Working Your Debt Solution Plan: Your Mortgage
The Dollar Stretcher.com 'Get Out of Debt' Course
Do You Have a Debt Problem?
How Long Will It Take to Solve Your Debt Problem?
Deciding to Solve Your Debt Problem
Your Auto Loans
Your Credit Cards
Your Student Loans
Your Unpaid Taxes
Charting Your Financial Future
This lesson is designed to give you tools that will help you reduce the time and effort needed to solve your debt problem. In the previous lesson, you used a calculator to prioritize your debts and see how long it would take to pay them off. Now we'll show you ways that can make your job easier. Let's get started!
Your Rent or Mortgage
For most people their biggest budget items is housing. Either rent or mortgage. So that's the first place that you'll want to look for savings that you can apply to your debt problem.
For renters, you'll need to decide whether you want to try to find a less expensive place to live. Even if your lease doesn't end for many months, take the time now to see wheher you could be happy with a less expesive rental. If you could save on a rental, calculate how long it would take for the savings to cover the cost of moving. For some the cost to move is greater than the savings.
It might surprise that you may be able to own a property for less than the cost of rent. Though mortgage rates have been rising over the past couple of years they are still very attractive. Those with VA benefits can purchase with no down payment and little to no closing costs and others can purchase with as little as 2.5% of the sales price. A mortgage of $100,000 at 4.25% costs $492/mth plus taxes and insurance. Many people pay rent of $1000, $2000, or more. Our friends at ArcLoan.com can help you find out what you may qualify for. You'll find more about ArcLoan here.
Homeowners have a different task. Managing your mortgage is one of the most important things you can do to build wealth. As interest rates and your life situation change there will be times when refinancing can be vitally important.
As an example, consider a $200,000 30 year mortgage. Did you know that a 1% change in rate could save you over $1,000 this year? Or over $35,000 over the life of the loan and payoff your mortgage nearly 6 years earlier!
If the mortgage rate is 5.5% you'll pay $1,135 in principal and interest. But if you can reduce the rate by 1% to 4.5% you'll only pay $1,013 per month. A $123 savings every month without lifting a finger! And if you could reduce it to 3.5% (just another 1%) you'd reduce your payment to $898 per month. That would save you $2,844 each year!
It is very important that you look at both the interest rate and the closing costs needed to get that rate. Most people only focus on the rate which could cause you to make a poor choice. We recommend you choose a lender who will help you evaluate your different options and help you understand both the potential benefits and the potential cost.
Bottom Line... Can you think of another way to earn that much money with so little effort?
Before you consider a refinance, you'll need to know your current credit score. If you don't already know it, you can get it here.
DIY? Or get professional help?
The next thing to consider is whether you want to find the lender yourself or whether you'd prefer to have a professional walk you through the process. There's no one right answer. Some people prefer to do it all themselves. Others like to know that they have a trusted and ethical mortgage pro to help.
If you are working to get out of debt, our free weekly Surviving Tough Times newsletter can be a great tool. Each issue features great ways to help you stretch your dollars and make the most of your resources. Subscribe today! Or you can like us on Facebook or follow us on Twitter. Simply look for posts marked with #TDSGetOutOfDebtCourse to get helpful ways to make extra cash and trim monthly expenses so you can free up additional money to put towards your debt.
We'll give you two options here. We've worked with both and can comfortably recommend them to you.
If you want to do it yourself, use this tool from our friends at Bankrate.com. You'll be asked for some basic information. Then you'll see different lenders and their rates. Bankrate checks these rates regularly to make sure they're legit. Keep in mind that rates change daily and there are a number of factors which affect what rate you can get.
If you prefer to have someone walk you through the process, we recommend ArcLoan. For over 25 years they've been working with clients to help them manage their mortgage. Not just for a purchase or refinance, but manage it through the years. They are mortgage management experts. We'll tell you more about ArcLoan here.
Choose the Next Step of Your Debt Solution Plan:
- Lower your auto loan payment(s)
- Reduce your credit card debt
- Reduce your student loan payment(s)
- Get help with unpaid taxes
- Restore your credit
- Chart your financial future
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