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Refinancing is a great option that homeowners have especially when mortgage rates are lower than what they already have in place. Can refinancing a mortgage eliminate debt? The reality is that refinancing a mortgage cannot eliminate debt, although using a refinance to reduce debt can be a very successful financial strategy.

When refinancing, the homeowner is basically turning in the existing mortgage for a new loan. The new loan can have a different rate, a different term and a completely different program. Normally, borrowers will try to obtain a lower mortgage rate and/or a lower term, if possible. In most cases, the standard fixed rate mortgage is chosen even when refinancing from an adjustable rate mortgage. Fixed rate mortgages offers borrowers security by knowing that the same mortgage payment will be in place for the entire term of the loan.

Debt consolidation is often done when refinancing. By doing so, the borrower is combining the balances of other debt, such as credit cards, loans, etc., and adding it to the mortgage balance. While this increases the funds needed for the mortgage, the other debt is paid off at closing. The debt is not eliminated, it is simply moved to another debt vehicle which is the new mortgage.

Moving other debt to a new mortgage can only be done if the borrower has enough equity in the home. The homeowner must also qualify for the refinance according to the lenders guidelines. This type of loan is considered a cash-out refinance and will generally have a higher mortgage rate than a no cash out loan. The new mortgage will include the funds that are necessary to pay off the other debt. The debt amount is then part of the new mortgage and is paid as part of the the monthly mortgage payment for the full term of the loan.

By utilizing a debt consolidation refinance, many homeowners are able to free themselves of the burden of carrying an overabundance of debt that must be paid on a monthly basis. This debt usually carries a higher interest rate which can make multiple monthly payments uncomfortable. Adding these expenses to a refinance often results in a more cost effective budget for a homeowner because the total debt payment is usually reduced. The end result to the homeowners is typically a better monthly cash flow.

In order to reap the benefits of a debt consolidation through refinance, homeowners must make it a goal not to incur additional debt. With less debt, a homeowner’s financial stability will can often remain intact which leads to added security in case a hardship should arise. The savings recognized from a mortgage refinance can be accumulated or used in lieu of credit cards. This is the beginning of the path to financial freedom for many homeowners. However, incurring additional debt expenses after the refinance can lead a homeowner to repeating the process with multiple debt consolidation loans which, in the end, will not be cost effective.

Everyone dreams of the day when there will not longer be a mortgage payment to make. While it may seem so far away, time does move quickly and, with careful planning, it will be a reality faster than you think. Planning a refinance with debt consolidation will also help a homeowner reach their goals of eliminating overwhelming payments on a monthly basis.

There are few guarantees in marriage, but one of them is this: You’ll have to spend much time discussing your household’s finances with your spouse. It doesn’t matter the age you marry, your commitment means you’ll have to share in the good and the bad. You may have to share your spouse’s credit card debt, student loans, child support commitments and other messy financial troubles – or it could be the other way around where you subject your spouse to your financial woes.

You might be tempted to shelve the topic of your finances for as long as possible. A history of poor financial management may put a damper on romance, after all. But even if you’ve both managed to keep your financial profile intact, marriage links both your finances, so it’s a topic that deserves some thoughtful discussion.

As a start, you’ll have to address questions like: Who will pay the bills? How will you share the expenses? What are your plans for saving? Will you combine finances?

The tips below will help newly married couples to manage their joint financial status and avoid the pitfalls that affect so many couples. Discuss your financial matters today to ensure marital bliss later on.

Commit to Saving A Percentage Of Your Household Income

Don’t assume that you’ll always have the income you now enjoy. Sudden interruptions in your income – whether voluntary or involuntary- may be lurking around the corner. In this uncertain economic climate, there’s the possibility of losing your job. One of you might decide to go back to school or stay at home to care for the children. You’ll have more options if you have a substantial amount of money saved. Your savings will guarantee that you avoid a sharp drop in your lifestyle when one salary is no longer available.

Commit to saving a percentage of your income every month, and stick to your commitment.

