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mortgage payments

Why Not Rent Something Out to Pay For It?

August 23, 2009

in Personal Finance

Many of us have wanted to purchase something, but couldn’t bring ourselves to justify paying the high-ticket price for it. One thing you could consider is trying to rent it out. By renting your dirt bike, four-wheeler, flatbed, camper, or even your cottage or a spare room in your home, you can pay off your investment in less time than you first anticipated!

The process of renting something out is simple. You can put ads in the paper, online and on local bulletin and college boards. People interested in what you have for rent will call you if they want further information. Once you have ads placed in all of the key places, renting your ‘toy’ out will be easy. After a while, you could be answering customer calls every day!

Once your investment has been paid off, you may want to consider the same process of renting out another item you own. And we aren’t just talking about heavy equipment either. What about a spare room in your home, or your summer home in the off-season? You can potentially be making enough money from any number of rental items to pay off credit cards, bank notes and even making double mortgage payments.

Let’s look at an example. Let’s say you rented out your dirt bike. Of course, the purchase prices for these depend on many factors, so we are simply going to use an imaginary bracket here. You decide to rent it out for $50 a day, for a minimum of two days at a time. It gets rented twice a month, giving you $300 in rental fees. Over a year, this brings in an extra $3600 which you can use to pay off the dirt bike. Once that dirt bike is paid off you have an extra $300 dollars in your pocket for renting out something you also get to enjoy!

For an example which could be more lucrative to you, let’s consider renting out your cottage in the off-season, or when you aren’t using it. We’ll say you rent it out for a week at a time, for $250 per week. When you consider you are only there with your family for approximately eight weeks of the year, you are left with 44 weeks you can rent it out. If you were to rent it out for each of those 44 weeks, by the end of the year you have earned $11,000 to put towards the mortgage on the summer home! And this is just in the period of a year.

For our final example, let’s consider the possibility of renting a room in your home. If you have one (or more) free room in your home, you could consider renting it out to a student attending the local community college or university. Housing around campus can be quite expensive, and many of these students just simply can’t afford it. You could rent a room in your home which will not only help out this student trying to make ends meet but also make extra money for yourself. You could charge the student enough to cover your utility bills, or to pay a portion of your mortgage.

The opportunities are endless once you take the time to sit down and think them through. There are definitely ways to give you that financial boost you need. Just one final note: You may want to verify your insurance policy before you embark on this money-making adventure.

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Walking Away from Your Home?

August 22, 2009

in Personal Finance

Becoming a homeowner is one of the happiest events in many people’s lives. But when times get tough, it can be difficult to scrape up the money to pay mortgage payments each month. If you’ve accumulated enough equity, you can sell your home at a profit and get on with your life. But what happens if you owe more on your home than it’s worth?

Many homeowners face the heart-wrenching decisions associated with these problems. Some choose to negotiate with their lenders, hoping for a solution that will allow them to catch up on payments and keep them in their homes. Others feel hopeless, believing that there is no chance that they will be able to keep up payments even with help. Those who fall into this category often choose to walk away from their homes.

Losing your home brings forth a deluge of emotions. It’s a sad event, and it may also make one feel angry or ashamed. It’s certainly not ideal, yet desperate homeowners often feel that they have no other alternative. But in most cases, there is help available.

Talking to your lender could be more fruitful than you might imagine. With the abundance of foreclosures going on today, many are willing to go to great lengths to help homeowners stay in their homes and meet their obligations. Paying extra each month to catch up on payments is one option, but it may not be the only one offered. The lender may be agreeable to bringing a homeowner back to current status and accepting lower payments for a longer period of time, or even lowering interest rates to reduce payments and the amount owed.

If your lender isn’t helpful, there are non-profit organizations that can help. They employ trained negotiators that know what it takes to persuade lenders to work with borrowers. They can also inform you of your legal rights, which is something that lenders may hesitate to do. These organizations usually charge nothing for their services.

The Consequences of Walking Away

If you do end up walking away from your home, there are certain consequences that you should be aware of. One of the most significant is a foreclosure’s effects on your credit record. You can expect your credit score to drop by a few hundred points, seriously harming your chances of getting any kind of credit for several years. In most cases, the foreclosure itself remains on your credit report for 10 years.

There’s also the chance that you could be held liable for the difference between the profit the lender makes from your home’s sale and the balance of your mortgage. Lenders often sell homes to the highest bidder, and if that bid doesn’t satisfy the mortgage amount, they will want to recover the rest. In some cases a lender may agree not to pursue payment if the borrower agrees to a deed-in-lieu of foreclosure or a short sale, but they are under no legal obligation to do so.

Sometimes, walking away from your home is unavoidable. But in most cases, there are alternatives available. If you find that you’re in danger of losing your home, talk to your lender or a professional immediately. You might find that your chances are better than you thought.

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Foreclosures and Short Sales Explained

July 31, 2009

in Personal Finance

When a homeowner defaults on a mortgage, the lender begins to consider options for recovering the money owed. They may negotiate with the borrower, adjusting payments or interest rates to keep him in the home. But in many cases, either a foreclosure or a short sale takes place.

What Is Foreclosure?

If a homeowner in default does not attempt to negotiate with his mortgage lender, or if negotiations fail, the home will usually go into foreclosure. This involves the lender obtaining a court order of repossession. The bank then puts the property up for sale.

When the home is sold, the lender receives the proceeds up to the amount owed plus repossession and selling costs. If there is any money left over, it is distributed to other lienholders. Once all leinholders are paid in full, if there is still money left, it goes to the former homeowner.

In general, foreclosure is a long, drawn out process. It usually begins when the homeowner is three months or more behind on mortgage payments. The lender issues a Notice of Default, and may demand repayment of the loan in full. If the homeowner does not meet the requirements of the Notice of Default, the lender can begin court proceedings.

What Is a Short Sale?

In a short sale, a home is sold for less than the outstanding balance of the mortgage. This is often used as a means of preventing foreclosure. But in rare instances, a short sale may take place even if the borrower is up to date on his payments.

The idea behind a short sale is to recover as much of the money owed as possible and avoid the expense and hassle of foreclosure. It is up to the lender whether or not a short sale is allowed. If they believe that the proceeds from a foreclosure minus the costs will be less than the proceeds of a short sale, they will usually allow it. Otherwise, they will go forward with foreclosure.

Which Is Better?

Neither a foreclosure nor a short sale is desirable. Both result in the homeowner losing his home, and both can have similar effects on one’s credit score. But in some instances, one or the other may be considered the lesser of two evils.

When undergoing foreclosure, a homeowner may have the opportunity to stay in his home for several months before he is forced to vacate. The time frame varies according to state laws, but it is almost always longer than that of a short sale. Short sales are set up to be completed quickly, so the homeowner will need to leave quickly.

But if you play your cards right with a short sale, you could potentially escape with less damage to your credit. If the lender strongly prefers a short sale, they may be willing to agree not to report the short sale to the credit bureau if you consent to it. Your chances of achieving this will be better if you hire an attorney to help negotiate.

A foreclosure is something we all hope to never experience. A short sale isn’t any better. If you find yourself facing the possibility of either of these, talking honestly with your lender may win you some other options. It’s certainly worth a try.

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How to Shop for a Car Loan

June 4, 2009

Shopping for a car loan requires time spent researching various options. Let’s take a look at a few of these options.
Let’s assume you are purchasing a new car from a dealership. Odds are before you leave the lot with your new car, you will be escorted into the financial office where you may [...]

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