Making extra mortgage payments might seem worthwhile when you can afford them, but is it really the best way to use your money? What benefit does making extra payments to a mortgage offer to you? Here are some of the pros and cons of making extra payments over and above the regular monthly mortgage payments you must make.
Extra Mortgage Payments: Benefits
Reduced interest: Your regular payments pay all the interest plus some of the principal. What you would pay in extra mortgage payments would all be deducted from the principal. That means that next month the interest on the reduced principal would be less, and so on. Over time you could pay a significant amount less interest to the lender. This is assuming that you continue your payments over the entire period of your original mortgage agreement.
Private mortgage insurance: Not all extra payments have to go towards your mortgage. If you are paying private mortgage insurance, you can make extra payments to pay off your PMI earlier. Having done that you can then assess whether you want to continue and reduce your mortgage – and its interest as above.
Peace of mind: Everybody feels better when they are paying their mortgage faster than they need to. They feel protected against foreclosure in the event of them hitting bad times. They think that they are doing better than most people with mortgages by paying extra – more than then need pay.
These are just three benefits of extra mortgage payments, although none are genuine benefits. Here are some reasons why, and arguments against paying your spare cash to your mortgage account.
Disadvantages of Making Extra Motgage Payments
Do you gain: What do you actually gain by making extra motgage payments? Mortgage interest rates are very low right now in comparison to what they once were. You could make more by investing your spare cash. Not only that, but what mortgage interest you do pay you can claim against tax. You can practically deduct 1% from your mortgage interest rate that way.
Best to Invest: Would you be paying all you spare cash in extra mortgage payments? How about saving for emergencies? What if you lost your job? It is always wise to have several months mortgage payments tied up in an investment, quietly gaining in value for the day that you might need it. It could pay your mortgage and other expenses for two or three months while you found other employment. Without it, you could face foreclosure!
Lenders don’t care: Your lender would not care if you had paid extra to your mortgage – they want this month’s payment, and the next, and the next! It’s better in your bank than reducing your term from 30 years to 25. Then you could pay the next few months and give yourself time to get back on your feet.
Extra Mortgage Payments: Conclusions
Extra mortgage payments are worthwhile in some situations. If you are not fully committing your income to such payments, and can also invest some to protect you from emergencies, then they can be worthwhile.
However, you should never leave yourself vulnerable to unexpected financial crises. Extra mortgage payments are not recoverable once paid. Investments are, and can see you through difficult times. Consult a mortgage advisor on this, because each person’s circumstances are unique, and the same solution does not apply to everybody.
Home accident statistics suggest that not enough is being dome to ensure safety in the bathroom. Your bathroom is the most dangerous room in the home according to the Centers for Disease Control and Prevention in America! It is not the kitchen as most Americans believe, but the room that most people feel to be one of the most innocuous. Why is that? What are the hazards associated with the bathroom that make it so dangerous and what can be done to improve safety in the bathroom?
Main Causes of Bathroom Injuries
Almost 33,000 people over 14 have to attend hospital after sustaining injury while using the toilet! That is an amazingly high number, although those aged 85 or over are particularly prone to injury this way. They are largely due to falls, and the lack of a safety grab bar at the toilet. In fact, 81% of all injuries in the bathroom or toilet are statistically due to falls.
Most of these falls occur in the shower or bathtub, particularly for those aged 15-24. These figures correspond with injury statistics for the home in general, in that most are caused by falls. This indicates a need for improved preventative action in the form of equipment designed to prevent such falls.
Most homes have insufficient grab bars in bathtubs and showers, and very few have these safety devices around the toilet. In some cases, people have slipped and fallen out of open windows, although there have been very few fatalities.
Improving Safety in the Bathroom
While around 63% of American households use non-slip strips or mats in the bathtub and shower, only 20% are fitted with a bar that people, particularly the elderly, can hold onto while getting out of the tub. This would certainly reduce the statistics of falling while getting into and out of the bath, particularly the latter when the tub can be very slippery. The same is also true of the shower, where grab bars are rarely fitted but could improve bathroom safety.
A grab bar or holding rail by the toilet would help elderly people sit and stand up, and it would also help them if the seat was raised to a higher level. This would enable easier sitting and standing.
