Category Archives: Guest Bloggers

Eight Strategies for Paying Off Your Mortgage Early

mortgage

Every homeowner dreams of the day they can burn their home mortgage note because the entire balance has been paid. There are some limitations for new mortgage loans that carry early pay-off penalties, but most banks will assist the homeowner by answering questions concerning the best methods to pay the balance down more quickly. Work directly with the lender and avoid anyone who promises to make the payments on your behalf. Embrace one of more of the following strategies to work toward financial freedom by eliminating that last long-term debt.

1. Pay extra principal – Additional principal payments of $25, $50, or $100 each month paid consistently throughout the year will shave years off the entire mortgage balance. Pay the full mortgage amount each month and add an additional $50 consistently for one year. Each time the statement arrives, compare the values against the previous statement. Highlight the outstanding principal amount and keep all of the statements together. If doubt of progress arises, look back across the previous statements and note the progress. Some mortgage statements also have a projected date when the final payment will be due this date should change as the principal amount decreases.

2. Reduce other expenses – Choose one or two seemingly frivolous expenses that can be eliminated from the monthly budget until the mortgage is repaid. Those expenses can be reinstated once the goal is reached. Add the entire dollar amount from the saved expenses to the mortgage payment every month. Continue to monitor the monthly progress reported on the mortgage statements.

3. Make extra payments – Whenever the budget will allow, make an extra full payment throughout the year. Monitor the drop in the principal amount reported on the monthly mortgage statement. The entire extra payment will be applied to the principal without any money being applied to the interest due on the loan.

4. Pay one additional payment annually – Commit to making one extra mortgage payment with the calendar year. If $1000 is paid against a 30-year mortgage every year, the mortgage term will be shortened by four and a half years. All the interest that would have to be paid for that part of the loan is saved and will add up to more than $40,000.

5. Switch to bi-weekly payments – Make two half payments within the month. This is a great option for those who are paid bi-weekly. Twenty-six payments will be made in the calendar year which means that thirteen full payments are made instead of twelve. This method will reduce the mortgage term by six years on a 30-year mortgage. Progress is made, but the extra payments are spread throughout the year to make budgeting easier.

6. Treat a 30-year like a 15-year – If the current mortgage has a 30-year term, calculate the 15-year payment schedule and pay accordingly. The additional funds will be applied directly to the principal and will reduce the term of the loan by half. This method is beneficial when unexpected expenses require a reduction in the mortgage payment for one month. Since the 30-year payment is actually due, a lower payment can be made without paying any penalty. The higher payment can be made in subsequent months.

7. Apply tax refund to mortgage – Whenever a tax return is received for overpayment of income taxes, apply the entire refund to the outstanding principal amount on the mortgage. Readjust withholdings for the next year and apply the amount saved each month.

8. Sell an asset and apply the funds – Unused assets are a source of funds that can be applied to an outstanding mortgage. A boat that sits on its trailer can be sold, and the funds used to pay down the mortgage balance. Consider the goal of living a debt free lifestyle when considering which assets can be sold to contribute to the project.

Many mortgage calculators exist to aid in creating an accelerated repayment plan. If emergencies arise, simply reinstate the plan when other obligations allow. When the mortgage is paid off, set another large goal to work for or reward the entire family with a once-in-a-lifetime vacation.

Matt is a freelance writer for Money Choices, an Australian website where house buyers can compare a range of refinance home loans from various Australian banks. Click here to visit their website.

How to Interpret Your Credit Card Statement

understanding credit card statement

By: Guest blogger Mark

Understanding a credit card statement is important if a credit card is used regularly to spend money and budget is being followed. For someone who has been using a credit card for an extended period of time, reading the statement is old hat, but for someone who is new to using a credit card there are some features of the statement that need to be explained. Understanding the fine print, both on the front and back of the statement, is important to fully understanding the charges within the statement. The statement for each credit card company varies slightly but for the most part there are common elements in each of the statements. There are several key pieces of information that must be examined when each statement is attained that will help the individual better understand their account.

