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Turn Off The Lights; Facts To Confirm Your Knowledge

January 25, 2016 by

It’s possible to make an individual effort to reduce the carbon footprint of the economy. What would be a better way to contribute by start saving electricity at your home and office? John Theodore Houghton, the writer of Global Warming: Complete Briefing mentions the largest savings in electricity are found in home appliances and commercial lighting.

Depletion of electricity sources is one of the major reasons why electricity rates suffer from price hikes. The sources include gas, coal, oil etc. By attempting to save electricity, an individual effort can be made towards conserving natural resources of the earth. The action also has an impact on carbon footprint, limiting the reliance on fossil fuels and reducing the emission of greenhouse gases.

It takes a few minutes to turn off the lights when not required. Assuming the average electricity cost is 15 cents per kilowatt-hour, and the average CLF bulb consumes about 20 watts, which translates into 180 kilowatt-hours.

Consider turning off the bulbs when you’re going for grocery. It will take you 3 hours on average to come back, and by then, you’ve saved 60 watts of electricity. Imagine the savings you can achieve by turning off the lights whenever you don’t need them.

Appliances are big consumers of electricity. According to Lawrence Berkeley National Laboratory, devices such as DVD players, tablets, smartphones etc. consume an average of 44 watts when switched off and 9 watts in standard mode.

A normal VCR consumes 13 watts per day or 114 kilowatt-hours annually. If you’re paying 15 cents per kilowatt-hour, the VCR power is costing you $17.1 per year.  You’re likely to have more similar items at your home, consuming over $100 per year on average. Plugging out even half of the appliances can lead to an average savings of $50 per year.

Energy rates vary for different areas, and a more accurate estimate of money savings per year can be made by finding out the electricity rate of your area through websites like  www.Electric.com.

Here are some of the things you can do to save electricity:

1.  Unplug electricity sucking appliances

As mentioned above, gadgets and appliances can suck up electricity as long as they’re plugged into a power source. The Lawrence Berkeley National Laboratory reports that leaving appliances plugged in standby mode consumes 5 to 10 percent residential electricity on average. They can be unplugged when fully charged or not being used.

2.  Replace conventional lights

Lightning accounts for 20 percent of electricity bill in most homes. Conventional lights should be replaced by compact-florescent lamps (CFLs). They cost more, but also last 5 times longer compared to their conventional counterparts and generate less heat. Lower watt bulbs should be placed wherever possible.

3.  Invest in smart units

Smart units turn off automatically when the charge given to a particular appliance or gadget has been filled. They’re able to detect that power is no longer required by the plugged in device, and provide cost savings by saving electricity consumption.

By making some lifestyle changes and small investments, it’s possible to reduce the production of electricity waste and depletion of natural resources.

Filed Under: Housing

What Can You Do If You Can’t Keep Up With The Rent?

May 4, 2013 by

I am single occupant in rented accommodation and this month I seem to have fallen short by a few hundred on the rent. Is there any way I am able to take out a tenant loan or put my rent back until payday?’

Losing track of what’s in our bank accounts can happen to the best of us and more often than not, bills will come in thick and fast. It seems that both the household energy bills and rent are often due in the same week. If, up until now, you have always paid your rent on time then coming up with a solution shouldn’t be too much of a problem:

Ask your landlord for an extension

If you have been in your housing contract for many months and this is the first time you have been short on your rent, then it is more than likely that your landlord will understand. Paying an estate agent to look for a new tenant will only cost them both time and money.

A little is better than nothing

Paying your landlord as much as you possibly can is better than paying nothing. He or she will appreciate your effort and as such, they will likely give you the extension you desire. You may only be £100 short and expecting a wage in the next few days; if this is the case try to warn your landlord in advance.

New tenants

If you are a new tenant and have only been renting for a few months, your landlord may not be so lenient. In this case you may have to come up with the goods another way. Borrowing money in the form of an unsecured tenant loan is certainly one way to cover your rent without getting the homeowner involved. When opting for this option you must make sure that you are able to pay the lender back, otherwise you risk racking more debts and getting into financial difficulty.

