No More Mortgage on budgeting and consolidation.

There are many different strategies for eliminating debt. One method when you have a mortgage and multiple other debts is to use a new mortgage to consolidate other debts and free up cash flow to pay the entire debt down. It is often referred to as a mortgage consolidation loan.

Whatever your goal is you need a strategy and a place to start.  As a home owner, you may be able to get a consolidation loan if you qualify and start attacking your personal debts. You should know that "paying off" debts in a mortgage consolidation loan isn't paying the debts off.

You have simply relocated them to the mortgage and there are positives and negatives to doing this. We're going to look at those and then talk about how budgeting can be the life or death of this strategy.

Replacing the current first mortgage with a new first mortgage is the most likely road you will take if you go with this strategy. Or you could try to get a new second mortgage so you can leave the existing first mortgage in place if you need to. For instance, you may have a pre-payment penalty on the first and decide to look for a 2nd.

Let's look at some of the benefits of consolidating the debts in a new mortgage or refinance.

• You will improve your available cash flow giving you some budget relief and providing some money to work with. The new loan payment and the elimination of other personal debt payments (now rolled into the mortgage) will mean that you are paying less monthly than you did before. When you compare the new mortgage payment to the old payment and take into account the old credit card and debt payments you should be saving anywhere from a couple of hundred dollars a month to well over a thousand or more.

• An improvement in your personal tax liability. In most cases, the interest you'll pay on your mortgage gives you a tax write off that can be a great benefit and possibly free up some additional cash by adjusting your paycheck deductions. You will most likely not be able to write off any of your credit card personal debt interest. You can consult with your tax professional on the possibility to take the tax deductions.

• Your new loan payment means you have fewer debts to track and you'll be cutting fewer checks too. You rolled debts into the loan so you have fewer debts right now to keep track of.

• By paying off some of your debts, most specifically credit card debts you most likely will have a bounce higher on your credit score in a month or two after they are reported. Credit card debt makes up 30%-35% of your score. So an improvement to your revolving debt is an improvement to your score.

• You just gained the ability to pay down your debt faster with the improved cash flow. You need to continue to budget well and not spend more just because you have more cash on hand. You need to attack your debt with the extra money. Do you really want a new TV or do you want to pay off your debt faster and save enough money for the retirement you want and deserve. The money you spend on a new TV today could be worth several thousands or more in your retirement.This improvement in cash flow could help you knock your mortgage down and pay everything off in a fraction of the time. You could be debt free with no more mortgage payments and very bright future years sooner than you thought you could.

Let's look at some of the negatives of a mortgage consolidation loan.

• You are taking out a new mortgage loan that is bigger than the one you had before. The new loan will most likely have fees and charges too. The new payment needs to be something you are sure that you can handle financially. The new loan should have improved you monthly cash flow making things easier on you. But it's still bigger and it's starting over the 30 point from scratch. You'll pay it down in a fraction of the time if you stick to your plan.

• Fees for your new mortgage loan need to be kept in mind. Check on the loan costs and make sure there are no discrepancies. Take the fees into account and decide on whether the new loan still makes sense to move forward with. Make sure the new loan terms and payment meet your budget and goals before you sign.

• Your overall personal debt might initially increase through a consolidation loan. You could also find that some loans don't lower your payment enough to make it worth it. You should be freeing up enough surplus cash every month to power down your personal debt or the consolidation loan is not the right choice for you.

• You have to be financially disciplined or you could end up worse off than when you started. You don't want to clear up credit card and other debts by rolling them into the mortgage and then building up the credit card debt again. It's happened to thousands if not tens of thousands of other people. Their goal was to have no more mortgage or other debts. Instead they ended up with even more debt than they started with.

A few more things you need to know:

• Over the last few years we have seen far too many home owners that meant well but ended up worse than they were before getting a consolidation loan. At one point they were arguably contributing as much if not additional to the down turn in the economy than anything else. It was common to see home owners get mortgage loans for debt consolidation and then build up their personal debt all over again. Had they been able to show some financial discipline their outcome could have been much different.How can you expect to get ahead and stay ahead if you continue to build up debt? You can't. Moving your debt around has given you additional cash flow to use to your benefit. Too many have then gone out and used the new cash flow to build up more personal debt.

• Here is where I lose some friends in the mortgage business. The deal you get on your loan is usually based on the commission your loan officer or mortgage originator gets paid. The higher your rate the higher their commission unless they are charging you an origination fee instead. They could get paid on both the rate and an origination fee on the loan. Read the initial paperwork on the loan and then check the final documents before signing to make sure everything is in order. You may be negotiating on both your rate and the loan officer's commission which are going opposite ways.