APR – On the front of the document the first piece of information that needs to be examined is the Annual Percentage Rate, or APR. This is the amount of interest that will be paid on an annual basis. The APR is an important factor in calculating the amount of money going into the credit card. The higher the rate, the more money it will cost in the long run to use this credit card. Interest rates of each credit card can be compared on a variety of websites available online.

Minimum payment – Another pivotal piece of information that must be looked at is the minimum payment due. This is the minimum amount of money that must be paid on the credit card during each billing cycle in order to remain in good standing with the credit company. This amount is typically determined as a percentage of the new balance. The minimum payment must be made by the due date in order to protect the individual’s credit reputations. Late payments have a negative effect on an individual’s over all credit score, which reflects poorly when trying to take out a loan for a house or other large item.

New Balance – The new balance on a credit card is the amount of money that is still unpaid or owed by the cardholder and will be a number present on the statement. This can be determined by starting with the remaining balance from the previous month and subtracting any payments that were made on the balance. To calculate the amount owed the new charges and miscellaneous fees accrued during the most recent billing period must be added to the previous amount.

Interest Paid – The finance charge is essentially the cost of doing business with the credit company. This is the money paid to the lender for using their credit. This finance charge is indicated on the each monthly statement and it is the interest that is paid on the unpaid balance of the account. The way in which this charge is determined varies with each credit company and the way in which it is determined affects the amount of money that the individual will be charged. The most commonly used calculation method is the average daily balance, which calculates the monthly finance charge based on the amount of debt on the account each day.

Fine print – The back of the credit card statement should not be ignored. There is a lot of fine print on the back of the statement and can present quite a headache. Although these paragraphs are not the most interesting read ever, there are many important details that can affect whether the individual is a successful credit card holder. One of the most important pieces of information that can be found on the back of the statement is the information about the Cash Advance Fee. This is a charge that the credit card company charges the individual when the card is used to take a cash loan from a bank. Generally there is an allowed amount of money that can be withdrawn using the card and the fee the credit company charges is a percentage of the loan amount. It is important to recognize this information on the back of the card in order to not break the fine printed rules of the credit company.

Understanding a credit card bill is the first step towards being a successful credit card holder. It is important to take the time to review the information on the statement and make sure that everything on the state is in line with the contract that was signed. It is also important to notice and verify any changes on the statement compared to the previous statements. An error can always occur and it is the responsibility of the cardholder to recognize these errors. Understanding finances is difficult but taking the time to learn a little about a credit card statement could save a lot of money in the long run.

Mark writes about finances at CreditCardCompare.com.au, an Australian website based just north of Sydney.

Features to Keep Your Mortgage Flexible

first home

Many people do not have a complete understanding of how different features work that are in place to help them pay off their home loans quicker than the standard 30 year term. Learn what you can do to help you manage your mortgage with some handy home loan features you may not be aware of.

Thankfully, most mortgages for home owners today have quite a few features for the loan that are made to help them pay it all off and manage the home loan successfully and positively. Unfortunately, too many homeowners have little to no knowledge of these features, or the ones they might benefit quite a bit from and which ones to choose.

Discovering Mortgage Features for You

Many people find that the best way to find out how you can benefit from home loan features is to talk with your mortgage broker. These professionals are going to be able to help you sort through all of your available options, features and loan products as part of their professional assessment service to you. Any excellent mortgage broker should be able to help you understand at least the most popular features, a few of which are explained below:

Valuable Mortgage Features

Extra Repayments

Having the option to make extra repayments on your home loan in addition to the minimum loan repayment amount. Paying amounts that are beyond the minimum of what you are required to pay to keep your loan status in good standing is what qualifies as extra payments. You can make extra repayments regularly by changing the amount that the bank withdraws from your account, or you can make them intermittently whenever you have money available to do so.

