When the base rate drops from 4.5% to 2% in less than a month, you might think switching from a fixed-rate mortgage to a tracker mortgage would be an easy decision. However, there are quite a few reasons it isn’t. Here are just three…

1) Margins

Not long ago, the interest rate on a tracker mortgage was higher than the base rate, but not much higher: trackers with a rate of ‘base rate + 0.3%’ aren't uncommon. Today, you’re more likely to see ‘base rate + 2%’.

With so many expecting the base rate to drop still further, mortgage providers are looking to protect themselves by increasing the ‘margin’ on their tracker mortgages – the difference between the base rate and the rate they’ll charge their customer.

So if a homeowner took out a ‘base rate + 0.3%’ tracker mortgage on 5 December 2007 (when the base rate was 5.5%), they’ll now be paying 2.3%.

But someone who took out a ‘base rate + 2%’ tracker mortgage on 5 December 2008 (when the base rate was 2%) will now be paying 4%.

2) Collars

Tracker mortgages do ‘track’ the base rate, but not necessarily all the way down. Many tracker deals come with a ‘collar’ or ‘floor’ – a minimum beyond which the rate will never fall, whatever happens to the base rate.

When the base rate is high, this isn’t likely to be an issue, but someone with a ‘base rate + 0.3%’ tracker mortgage would probably be irritated to find their mortgage’s collar means they’re paying 3%, rather than 2.3%.

3) The future

Whatever the margin, switching from a (for example) 5.6% fixed-rate mortgage to a (currently) 4% tracker deal still seems like a good idea – but is it really? This is dependant largely on three factors: how long the two mortgage deals will last, what kind of mortgages are available when they finish – and what happens to the Bank of England’s base rate in the meantime.

After all, someone on a five-year fixed-rate mortgage knows exactly what they’ll be paying four years from now. The person on the tracker mortgage has no such certainty: in the late-80s - early-90s, the base rate was consistently over 10% and actually reached 14.88%!

For anyone on a tracker, it’s tempting to think they could just switch to a fixed-rate deal if the base rate started climbing higher, but they might end up paying a substantial early repayment charge. Even more worrying – they might not be able to find a good fixed-rate deal. As the last year has demonstrated, there’s no guarantee that people looking for a new mortgage will be able to find one at the right time at the right price.

Technorati Tags: finance, fixed rate mortgage, Mortgage, personal finance, tracker mortgage

If you must repay student loans, there are a few factors that you should keep in mind. First, it is key that you make your payments when due. When you sign the documentation to get your student loans, you are binding yourself in a legal contract to repay the student loans you have been granted. If you fail to pay your payments each period, several problems occur.

The first thing that occurs is the damage to your credit score. When you fail to pay your bills, it is noted in your credit score, where it will remain for a period ranging between five to seven years. This translates to any instance you go to obtain credit, be it you are trying to gain a loan for a home, or you want to apply for a credit card, the creditor will see that you have a flag on your credit score. They can then tell that it was a failure in repaying student loans, which puts you in a very bad position and will make it very difficult to gain credit until the credit history has been cleared.

If you are thinking about taking out a student loan to assist with paying school, there are several factors that you will want to keep in mind. Above all, you will want remember that while you can request more funding than you need, it is not necessarily a great idea to do so. If you do this, when you go to repay student loans, you will possess a higher monthly payment than if you had only requested what you needed. Greater payments means that you have to locate a better job the moment you leave university, which can be quite challenging. While having a degree will help you obtain employment, good jobs typically need experience to go along with the certification. This can make finding the first job a little challenging.

If you have utilized a co-signer with your loan, it is particularly vital that you repay student loans when due. This is due to the fact that your guardian is sharing equal liability as you in regards to the funds. If you cannot make a payment, you must to inform your co-signer, as this will directly impact their credit history. In many cases, your guardian may be willing to assist you in making owed money payments to protect their credit rating.

Technorati Tags: Business, credit card, credit rating, Financial Services, Home, loan, personal finance, student loan

Many of us have several ways to cut the money that we spend each month. It may be easier to reduce our Starbucks expense, now that they are closing stores all across the country. All kidding aside, reducing expenses will allow your family to get through these tough times. It is time to sit down and start eliminating all of your unnecessary expenses. Analyze exactly where your money goes each month. This is a time to sacrifice some of your expenses and reduce the expenses that you cannot eliminate.

How do you go about refinancing your life?  It’s actually really easy. We often don’t realize how much finances have added up over time. It is important to pause and take a look at the expenses that have been accruing over time. Stop putting it off. Set realistic goals. There is no way to avoid some expenses. If you are willing to make some sacrifices you can eliminate many of your monthly expenses.

