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Mortgage Loans

Nov 9

Posted by admin in Loans

One should never take a mortgage loan at face value. When you sign your mortgage loan papers, you will know the interest rate you will be paying for every month after that for the duration of the mortgage loan. But interest rates of mortgage loans aren’t always as good as they look. Very few people know that most of their monthly payments actually go to their mortgage loan interest.

When you take a 30-year mortgage loan for $100,000, the actual amount you pay for is $300,000. $100,000 is used to pay for the principal mortgage loan balance. But the remaining $200,000, which part of your mortgage loan did it go to? That’s right. Interest. Majority of your mortgage loan payments actually go to interest and to the pockets of your lenders.

Now, here’s another thing to think about when acquiring a mortgage loan. Moving is a common trend in America. The average person in America moves every 7 or so years. Moving into a new house usually means acquiring a new mortgage loan to cover the costs of the new house. It’s a never-ending cycle. And with interest payments at 91% of your monthly mortgage loan payment, it is also a vicious cycle.

Think getting a 30-year fixed rate mortgage loan at $100,000. Interest rate for this mortgage loan is 7%. When you move after 5 years, you still have a mortgage loan balance of $94,000, 94% of the original amount.

In five years, you paid several thousands of dollars for your mortgage loan but only ended up paying only $6,000 of your mortgage loan because the rest went to interest. 86% of your mortgage loan is what you would still owe even after ten years or 120 repayments. To reach 50%, you need about 20-25 years of mortgage loan payments. That’s how long a mortgage loan takes to get paid off.

And if you think that a mortgage loan will help you with your taxes, think again. Mortgage loans takes about a dollar of interest from you while you only get back about 28 cents from tax deductions.

Instead of prepaying their mortgage loans, some people use the money to jump start another investment. But the thing with investments is that there is no sure-fire way to adopt in order to succeed. You could get lucky or you could lose a lot. It’s a far riskier business to invest your money on the stock market than paying off your mortgage loans.

Now don’t let this picture about mortgage loans depress you and make you stay away from them for the rest of your life. The truth of the matter is, mortgage loans are a way of life. So how do we go past the mortgage loan hurdles? Pay off your mortgage loans early by paying extra. By paying extra once a year, you can actually remove 8 years from a 30-year mortgage loan.

Perhaps the best way for you to get ahead on your monthly mortgage loan payment is through a bi-weekly mortgage loan. With a bi-weekly mortgage loan, your payment is done every two weeks for half your monthly amount. At the end of the year, you’ll notice that you have made 13 monthly payments instead of 12.

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Tips to Avoid Overspending on Credit Cards

Nov 3

Posted by admin in Credit

Shopping or buying things is one of the guilty pleasures in life and with the presence of credit cards, spending seems to be more like a habit and way of life. Credit cards make one’s life easier but it could also make one’s life a living hell once you find yourself drowning with credit card debt.

For people that are not yet in this situation, good for you (and read on anyway to make sure you recognize the danger signals) but for those who are just inches away from that situation (or worse), pay attention because this might actually save your life from overspending your credit cards.

1. Know your credit limit

The first thing that you should know is your credit card limit so that you know if you are going overboard. Always keep in mind that once you cross that limit, there is no turning back.

2. Set your own credit limit

Aside from the credit limit set by the credit card company, it is advisable that you set your own credit limit that you can follow. It would be good if it is significantly lower than your standard credit limit so that you could actually be in control.

3. List down all your expenses

Having a list is really helpful in determining the things that you are buying and purchasing. Listing it will help you track down the things that you put your money into and trust me, half of it is really not that important to your life.

4. Don’t succumb to the following sales pressures

Advertising on TV, radio, or elsewhere is meant to not only inform but to tempt you into making purchases you would otherwise do without. Some common techniques are associating the product with heroes, as a status symbol, as a way to be more attractive, sexy, or smart. Avoid purchase decisions based on advertising techniques because they are cleverly done solely as a way to get you to transfer your money to the company that’s doing the advertising.

5. Avoid shopping unless it is really needed

It is not easy to resist temptation especially if the name of that temptation is the word, ‘sale?. Avoiding stores would help you overcome the instinct of buying and using your credit card unnecessarily. It would be better if you did not see the things that would tempt you. Just use your imagination! Also avoid buying just because there is a coupon, free gift, or other incentive attached, unless you really need the item.

6. Keep your credit cards at home

If you are the type of person that carries at least 5 types of credit cards in their wallet, I suggest that it would be better if you just carry one or two so that you will not be tempted to use all of them. If you cannot avoid the shops, then just leave your non-emergency credit cards at home.

7. Keep your receipts

If you are still not aware that you are on the verge of overspending, keep your receipts for a week and then total all the expenses that you did for that week. This would really be an effective wake-up call, more so even than coffee for your body!

8. Carry cash

Instead of making the habit of paying through credit cards, develop a habit to depend on paying transactions by cash so that you could really be able to keep track of your expenses. Cash is easier to count rather than card transactions. It will also make you more resistant to impulsive purchases.

