Refinance Your Mortgage With a 4% Current Interest Rate

In 2011 banks and mortgage companies are offering a 30 year fixed rate mortgage for about 4% and a refinance interest rate of 3.5% which means everyone could probably benefit from these low interest rates. Most people hear rumors from friends and family that “if you lower your interest rate by 0.50% you’ll save a lot of money on your mortgage”.

That’s true, but how do you know exactly how much you’d save? There’s a mortgage calculator on this website that’s very easy to use and will show you, in seconds, exactly how much money you’ll save in many different scenarios.

First plug in all of your current information such as, $150,000 over 30 years at 6% interest. If that’s what you started with then you should see your monthly mortgage payment amount. Your current mortgage payment probably includes your monthly taxes so the number might seem lower that you see in the calculator.

Then simply change the interest rate to 4% and watch the bottom “Interest Paid” box lower. The amount that it lowers is the amount that you’d save on your particular mortgage. Going from 6% to 4% in this situation you’ll save $70,000 over the life of the mortgage.

Then I want you to add money to the “extra monthly principal” box to see how much interest you’d save by adding $50 per month to your mortgage payment. Adding $50 per month at 6% interest will save you $30,000 over the life of the mortgage.

Learning how to use a mortgage calculator is so easy and you’ll end up saving thousands and thousands of dollars on your current mortgage and possibly more in the future. Paying interest on the same money for 30 years will cost you more than double the price of the home in the first place.

If You’re Refinancing

If you plan to refinance your home after using the interest calculator then you should remember to only get the loan over the amount of years you have left rather than a new 30 year mortgage. You already spent 5 years paying down your mortgage so make sure you don’t start over at 30 years again. I’ve even lowered it to 20 years because I’m saving so much on the monthly amount that I can technically afford more…

150,000, 30 years at 6% – $900/mo
          Paid down – $10,500

Refinance 139,500 20 years at 4% – $845/mo

So instead of refinancing to save about $150/mo and keep paying it down in 25 years you’ll pay the same monthly amount to pay off your mortgage in 20 years. If you can continue to pay the same amount each month this is the best option for you when refinancing your mortgage.

If you really want that extra $150 per month then please write down what you’re going to use it for. I do understand that people are in tough situations in this 2011 economy so if you really need the money just write down what you’re using it for. Otherwise you’ll probably just waste it and forget you’re even getting it after a few months.

You’re better off keeping the mortgage payment close to the same and paying it off 5 years faster. This will save you the most money on your mortgage, pay it down faster and make it very easy to sell down the road because you’ll have more equity in it to make a profit. A lot of people are up side down on their mortgage right now making it very hard to sell because they’ll owe the bank money if they sell it. Being “up side down” is owing $150,000 while your home is worth $130,000.

Learn and use a mortgage calculator if you have a mortgage or are thinking about getting one. It will save you money.

Knowledge Will Save You Thousands
The Free Mortgage Calculator

Real Estate Buying Tips In This Bad 2011 Economy

The housing market, though very uncertain, still may yield some exciting opportunities for a few well-informed and patient buyers. Real estate tips during this economy are abundant, be careful, advice and tips should be taken with a grain of salt and researched well before acting. Here are a few time-tested tips to help you get started.

Work with a pro. This is good advice no matter the economy. There are a lot of people out there who call themselves real estate professionals. Try a Realtor. Realtors are professionals who hold themselves to a high ethical standard. They also work with other pros like inspectors and contractors who do the same. Realtors also are knowledgeable about market trends in your area.

Make sure you look good to the banks. Banks have raised their lending standards in the wake of rising mortgage defaults. They want borrowers to have great credit, a down payment and verifiable income. You can check on your credit worthiness before you go to the bank by using a borrowing power and a mortgage calculator. You assess your borrowing power by inputting your income and financial obligations. If your debts are minimal and you have a lot of extra money available, then you could be viewed as a better risk. A mortgage calculator allows you to input mortgage terms for you to gauge what your monthly payment may be.