Bathroom Safety and Lighting
Many people have been found to have tripped over bath mats and throw rugs in the bathroom. It would help if these were removed, and also if the lighting was improved. Many bathrooms are poorly lit, particularly at dusk when natural light is dropping but people are not yet using artificial light. It would help to have a light that comes on when the light level in the bathroom drops to an unsafe level.
The best overall solution would be to install walk-in bathtub with a watertight door, and a sit-down shower for the elderly. Price seems to be a factor here, but there is still a lot that can be done to improve safety in the bathroom and toilet, particularly for the elderly.
Whether or not financing closing costs when refinancing your mortgage is a good idea depends on your circumstances. Closing costs may include costs such as settlement fees, one-year homeowners insurance, escrow reserves, property taxes, legal fees and so on. You may refinance your home for a number of reasons, the most common by far being to cash-out your equity, or at least some of it.
Cash-out refinance can be used for debt consolidation, to finance school or college fees, or even to build an extension to your home. It is often possible to include the closing costs in the principal sum, and repay that at a higher interest rate over the term of the new mortgage. Is this wise or is it foolish?
Disadvantages of Financing Closing Costs
If you are allowed to include the closing costs in your mortgage, the price is generally going to be a higher interest rate and balance. Whether or not it is worth doing will depend initially on what the higher rate is. Lenders will not consider offering this with a first mortgage, your only hope then being if the seller agrees to pay some of the closing costs.
With refinance, however, you will still have equity in your home, so lenders are more amenable – along with that interest rate hike. It means you will be paying a higher interest rate for the whole term of the mortgage. This is a common reason for foreclosure: an inability to make the higher payment month on month over 30 years. After about 5 years you will have paid the closing costs and the rest is a net loss to you.
Benefits of Financing Closing Costs
If you don’t have the cash available to pay the fees at closing, then you either don’t get the refinance or you must apply to have them rolled into the new mortgage. Keep in mind you can only cash-out a proportion of your equity, so that the lender has the security of what is left. Whether you will be permitted to do this or not will depend on the amount of both the remaining equity and your new mortgage.
There are pros and cons to financing closing costs when refinancing a mortgage. It enables you make use of some of your equity even though you have no cash at all to close the new mortgage.
The best way to find out if financing closing costs makes sense for your situation is to speak to a mortgage professional so that they can run the numbers and give you the big picture. The length of how long you expect to be in your mortgage will play a role in whether or not financing closing costs makes the most sense for you.
The terms mortgage prequalification and mortgage preapproval seem to confuse some people. It is very important that you understand all the terms used when you are looking for a mortgage. If you are unsure what a particular term means, then ask. Prequalification for a mortgage does not mean that you have been approved for it. Here is why.
Mortgage prequalification refers to the amount of mortgage for which your bank or lender believes you may qualify. It gives you an idea of the price of home you can afford to look at. Most borrowers, particularly those seeking their first mortgage, are unsure what mortgage they might be offered and this helps them.
In order to undergo this process, you must supply your prospective lender with a full notification of your financial situation. You should be completely honest with your total income, debts and assets. A lender can use this information to assess the maximum amount of mortgage loan you may be offered on the basis of that information.
It is better to be prequalified for a certain ballpark figure than take a guess and be disappointed: either because you are refused the mortgage you need or are accepted and find you could have had more. Once you have been qualified, you can discuss the various options open to you with your lender. These include the type of mortgage most suited to you, interest rates and other options.
Mortgage pre-approval is beneficial to you, because you know how much of a mortgage you will be offered – not what you ‘might’ be offered. In some cases you might also be allowed to lock-in to a certain interest rate, even before you have selected your property. You can look for homes priced up to your allowed preapproved mortgage plus the down payment you can make, knowing your mortgage will likely be approved by the lender (see previous paragraph).
You must provide full documentation before having your mortgage approved in advance. Your credit record will be examined and FICO score requested. In effect, everything necessary when you apply for a mortgage will be carried out when you seek mortgage preapproval.
Mortgage Prequalification and Mortgage Pre-Approval: Which is the Better?
Mortgage prequalification does not involve a credit check, which is why you must be completely honest. A credit check can have a negative impact on your credit score (FICO score). That is why such searches are not carried out for prequalification, but are carried out for mortgage preapproval.