Compare Spending Habits

Your spouse might not share your beliefs about money; his spending habits may come as a complete surprise. Spouses who have different financial values need to spend a lot of time discussing their finances. This includes talks about spending habits, debt, and how to manage it.

Plan A Budget

A budget will help to curb unnecessary spending and point out exactly where your money goes. Discuss your financial goals before you build your budget. This will help you to include a plan for meeting those goals.

Get Rid Of Debt

Have a plan to pay off credit cards and student loans. Clearing your debt is the first step towards achieving the goals you’ve set as a couple.

Purchase Life Insurance

You might be uncomfortable discussing the subject of death, but you need to be prepared if the unthinkable happens. Life insurance will protect your finances if your spouse should pass away.

Combine Your Policies

Combine all your insurance policies under one provider and save money. For instance, companies will give you a discount if you combine your car insurance, health insurance and life insurance.

Start a Retirement Fund

It is never too early to start planning for retirement. Make an appointment with a financial advisor to discuss your options.

Live within your means and you’ll enjoy years of marital bliss.

Barry Johnson is a personal finance consultant. His articles mainly appear on money blogs.

Purchasing your first home together can be almost as exciting as your wedding day. If you’ve made that first major purchase together before tying the knot, you may have already built up some equity in your home that can be used for repairs and renovations. Whether you plan on using a home equity loan to put an addition on your home or undertake maintenance on your existing home, here are a few things you should know before enquiring about a home equity loan.

Get Appraised (And Know How to Calculate Your Equity)

When determining your home equity, you will first need to have your home appraised to determine its current fair market value. Once appraised, take your home’s fair market value and subtract the amount of money you still owe on your mortgage. For example, let’s say you bought your house for $250,000. Having paid $50,000 as a down payment, your mortgage is now $200,000.

Fast forward to the future when you decide you want to apply for a home equity loan. At that time, you have paid off $125,000 of your mortgage. After an appraisal, you discover that the new market value of your home has risen in value to $300,000. Since you have paid off $125,000 of your mortgage, you still owe $75,000.

$200,000 – $125,000 = $75,000

Take your new fair market price of your home and subtract what you still owe on your mortgage, giving you the amount of money you qualify for your home equity loan, $175,000.

$300,000 – $75,000 = $225,000

This is the total equity available. A bank will typically lend 70-80% of the total equity available.Now that you understand home equity, you have two main options: You can either get a Home Equity Loan (HEL) or a Home Equity Line of Credit (HELOC).

Option 1: The Home Equity Loan

Also known as a “second mortgage,” a HEL gives you a lump sum of cash with a fixed rate of interest. You will have fixed monthly payments for a fixed amount of time, normally between 5 and 15 years. A huge benefit to this option is you won’t be surprised by fluctuating interest rates.Some people use their HEL to help pay off their student loans or credit card bills upon discovering that their HEL interest rate is lower than their student loan and credit card rates. This isn’t always the case. Your HEL rate might not be lower than your other rates, but it is worth your time to determine whether your HEL can assist you with your newly-combined household finances, as well as home improvement projects.

The Home Equity Line Of Credit

A HELOC is a credit line given to you by a lender. You have a maximum amount that you can borrow and are given blank checks or a debit or credit card that allows you to withdrawal from those funds. This allows you to borrow what you need when you need it, instead of taking out one lump sum. You don’t have to withdraw the maximum amount. This just means that the amount of money you are paying interest on has the potential of being significantly lower than your determined equity. Keep in mind that there may be transaction fees each time you withdrawal money. Help from Uncle Sam

The IRS Publication 936, “Home Mortgage Interest Deduction,” offers some helpful advice to newlyweds with home equity loans at tax time. It states that joint tax filers can deduct the interest paid on a maximum $100,000 in home equity loans. The maximum is cut in half if the married couple files separately. Keep in mind, this is a maximum and chances are you will not get to deduct near that amount. This deduction also only applies to home equity loans taken out for home improvement purposes.

Remember

Armed with some knowledge beforehand, you can decide which home equity loan option is best for you and your home – and the vision you have in mind for it.