Don’t be afraid of foreclosures. Bad things are happening to good people because of the housing collapse. You may find a real gem and help a family out of a sticky situation. A local real estate pro could help you in finding decent prospects. You could save thousands or get a little more home for your buck by considering foreclosures.

Lending may be stricter, but this is still a buyers market. Be careful and research all tips carefully.

Knowledge Will Save You Thousands
The Free Mortgage Calculator

How Long Will It Take To Pay Off My Mortgage – Interest Calculators

Most people want to use my mortgage interest calculators before buying a home to figure out the monthly mortgage payment and to see how much principal they’ll be paying each month. However, using a mortgage calculator when you already have a mortgage is still very useful to figure things out about your finances.

I hear a lot of questions like: How long will it take to pay off my mortgage if I start adding extra prinicpal now? How much do I need to add to my mortgage to pay it off in 15 years?

The interest calculators on this website will show you everything you might have questions about. The basic calculator on my home page will tell you to plug in your mortgage details, interest rate and amount of years you started the loan with. Then there’s a spot to add extra principal per month. It will show you how much interest you’ll save and how many years you’ll save by adding the extra money.

If you’ve already been paying your mortgage for 5 years you should plug in the amount of years you have left (say 25 years) and the amount left on your mortgage after the principal you’ve already paid. The easiest way to do that is to plug in 25 years, your interest rate and keep lowering your mortgage amount until you get your exact monthly mortgage payment. That will be the amount you still owe to this day.

The reason for doing that is that you’re only adding extra principal for 25 years of the mortgage. So you can’t calculate it using the 30 year term because you’ve already missed out on 5 years of adding the extra principal.

That’s just the basic calculator. If you want to get more in depth about your payment and loan then you can use the more informative calculators to help you with your questions. There are borrowing power calculators, debt ratio and mortgage comparison calculators to help you with any piece of your mortgage payment you can think of.

If you want to figure out how many years it will take you to pay off your mortgage then it’s very easy. You can plug in the amount you currently owe on your mortgage and change the years to the desired amount which will change your monthly payment. That will be the new monthly payment you need to start making (which will add the difference to principal) and you’ll pay your mortgage off in that time period.

To check your math you can simply keep adding money to the “added monthly principal” part of the calculator until it tells you that you’ll pay it off in that many years. The sum of you current mortgage payment and the added principal should equal the same number as just changing the years from 30 down to your desired amount.

You don’t have to start using the interest calculators with a specific plan of attack. Just play around with them to see how much money you’ll save if you add a certain amount of money. Even adding $50 per month will have a very big impact on how quickly you pay off your mortgage and how much interest you’ll save over the years.

Knowledge Will Save You Thousands
The Free Mortgage Calculator

Renting Costs More Per Month Than Buying A Home in 2011

I’ve been wondering why rental prices haven’t been coming down as fast as the price of real estate, so I researched it and started to understand very quickly. Real estate pricing has come down because there are a lot of people selling their home and very little amount of people buying homes.

That’s simple supply and demand. If you have a product that everyone else has it will be very hard to sell because everyone’s trying to get rid of their extra stock already. People are trying to sell their home in 4-5 months and it doesn’t happen, so they lower the price and it still doesn’t sell. Then prices continue to drop until it’s a great deal and a real estate invester picks it up.

The rental market is doing the opposite right now. Once all of these people finally sell their homes for a cheap price they need to rent an apartment in order to live. Well rentals are actually going up because investers are able to rent out each of their homes very quickly.

I’m assuming people are doubling up and sharing the rent of an appartment or else I don’t understand how they couldn’t afford their home but can afford more expensive rent.

You’re better off waiting and looking around for the next 4-5 months for a great deal on a home even if it’s a foreclosure or short sale. You can use a mortgage calculator to figure out the monthly mortgage payment, add in the monthly taxes and condo fee to get your total costs for the home. Then list it for for rent at $200-300 higher than that to make money. It’s actually a pretty simple formula now that this has happened.

Buying a home right now can be very hard especially if you’re not living in it because the banks need at least 20-25% for a down payment on an investment property. If you plan on living there you’ll only need about 5% at the most depending on your credit score.