This also explains the fundamental difference between the two. Mortgage prequalification is unofficial since it is based upon your volunteered information, while a preapproval is based upon a credit search and documented proof of your overall financial situation. Prequalification is best if you want to look around at what is available in your price range, but might not buy right now.
Preapproval is best if you have made a decision to buy now, and are seeking the best property you can within your maximum price. Because preapproval involves a credit search, it impacts on your FICO score, and should not be requested unless you mean to use it.
It should be stated here that both mortgage prequalification and mortgage preapproval are only interim stages in the real estate-purchasing process. It is only when a loan commitment has been issued by a bank that the funding is actually confirmed. This is based upon both the preapproval and the property concerned. The latter must be appraised correctly and appear to the bank to be a good investment for the buying price involved. This makes sure that you do not make too high an offer just to secure your new home.
A small home office need not necessarily be furnished with small office furniture. When choosing furniture when space is limited, you should first make a list of the essential items you must have, then a list of what it would be good to be able to accommodate. Keep in mind that most home offices in the USA are small rooms, and only the professional home business owners have better.
First check your equipment. Use a laptop rather than a cabinet PC. Laptops are just as powerful as case computers these days, and take up a lot less room. Even if you prefer a larger monitor, a decent desk should be able to accommodate your laptop and a good-sized monitor. Use a 3-in-1 printer, including a printer, copier and scanner all in the one machine.
When choosing office furniture for a small home office, all you should now require are:
The Small Home Office Desk and Chair
Even a small home office should be able to accommodate a good sized desk. Make sure you have a cupboard and drawers for immediate supplies such as paper and other items. Your desk will accommodate a router and telephone, so you will need only a small table or stand for your printer.
The chair is an essential item of office furniture. Choose a chair that is comfortable to sit in. Swivel chairs are generally best for an office, and they are available in many styles and covers from genuine leather to vinyl and a range of fabrics. If you purchase online, make sure it is adjustable in height and tilt, though it always best to try furniture out before buying it.
Home Office Furniture: Shelving
If you have the space for a bookcase then get one, but if not then use shelving on your walls. Shelves are always handy items of office funiture, even if your books are limited. They are useful for spare printer paper and ink cartridges, diaries, CD or DVD cases and so on. A rack of shelves makes much better use of space, and enables you to use the height of your home office, not just the floor space.
Integrated Wall Units
Some small home office spaces are ideal for integrated wall units. You can use the full height of the room and all the wall space to incorporate shelving, cupboards, drawers and desk space. The only space you need leave is room for the door to open! You can find a massive selection of modern wall units online that are suitable for a small home office. Choosing office furniture never got easier.
You can select pieces of home office furniture to suit your room dimensions, and mix and match to fit in with your storage needs. There are many collections of home office wall units comprising built-in desks, cupboard and drawer units, display shelving, file cabinets and drawers and printer cabinets. They all fit together just as you need them.
Choosing office furniture for a small office is no longer a difficult chore. You can approach it in two ways. Either go for the traditional individual desk and storage units, or take the integrated approach and build up your small home office from the walls outwards and upwards. This will increase the value of your home, though both should enable you to accommodate the equipment you need.
What is amortization? How does it work? Many people have asked these questions and have been offered complex answers that have left them even more confused than before they asked. Here is as simple an explanation as you are likely to get, particularly with reference to mortgage amortization
Mortgage Amortization Fundamentals
When you take a loan of any sort, you want to repay the same amount every month. There are loans where you can start paying less and end up paying a lot more, but most people like to make the same monthly payment every month over the term of the loan – whether that is a car loan, personal cash loan or a mortgage loan.
The interest on your loan can be arranged in a number of ways. It can be charged daily, weekly, bimonthly or monthly according to the agreement you signed. Most mortgages apply the interest monthly in advance. Let’s say you have a loan of $150,000 over 30 years at 4% interest.
Annual Mortgage Amortization
If we start the calculation on the first day of the month, then:
On day 1 of year 1 you are due 4% of $150,000 = $6,000 interest, plus your principal repayment: $150,000/30 = $5,000. That makes $11,000 mortgage payment due for year 1. Obviously you could likely not pay that in addition to your down payment and closing costs.