Redraw

One of the nicest benefits about this feature is that you are able to access these additional payments when you need them. Many people find security in making extra repayments because they have funds on standby available to save for any reason that may arise in the future. You might be charged for that withdraw, so be sure that you are aware of all of the terms and conditions that apply to your home loan.

Professional Package Discounts

A professional discount package is when a home owner receives discounts on a variety of products and services from the home loan lender by paying a single annual fee. These might include things like waived valuation fees, interest rate discounts, discounted insurance products, waived monthly and application fees and many others as well.

Interest Only Periods

With interest only periods, homeowners just pay the interest on the home loan that is due each month and not the principal itself. The benefit is that repayments are kept to an absolute minimum, but there is no possible way to pay off the loan unless extra payments are made. These interest only periods may be 5 years, 10 years or even 15.

Loan Portability

This mortgage feature will allow you to move your home loan onto another property. Normally this is given to people when they sell their home and buy a new one. Usually, in most cases for this home loan feature to be executable, the settlements have to happen within the same day, which would all let home owners avoid having to re-apply for a new home loan when they move to a different house!

Repayment Holiday

This is a valuable feature that can be used when a home owner’s financial circumstances change. Normally this would be due to the arrival of a new baby, a lay-off from a job or any other circumstance that results in a decrease in income for the family. Usually this home loan feature will let home owners reduce or eliminate the amount of payments that are made for up to six months, which does add interest to the loan.

This article was written by William from homeloanfinder.com.au. Visit the HomeLoanFinder website to compare variable home loans and home loan interest rates today.

When and How to Consolidate Credit Cards Debts?

credit card debt

By: Andrew

As my wallet gets full of plastic cards and my mailbox gets full of credit card bills, this is the time to consolidate my credit cards. Just like other consumers, I prefer to organise my finances especially these days when costs of living simply get out of control. Carrying lots of credit card debts surely make anyone’s finances all the more crumpled. That is why it is high time to consider several available options to consolidate my credit cards.

I want to save on costs and lower interest repayment expenses. This is the usual intention why consumers aim to consolidate debts. There are several ways to consolidate my credit cards to attain lower interest rates and shoulder lower monthly payments. Stretching the duration of such loans would also be strategic.

Balance transferring of credit card debts

I have learned that one of the most effective, fastest, and manageable ways to consolidate my credit cards is through doing balance transfer transactions. This means consumers should intend to transfer their balances on high-interest credit cards into a single credit card, which facilitates such transactions and offer a much lower interest rate.

As I consolidate my credit cards through balance transfer, I make another decision. Should I use a 0% interest rate or a lifetime low-interest balance transfer? The 0% interest rate balance transaction is usually offered as an introductory scheme and would only be effective in just six months or shorter, as specified by the credit card firm. After that period, any transferred balance would incur a higher ‘revert rate,’ which could reach up to 19.99%.
Transferring balances and closing accounts

Another option I have been considering when I intend to consolidate my credit cards is closing the credit card accounts after transferring balances of some of those into a single low-interest one. Many consumers would agree that this is a wise move especially these days when credit card purchases get more tempting. If I get rid of some or most of my credit cards, I would surely manage purchases and debts more effectively.

How should I decide which credit cards to lose?

When I consolidate my credit cards, the first thing I look at is the interest rates applied. I prioritise repaying debts in cards with higher rates. Once I have cleared balances on such cards, I consider closing the accounts. This way, I would never struggle to fight the temptation again to use them and to seize opportunities to earn special ‘rewards’ points from purchase transactions. Are such points worth all the fees I pay and the troubles of accumulating debts?
Consumers like me should not wait further to control and manage credit card debts.

It is always the best time to consolidate my credit cards before debts get higher and before I get into further troubles. After all, keeping one or two multipurpose and low-interest credit cards would surely be adequate to cover my basic card purchases. How about you?

– Andrew has been working in the finance industry for several years.