It’s not as hard as you think to get a mortgage loan on a $35,000 mortgage for a 2 bedroom condo that rents out for $300 more than your monthly expenses. You can be buying a condo and taking the $300 extra monthly money and adding it to your first mortgage payment as principal. Then your renter is paying for one home and saving you thousands in interest on your primary home. Sounds like a good deal to me!

Knowledge Will Save You Thousands
The Free Mortgage Calculator

Should I Refinance My Mortgage? What Percent Savings Do I Need?

Refinancing your home in this 2011 economy can be a very good idea because you’ll save a lot of money over time. It’s very easy to figure out and it’s different for each financial situation.

Have a mortgage calculator handy in order to do a few calculations. You’ll need to know the amount left on your mortgage, your current interest rate and the new interest rate you are thinking about. It also helps a lot to have the amount of years you’ve been paying the mortgage because you don’t want to go back to a 30 year mortgage.

First plug in the original numbers into the mortgage interest calculator to see everything as it started. Let’s say it was $150,000 at 6% interest over 30 years and you started paying it 4 years ago. That gives you a monthly mortgage payment of $900 and a total amount of $174,000 in interest.

The current interest rates are about 4.75% right now on a 30 year mortgage and the cost of refinancing is usually about $1,500-2,000. After 4 years you have paid down $8,000 giving you a refinance amount of $142,000 at 5%.

Over 30 years – $762 – Total Interest – $132,000

That’s you’re first option if you really need to save money each month and you’re actually going to use the difference of $138 towards other bills. The other option is to keep the same $900 monthly payment and take years off of your mortgage.

Over 20 years – $940 – Total Interest – $82,000

This is a great idea if you can afford an extra $40 per month. You will have spent about $2,000 for the refinance to save $50,000 over the life of the loan. I don’t think people care about paying off their mortgage anymore because “they’ll always have the monthly payment”. I don’t believe that’s true at all.

The problem is that people keep refinancing up to another 30 year mortgage, getting a home equity loan up to the full worth of their home or upgrading to a more expensive home before they can really afford it.

Sometimes people will even refinance their home over 30 years again at $150,000 and get a check for the $8,000 balance. Usually the number would be higher than that but either way it’s a big chunk of cash that’s about to be wasted on something.

If you’re looking to refinance your home you either want to pay off your mortgage sooner, get a lower interest rate to save money per month or get that chunk of cash out to spend. My recomendation is to get the mortgage over less years and keep your monthly mortgage payment the same. You can already afford it because you have for 4 years so keep everything the same and realize how much money you’re going to save.

You should at least keep the years the same. If you paid down 4 years then get the refinance over 25 years which saves you a year and lowers your mortgage payment slightly. Then divide $2,000 (cost of refinance) by the amount of monthly savings to see how long it will take you to start making money on the refinance.

A mortgage calculator is a very useful tool that can help you with your mortgage payment. If you own a home or are thinking about buying a home then you should learn and understand interest calculators because I know you’ll save money from the knowledge you gain.

Knowledge Will Save You Thousands
The Free Mortgage Calculator

Can You Get A 25 Year Mortgage Loan?

When you look at most bank websites or talk to a mortgage lender you’ll see that the average mortgage loan terms are 10, 15, 20 and 30 years. Some people wonder if they can get a 25 year loan or even a 22 year loan so that they can pay it off faster because they may not be able to afford the 20 year mortgage.

The answer is yes, you can get a 25 year mortgage. You can get any loan term you’d like from most mortgage lenders. You should use a mortgage calculator to see the monthly payment you feel most comfortable with and go with that amount of years.

The bank approves you based on the amount of monthly income you have after paying all of your bills. If you can afford the mortgage payment over the amount of years you chose then you should get approved pending your credit score.

If your mortgage lender won’t allow it for some reason and you have your heart set on using them then you still have another option. Figure out your mortgage payment with an interest calculator over 30 years. Then add money as additional principal payments into the calculator until you get down to 20 years.

When you add money per month the amount of years will keep getting lower because you’re paying it off sooner. So you could get the 30 year mortgage and start adding that amount of money to your mortgage each month to be sure you’ll pay it off in 20 years. The good thing about doing that is you can choose to skip a month if times are tough and you need the money for something else.