If it is agreed that you make equal monthly payments for year 1, then that would be $916.67 each month for the first year. That might be more affordable. The following year would then be calculated assuming you only owed $145,000 ($150,000 – $5,000). You would then pay less that year since your interest would be less, but you would still make the same annual $5,000 payment off the principal.
Amortizing a Mortgage Monthly
Take that to a monthly basis: each month your principal payment would be $5,000/12 = $416.67 and your interest would be based upon the principal still owed at the start of that month.
What this means is that your initial payments would be high, because you are paying interest on the full amount still owed. Interest would become increasingly lower as the year progressed because the principal would be getting less. Your payments later into your 30 years would be much lower, because your total sum would be less, and so the interest charged at the beginning of each month would less.
What is Mortgage Amortization Today?
What is amortization in terms of today’s mortgages? Let’s take the above examples to the extreme. Take:
Total reducing monthly interest paid over 30 years + total monthly principal payments due after each month
Divide that total 30 year figure by 360 to come to an average monthly payment. That’s how mortgage amortization works. Amortization is a system that calculates your total payments over the 30 years, and divides them by 360, so you make the same payment each month. You pay exactly the same monthly mortgage payment for the full 360 months.
What is Amortization?
Let’s come back to the original question, ‘what is amortization?’ Amortization of any loan, including mortgage amortization, is a financial tool that enables borrowers to repay their loan at the same amount every month. Without it, you would pay considerable more at the start of your mortgage term and less at the end – the opposite of what would likely be ideal for you.
Paying off your mortgage early can ease your mind from worries of foreclosure or increasing mortgage rates. Increasing numbers of people are doing this, and relaxing in the knowledge they not only have no mortgage, but also own the entire equity in their home. It’s something to think about, but can you pay yours early?
Most people are unable to make a cash payment to clear their debt. However, there are steps they can take to reduce the time they will take to clear off their mortgage loan. Here are some ways of paying your mortgage early without actually paying off your loan balance in cash
Paying Your Mortgage Early: Pay More Principal
If you increase your monthly payment you can make sure the extra comes off the principal you owe. The way amortization works is that even if you make a single lump sum payment, each normal monthly payment you make after that will be paying less to the interest and more to the principal.
If you can’t afford a lump sum, then add something to your monthly payment. If you are paying $575/month, increase that to $580 or even $600. Your mortgage will then be paid off several months or more early. Obviously, the more you pay extra, the faster your mortgage will be cleared. However, even if you just pay these extra sums now and again, it will still make a big difference.
Switch to Biweekly Payments
Biweekly payments are a popular way of clearing your mortgage early. There are 12 months and 52 weeks in each year. 26 biweekly payments come to 13 monthly payments each year, and not just 12. Your lender will take your biweekly payments, and apply them at the end of each month. You will be paying slightly more each month, amounting to a full month by the end of a year. By the simple task of making this extra payment each year, you can reduce your repayment period for a 30-year mortgage by as much as 6 years!
Your bank or lender should be able to accommodate you with that. Some will accede to your request free of charge while others will charge you a fee. You should make sure that your bank applies the extra payment to your principal. As the principal reduces faster, so your interest reduces faster than normal each month. Even more of your regular payments then go towards the principal.
Refinancing to a Lower Term
If you are now earning more than when you set your mortgage up, you may be able to refinance it. By refinancing a 30-year mortgage to 15 or 20 years you will be making higher payments but you will also be clearing your mortgage early.
An even better way is to arrange your mortgage over 30 years, but repay it as if it were over 15 or 20 years. Alternatively start paying more as you earn more. Pay 50% of your increase to your mortgage and spend the rest. The only time this doesn’t work is if your mortgage interest rate is significantly less than you could earn by investing the cash. Don’t forget that by reducing the principal you are also reducing your interest payments into the future. A direct comparison of mortgage and investment interest rates is therefore not valid.
Clearing your mortgage early is a good way to increase your equity at a faster than normal rate. It is also a good way to invest your spare cash. The less you owe on your mortgage, the less interest you are paying, so the more goes into paying off the principal – you gain all ways. It is also good to clear your mortgage before your retirement, and these steps could ensure that. However, take good financial advice before committing yourself. A mortgage adviser can offer advice tailored to your personal circumstances.