Ask for an advance on your wage

If you have been in your job longer than you have in your housing contract, it may be wise to ask your employer for an advance on your wage as opposed to asking your landlord for an extension. Arrange a meeting with your boss and explain the situation clearly; if you are a good employee, both parties may be able to come to some sort of solution.

Filed Under: Debt, Housing Tagged With:

Before You Go into Foreclosure Check Out HAFA

September 12, 2012 by

short saleIf you’re considering a short sale to sell a house that you can no longer afford, or even if you’re facing the very real prospect of foreclosure, you may have an alternative. It’s a federal government program called the Home Affordable Foreclosure Alternatives, or HAFA for short.

The program was launched by the federal government in 2009 in response to the housing meltdown. It’s purpose is to give people a chance to get out from underneath their mortgages without all of the usual unpleasantness that goes with disposing of an underwater mortgage (house value less than the amount of the mortgage it secures).

A program that allows you to exit gracefully

HAFA covers loans that are either owned or guaranteed by either Fannie Mae or Freddie Mac, or serviced by more than 100 mortgage servicing companies that participate in the program. There’s an excellent chance that the mortgage on your home is eligible.

The program provides two options for mortgage debt relief: a short sale or deed in lieu of foreclosure.

Short sale. Under a short sale, the lender approves the sale of your home even though the proceeds of the sale will be insufficient to payoff the full balance of the mortgage. This arrangement is available under HAFA, and the deficiencyâ”the amount of the mortgage not satisfied by the proceeds from the sale of the homeâ”is guaranteed to be waived by the mortgage servicer. In addition, you won’t be held liable for the amount of the deficiency, and you will be completely released from any further responsibility for the remaining loan balance.

Deed in lieu. This is the second option. You don’t sell the home, but instead you give the title to the property back to the mortgage lender.

Program benefits

As anyone who’s ever been through it can attest, foreclosure is a messy affair. And short sales can leave you at the mercy of an uncooperative bank. HAFA helps you with both and makes the whole process easier.

In addition, HAFA provides other valuable benefits:

Free housing counseling. Many homeowners who are underwater on their mortgages don’t know what to do or where to turn to improve their circumstances. Under HAFA, you will be given advice from HUD approved housing counselors and licensed real estate professionals who can give you the direction you need. This service is available to you for free.

Less effect on your credit score. A short sale or deed in lieu will have less of a negative effect on your credit scores than traditional short sales and foreclosures, though the program website doesn’t explain exactly why that is.

Relocation assistance. After closing on the sale of your home, you may be eligible to receive a $3,000 relocation assistance package.

Qualifying for HAFA

There are qualifications for HAFA. According to the program guidelines you must meet all of the following:

  1. “You have a documented financial hardship.
  2. You have not purchased a new house within the last 12 months.
  3. Your first mortgage is less than $729,750.
  4. You obtained your mortgage on or before January 1, 2009
  5. You must not have been convicted within the last 10 years of felony larceny, theft, fraud, forgery, money laundering or tax evasion in connection with a mortgage or real estate transaction.”

The program isn’t specific on what constitutes a financial hardshipâ, but it’s also clear from the restrictions that you won’t be able to use HAFA as a way to engineer the sale of one house for the purpose of buying a new one. The program is specifically aimed at homeowners who are in distressed circumstances.

Whether it’s a likely foreclosure or the prospect of a short sale, check out the HAFA Program if you think it could help in your situation.

photo by aegishjalmur

Filed Under: Housing

How Someone’s Lunch money Bought a Washer and Dryer

May 21, 2012 by

bought a washer and dryerI’m going to do it. I’m going to bum change off people for two months and pay for it. My wife thinks I can’t. She think it’s impossible, but just watch me.

My friend seemed pretty determined and sure of himself just a day before he had finally given in to his wife’s demands for a new washer and dryer. But instead of heading off to the local Sears or Best Buy and swiping plastic, he was determined to do things the good old-fashioned way — by asking for simple pocket change.

“Can you give me a dollar or two for lunch,” he asked friends and acquaintances (and sometimes even strangers) every day. He did this for two months and he proved his wife right â“ in a short amount of time he had enough money to buy a new washer and dryer.