Paying off Giant Credit Card Debt

credit card debt

The bills are getting so out of control that you will be forced to stick with a budget to become debt free. This sounds like it will never be accomplished, but this time you have really gotten yourself into big financial trouble. It has gotten to the point where you are using one credit card to make minimum payments on another. Sure, this may be a sign of the bad economic times, but you really had this horrible habit long before the recession hit. What are you going to do to finally get out of debt? Where do you start?

Make a Commitment

Basically, everything will have to start with you. You must make a commitment to become fiscally responsible so that you can get your financial life back on track and begin living again. Sure, you made many bad financial choices in the past, but this does not mean that you can’t make better choices now and move on. Basically, you will have to make a change for the better if you want to pay off your giant credit card debt and become debt free and it must start now.

Stop Spending

The bottom line is that you have to stop spending money. Whether it is cash or credit, you will never become debt free if you continue to spend money unwisely. You should never let your credit card spending get out of hand and you need your cash to pay down the credit cards. So never feel like it is okay to spend cash when you could be putting it somewhere else like on an unpaid bill or in a savings account. Make the commitment to spend money wisely. This mindset will get you closer to your goal of becoming debt free.

Start Saving

When you stop spending money and learn how to budget, there are only a few things that you can do with it at this point. You will make investments, pay off bills or put it into some type of savings account. Before you tackle a long term goal of paying down bills, you should create a basic savings account and an emergency savings account.

Contrary to belief, the two accounts are different and should be a part of your budget plan. The savings account will be for larger items that you want later. The emergency savings account will be for emergencies that you have no control over. Both accounts will be needed when you start paying down your giant credit card debt. You don’t want to stop your long term payment plan if an emergency breaks out. In addition, it would be wonderful to have extra money on the side to reward yourself if you reach your debt free goal. Once you have at least 3 month’s salary in your emergency savings account, you can begin your long term payment plan.

Create Your Long Term Payment Plan

What method are you going to use to pay off your giant credit card debt? You need a budget plan that is realistic and easy for you to follow. The following are a few suggestions to get you on your way:

1. Make a list of all debts. Before you can tackle your debt you have to budget and know exactly what is outstanding. Write each credit card down on a sheet of paper along with the outstanding balance beside each credit card.

2. Arrange your credit cards according to the outstanding balances. List them from the lowest amount to the highest. Most financial professionals say that you should budget and handle the credit card with the highest interest rate first, whereas there are others that would strongly disagree. Think about the motivation that you will receive once you see the first debt paid off, which will be easy to accomplish if you pay off the lowest amount first.

3. Concentrate on one credit card at a time. Make the minimum payments on all cards, but put an extra amount each month on the lowest credit card, if you have it in the budget. If not, make little extra sacrifices. Once you have paid off the first card move on to the next. The amount that you paid towards the first paid credit card should now be put on the second card until it is paid off. Notice a pattern?

4. Do the same for each credit card on your list. Continue making payments in this manner until each credit card on your list is paid off. If this strategy is followed, you will eventually reach your goal of being debt free.

Don’t Fall for Empty Promises

One word of warning would be to not fall for the rhetoric of companies that claim they can help you become debt free. Sure, they might be able to help in a small way, but it will cost you money. Why else would they be so willing to help you get out of debt? What will they get for helping you become debt free? Do you really want to budget for extra service fees to pay to debt consolidation companies when you could put this money on your credit card payments? Why make these companies richer and yourself poorer? Move on to a debt free life and don’t fall for the empty promises of these financial companies.

Change! Change! Change!

In conclusion, if you want to pay off your giant credit card debt and become debt free, do something about it. The change begins with you. Stop spending money unnecessarily and find ways to save money for the future. Look inward and determine ways in which you can make financial adjustments in your life.

Try to figure out the various ways that you waste money on a daily or even yearly basis. Do you really need to have fast food every day for lunch? Do you really need to have 225 pair of black designer shoes in your walk in closet? Does your kitchen really need new granite countertops? Do you really need to have an oceanfront condo with a balcony on your next family vacation?

Reconsider these purchases. Adjust your budget accordingly. These are all ways that you can modify your budget and reach your long term goal to become debt free.