You have likely heard of people with mortgage difficulties. What if you can’t pay your mortgage – what can you do?” Where can you turn to for help to avoid foreclosure and losing your home? As the 2008 mortgage crisis taught us, that could be any of us with that very same problem. So what is the answer? What can you do if you can’t pay your mortgage?
Did 2008 Teach Us Lessons?
If you have mortgage difficulties there are certain things you can do to prevent you losing your home. It happened to vast numbers from 2008 onward through little fault of their own. They were not to blame for being offered mortgages they could not afford, and certainly not for the irresponsible trading of sub prime mortgage derivatives on the stock market that brought the problem to the attention of the general public.
Five years on and it is slightly easier for those with mortgage difficulties. Thankfully, both lenders and the government have learned some lessons from the sub prime derivative crash. If any good can come from such a harrowing time for many people this is one example. Here is what you can do if you have mortgage difficulties or even if you just can’t pay your mortgage:
Don’t Ignore the Letters
Read the letters! It’s difficult to watch the post coming into your mailbox and seeing these envelopes knowing what they might contain. You must not ignore them, but open the letters and respond to them. Don’t hide them in cupboards or drawers – they won’t go away. Write back or call your mortgage lender and state your financial situation. You may be surprised by the help they are willing to offer.
You will likely be asked for a financial statement. Be honest with your total income and expenditure, including all your debts. They won’t be forgotten, but you may be able to come to an affordable mortgage repayment schedule. Your lender might rearrange your mortgage to offer you a lower interest rate or longer repayment period – each of these will reduce your monthly payments to a more affordable amount.
Federal Help with Mortgage Difficulties
Check out the HUD website and contact a HUD counselor. This is a free service, and you will be given the best advice possible for your specific situation. There are several ways in which your situation can be resolved and improved so you can keep your home with affordable repayments.
What you must not do is to leave your home. Abandoning your home will not help, and may ruin any possibility of you getting help from your lender or the government. One government program, ‘Hope for Homeowners,’ offers 30-year fixed rate mortgages. You will only get this type of help if you are still living in your own property.
Home Affordable Foreclosure Alternatives Program
Another program if you have mortgage difficulties is known as Making Home Affordable. This helps you to refinance your mortgage and makes it easier for you to pay. However, if you are really in deep trouble then the Home Affordable Foreclosure Alternatives Program can help.
You won’t be able to save your home, but if you are interested in a Deed In Lieu of Foreclosure or even a short sale then it can help. Each of these enables you to clear your debt to the mortgage lender in return for your home. You benefit by not having a foreclosure on your credit record, and usually having your mortgage debt paid off.
If you have mortgage difficulties and can’t pay your mortgage, then you should consider one or more of the above options. Each situation is different and what suits another person might not be best for you. Seek independent advice for the solution that best meets your needs.
Kitchen flooring used to be a simple choice: linoleum or tiles. Now you have a much wider choice of flooring materials for your kitchen. The choice you make can make a difference to the value of your home, particularly if you intend selling in the near future. Here are some ideas for materials suitable for your kitchen floor.
Kitchen Flooring Ideas: Wood
Wooden floors are popular in many homes, and are frequently enhanced by the use of area or accent rugs. However, rugs are not recommended for use in kitchens for hygiene and safety reasons. Nevertheless, many still prefer large expanses of solid wood flooring to any other floor covering. It is particularly popular in homes where the kitchen and living areas share an open plan design.
Hardwood floors look good when finished with wax or oil to provide a glowing but waterproof finish – though not ideal for kitchen flooring. Such finishes require regular cleaning and treatment to maintain the finish. A more durable surface for kitchen flooring can be obtained by using a polyurethane varnish on the wood. PU cures to a very hard and resilient surface that is easily cleaned.
The type of wood flooring available today is more durable than the old style boards of the past. Harwood blocks coated with PU varnish will last 5-6 years before needing another coat of varnish. The surface can be kept clean with an ordinary floor mop and is resistant to everyday spills, oils, hot fats and most other kitchen spillages. Popular hardwoods include cherry, maple, oak and hickory – the latter being particularly hardwearing.