Maybe in a year or two you’ll get a raise and you can pretend that you didn’t so that you can add it to your mortgage payment as well to pay it off even sooner.

When you add principal make sure to look at the amount of interest you’re saving as well. It will show the amount you’ll pay in 30 years and the adjusted amount you’d pay if you continue to add that amount of principal each month for the life of the loan.

A mortgage calculator can be very helpful to use before talking to a mortgage company about getting a loan. It will give you a good idea of what you can afford each month. Remember to add in the monthly taxes and a condo fee if you’re buying a condo. The bank will add those into the amount you can borrow per month so you should too.

Getting any mortgage loan for less than 30 years is a great idea if you can afford the higher monthly payment. If you can’t it could be very scary if/when times get tough. If you’re paying your mortgage down in 20 years you’ll far less likey to ever be upside down on your mortgage. Being upside down means you owe more than your home is worth if you sold it. So if you’re paying it down faster with a 20 year mortgage then you’ll always be ahead and be able to sell your home if you need to.

There are a lot of people out there right now upside down on their mortgage because of interest only loans, 40 year mortgages and getting home equity loans that bring them back to square one.

An interest only loan is exactly what it sounds like. You don’t pay ANY principal for the first 5 years of the mortgage which means those people are VERY far in debt right now (2011). As long as they can afford the monthly payment they’ll be alright, but if they have to sell for any reason it will put them thousands and thousands of dollars in debt, if not bankrupt.

A 40 year mortgage pays down very little principal because the loan is over 40 YEARS! Even a 30 year mortgage is too slow in my mind because it doesn’t keep up with the rate homes are decreasing right now.

A home equity loan is a loan that you can get based on the amount your home is worth. 5 years ago when things were good and banks were fighting for every loan possible they were giving out loans up to 100% of your homes value. If your home was worth $100,000 and you owed $80,000 you could get a loan for $20,000 over 10-15 years.

The problem is when the market started going down and people immedietly owed more than their home was worth. Even if your home was still worth $100,000 then you’d owe real estate fees and transfer fees to sell it which means you’d need close to $10,000 to pay the bank when you close.

A 25 year mortgage is a great idea! I highly recommend it as long as you can afford it. If you’re slightly skeptical then use the mortgage calculator as I explained to pay extra principal each month. Good Luck!

Knowledge Will Save You Thousands
The Free Mortgage Calculator 

Should You Pay Down Your Car Loan or Mortgage Loan First?

I get this question a lot because people aren’t sure if they should add extra payments to their mortgage or their car loan in order to save the most money. It can go both ways depending on you, your monthly payments and interest rates on both loans.

Why Does It Depend On You?

I’ll talk about the amount of interest each loan has overall in a bit but first I want to know about your ability to save and actually do what you set out to do. If you have an extra $500 per month and want to add it to your car loan or mortgage loan I’d say add it to the car loan first. Then add the $500 plus the amount of your car loan to your mortgage because over time that would be the best idea.

However, if you know this will be short lived I recommend simply adding the extra monthly payments the loan with the higher interest rate.

Current Interest Rates

The length of the loan has nothing to do with the amount of interest charged each period (usually monthly). If the current interest rate on your car is 5% it means you’re being charged 5% per year or .4166% per month (5 / 12 = .4166). So if you owe $10,000 at 5% your monthly interest will be 10000 x .004166 (.4166%) = $41.66. It doesn’t matter if that loan is over 5 years or 20 years the interest for the first month is the same.

Here’s where the interest changes:

$10,000 at 5% over 5 years

Monthly Payment – $188.71

Monthly Interest – $41.66
Monthly Principal – $147.05

$10,000 at 5% over 20 years

Monthly Payment – $66.00

Monthly Interest – $41.66
Monthly Principal – $24.34

For the second month in the left column the monthly principal will be subtracted from the loan amount of $10,000. $10,000 – 147.05 = $9,852.95. The right column will only lower to $9,975.66.