Do this exercise: Sit down and try to remember the major purchases you’ve made in the last year or more (or go through your old receipts to jog your memory). How many of those purchases would you consider to be a ?bad? purchase? In other words, was it something that you haven’t really used, worn, or wasn’t as important as you thought at the time?

Of those major purchases (items that cost maybe $100 or more that weren’t necessities), how many of those purchases would you repeat if you knew then what you know now?

You’ll probably find that at least half of your purchases were ?bad?. So use that as a guideline to help you avoid making similar bad purchases in the future, perhaps by postponing instant gratification by ‘sleeping on the decision?. More often than not, you’ll wake up in less of a buying mood than you were the day before, and you won’t miss the item you would have purchased in the slightest.

9. Recognize the signs that you are overspending

Once you realize that you are having a hard time paying your monthly credit card statement, that is already a sign that you are losing your control over the matter. Be aware of these things because it is a warning to be heeded.

10. Know your limitations

Being aware of yourself could actually save you a lot of money because you already know the things that you need and the things that you don’t. Knowing your limitations could help you stop the unnecessary spending through the use of credit cards.

Credit cards are convenient to use, and absolutely necessary sometimes, but if one abuses the usage of their convenience, overspending results and it can really be a big burden for a person.

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The Truth About Cosigning Loans

May 9

Posted by admin in Loans

Myth: By cosigning a loan, I am helping a friend or relative.
Truth: Be ready to repay the loan. The bank wants a cosigner for a reason – they don’t expect the friend or relative to pay.

Think with me for a moment. If debt is the most aggressively marketed product in our culture today, if lenders must meet sales quotas for “loan production,” if lenders can project the likelihood of a loan going into default with unbelievable accuracy – if all these things are true and the lending industry has denied your friend or relative a loan, there is little doubt the potential borrower is trouble just looking for a place to happen. Yet people across America make the very unwise (yes, dumb) decision to cosign for someone else every day.

The lender requires a cosigner because there is a very high statistical chance that the applicant won’t pay. So why do we appoint ourselves as the generous, all-knowing, benevolent helper to override the judgment of an industry that is foaming at the month to lend money, and yet has deemed your friend or relative a deadbeat looking for a place to fail, or at least a loan default looking for a new home? Why do we cosign knowing full well the inherent problems?

We enter this ridiculous situation only on emotion. Intellect could not take us on this ride. We “know” they will pay because we “know” them. Wrong. Parents cosign for a young couple to buy a home. Why do they need a cosigner? Because they couldn’t afford the home! Parents cosign for a teenager to buy a car. Why would parents do this? “So he can learn to be responsible.” No, what the teenager has learned is: if you can’t pay for something, buy it anyway.

The sad thing is that those of us who have cosigned loans know how they end up. We end up paying them but only after our credit is damaged or ruined. If you cosign for a car, the lender will not contact you when the loan is paid late every month, but your credit is damaged every month. The lender will not contact you before they repossess the car, but you now have a repo on your credit report. They will contact you to pay the difference between the debt and the below-wholesale repo price they got for the car, which is called a deficit. If the lender did contact you, there is nothing you can legally do to force the sale of the car, because you don’t own it; you are merely on the hook for the debt. When you cosign on a house you will get the same results.

According to Proverbs 17:18, “It’s stupid to guarantee someone else’s loan” (CEV). That pretty well sums it up. Just like trying to bless a loved one with a loan, many people are trying to help by cosigning, and the result is damaged credit and damaged or destroyed relationships. I have cosigned loans and ended up paying them. One poor guy cosigned for me, and he ended up paying when I went broke. If you truly want to help someone, give money. If you don’t have it, then don’t sign up to pay it – because you likely will.

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Tax Deduction For Alimony Payments? – Yes!

Jul 7

Posted by admin in Taxes

Over 50% of marriages end in divorce in the United States. Many divorce decrees include provisions for the payment of alimony. The IRS takes the position that such payments constitute a form of income and create an alimony tax deduction for the person making payments.

According to the IRS, alimony payments are taxable to the recipient in the year received. In turn, the person paying the alimony can claim a deduction for the payments if the following tests are met:

1. You and your spouse or former spouse do not file a joint return with each other,

2. You pay in cash (including checks or money orders),

3. The divorce or separation instrument does not say that the payment is not alimony,

4. If legally separated under a decree of divorce or separate maintenance, you and your former spouse are not members of the same household when you make the payment,

5. You have no liability to make any payment (in cash or property) after the death of your spouse or former spouse; and

6. Your payment is not treated as child support.

If you are receiving or paying alimony, you must use Form 1040 for your personal taxes. Regardless of income levels, deductions or miscellaneous tax issues, you cannot use Form 104A or Form 1040EZ.

In preparing your tax return, the person receiving alimony will report the information on line 11 of Form 1040. That person must also provide their social security number to their former spouse or face a fine of $50. The person paying the alimony can claim the deduction on line 34a of Form 1040.

Richard A. Chapo is with http://www.businesstaxrecovery.com – recovery of business taxes through tax help and tax relief. Visit http://www.businesstaxrecovery.com/articles to read more business tax articles.

Writen By : Richard Chapo

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