• Very important!!! It's common to see the loan choice determined by the amount of cash out and debt that can be paid down. Yes, it is appealing to get cash out and in your pocket after paying off the debts, but that doesn't mean it is a good strategy as you are paying interest on that money. Don't waste any of that money on things you want as it will end up costing you extra in the long run. Your goal is to become debt free sooner. Be smart.

• Just as important!!! You need to be aware of any pre-payment penalties that are on your current mortgage loan. If you have a pre-payment penalty you might have to pay up to several thousand dollars in a fee for paying off the existing loan too soon. This is usually in place if you got a good rate the last time you refinanced and agreed to a 1 to 5 year period where you would not refinance again. That is build in some protection of profit for the lender in exchange for lowering your rate to save you money. A good deal should always be a two way street or it's not a good deal for everyone involved.So your last mortgage could have come with a pre-payment penalty in exchange for a lower rate that you did not think you would have to worry about or may not even remember. Unfortunately, a lot of people don't know they have a penalty for the prepayment on their current mortgage loan. Go through the current mortgage loan documents that you signed to look and see if you have a penalty. Check on the period you have to wait and amount you have to pay if you pay it off early.

Make sure you are working with someone on your mortgage consolidation loan that has your finances and your future put first and foremost. You really want someone with a financial planning approach to help you. The conversations need to be about your future and how to get to your goals. Start your search by talking to friends or family and seeing who did a good job for them and went beyond the typical service.

Then you should check out who you want to work with at the BBB website to see what their rating looks like. The BBB (Better Business Bureau) is a good place to start. It takes a lot of work to keep a good rating there. We should know. See the No More Mortgage BBB A+ rating here.

You have some good information so far but consider the following too.

• Getting a mortgage loan to consolidate debt does not really pay anything off. The debt was just moved to the mortgage where it became part of a long term debt. You are increasing your risk of losing your home if you become unemployed or disabled. It could end up being the wisest move you've ever made financially if you stay disciplined and use the additional cash flow correctly. This could be the worst move you could make if you don't have the ability to follow your plan and end up adding new debt. You'll never have no more mortgage payments that way.

• You need to be able to make the new mortgage payment which will be bigger than the the old one. It should be less than you were paying on your total debt before but you might end up consuming the additional cash flow in your monthly budget and then not paying additional to get ahead of your personal debt. Budgeting and financial discipline are key here.

It is possible that you have already gone through one of these "refinance to pay off personal debt" cycles in the past and it wasn't successful for you. If you have you should consider a debt elimination strategy that incorporates a program you can use to stay on track. You're working towards becoming personal debt free and retiring with no moremortgage or other payments. You can make this happen with financial discipline and good strategy.

Now, don't forget to use one the most important and free tools that you have available to you.

Learning to budget. Become a budgeting master. Be aware of your budget at all times. Sounds real exciting doesn't it? It works though. Budgeting is a tool that can help you tame your spending and start making headway on your financial goals. It really works. When it doesn't, it's because you are doing what you're supposed to.

Any financial strategy is doomed to fail if you don't control your spending. Some of the easiest ways to do that are to track what you are spending and plan out what you need to spend. Once you start doing that you are going to be well on your way to succeeding in your financial goals.

When you learn to budget well and stick to your budget you will experience significant change in your finances and headway towards controlling your personal debt. You will be able to plan better and not have to rely on credit cards to bail yourself out of unexpected expenses. Get on track to having no additional personal debt and no more mortgage payments.

Your friends at No More Mortgage on Budgeting.

Related articles online

• What's with older Americans and credit card debt? (blogs.reuters.com)

No More Mortgage : Budgeting and Mortgage Consolidation Loans is a post from: No More Mortgage News on Budgeting

Continued from Budgeting Basics should be taught earlier. Part 1

There are a lot of people who are forced into bankruptcy over medical costs or other tragedies. But many filers have just built up too much debt that got out of control.

This brings us back to the need to learn about budgeting far sooner in life, preferably as students in school where we can practice and learn to do it well. Where we can see what the repercussions of mistakes look like on paper rather than through first hand experience and how they can affect your life in the future. And yes, this is an area where parents really need to step up and teach their children about money and budgeting.

A lot of our success in life comes from what we learn through childhood and early adulthood. We can't depend on our early education in school for everything. Unfortunately many of the people that have gone through bankruptcy didn't learn about the pitfalls of credit and debt soon enough, and the importance of financial discipline, and paid the price. I've seen friends that have gone into their 40's and 50's before getting a real hold on their finances and still aren't building enough up for the retirement they want to have.

If you aren't in control of your spending and your debt you have a chance of becoming a bankruptcy statistic yourself. That doesn't have to happen. There is often help for you no matter what your current circumstance is. If things are bad you may need to look into debt settlement. If you are still able to cover your bills every month a debt elimination program could help turn things around for you. But no matter what choice you make, you need to learn good budgeting skills and how to spend wisely to avoid future problems.