His experience teaches us a couple simple truisms about money: where there’s a will, there’s a way and (even more importantly) that small change adds up, even in a short amount of time.

Tracking Expenses: From Pennies to Big Bucks?

My friend knew he could bum enough change off friends and strangers to pay for two big-ticket consumer items. He had no shame in asking for change from the same folks, over and over, too.

Even if you would never go to this extreme in seeking new cash streams, consider that his experience shows the possibility of creatively seeking out new sources of cash flow and (more importantly) that his friends, acquaintances and some perfect strangers had no idea just how much money they willingly forked over to him. They were literally bleeding pocket change that added up to big bucks over time.

Learn from my friend’s accomplices: Keep track of your expenses! If possible, forgo cash because it’s so difficult to track. Create a family and household budget that narrows in on spending and is as focused as a laser beam. Above all, remember: small sums add up over time, but small losses and untracked purchases and expenses do too.

There’s a Saying About Change…

You’re happy and rich but you need to change your change to cold, hard cash. Head to your local bank and ask for some (free) coin wrappers, roll the coins in the privacy and comfort of your home and deliver them back to the bank for cash, free of charge.

Credit union members take heed: many credit unions offer coin machines — free of charge — to their customers. You can dump your unsorted shinies into the machine without facing the 10% haircut charged by commercial coin changers. If you have several hundred dollars in change (or even more, like my spouse-betting friend), that’s one very expensive haircut.

Wonderfully Weird and Wacky Ways to Wealth… or a Washer and Dryer

Bumming change to best a betting spouse may be uncouth, but it proves that small things can add up to bigger things? People unfortunately often overlook the fact that they are losing money by throwing away every item passing through their household. Instead of trashing it, you should try cashing it (in). For example, did you know that empty wine bottles could fetch up to 50 cents? Or that used toner cartridges can command even 20 bucks?

If you don’t want to deal with ink, bottles or basketball player undies, you can even earn a tidy monthly sum by testing websites.

If bumming change can buy you an appliance, why not selling your garbage or website testing? Be creative and the change will start to add up very quickly…

(Kyle Taylor is the editor of The Penny Hoarder, a daily blog with weird & wacky tips on how to make extra money. Connect with him on Facebook/Twitter or subscribe to his newsletter to get his 5 wackiest ways to make money via email!)

photo by editor

Filed Under: Frugal Living, General Finance, Housing

Building a Home Movie Theater on a Budget

February 3, 2012 by

building a home movie theaterWe love to watch TV and movies in the privacy of our homes.   So it stands to reason that we would want to enjoy these simple pleasures in the best possible setting, as a way of enhancing the viewing experience.   But media rooms can bust the budget of the ordinary TV buff.   That’s why building a home movie theater on a budget can make your viewing sanctuary a reality.

The right media equipment makes or breaks the room.   This is where a lot of the media budget usually goes.   But there are ways around that.

 

The right equipment

As soon as you decide to go with the room begin your search for used equipment.   People are always moving where they no longer need their equipment, update their older set or simply don’t want it anymore.   Start looking early and this will give you time to come across exactly what you want at a fraction of buying it new.

 

Acoustics

Acoustics are an absolute necessity for the proper media room.   Under normal circumstances you would go with sound-proof tiles all around, but these are expensive.   A cheaper route would be to maximize the amount of insulation in the walls and especially the ceiling.   Doubling or even tripling (if   space allows) insulation makes quite a difference in the amount of sound that escapes.   Plus, insulation is cheap and can be installed by anyone.

 

Sound quality

Sound is also affected by the floor.   But sound doesn’t do very well bouncing off of anything hard like wood, concrete or tile.   You need soft to absorb sound better.   Carpet is, by far, the best choice and the plusher the carpet, the better.   This goes for padding, too.   Although you don’t necessarily want to sink into the floor when you’re walking.

 

Carpet on the cheap

To keep costs low, make some calls to local carpet companies.   They are always replacing old carpet with newer brands or removing carpet to put in hardwood floors.   The old carpet is taken back to their shop and disposed of.   Have them notify you when they receive carpet in good condition.   Taking it off their hands means they don’t have to pay to dispose of it.   You might go through this sequence several times before you get what you need, but free is still cheaper.