This post was written by Holly Wolf of Conestoga Bank. Conestoga Bank has serviced Philadelphia and the surrounding regions for 120+ years.

This publication does not constitute legal, accounting or other professional advice. Although it is intended to be accurate, neither the publisher nor any other party assumes liability for loss or damage due to reliance on this material.

A secured loan is a lending product which can be obtained by leveraging an asset against the value of the loan amount. They’re a great choice for people who are asset rich, but cash poor. They’re can also be very helpful in an emergency, when you need to access cash quickly. But what does taking out a secured loan actually entail? And how can you tell if it is the right product for you?

Assessing Your Needs

Before applying for a secured loan, it’s important to make sure that you are fully aware of your needs beforehand.

• Do you really need a loan?
• Are you able to make the repayments?
• Is a secured loan the right type of loan for you?
• Do you meet the criteria to qualify for an unsecured loan?

If the answer to all of these questions is yes, then a secured loan is the right option for you. But secured loans come in all shapes and sizes, so it’s a good idea to shop around before settling on one. For example, 1st Stop secured loans are the perfect choice for people with bad credit, who need to borrow any amount between £1500 and £15,000.

Finding the Right Loan Provider

If you’re thinking about taking out a secured loan, it’s important to find the right provider. There are many providers of secured loans, but not all of them are as reputable as they might first appear. When shopping for a lender, you should always check to see if they have any affiliations with regulatory bodies such as the FCA (formerly the FSA). If they do, this is a good indicator of trust.

The Risks of Taking a Secured Loan

Just as with any financial product, there are risks involved in taking out a secured loan. But as long as you are aware of these risks, and know how to manage them, you should find that your secured loan is very beneficial.

Because a secured loan requires that you leverage an asset against it as collateral, if you default on your loan this asset may become forfeit. If the asset in question is your car, or even your home, this loss can be devastating. So it’s important that, before you take out an unsecured loan, you are aware of the repercussions and fully able to make your repayments.

In the current economic climate it can be difficult to keep things afloat. The last 5 to 10 years have seen many businesses struggling to get by, prompting dramatic changes of business models or steps towards insolvency or recovery. If you’re worried about your business it only takes a walk down any high street to see you’re not alone. Large retailers BlockBuster, HMV and Jessops have gone into administration since Christmas, so now is the time to take action.

Things are ok at the moment. What steps can I take to keep my business afloat?

With the current state of the economy, even if you are making profit, things can spiral downhill very quickly if you’re not careful. You’ll need a watertight business plan, so talk to an advisor. Their help can save you a fortune later on. They will help you see your business through the eyes of potential customers, including the shopping experience and services you provide. You might be advised to make changes, and it’s important you follow these changes through.

Things are already bad. What options do I have?

Insolvency and recovery options depend largely on just how bad your business’s financial situation is. If you notice difficulties arise, it’s important to take action as soon as possible and not to wait for issues to resolve themselves over time. If this happens you can halt your insolvency or recovery programme, but if your company is trading while insolvent directors can be liable for wrongful trading. You don’t want to find yourself facing legal action or being personally responsible for debts, so take action now. A financial advisor will guide you through your options, which may include refinance, administration and liquidation.

Liquidation is the winding up of a business so it ceases to trade. Creditors’ Voluntary Liquidation is the most common form in the UK, involving closing the business and selling its assets to pay debts.

Pre-pack administration is when the company is sold to a third party (the administer). This is a good option if you are under a lot of pressure to react quickly, but it does mean the administer can sell the company without the agreement of creditors – unlike in liquidation cases. It can, however, be sold to the current directors to create a phoenix company; essentially your old business with a new name.

If a bank (or other creditor) decides the directors aren’t suitable, they may appoint an administrative receiver to take over running the company. This person can sell off assets and recover money as they see fit, and will primarily serve their own interests. This is called receivership, and means the conduct of directors will be investigated.

Voluntary arrangements and voluntary liquidation are a much better option than court ordered compulsory options, but your business doesn’t have to get to those stages. Consider debt management, lending money or restructuring before your cash flow problems get out of hand. Business recovery experts will be able to help you, whatever your situation.