If you have children you owe it them to teach them how to budget and manage their money so that their money doesn't end up managing their lives. I know a family that uses play money to show how Dad's pay check is spent every month. They start with a pile of money and start taking out money to cover the mortgage, bills and savings. As each item is paid for the pile gets smaller and smaller. This has helped the kids learn how to manage money and think before they spend. Real world examples often help make it easier to understand.

The bottom line is that if someone isn't taught the financial skills they'll need in life early on they will often learn the hard way, which is very costly and often leads to a much more difficult life then they could have.

No one else cares about your future as much as you do. It's your responsibility to make it happen.

Your friends at No More Mortgage.

No More Mortgage: Budgeting Basics should be taught earlier. Part 2 is a post from: No More Mortgage News on Budgeting

No More Mortgage on Budgeting

It would make sense that we spend a great deal of time learning how to budget when we're learning math as we grow up. But that's not how they did it when I was in school. And it doesn't seem to have been the case for many others either. And many have paid the price.

We're called consumers for a reason. We spend, build up debt, and don't save enough for retirement. If we learned better budgeting skills earlier in life and were more prepared, much of what goes wrong financially for people could be avoided or at least mitigated.

The financial goal should be planning for a retirement with no more mortgage or other debt payments and spending time doing the things you want to. Yet people don't take the repercussions of their financial choices seriously enough or soon enough.

We're once again seeing record numbers of personal bankruptcy applications. Who has been filing?

Let's look at some figures for 2008 from Who's Filing For Bankruptcy

• The largest age group filing was 35-44, with the levels tapering down as the age groups went up.
• Highest education level was "Some college" with levels falling as education level increased.
• Income level showed filings decreased as income levels increased.
• Employment status for highest % of filings was "Unemployed"

What could we be seeing based on these stats?

As they hit the 35-44 year old age group, people are often making a stable income and are a huge purchasing group. They're buying homes, cars, tv's, and using their credit cards without enough regard for the debt they are building up. After all, you figure you have plenty of time to pay it all off. As they get older and have gained some experience in handling or mis-handling their finances they are less likely to file for bankruptcy. They've learned to do a better job with their finances and are starting to look ahead at their future more as it's a lot closer than it was previously.

As levels of education rise the number of filings decreases. That makes sense. Most of those are exposed to higher education on finances and business.

As income levels rise the percentage of filings goes down. Part of that could be that they are making more and are able to stay above water longer and eventually gain enough control of their finances to get by. It's interesting how as people earn more money they often start spending more money and don't start saving more money. They buy a lot of the same things as those who earn less but pay more for the bigger house and more mortgage, the nicer car, the bigger tv, etc.

The largest % of filers were unemployed. If they had enough debt to need bankruptcy then they must have been working and earning a living before. But they obviously didn't save enough for an emergency and eventually found themselves unemployed.

Read more in Part 2 on Budgeting Basics should be taught earlier.

Your Friends at No More Mortgage.

Related articles online.

• Tip of the Day: Living on a Budget (abcnews.go.com)

No More Mortgage: Budgeting Basics should be taught earlier. Part 1 is a post from: No More Mortgage News on Budgeting

Image by hellochris via Flickr

No More Mortgage Budgeting Tip on saving money at home.

We all try to find ways to save money and stay within our budget. The more money we save on the things we have to pay for, the more money we can put towards paying off our debt or building our retirement.

Here are a few more ways you can save money around the house.

• Beware of buying in bulk. If you have room to store items you buy in bulk, you can save a lot of money. But you need  to compare the bulk prices to the standard size you normally buy. Just because it's in bulk doesn't mean you will save money. Some items are no cheaper in bulk, and you can be fooled into spending more money today for things you won't need for a while. Whether it's a supermarket or a big box store you need to watch the prices to make sure you're really saving money on the bulk purchase.
• Find disposable items you can cut down on or eliminate. If it's disposable, you spend money on it regularly and may not need to. Instead of using sandwich bags to store foods in the refrigerator, use a plastic storage container instead that is washable. Try getting the paper towels that come off in 1/2 or 1/3 the normal size or use kitchen rags whenever possible. Disposable may mean convenience but it's also a lot more money for the store rather than in your budget or savings.
• How often have you bought water bottles and then thrown out the bottle when you're done only to pull another out next time? A water filter can pay for itself and a good quality water bottle you refill is convenient and helps keep you drinking as much as you should. Both will pay for themselves over time and then save you money on an ongoing basis.
• Try some of the supermarket brands of the foods you buy regularly including snacks and drinks. You may find some don't taste as well as the name brand so you pass on those. But when you find some that do taste as good you'll start saving more every month.

The little things add up over time and pennies turn into dollars. Those dollars in turn can save you any more dollars when put against your debt by reducing the time it takes to pay it off and the interest you will pay. Paying off your debt faster will save you years of payments as you work to get to the point where you have no more mortgage and no more debt. But it takes time and discipline to accomplish this. Budgeting is one of the tools you need to do well to get there faster.