 

Comfy seating a must

In order to enjoy your media room you have to be comfortable.   That means having the right seating arrangements.   In oder to fill this need, you need to decide if you are going for single seats or multiple.

For single seats, you can simply line up some recliners.   You can find these all day long on sales sites like Craigslist or even in the classifieds.   If you want uniformity, spring for some matching upholstery covers.   It will still come out considerably lower than custom media chairs.

For multiple seating, put in an old sofa.   Again, an upholstery cover will bring new life to a dated or worn out sofa.   If you need more than one row, you can line up two or even three couches.   For each additional row, you can build a short platform out of two-by-fours and plywood to elevate each row behind the front one.

 

So there you have it folks, a home theater on a budget!  Any additional tips would be great, so comment below!

Filed Under: Housing

Tips for Buying Furniture Online

November 19, 2011 by

furniture onlineSince buying furniture can quickly translate into a large outlay of cash, consumers like to know that they are getting their money’s worth.   And since purchasing furniture also means that said furniture will need to be delivered anyway, why not purchase it online, at a discount, and take advantage of the savings?   While this sounds like the best of both worlds, convenience and savings, there are still some tips for buying furniture online that could potentially save you even more money.

-When you begin your search, look past the snazzy website and the read customer reviews. With this age of instant technology also comes customer opinions.   Consumers love to share the good, and the bad, experiences of dealing with retailers.  Take advantage of their experiences.

-Once you find a company you are interested in, take some time to read about them.   This means checking out all about who they are, how long they have been in business, if they have multiple locations, etc.   All this information tells you if they plan to continue growing or if they are barely surviving.

-Can the company be contacted easily if you have a question before or a concern after the purchase? If the only route of communication with them is email this could be a sign that they like to avoid confrontation.   And why would a reputable company ever avoid their customers? A reputable company wouldn’t.

-The right company will also provide detailed shipping information.   Some companies will even offer free shipping.   But is it really free?   If they ship for free, but are consistently higher than all of your other options then they are probably just adding the shipping cost into the price of the furniture.   Get all shipping charges in writing before you pay.

-Make sure that the company has more than one of what you are interested in.   Is it a closeout? Has it been returned?   A reputable company will have more than one of their designs to accommodate multiple buyers.   If the set you are interested in is the last oneâ, ask when they will be getting in more.

-Does your choice have a physical location?   Many online companies also have store locations where consumers can browse, pick out what they like and order it from the online service. This eliminates the store from having to carry fifty of the same couch on-site.   Some will even ship your purchase to their physical location for free as a way of showing their appreciation for choosing them.

-What is the return policy?   Check for hidden charges such as re-stocking fees, handling fees, additional shipping charges, etc.   The return policy should be clearly posted on the website and should not require an engineering degree to decipher.

-Above all else, make sure that the website is secure.   Anyone can throw up a website, post pictures and fake customer reviews.   Research them in directories like the Better Business Bureau or Chamber of Commerce.   Check out the URL.   Spend the time and do some research to avoid possible identity theft.

Filed Under: Frugal Living, Housing

Mortgage Calculator Tips

November 9, 2011 by

calculatorHave you heard of Emortgage calculators?  Yup, neither did I until yesterday.  After messing around with them for a little bit, I have found these types of calculators to be extremely useful.

A mortgage calculator can produce simple answers or even answer your most complex questions.  Typically, you are probably looking for a monthly payment on a house.

But how does it know what to ask you?   These calculators are programmed to ask you very specific questions.  Examples of these questions are things like the interest rate of the loan, loan amounts, and the contracted terms. These simple questions will produce a simple answer, a monthly loan amount.

You may be wondering if these questions are enough.  I really don’t think so.  To be honest, a home purchase is the second most important decision you will make behind who you marry.

So, what else should you look out for?  Things like taxes and insurance, total amount payable, personal income, PMI, credit information, and adjustable rates are things you should look out for the hunt for the perfect E-Mortgage Calculator.

