Tag Archives: budget

Home Equity Basics from Member One

Your home improvement to-do list is a mile long, but you’re lacking the funds to get anything done. Sound familiar? Since the likelihood of stumbling upon a pot of gold is none, consider tapping into your home equity—the difference between what your property is worth and what you still owe on your mortgage. Read on to learn more about how to leverage your home’s hidden value.

Do the math. Home equity is calculated by looking at the value of your home and subtracting the amount you owe on any mortgages. Let’s say your home is valued at $200,000, and you owe $150,000 on your mortgage. That means you have $50,000 in equity you could potentially use to fund a renovation.

Know the difference. With a home equity loan, you receive the money you’re borrowing in a lump sum payment. It usually has a fixed rate and is often best for large, one-time expenses like a new roof. A home equity line of credit (HELOC) operates more like a credit card in that you can draw money as needed from an available maximum amount. This is best for ongoing expenses that require spending flexibility.

Shop around. You have to apply for a home equity loan or line of credit through a financial institution that offers it. As with any loan, shop around for the rate and features that fit your financial situation. It’s important to understand that committing to a home equity loan or line of credit means you’re using your home as collateral—if you don’t repay the loan, it could go into default, and you could risk losing your home. Make sure you understand the terms and only borrow the amount you can afford.

Budget accordingly. One of the most common ways to use a loan or line of credit is for renovations because they add even more value to your home. You can also use it for things you might not expect like college tuition, debt consolidation, or unexpected medical costs. Whatever you decide to fund, make sure it fits your budget. If your income is unstable and you can’t keep up with the payments, it’s probably not a good idea to incur more debt. If you don’t need to borrow much money or you’re just going to use this for basic day-to-day expenses, it might be wise to consider different options—such as a credit card—or reevaluate your spending habits.

Warm Up to Responsible Spending

With warm, sunny days upon us, it’s time to plan for more than just your tan: summer spending. Vacations, airline tickets, dining out, and entertainment—it adds up. If you haven’t budgeted for these expenses in advance, a quick swipe of your credit card takes care of it. But if responsible credit card use isn’t your strength (or you just need a refresher), these tips could help curb the temptation to overspend this summer.

Be selective. There are several factors to look at when picking a credit card. First, you’ll want to see what your limit is. If you don’t think you can handle the freedom of a credit card, start with one that has a lower limit, like $1,000. Additionally, look at the credit card’s annual percentage rate or APR. That interest will add up if you’re not planning on paying off the total each month, so shop around for a low APR. Finally, look out for cards that charge annual fees just for keeping them open.

Monitor your balance. You should keep credit card payments to 10 percent of your monthly take-home income. For example, if your monthly income is $2,000, your monthly credit card payment should not be more than $200. This doesn’t mean your balance should not exceed $200, but make sure your minimum payment is no more than that. Keep in mind, however, that paying off the entire balance each month is in your best interest financially.

Know the benefits. By making purchases with your credit card and paying the balance off each month, you’re proving to lenders that you’re a responsible, creditworthy consumer. It boosts your credit score and will help you in the future if you ever want to get a loan—or another credit card.

Stick to a budget. It’s important to set parameters for yourself when using a credit card. One simple way to do this is to use the credit card for one specific purpose, like gas or groceries, so it’s easier to keep your spending in check. Another way is to get a card with a low limit. This forces you to keep your spending under a certain amount.

Smart credit card use doesn’t have to be a mystery or limit your fun this summer. Follow these simple tips and your poolside lounge session (while possibly chasing the kids) will be that much more relaxing.

Presented by Member One Federal Credit Union

Home Buying and Renovation Budget Prep

So, you want to buy a house. Or, you’re considering a renovation. Looking at homes and upgrades is exciting, but don’t get ahead of yourself. While HGTV makes it look easy, purchasing a home or getting a second mortgage actually takes a lot of planning and preparation. Here are a few ways to get yourself ready:

Know your budget. You should spend no more than 25-28 percent of your monthly take-home income on a mortgage. Look at your monthly paychecks (after taxes) to see what that percentage would be so you aren’t looking at homes out of your price range. If you’re considering a home equity product (also know as a second mortgage), make sure the extra monthly expense keeps you in that 25-28 percent range.

Save the right amount. Traditionally, your down payment should be 20 percent of the purchase price to avoid paying more in interest and private mortgage insurance (PMI). If the home you want is $200,000, you should have $40,000 saved. Additionally, be prepared to pay closing costs, an inspection fee, appraisal fee, and a lender’s fee. There are loans that don’t require 20 percent down, but you’ll pay more in interest over time and PMI could be required.

Plan for future costs. If you have enough money to comfortably buy a home now, don’t forget about future expenses. Are you planning on starting a family soon? According to the USDA, a middle-income married couple spends an average of $727 a month on a child. Can your budget handle that with a mortgage? What if something breaks? You’re now responsible for home repairs and must plan for those unexpected expenses.

Home Equity Loans or Line of Credit. These options are for people who already own a home; they can be used for renovations, college costs, or even a vacation. When choosing a lender, you’ll want to look at their closing costs, interest rates, and fees. You should also consider if you want a lump sum up front (home equity loan) or a revolving loan that works like a credit card (home equity line of credit). And keep in mind that you’re essentially adding to your mortgage payment, so make sure you’re financially prepared.

Buying or making upgrades to a home should be exciting, but don’t let the thrill of the hunt overshadow the financial preparation. Do your homework and get your ducks in a row; when you’re ready, your dream house will be there.

Presented by Member One Federal Credit Union

Gardening Without Breaking the Bank

Ladies, it’s just about time to break out those watering cans! Summer is just around the corner and we know what that means… fresh vegetables and flowers straight from the garden! We wanted to help you make the most out of your gardens this year while still being able to stay within your budget. Also, we have a few ideas to keep you out of those annoying hardware stores buying gallons of chemical-filled products for your garden, and instead spending more time enjoying your garden by making your own products at home!
First, did you know that you can actually regrow some vegetables like lettuce, celery, onions, tomatoes, carrots, and even potatoes from the scraps left in your own refrigerator? This is a huge time and money saver because you’re regrowing from something you have already purchased and you’re starting from a base instead of a seed! So, stop throwing them away and find a planting pot, fast! For flowers, you and your neighbors can share and propagate cuttings from your larger flower bushes/plants in order to save one another money.  Plus, this way everyone has beautiful flower beds while building stronger relationships with their neighbor! Another super easy way to save money is to, instead of waiting until the middle of the day when it’s the hottest to water your flowers or vegetables, do it first thing in the morning or after the sun has started to go down. This saves money because you end up using less water because plants will need more water in the middle of the day to prevent becoming wilted. However, if you water them in the morning or the evening, then they already have all the water they will need to make it through the day! While this may seem like a difficult time of the day to squeeze another task into your morning/evening routine, spending quality time in your garden during the most peaceful times of the day is good for the soul. You might even find that it puts you in a better mood for your day by just spending a few extra minutes in your garden each morning/evening.
gardening1Making your own organic sprays or fertilizers in order to avoid spraying your flowers or vegetables with potentially harmful chemicals is a great alternative! Even better is that making your own organic sprays prevents you from going into those overwhelming home improvement stores trying to sell you unnecessary things in order to have a successful garden. If you are active on Pinterest you can find tons of recipes for both organic pesticide sprays and fertilizers here. Our favorite organic pesticide spray to use on vegetables and flowers is from LavenderandLime.com and contains only the best ingredients to keep pests and chemicals out of your garden! For more ideas on how to have a successful garden and how you can get an early start, pick up our March issue out now!

Written by Kathleen Duffy