Watch your spending. Your friends at No More Mortgage

Related articles on line.

• Tip of the Day: Living on a Budget (abcnews.go.com)

No More Mortgage Budgeting Tip on saving money at home. is a post from: No More Mortgage News on Budgeting

No More Mortgage on financial management and budgeting.

A budget is a powerful tool which you can use to take control of your money and your spending. Look at budgeting as an effective way of planning your expenses and savings. The foundation of a successful financial plan is a well followed budget. Your budget provides you with a forecast that allows you to plan out the way you run your life, allowing you to work on your future at the same time.

Budgeting is applicable to all of the financial aspects of your life. For example, when getting married you have to set a budget for the wedding. Your costs include invitations, wedding favors, the cake, photography, reception hall, and much much more. You have to calculate costs in accordance to the number of guests and forecast other needs and costs. Unless you have an unlimited amount of money, you can see the importance of creating a budget and tracking your actual expenses to make sure you go on track or adjust your budget accordingly.

Another example would be when buying a home. You have to make the new mortgage payment, taxes, insurance, and maintenance will fit into your budget. You also need to look at the potential tax deduction and how much cash flow your new write off will improve things by. Your budget and financial plan should include a strategy to pay off all of your debts along with your mortgage. Your goal is to have no more debt and no more mortgage.

Budgeting is the anchor in your financial plan. Without it you have no control and you're doomed to fail. Knowing how much money you have to work with and where it needs to go is critical to your financial success.

Creating a budget is your first step, but the real work comes in tracking your spending. Where most people go off track or eventually quit is in the tracking and comparing to their budget to see where they need to make changes if they are off budget. Tracking and comparing your actual spending to the budget on a consistent basis should help you to do a better job of watching your spending and making sure you are not overpaying for what you buy.

When you create your budget you need to not only make a monthly budget, but put together an annual budget that includes spending at holidays like Christmas and mothers day, as well as your vacation and any large purchases you have coming up.Then you can budget to save up the money needed to cover them.

There are no hard and fast rules for creating a budget but it should be easily updated and you should be able to track your actual expenses and compare them to the budgeted expenses.

You can almost depend on something to come along that threatens to derail your budget. Add in some money to go into an emergency fund to help cover unexpected costs that will come up from time to time.

Lastly, if you find that you are unable to come up with a budget that works, consider seeing a financial planner.

Your friends at No More Mortgage

Related articles

• Separate Fixed and Flexible Spending for Pain-Free Budgeting [Finances] (lifehacker.com)
• Tip of the Day: Living on a Budget (abcnews.go.com)

No More Mortgage on financial management through budgeting. is a post from: No More Mortgage News on Budgeting

No More Mortgage has seen uncounted examples over the years that show that not having a budget can be a large contributor to building up additional debt.

So we would ask you, what does your budget look like?

If you're like most people your budget is non existent or something intangible you keep in the back of your mind somewhere next to last year's resolutions.

Well, it's time to bring it out of storage. You really need to start looking at your personal budget as one of the most important personal finance tools for survival today as well as building the future retirement income you will need later.

One of the most pressing issues we face today is the amount of debt we carry. Among the obvious problems that comes with debt is how it robs you of your future. The money going towards your debt today could be building up in your retirement account if it weren't for that pesky debt. With the hits we've taken to our retirement accounts the last few years many of us just don't have the same nest egg building up that we did.

Budgeting is one of the main tools that will get you moving forward and help you achieve some gains against your debt while relieving some stress at the same time. Creating a budget is one of the first steps you need to take to get your hands around your personal finances and make a financial plan with an end goal in mind.

Before you start to create or update an old budget, do this exercise and you'll often find some quick ways to start saving money.

Get your last bank statement and go through it line by line. Next to each line, write down what was bought. If you don't know, write down "don't know where my money went". Then go back and total up similar expense together so you can see how much you really spent in each area. Whether it's groceries, clothes, entertainment, coffee or lunches, group them and total it up. When your done take a look at what you spent your money on.

Your going to find areas where you could cut back your spending or eliminate it altogether. You may also realize there is an area like cable or cell phone usage where you  can lower your plan and save a little bit more.

The point is, until you analyze it you won't know. And when it comes to your money you need to know where it's all going. Times are tough and we're living in a different environment than we did just a few years ago.

No More Mortgage has been helping our clients get on track to becoming debt free for over a decade. We can't tell you enough how important it is to have a plan and a budget to follow.

Related articles by Zemanta

• Tip of the Day: Living on a Budget (abcnews.go.com)
• Tip of the Day: Saving at the Grocery Store (abcnews.go.com)

Budgeting isn't just for today. is a post from: No More Mortgage News on Budgeting