Cork Flooring for Kitchens
Cork might appear to be an unlikely material for a kitchen floor, but it is preferred by a lot of people. Cork is warm to the touch, and great if you like walking barefoot in your home. It can be finished in a number of colors and varnishes. It is also a very handy surface if you drop a glass or valuable plate.
Many believe that cork would easily be dented, but nothing is further from the truth. Unlike wood, where a dent is permanent, cork quickly reverts to its original smoothness when deformed. It is also extremely resistant to water spillages.
Brick and Ceramic Tiles
Many people love using ceramic tiles in their kitchen. These are not like the small glazed tiles you would use in a bathroom. Kitchen tiles are larger and specifically designed to be anti-slip. They are available in a wide selection of patterns and colors and are easy to mop. Ceramic kitchen tiles are beautiful and add a touch of class and a Mediterranean look to your kitchen.
An alternative to regular ceramics is brick. Rather than use standard building bricks, kitchen bricks are a thinner version that have the durability and look of aged brick and easy to lay. If you like the idea of a brick floor in your kitchen, pavers are available in a wide range of finishes and shades. They are very durable, almost indestructible and very easy to wash clean. Perfect for a ceramic kitchen floor!
Rubber Kitchen Flooring
Professional chefs have been using rubber kitchen flooring for many years. It helps reduce breakages to a minimum, is warm to walk on and is very easy to keep clean. It is also a very easy surface on the feet and legs which is why the pros like it. Even though they are made from recycled tires, rubber flooring is available in a huge choice of colors. You can buy them like vinyl – in tile form or in rolls for easy laying over large areas.
These are just some of the alternative forms of kitchen flooring that are available today. We have still to mention concrete, bamboo and vinyl, but if you choose any of those above you are sure to have fabulous kitchen flooring that is easy to keep clean and is very durable. Most are available in colors and designs to suit any kitchen and will certainly help your home to improve in value over the years and maintain your home equity.
There are several ways of financing home improvements. However, before you even begin thinking of home improvement loans you should have a budget and try to stick to it. Keep in mind that most people go over-budget with a home improvement project, so add about 20% or more for your final costs.
Here are the common ways of financing home improvements;
Financing Home Improvements: Home Equity Loan
A home equity line of credit is probably better for financing home improvements that a straight reverse mortgage. Also known as a HELOC, a line of credit enables you to borrow as you need during the draw period up to your credit limit. For home improvements, a short draw period would be sufficient, typically 5 years. Arrange enough to cover over-budget costs – you need not use it but the facility is there if you do.
You pay interest only on what you draw from the line of credit, so you can purchase home improvement materials as you require them, or pay contractors as the bills come in. A HELOC is repaid in full at the end of the period, or can be amortized for the full amount over the draw period. There will be a minimum monthly payment to cover at least the interest, and you can pay as much as you like above that.
If you are aged 62 or over, a HUD Home Equity Conversion Mortgage (HECM) might suit you better and the costs are less. You can also get a line of credit with this. It should be noted that with equity loans you will be unable to use all of the equity in your home.
Title 1 Home Improvement Loans
In the title 1 program, private lenders are insured by the FHA to provide home improvement loans. These are for up to $25,000 and a maximum period of 20 years. You can use the funds for genuine home improvements, but not luxuries such as spas, saunas and hot tubs. The interest rates tend to be around 50% of those of a private home improvement loan. You need not have equity in your home, but you must apply to a lender approved to offer a Title 1 loan.
Personal loans offer lower interest rates than credit cards. Traditional banks tend to charge high interest rates for personal rates, but if you go online you can find a selection of lenders offering such loans at much lower rates.
Loans from Contractors
If you have some form of security, such as the equity in your home, some contractors will help with financing home improvements. If you take this route, make sure that the rates are lower than with a regular lender because many contractors get reward by lenders for passing your inquiry on.
Energy Efficiency Tax Credits
The government offers tax credits to a maximum total of $500 for installing energy efficient equipment in your home. This is not much, but it is something. Some credits can be higher if you upgrade to Energy Star equipment. Some states also contribute to the equipment costs. Check online for what your state offers – you may be in luck.
These are the more common methods of getting help financing home improvements. Always check the interest rates and costs of home improvement loans and go for the cheapest without putting your home at risk.