Start with your minor expenses. Can you pick up a newspaper at the store once or twice a week instead of having it delivered everyday? Can you cut back on eating out? You can use this as a great opportunity. You can lower your grocery costs by opting for healthier meals in many cases. You can try buying some generic brands for many kitchen and household items. How often do you use your gym membership? You can find alternative ways to exercise without using a gym membership. Just put some thought into your own lifestyle and your own expenses. You will find that if you are willing to make some simple sacrifices you can dramatically reduce your monthly expenses.

Major expenses may require a bit more work. Spend one day a week working with your major expenses. Contact some insurance companies and shop your rates again. You may not need such a low deductible if you hardly ever use your auto insurance.

Your largest expense is most likely your payment on your mortgage. You can use a home refi as a tool for your finances. There are many ways to reduce your mortgage payment or get into a loan program that makes more sense for your lifestyle than the mortgage that you are currently paying. Roll your credit card debt into your mortgage. You may want to cash out of your home to payoff auto loans. This may even allow you to make the same payments that you’re making right now, and go from a 30 year fixed mortgage into a 15 year fixed mortgage. Your time will be well spend if you want to search for a free refinance.

You may be surprised how easily you can turn your finances around. You just have to commit some time and effort, plus make a few sacrifices. You may need to make some sacrifices but it will be worth it. You will feel as if a huge weight was taken off of your shoulders when your are done. Don’t you want financial freedom?

Technorati Tags: home values, life, personal finance, refi, Refinance, saving money

The completed puzzle of the financial pieces of your life are all fitted together in place by the term referred to as your personal finances.This term of personal finance is used to include not only the various channels through which you acquire funds for your personal use like loans and credit cards; it also includes the process of budgeting, saving and spending.

The different things we use to gain access to money need to be examined first. When money is borrowed through use of credit cards it is instantly yours, but it has to be repaid with interest later.Today the use of credit cards is quite widespread, but it is necessary to take the proper precautions when you are using them.Credit cards make it too easy to overspend and when the time comes to make the payments be amazed at how little you will actually be paying on the purchase price compared to the interest rate charges. 

When you take out a personal loan it will be for a certain required amount and this will help you reduce your spending. Personal loans are available for different purposes, among them are such things as auto loans, debt consolidation loans, home loans, and some may even be used for cosmetic surgery.

Personal loans have interest rates too and they do have terms of repayment which you must carry out.If you get your loan through the offering of collateral, there is a possibility of losing your assets if you do not make the required payments. 

The best results with these financial opportunities may be easy to get to and the journey may begin with you. The characteristics of prudence, and being of an economical mindset and having the patience to use unlimited time to research the loan market are all helpful.

It will be possible to create a doable budget and develop the habit of staying within it when you know your financial limitations and ability to make payment. If you can keep accurate records of your expenditures you will begin to understand your spending habits and where to make the changes you feel are necessary, you will also be aware of your credit card usage.  

The loan market has trends and offers you must gain knowledge of before you make any final loan deals. Make a request for several quotes as this will give you an idea of how much a loan deal is going to cost you. Thus, you will know whether you will be able to afford the loan comfortably, and you should also read the fine print carefully for any hidden cost and fees.

Personal finance is the determining factor of the way you live your life and handle the economics of it. You will have a lifestyle that is not encumbered with worry over finances when you handle your personal finance properly, but if you do not take charge of it you find that you are wandering around in a maze of debt.

If you gather as much information as you can on personal finances and learn how to handle your own, you will be able to live a relatively safe and stress free life.Every one of us has our own particular financial puzzle pieces to arrange into the perfect financial picture for us.

Technorati Tags: auto loans, credit cards, personal finance

This is a good question and not one in which people understand very well when thinking about their financial lives. When you think about your finances and you think about buying different products in your life, you have the need for a loan at times and you will need for a line of credit at times.

Let’s discuss when it is wise to use a line of credit versus when it is better to get a loan (or even an unsecured credit card for that matter).

A loan is when you receive a lump sum of money under set terms and conditions for repayment, with a set interest rate and monthly payment. For example, your mortgage is a loan. The terms of the loan are fully disclosed to you when you receive the money so you know exactly when you are expected to have the loan paid in full.

Another example is a car. You are able to choose how long you want the loan to go along with the payment you want by talking with your local banker or the car dealership. An important point to remember is that the shorter the loan duration will equal less interest paid over the life of the loan.

Of course, all of your monthly payment is not going toward paying down the principle of the loan. Much of that payment is applied to interest.

Starting with the first payment, only a small portion goes toward the principal and the lion’s share goes toward interest. As you progress further into the loan, the amount going to principal increases.

A line of credit works differently in that it is an amount of money available to you to use when and as you see fit. You may set up a line of credit without having a specific purpose for the money at the time. Interest rates for lines of credit are figured based on prime, which is established by the Federal Reserve.

Knowing the difference between a line of credit and a loan is good financial planning help. It will help you to make good decisions as to which is best to choose to handle your financial needs.

Technorati Tags: credit, credit line, credit management, home equity line of credit, line of credit, personal finance