$9,852.95 at 5% over 5 years

Monthly Payment – $188.71

Monthly Interest – $41.05
Monthly Principal – $147.66

$9,975.66 at 5% over 20 years

Monthly Payment – $66.00

Monthly Interest – $41.56
Monthly Principal – $24.44

That will continue for each and every month for the entire loan. Since the interest is calculated exactly the same for any loan, the higher interest rate is the one you want to pay down first. If you have an extra $500 to spend on paying down your loan and you put it to the left column your loan will get paid off much sooner because of the extra principal in the payment already. You’d have to add $125 to the right column to equal the left and pay it off in 5 years anyways.

Best Way To Pay Off Both Loans If Fully Committing $500

Add $500 to the left column first until it’s paid off and it will take you 1.25 years instead of 5 years and you’ll save $1,000 in interest. Then add $500 + $188 to the right column to pay it off in 1.14 years and save $5,500 in interest.

Both loans paid in 2.39 years total and about $600 paid in interest.

IF you paid the left column first it would take you 2.70 years and you’d pay about $900 in interest.

Remember these are very small loans and you’d save much more on a mortgage and car loan. The point to be made is that you’re paying interest on the amount left on your loan no matter what. If you want the interest portion to be lower then add principal each month and it will get much lower.

Use my mortgage calculator to plug in these different amount and see how much interest you’ll save over the loan by adding extra money.

Average Car Loan $20,000 at 5% – Total Interest $2,650

Add $200 – Save $1,000 and 2 years
Add $400 – Save $1,650 and 2.70 years

Average Mortgage Loan $150,000 at 6% – Total Interest $173,500

Add $200 – Save $71,000 and 11 years
Add $400 – Save $99,500 and 15.50 years

Since your mortgage loan is much longer then you should get rid of your car payment first and then use your extra money plus the car payment to hammer away at your mortgage. Look at an amortization schedule over 30 years and look at the amount of interest paid compared to the principal.

Then look past year 10 of payments and see the difference. The amount of interest has lowered because paying 6% on $150,000 is much more then paying 6% on $90,000. So even if you add extra money for 5 years and need to stop because you’re in a jam your mortgage payment will now have MUCH more principal with each monthly payment. So the hard work paid off and will continue to pay off even without adding more each month.

Knowledge Will Save You Thousands
The Free Mortgage Calculator

Plan to Pay Your Mortgage Off Instead of Getting a Monthly Payment Forever

Why wouldn’t you plan on paying your mortgage off at some point in your life? Do you plan on just getting a monthly mortgage payment for ever? A lot of people will even get a home equity loan after paying down part of the mortgage which brings you right back to square one. It amazes me…

I know someone who is 60 years old who just got a new home and was very excited. I asked “I don’t mean to burst your bubble but how do you plan on paying this mortgage payment when you’re 80 years old? You’ll only be 20 years into it and have 10 years of payments left so what’s the plan?” This person didn’t have much to say and I’m sure the bank wouldn’t either if I questioned them about giving out a loan to a 60 year old.

The fact is most people retire when they’re 65 which means you better have all your ducks in a row so that you can RETIRE. Does everyone understand this word? When I retire I better have my home paid off and there’s no way I’d get a mortgage that will last longer than my 65th year because I won’t have a way to pay it each month.

When you buy a car you think about paying it off in 5 years. Why? If you could get a 30 year loan on your car would you do that too? Just so the monthly payment is lower and you can spend the extra money on crap throughout the month right? Probably..

A mortgage calculator says that your $20,000 monthly car payment would be $107 over 30 years or $377 over 5 years. Everyone starts the process of getting a car loan with the idea of paying it in 5 years so the mortgage calculator shows you what you can afford per month.

The problem with a mortgage is that everyone starts the process over 30 years and says “there’s no way I could afford a home with a 15 year mortgage”. Yes you can if you get less of a home, however that’s way out of the question for EVERYONE because we love to spend every last dime we make each month.

So you have $1,500 worth of monthly borrowing power from the bank. First things first, I believe the banks should start each mortgage to end when you’re 65 if you’re over 35 years old.