Another tip I have for you is to compare results from various mortgage calculators.  Since not all mortgage calculators are made the same, it’s important to shop around just like anything else in life.  While one calculator may produce a certain monthly payment, another mortgage calculator may produce a very different number.  Don’t be fooled into thinking they are all the same; they’re definitely not!

Another great option you should consider is an amortization calculator.  These calculators break down how much interest you will owe and how much pinciple you will be paying off.  This will all depend on your current repayment plan.

Well, I hope these tips have helped you decide on a mortgage calculator.  In conclusion, don’t settle for a simple calculator unless you don’t care about factoring in other options.  Good luck on the quest for the perfect mortgage calculator!

(This is a featured post on behalf of  Emortgage Calculator.)

photo by Images_of_Money’s

Filed Under: Housing

Controlling Expenses From the Top Down

October 26, 2011 by

top downIn an attempt to get control over finances, we’ll usually start with an assault on the smallest expenses; because they’re the smallest, cutting them will produce the least amount of disruption in our lifestyles. But it’s equally true that cutting small expenses also produces the lowest savings. No amount of coupon clipping, turning out unused lights or canceling subscriptions will offset a crippling house payment or an outsized car payment.

If we’re serious about controlling our financesâ”and I mean really serious–nothing will have greater impact than lowering expenses from the top down, meaning the Big Stuff. I’m talking about four expenses in particularâ”housing, cars, health insurance and entertainment.

Let’s consider each and the impact it has on our finances. At the end, we’ll discuss why this is even more important for a Christian.

Housing

Many or even most other expenses in your budget will be determined by how much you spend on housing. A house is the single biggest driver of lifestyle inflation! Where you live and the size of the home affects what you pay for utilities, repairs and maintenance, furniture, insurance and even entertainment and the car you park in your driveway. It’s never just about being able to afford a particular house payment–bigger houses seem to demand higher outlays for everything else.

For this reason it’s critical to be conservative in your choice of housing. For decades we were told to buy the biggest house we could afford, and our finances would grow into it; do we believe that anymore? Should we?

Here’s something else: once you close on your home and sign the mortgage papers there’s no way to lower your monthly house payment should it become necessary! This is especially true today since the ability to refinance is no longer assured. And while the principal and interest portion of your payment will be stable for the life of your loan (on a fixed rate), taxes and insurance can and usually do rise over time.

Consider these facts when buying a home, or even if you’re currently struggling to maintain your payment. It’s better to buy beneath your means when it comes to housing.

Cars

High car expense isn’t nearly as long term in scope as housing, but it can still do a lot of damage in the short run. Much like housing, other expenses tend to rise the more you pay for a car. Like housing, there’s a strong argument for buying less car than you can afford.

If you’re struggling with an uncomfortably high house payment you may want to consider buying no more car than you can afford to pay cash for. A car payment on top of a large house payment can be the tripwire into financial oblivionâ”most of us can afford to carry some debt but we can’t have it coming at us from all directions.

Health insurance

There’s a strong case to be made that this is quite possibly the most important expense we have in the modern world, but even if that’s true it still has limits. Many people want their health insurance plan to cover as much as possibleâ”the fewer checks they have to write the better. The problem with this goal, from a financial standpoint, is that it’s also very expensive.

A substantial part of the cost of health insurance is coverage over first dollar expenses. What this means is that the lower your co-payments, deductibles and co-insurance provisions, the more you’ll pay for your premiums.

If you’re in generally good health, it can be more cost effective to trade higher co-payments, deductibles and coinsurance provisions for lower monthly premiums. You can also offset these by maintaining an emergency fund balance large enough to cover your maximum deductible and coinsurance provision in any one year. You’ll be covered in the event the worst happens, and if it doesn’t you’ll be ahead through lower monthly premiums.

Entertainment

Not so long ago entertainment was a fringe expense, something we paid for with what was left after all the bills were paid and some money was socked away in the bank. No longer. Today entertainment has a far stronger claim on our first fruits, so much so that many go into debt to be able to afford it.

