Fixed vs Variable Mortgage Rates for Buying a New House

Before buying and moving into a new home there is one big decision to make and that is whether to choose a fixed or a variable mortgage rate. This decision will determine what interest rate you are going to pay on a monthly basis for your mortgage for the next twenty years or so, so choosing the right rate is definitely one of the most important things to do. However, there isn’t one correct way to go about this, as there are many factors you need to take into consideration before you make that initial decision, but here are some facts to help you out.

Fixed and Variable Mortgage Rates

What is a Fixed-Rate Mortgage?

A fixed-rate mortgage is one where there is a set interest rate that cannot change in the duration of the mortgage (if you don’t refinance). The fixed mortgage rate guarantees you a determined interest that you have to pay each month.

The advantage of a fixed-rate mortgage is that the homeowner will not have to contend with varied loan payment sum of money that changes with the interest rates.

What is a Varied-Rate Mortgage?

A varied-rate mortgage or adjustable-rate mortgage (ARM) is one where typically the interest rate is not fixed and can vary from month to month, potentially going either higher or lower over longer periods of time.

The biggest advantage of variable rate mortgage is that the interest rate modifies periodically. Monthly principal and interest payments vary according to a preset agenda throughout the life of the loan.

Most creditors and private firms need a down payment of about 5 to 20 percent of the entire sum of money from a borrower. This is more than the government mortgage loans with lower down payments. Your down payment also affects your loan-to-value ratio, or the amount of stake you have in your home compared to your mortgage. If you put down a larger down payment, you’ll start off with more equity in your home.

Factors to Keep in mind before Applying for a Mortgage Loan

While taking a fixed or varied rate mortgage loan for purchasing a brand-new house, it is important to keep in mind your monthly income, interest rate of the loan and actual price of your house.

You need stable and reliable sources of monthly income before applying for a mortgage loan.

The interest rate of the loan is an important factor to consider as it will decide how much money you will have to pay every month. While the whole act of loan processing will continue with paperwork and reviewing, the rate of interest will vary.

The price of a house impacts your mortgage. For example, if you want to purchase an expensive house you will have to make a larger sum of money as down payment or convince the seller to make some reduction in the price. Similarly, if the house costs lesser, the amount of money as down payment will be less.

It’s Personal

While you may be able to find great real estate deals online, make sure you don’t get carried away and rush into anything when applying for a mortgage. Only you know your financial situation which is the main thing to bear in mind when deciding to go with fixed or variable mortgage rate. Variable-rate mortgages can be risky for those who don’t have a high or constant income. If your financial situation fluctuates throughout the year, fixed rate may be the better option for you. If you are willing to take the risk, and believe that in the future the rates will go down, choosing the variable interest rate is the way to go. Especially nowadays, with all that economic turmoil going on choosing the variable interest rate can possibly save you some money.

Take Your Time

Last but not least, take your time. Do your research and homework and find out as much as possible about your possible lenders and what interest rates they offer. Use the internet as a source of information. Read about other people’s experiences, and ask yourself these questions: What monthly mortgage payment could you afford at the moment? If interest rates rise would you still be able to afford those payments? How long are you planning on living in the property? Either way you go, make sure you understand the consequences of your choices.

Keep in mind that making the decision to go with fixed or variable interest rate doesn’t have to be the last decision you’ll ever make, as you can always refinance your mortgage. Whatever you do, make sure you evaluate your personal situation as well as what’s going on in the market at the moment, taking into consideration all these factors will help you to make the right decision.

The Ultimate Credit Card Management Tips

Everyone looks for tips on how to manage credit cards. Often, these are the ones that give us severe financial troubles. However, you should know one essential truth with these things, there’s no single tip or guideline or advice to correctly manage your credit cards. This article can give you simple thoughts but the rest of the methods are up to you. Later on, you will discover that you have more options rather than just looking at these words.

basic finance tips

The real answer is right in your hands so, if you’re ready, here are some of the useful pointers for your credit card management.

The Stand.

Your credit interest rate and credit limit can depend on your credit history. The sad news is that a lot of people do not know how good or bad they are. To overcome this, you should pull your credit report from about three credit reporting agencies. There are free services in which you can get this data from like the AnnualCreditReport.com. It will show you the factors that can greatly affect your credits like late payments. All in all, more negative records will mean less chances of having the best interest rates.

The Chances.

To get higher chances, you have to wait. For about six months, you should fix everything with your former credit problems. The most important thing to remember is to put everything in order. As a guide, you can use your credit report. Basing in your credit report which you should first check for inaccuracies, learn about the mistakes that you have made and start from there. If not paying on time is your problem then make a habit to pay earlier or better. The bottom line is that you should stand up for good record. This will help increase your chances in getting the best benefits later on.

Experts advice that even if you can’t  afford to pay the full sum then at least pay the least amount. It will help you to avoid hefty penalty fees.

The Benefits.

Let’s assume that your credit is now in order and so, the next move is learning the kind of benefits that you really want. For example, if you love to travel, then it’s good to consider cards that are affiliated with hotels or airlines. These cards should also allow you to have reward points that can be used to buy tickets or hotel bookings. If you are a road freak, there are cards that have gas rewards. Just know your type of life and base your credit card benefits there.

It’s always a great idea to use one credit card at a time to optimize the benefits. Use Visa, Mastercard or American express as they are accepted everywhere. Amex card by and large gets you more points on every dollar spent.

However, it is beneficial to use an extra credit card if you have a business venture and want to compartmentalize between your personal and business expenses. If you are a globetrotter and are fond of traveling to foreign countries, then using Westpac credit card is a convenient option to consider.

Beware of the fraudulent activities if you have already acquired the EMV chip card. It is believed that the skimmers devices  can steal your confidential credit card information effectively. Closely monitor your credit reports and statements for protecting against frauds.

Our credit cards are often more precious than we think it to be. It can provide rental car insurance, trip cancellation insurance, purchase protection, price protection and even prolonged warranties. During shopping and vacation, these things can make a great difference and save up plenty of dollars.

The Records.

Though it looks good to pay the minimum amount every month since it only uses lesser money from your pocket, you have to consider it again. Interest rates between 13 and 15% is the  minimum payment that will increase your payments later on. Therefore, the key here is to charge only those that you will be able to pay each month. Next, pay on time. You can actually set up an automatic payment so that in case you forget about this, you won’t have to worry. If you are consistent with this, it can boost your credit score which means you will have lower interest rates. Lastly, consider your limit. One of the best factors to calculate your score is called the utilization rate. The lower your rate, the better your score will become.

The Laws.

Credit card laws are your friends. That’s one thing you should realize for a fact. Two huge acts that cover credit cards are the Credit Accountability Responsibility and Disclosure Act or CARD Act and the Fair Credit Bill Act. The first one eradicates a lot of typical but questionable credit card practices like retroactive rate increases, double-cycle billing and applying to lower-rate balances. Also, this act requires advance notice for rate hikes and more provisions. The second one is about all the rights of the card holders the moment he encounters a billing dispute with the credit editor.

Set a budget from the beginning

In order to keep  a track of your expenditures, it is important to set a budget on your credit card right from the beginning. It will help you understand where you are spending your money and what  should curb your spending. Credit card owners also  should check their transactions regularly.  They can use both PIN numbers or signature while operating it. At familiar shops and trustworthy companies, using PIN operated credit cards are the best. Many  modern credit cards come with an integrated  microchip for more safety and protection.

Knowledge of these things can greatly help you master the world of credit cards. These tips will really pull you off from credit card trouble you may be in today. If you have any question contact me today!