Timothy Ng is a personal finance writer, and has a real passion for encouraging people to compare credit cards to ensure they get the best deal.

How To Start Making Passive Income In 2011

passive income streams

Most of us probably have the same fantasy at some point in life. The dream is to earn cash without having to do much, or any, work at all. Even after 25 years in the plumbing business my father used to read the classified advertisements every day. When asked what he was looking for the response was always the same, “my thousand dollar a week job where I don’t have to do anything.” We all used to get a chuckle out of it, but the idea always stuck in my head.

Ways To Earn Passive Income

Investment Property – Buying investment property, even in our current housing market is a great idea. There are stories all over the world of people who simply buy up properties and then sell them, trying to make money on the resale. While this can be lucrative you have to have a lot of money at your disposal and put in a great deal of work to make it happen. But, if you actually buy properties up and hold on to them you can earn income without having to do all that extra work. If you were to buy one house that carried a mortgage of $1,000 you could probably rent it out for $1,300 per month. Right there you have already added $300 of income to your monthly budget. Of course, in the first few years you probably want to stash some of that money away for an emergency fund or to make repairs to the property, but after that it is gravy. You can even use it to pay down the mortgage faster so that you send less on interest charges. After a few years you could sell it and all get the full purchase price back as profit.

Using The Internet – There are loads of ways to earn income on the Internet. If you are ambitious you could start your own membership site. On it you provide valuable content for a specific area. Your members pay a fee to see that content, which becomes your profit. This can be a lot of work and you have to have some area in which you are an expert or you will wind up spending a lot of money buying content from others. Another way is to use Google AdWords to set up a Pay Per Click campaign. When web surfers click through the ads that you promote you make money. While it is not a lot of money per click, over time it can add up. This is an excellent way to add profit to a web site that you have already set up or will set up. If you have eBooks you have written or other intimate knowledge of a subject you can set up the site once and then sell the advertising space. Ebooks themselves are an excellent way to earn passive income. If you choose to sell the book online you can make easy cash for as long as you choose to sell it.

Software – Even if you do not consider yourself the most technically savvy person in the world you could create software. All that you really need is one good idea. For example, if you know how to train a dog because you have had dogs all of your life, you could build software that helps teach others how to train dogs. Broad topics are excellent because they can be sold to people all across the globe and tend to be timeless.

You probably have some of your own ideas about how to build passive income. Most of us come up with little ideas all the time that we think could make us the next Steve Jobs. The difference between us and them is that many of us do not follow through on those great ideas. With a full time job, a family, and loads of other responsibilities it is easy to see how those ideas can get left in the dust. Take action to make sure that this does not happen to you.

Make Your Passive Income Dream A Reality

Step One – Do not forget anything. Carry a notepad and paper with you all of the time so that you can write down your inspirations and ideas. The wildly popular and lucrative Harry Potter series started from an idea written on a napkin. You just never know when brilliance will strike so be prepared all the time.

Step Two – Try it. Try everything, even those ideas that you think sounds silly at second glance. If you have an idea for an eBook, sit down and try to write one. If you think you can make some money doing Pay Per Click ads, then give it a go. Even if you do not make loads of money at first you can learn a lot so that eventually the money will start flowing.

Step Three – Build a war chest. If you want to create a passive revenue stream you might need some seed money to do it. So even if you do not have your million dollar idea yet, save money as if you do. That way you will have the cash on hand whenever you are ready to get started.

Step Four – Do it every day. If you do not work on your ideas every day they will gather dust. Instead, take time out every single day to work on your ideas or to track the income streams you already have going. It does not have to be a lot of time every day, but enough to keep you focused on the goal of having long term passive income.

Imagine how great your life would be if your could take a few simple ideas and put them into action that can generate passive income. It is completely possible. While it might not start out as passive income within a short time you could be earning money for nothing.

Timothy Ng is an experienced personal finance writer, specialising in credit card comparison.