The problem with this lifestyle is that it’s expensive! Theme parks, travel, restaurant meals and professional sporting events are expensive, and even old stand-by’s, like movie theaters, are no longer cheap. If you’re entertaining yourself with these on a regular basis it’s a solid bet that entertainment is eating up a much larger slice of your finances than you might assume.

I have a theoryâ”stay with me for a momentâ”I think formal entertainment has grown with the decline of families and communities. The less interaction we have with people, the more we’re willing to pay to find recreation and contentment in more formal venues.

Spend more time with peopleâ”they’re more fun than formal entertainment, and a lot less expensive. Be purposeful about getting together with family and friends on simple activities like potluck suppers, outings or at home movie nights.

If boredom is an issue, try volunteering to help the less fortunate, exercising to improve your health or starting a side business to earn extra money.

What’s the payoff?

I’m of the opinion that as Christians we need to travel light❠in life. That starts with keeping control of the biggest expenses. By doing so we have more money free for other purposes; some examples:

Mobility. God sometimes calls us to stop what we’re doing and to go in a different direction. Mission work is an example; a career or geographic move are a couple of others. It’s not so easy to heed such a call when we’re weighed down with expensive possessions, large debts or a high cost lifestyle. We need to be ready because we can never know when such a call might come.

Peace of mind. Possessions have a way of controlling our thinking. The more possessions we have, and the more money we have tied up in them, the more we obsess on them. While we’re obsessing, we’re stressing, to at least some degree, and almost certainly neglecting other pursuits we’re charged with, including prayer and Bible study, fellowship and volunteering.

Liquidity. I believe that as Christians, we have an implied command to stay liquidâ”that is to have money, time and resources to contribute to our churches and to help others. Having income available and at least some discretionary savings will enable us to either deal with a personal crisis, or to help others with theirs. None of that can happen if our income and savings are maxed out in possessions or a lifestyle that’s at or just beyond our reach.

Giving. The less money we spend on our basic cost of livingâ”in other words, the money we spend on usâ”the more we’ll have to store up treasures in heaven❠( Matthew 6:20) by helping others.

Time. It’s become almost axiomatic in our culture that we never have enough time; how much of this owes to the fact that we strive to acquire and maintain a certain lifestyle? Time is probably a more valuable commodity than money because it represents our very lives, and not just our money. The more of it that we have that’s free, the more we have to do everything else we should be doing as followers of Jesus Christ. Our witnesses are driven more by how we use our time than by how we use our money. But in the Catch-22 that life can be, how we use our money has a major effect on how we use our time as well.

We can free up both our money and time for Kingdom purposes by controlling all kinds of expenses. But by tackling the biggest onesâ”by controlling our expenses from the top downâ”we can do even more!

Filed Under: Budgeting, Housing Tagged With: , , , , ,

Honey, the Kids are Moving Back Home!

September 26, 2011 by

moving homeWhen parents raise their kids and get them up to that all-important age of 18 years old, they are prepared to say goodbye. This is because the teenager is usually moving on to their own, independent life either by going to college or getting out into the working world. These days, however, there is a new trend of college students moving back home in order to save money. What’s going on? After all, aren’t college kids the ones who like to go out and party? How in the world can they enjoy living back home with mom and dad?

Although many parents are sad to see their kids leave for college, commonly called empty nest syndrome, most of them get used to the idea of their new lives. In fact, many parents relish the idea of having the ultimate freedom to do what they want in life after finally raising their child to 18 years old. That’s why it can be quite an adjustment to have your grown college student living back in your house. This leads to the question of how can you make the process of living together again less of an imposition? Here are some ideas and tips to get you started when you find out that your college kid is moving back home:

Boundaries from the get-go

You have to think about your college student moving home almost like you’ve just taken in a tenant. There should be boundaries and rules put into place for what you will and won’t accept in your house. For instance, is there a specific time that you want the house locked down for the evening? Many parents don’t want their college student to be coming and going at all hours of the night like they are living in a dorm. As the owner of the home and the landlordâ, you are perfectly within your rights to set up rules that they are expected to follow.