35 years old – 30 year mortgage  -  Ends at 65
40 years old – 25 year mortgage  -  Ends at 65
45 years old – 20 year mortgage  -  Ends at 65

Since we all know that will never happen you should do it on your own. Here’s how: Back to your $1,800 per month borrowing power..

The $1,800 has to include your mortgage payment and your monthly taxes so before searching for a home START AT A 15 YEAR LOAN to see what you can afford. If $300 goes to taxes you have $1,500 left for a 15 year mortgage which is still $190,000!!! Isn’t that enough?? If you wanted it over 30 years you could afford $280,000.

Let’s do a comparison:

$190,000 over 15 years at 5% interest (better interest rate for lower term)

Monthly payment – $1,502
Monthly Interest – $791
Monthly principal – $711

After 10 years you only owe $79,600

$190,000 over 30 years at 6% interest (higher interest rate for longer term)

Monthly payment – $1,139
Monthly Interest – $950
Monthly principal – $189

After 10 years you still owe $159,000

Now if you had gone with the $280,000 home that you could’ve afford here’s where you’d be in 10 years:

$280,000 over 30 years at 5% interest 

Monthly payment – $1,503
Monthly Interest – $1,166
Monthly principal – $336

After 10 years you only owe $227,700

Everyone should use a free mortgage calculator to figure out the different scenarios they’ll end up in 10 years down the road. You can also get a 10 year mortgage that you could have paid off by then. If everyone did this then we wouldn’t have so many people upside down on their mortgages right now.

Being upside down on your mortgage means you owe more than it’s worth. So if you tried to sell it you’d still owe the bank a big chunk of money. The bank loans you money based on your monthly income. They do the best they can to make sure you’ll pay it back and also afford it for the next 30 years but they can only do so much.

Some of the pressure needs to be on YOU because you know you monthly spending more than anyone else. So why in the world would you try to sneak into a $200,000 mortgage if you know you can’t afford that monthly payment?? Do you plan on getting another job to cover it? Do you plan on a promotion?

Spend what you “can” and use the rest for fun because that seems to be the American way in this 2011 economy. Everyones stressing over their mortgage payment instead of enjoying life and spending money on fun things you like to do.

There’s many things you can do with a mortgage calculator and I suggest you do them ALL before buying a home. It will help you make the right decision and give you a happier life.

Knowledge Will Save You Thousands
The Free Mortgage Calculator

Showing Up in Google Search Results

I’ve been building and working on The Free Mortgage Calculator since 2006 so I’ve learned quite a bit along the way about building websites, ranking in the search engine and getting advertising on my site in order to get paid for my work.

I have a 2nd website www.creatingvisits.com where I build small websites for people for very little money compared to web designers. I’ve built quite a few and people like them because I guarantee visitors per month. If you look online for a web design company they will build a nice looking website but they won’t optimize your website at all in order to show up in the search engines. Why have a website if you’re not going to show up in Google?

So after they build your website you have to pay thousands of dollars per year to a Search Engine Optimization (SEO) Company in order to show up. These SEO companies will guarantee that you show up for 10-15 exact keywords or phrases that you pick as well. They’re great, but very expensive.

Since I know how to do both I offer both in one package because you NEED both obviously. So I charge about $750 for a 5-10 page website and $70 per month to guarantee 200 visits per month to your website. We’ll work together to figure out the best keywords for your business and work on them month to month in order to get the guaranteed visitors.

How To Show Up In Google

1) Title of Domain and Pages

If you type “creating visits” into Google my website will show up first because that’s the name of my website. Very similar to if you typed in the name of a book into a library computer you’d get that book first on the list of results. As you continue to add pages to your website and title them you’ll start showing up for variations of those keywords as well.

If I have 1 page titled “mortgage calculator” and another website has 100 pages titled with variations of the phrase “mortgage calculator” who would show up first?

2) Add Content

Adding pages and pages of GOOD QUALITY content that sets your website apart from others with not only get you to the top of Google it will create repeat visitors. Don’t just say “you should know your debt to income ratio“. Let people know how to figure it out so they come back later if they need to know their borrowing power or how to use a mortgage calculator.

