanding Issues Resolved. Ideally, your closing day should be a bit anti-climatic in that all you’ll have to do is sign a lot of contracts and other documents. If something comes up late in the process, contact the other side (or their broker) and do everything you can to resolve all issues prior to the closing date.
• The Closing Documentation. The closing will involve a surprising amount of paperwork, including the final documents relating to the title search, the loan documentation and the settlement sheet.
• Title Search and Title Insurance. By the time of closing, your title search and title insurance coverage should be complete. A title search is the process of reviewing property transfer records to make sure that the seller actually has the right to sell the property, and that there are no undisclosed liens, easements or other restrictions on the property. Title insurance is simply a specialized insurance policy that protects a new buyer against any problems that exist with the title but which weren’t discovered during the title search.
• Settlement Sheet. Given the large number of documents and payments that go back and forth between the buyer, the seller, the buyer’s lender and the seller’s lender or lenders, it’s easy to become confused without something to help keep track of them all. Thankfully, the settlement sheet does exactly that. The settlement sheet is a standard form that itemizes all of the fees and charges that are associated with the closing. It is customary that the buyer’s lender will prepare a draft or estimated settlement sheet so that the buyer can reasonably anticipate the full financial implications of the closing. Again, the idea is to plan for and anticipate what will happen at closing so that there will be no significant surprises.
• The Final Step. Once all of the necessary documents are signed, you’ll receive the keys to your new home, as well as a binder containing all the final documents for the transaction.

Ideally, the closing day for a new home purchase should only be exciting because of the outcome. But there shouldn’t be any surprises or excitement because of the process itself. Spend the necessary time to prepare yourself for closing so that everything goes smoothly.

The post What to Expect At Mortgage Closing Day for Your Home first appeared on Borrowing Advice | BorrowingAdvice.com.

The proper way to manage a mortgage will depend a great deal on how big your mortgage is, your other financial obligations, and your overall financial situation.

Here is some mortgage advice and tips for finding the best way to manage your own mortgage.

The best single piece of advice for managing your mortgage is to keep yourself informed. Knowing the terms of your mortgage, as well as your outstanding balance, will help you make the best possible decisions.

The post Advice on How to Manage Your Mortgage first appeared on Borrowing Advice | BorrowingAdvice.com.

The mortgage process itself can be a little stressful, even under the best of circumstances. In order to make sure that the process goes as smoothly as possible, and that you wind up with the best deal for your budget there are several mistakes that individuals may make.

Here is some mortgage advice on major mortgage mistakes you should avoid.

By paying attention to these issues, you’ll increase the likelihood that you’ll be happy with your mortgage in the years to come, and that you don’t adversely affect your overall financial health.

The post 5 Major Mortgage Mistakes to Avoid first appeared on Borrowing Advice | BorrowingAdvice.com.

Calculating home affordability takes into account a number of different factors relating to your personal finances. You’ll need to consider not only your income, but also your other expenses and financial obligations. You also need to consider whether you will potentially receive a gift to help you with the down payment.

Here is some borrowing advice and guidance to help you determine how much house you can afford.

Remember that the calculations discussed above simply help you determine how much you can afford at the high end. Don’t automatically look to buy the most expensive home you can afford; if you find a home that works for you and your family at a lower price, don’t be reluctant to consider it as an option.

The post Borrowing Advice on How Much House Can You Afford first appeared on Borrowing Advice | BorrowingAdvice.com.

It’s true that for some individuals it might become necessary to declare bankruptcy, but it should generally be considered as an option of last resort. There are a number of financial consequences to bankruptcy, and some of them can impact your financial situation for many years into the future. Make sure you consider all of these impacts and weigh them against the short term debt relief you might be able to obtain through bankruptcy.

Here is some borrowing advice on the consequences of filing for bankruptcy.

It might seem too difficult to focus on your future when you’re having significant financial problems in the present, but it’s important to not let your immediate financial needs completely dictate what happens to you in the next decade or more. Filing for bankruptcy might become necessary, but make sure you understand the full impact of doing so.

The post What are the Consequences of Bankruptcy? first appeared on Borrowing Advice | BorrowingAdvice.com.

But owning a home also requires you to organize your finances in order to pay for the maintenance and upkeep of your new house on an ongoing basis. Home ownership has an entirely different set of financial responsibilities as compared to renting.

When you’re coming up with a new plan to organize your finances, make sure you take the following considerations into account.

Ultimately, you’ll need to organize your finances in whatever way best works for you. Once you’ve bought a house, the financial obligations of the mortgage – as well as all of the other expenses that go along with owning a home – will be a primary driver of how your budget looks.

The post How Should You Organize Your Finances Once You’ve Bought a House? first appeared on Borrowing Advice | BorrowingAdvice.com.

Despite the emotional weight of buying a new home, it’s important that you also approach the process with a businesslike demeanor. This means conducting appropriate due diligence into the home to make sure that it’s everything it looks to be. Perhaps the most significant part of your due diligence will be commissioning an inspection by a qualified home inspector.

Here is some information and advice about how important it is to do a home inspection before you buy.

While home inspections are not always legally required, they’re almost always a good idea, and a good use of the few hundred dollar fee. Having an objective pair of eyes can help you fairly evaluate the home you’re interested in.

The post The Importance of Doing a Home Inspection Before You Buy first appeared on Borrowing Advice | BorrowingAdvice.com.