Delegate some chores

Just because your college student is moving home doesn’t mean that they are relieved of housework duties. If they are going to be living in your property, they need to have certain cleaning tasks that they take care of. Remember that you’re trying to prepare your college student for the real world after they graduate. Letting them be a slob around your house is not teaching them anything.  I remember when some of our Composite doors had been abused and my Mom asked me to clean them.  It was my chore and I did it!

Paying your fair share

Financial contributions: Even though your college student has moved home due to financial reasons, that doesn’t mean that they shouldn’t contribute something to the household. Even if it is as simple as paying a quarter of the electric bill each month, your student needs to understand that they have to pay their way in life. Most college students have some kind of a part-time job to pay for their car insurance and gas. Sit down with them before they move in to decide what part of the bills will be theirs to pay. You don’t want them to move home and start living off of you again because that will only set them back from becoming independent after they graduate.

Teaching opportunity

For some empty nest parents, having a college student move back home can be a wonderful thing. You might feel great about getting to take care of someone else again. However, remember that your needs are not the only ones in play here. It’s much more important to make sure that your college student gets a real world wake-up call. The whole purpose of sending them for higher education is so that they can go out and be independent in their lives. You want them to be successful not only in their career, but also in their personal life. That’s why having these boundaries and rules in place is so important.

Filed Under: College Finances, Family Finances, General Finance, Housing, Life Experience

Why a 15 Year Mortgage is a Smart Move

September 12, 2011 by

15 year mortgageWhen it comes to purchasing or refinancing a house, borrowers have to consider whether or not they want to go for the 15 year or 30 year option on their mortgage loan. Most people go with the easiest option, which is the 30 year plan. This is because it gives them more time to pay the home down and results in a lesser payment each month. However, you have to think ahead when it comes to personal finance. After all, if you can save a lot of money by going with a 15 year option, it makes sense to consider it from all viewpoints.

The primary difference between a 15 year and 30 year loan is pretty well known. A 15 year loan has a higher monthly payment, but you pay a lot less interest over time simply because it is repaid in half the amount of time as a 30 year loan. It means that you will own your home sooner because more of your payment is going toward principal than interest. When you get a 30 year loan, your monthly payments will be a lot less, but you will pay a lot more interest over time.

Many people who choose a 15 year loan are the same individuals who do a lot of forethought and planning when it comes to personal finance. Instead of simply thinking about today, they look ahead into the future. These people do not want to pay too much for a property simply to save a little bit on the monthly mortgage payment.

Here are some things to consider when trying to choose between a 15 year and a 30 year option on your mortgage:

-What can you really afford?

You need to look at your monthly payment and debt obligations to assess how much of a mortgage payment you can really afford. There are online calculators that you can use to give you an idea of how much you will save between a 15 year and a 30 year mortgage. You might be shocked at how many thousands of dollars you’ll save by going with the 15 year plan. However, if you cannot afford the monthly payment on a 15 year mortgage, it makes no sense to struggle each month.

 

-Are you saving for retirement?

Although real estate is a pretty safe investment most of the time, you can’t totally depend on it for your retirement. That’s why it’s very important that you’re still putting money aside in your retirement accounts each month. If having a 15 year mortgage keeps you from having the extra income to throw at your 401(k) or IRA, it may not be the best option for you.

 

-Do you have an emergency fund?

Before you sign up for a 15 year mortgage loan, you need to make sure that you have a good emergency fund in place of at least 6 to 9 months worth of expenses. You never know when you might suffer a job loss or medical issue that causes you to be out of work. Because of this, you don’t want a higher mortgage payment that you can’t handle unless you have a substantial emergency fund in place.

 

A 15 year mortgage can be of great financial choice for many people. As with anything, it really depends on the circumstances as to whether or not you should make this choice for yourself. Sometimes, it makes sense for a person to start out with a 30 year loan and refinance later into a 15 year option when they are in a better financial position to handle the monthly debt obligation. If you do some research online using amortization calculators, you should be able to see what your savings will be while looking at the two options. Then, you can make plans to put yourself in a financial situation will allow you to take advantage of that 15 year option later if you cannot do it right now.

Filed Under: Housing