3) Discuss Your Items

If you’re selling a product discuss each product on it’s own page in detail. This creates more variations of the keywords and phrases you want to show up for in Google.

Think about the worth of each word in a book. The Title is worth the most, the chapter second and the content third. Websites also have links that send you from one of your pages to another rather than a page number in a book so those are also worth points. Whenever I mention “mortgage calculator” I make it a link to my homepage with the calculator at the top of the page so people can use it.

I’m very honest and up front as you’ve seen with most of my blog posts so far. If you’d like to start a website or blog then let me know and I can do one of 2 things: Build the website, add it to search engines and start link building or build you a blog and set it up for you to continue to add posts yourself to save you money.

If you like my blog and information please add a link to your Facebook page so that I can increase visitors! Maybe soon you can tell people to Facebook your website or blog as well!

Knowledge Will Save You Thousands!
The Free Mortgage Calculator

Flipping a Home – Part 2

So you found a good home to flip that needs a little bit of work and you want to buy it, fix it up and sell it for a profit. It will take a lot of work but I’ll help you figure out if you can do it.

Borrowing Power

Your monthly borrowing power will first tell you whether or not you can afford the home and the extra loan to make the renovations. Multiply your monthly gross income by .40 to get your monthly amount that you can borrow from the bank. Then subtract your loans that you already have such as a current mortgage and monthly taxes, car loan, credit card loan (minimum payment) or student loan. You do not want to subtract your monthly housing expenses, car insurance or spending money per month.

The amount left over is the monthly amount you can afford for new loans and home taxes. That could be a home equity loan, mortgage loan, car loan or even a personal loan that doesn’t exceed that monthly amount.

Assume you have $1600 for monthly borrowing power

Use my free mortgage calculator to see what your new mortgage payment will be and then divide the yearly taxes by 12 and add the 2 together. Then figure out how much money you’ll need to borrow in order to do all the renovations you need to do.

You’ll want to start with the lowest interest rate loan first. Get whatever you can for a home equity loan if you can because it will be a low interest rate. If you’re car is paid off you can get a loan against that as well for a very low rate. Then you want to look into a personal loan which will be in the 12-15% range but don’t get dicouraged because the amount of interest paid over all won’t be that much. The last thing you can do is use credit cards to pay for the things you need done and pay them off when you sell the home later.

Buying the Home

When you’re looking at the home you want to renovate you should write down everything you want to fix and get estimates on them before making an offer to buy the home. This way you can start looking into the different loan possibilities to be sure you can follow through with this entire process before it starts. Don’t forget about the closing costs when buying a home and the 4-5% real estate commission when you sell the home.

Before making the renovations you should look at similar homes online for sale. Look at the amount of money they’re trying to get so you have an idea of the amount you can sell it for later. Also look at the decor of their homes because you’re going to be making a lot of changes and want it to be the best home on the market when it comes time to sell.

If you aren’t very good at picking paint color, rugs and cabinets I suggest hiring an interior designer to help with the choices you need to make. They charge about $150 per hour but you can use them for 4-5 hours to help you choose a great looking decor for you. Then you can do all of it yourself. They’re VERY good at what they do because that’s their job and they do it everyday just like you’re good at doing your job everyday.

Picking the price to sell your home for:

Picking the price of your home will be very difficult because you’ll think it’s much better than the rest of the homes on the market similar to yours. Trust me, the owners of the similar homes think theirs is better than yours as well. Remember, every month it takes to sell the home is another monthly mortgage payment and taxes you’ll have to pay and take right off of the profit you intend to make.

Speak to your real estate agent about the price and they’ll ask you if you want to stick it out for a high price or if you want to price it low and sell it fast. They know the real estate market like the designer knows design. They sell homes everyday and you should trust their judgement. If you don’t for some reason then get an opinion of another real estate agent because it’s possible you might not have found the right one immediately.

Using my mortgage calcluator will help you keep a close eye on your monthly borrowing power to see what you can afford each time you want to buy a home and flip it. Don’t forget about personal loans to help with the renovations. You can pay it off when you sell the home or keep it for the next flip you want to make.

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