Young Online Millionaire

Borrowing money is quite simple these days. One of the most common ways to do this is applying for credit cards. While these are beneficial in building a solid credit score, they can also become quite the nightmare if not managed properly. Consider this: credit cards can add up to 20% interest on top of your monthly expenses. Just think about this for a second, if you avoided all that interest accrued during the month, it would be just like giving yourself a healthy 20% raise.

Credit cards do have their advantages however. Most offer some type of rewards or incentives such as dividend programs; extended warranties, purchase protections, and even air miles acquired for every purchase. While this is all fine and dandy, the disadvantages outweigh the good stuff. With this in mind, the best possible way to approach credit cards is to pay them off at the end of the month so you don’t accrue any interest. Doing this will ensure that you build a healthy credit score and will allow you to manage your finances and your money more closely. I have been doing this since I was 16 and my credit score now, at age 21 is pretty great for my age.

The thing to do is really simple, use your credit card throughout the month and always make sure that you have sufficient funds in your bank account to cover the balance. Make sure you set a budget with your allotted spending for the month and try your best to meet that goal set forth. If you do this correctly, you will have the best of both worlds since you will not have to carry much cash on you (security), will establish a great credit history, and will avoid substantial interest charges as well as the possibility of falling into too much debt.

There is always some good to take out of every situation. During this economic crisis, the ability for homeowners to benefit and save drastically on their home loan rates still remains. It has never been a better time to refinance your home. With the current rates, you will be getting the lowest home mortgage refinancing rates in the history of our great country!

If you have great credit you will have no problem getting a new home loan at a ridiculously low rate. Before you get started however, lets make sure you are prepared to get the lowest home refinance rates possible.

Consider if you would like to take out an adjustable-rate mortgage. The advantages would be a lower monthly payment to start, but depending on the fluctuating rates, you could end up paying much more money in the future than you would with a fixed mortgage. If you do opt for an ARM, make sure you review the contract details very carefully and make sure that your rate does not adjust too often. (Typically, ARMs that adjust monthly or every 6 months are something you want to stay far away from).

Also, let us remember that refinancing has potential to help reduce the costs associated with owning a home significantly, but it is not necessarily the best strategy for every homeowner. It is important to analyze your situation and make sure that a home refinance is for you.

A good rule of thumb is to only refinance if you can get your interest rate lowered by a minimum of two percentage points. For example, if your interest rate is currently at 10% you want to get it down to 8% to make it worth your while. Perhaps a better rule is to make sure you feel comfortable with the amount of time that it will take for your savings to compensate for the cost of refinancing your home. If you feel comfortable and are fairly certain that you will be living and enjoying your household for that long, then a home refinance might be for you.

Just for kicks, here is an example to show you what the above paragraph means. Let’s assume you took out a loan for $200,000 for 30 years at an 8% interest rate. You would be paying $1,468 monthly. Now let us assume you refinance at a 6% rate. Your new monthly tab would be $1,199 a savings of $269.00. Let’s say your closing cost for the new home refinance loan was $2,000, it would take you eight months to see a profit on that investment. ($269 X 8 = $2,152). What does this all mean? Quite simple. If you are planning on staying in your house for another 8 months or more, then refinancing your home in this situation is a no brainier. If you plan on selling before 8 months, then you shouldn’t even bother with a home refinance loan.

Keep in mind as well that not all loans are created equal and that the annual percentage rate is not the only thing to look for in a loan. Make sure you know the term of the mortgage, a longer one results in smaller monthly payments but more interest in the long haul. Also, if you plan on staying in your home for a long time, a fixed rate would be the ideal choice since you will not have to worry about changing interest rates and your payments skyrocketing from one month to the next.

Lastly, remember points (AKA “origination fees”). These are fees that your lender or broker imposes when the deal is closed. Typically, a “no-cost” mortgage does not carry any fee upfront, but the interest rate might be higher to offset the cost to the lender. In this situation, it is important to calculate how much you would save from having a “free” home refinance loan or one that you pay one or two points on.