“Ask Your Mortgage Professional”               

Financial Tips 2010 

Managing Your Debt 

All debt is not created equal.  Managing your debt plays a major role in financial planning and qualifying for a mortgage.  Identifying your overall debt will help you manage it.  In order to determine the amount of debt and the type of debts you have make a list of all your obligations.  The key is to be able to review all your debts at one time to determine the best strategy in maintaining a positive cash flow.  Write down the overall amount owed, the payment amount per month, the current interest rate, the possibility of the interest rate increasing in the next 12 months, and the number of payments left to pay off this debt.  Manage your payments with these rules in mind, pay off higher interest rate debt first, and then target debt with the highest monthly payments to pay down in an effort to lower your overall monthly costs.  The credit crisis has left many borrowers struggling to maintain lines of credit and credit cards. Being able to prove to the banks that you are credit worthy sometimes will help you keep your credit lines open and active.  Why does this really matter? If you are in the market to purchase a home, Fannie Mae has recently made some major changes that will affect many borrowers.  The debt to income ratio limit has been capped at 45 percent unless you have compensating factors which may allow for an exception up to 50 percent maximum.  This is a significant change and some borrowers may be just outside the limit and now have to pay off some of their current debts in order to qualify for a mortgage.     

Investing In Your Mortgage 

Now you have a mortgage, now what? Consider your home as an investment.  Your mortgage is a tool in which you have to pay for that investment.  How do you manage your investment?  Do you pay extra principal payments on your mortgage?  For some people using your home as a savings bank may not be the best strategy. That is exactly what you are doing when you pay extra on your mortgage.  You do not earn interest on the extra money you pay on your mortgage. There is no rate of return on unused home equity, so why invest more in your mortgage than necessary.  The only way to gain access to this money again is to refinance and in some cases such as natural disasters, declining markets and credit availability it may be virtually impossible to get that money out again.  So don’t invest money where it becomes inaccessible.  Remember liquidity, safety and rate of return is what you look for in an investment.   Mortgage planning and equity management are a part of home financing and you need to work with a Certified Mortgage Planner that can advise you on how to make your home and your mortgage an investment opportunity.   

Personal Finances 

Finally take a few minutes to perform an annual assessment of your overall personal financial situation, making sure to evaluate what is important, setting goals, and determine a plan that will allow you to achieve your short term and long term goals.  Don’t let another year slip by without setting forth a plan.  As your Certified Mortgage Planning Specialist I can help you with Mortgage Planning and set forth a Mortgage Strategy that will help you meet your financial goals.  Planning for the future starts now, don’t delay any longer call today! 

If you have questions or comments please email them to [email protected]  

Call Andrew today at 573-302-0600.   

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