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Apache is functioning normally

June 9, 2023 by Brett Tams

The FHA insures mortgages that are issued by banks, non-banks, credit unions, and other lenders. The main reason for this insurance is to protect lenders if there is a default on the loan. Because of this setup, FHA lenders can offer more favorable terms to borrowers who would otherwise have more difficulty qualifying for a … [Read more…]

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Apache is functioning normally

June 9, 2023 by Brett Tams

“Persistently high inflation and the recent spike in lending rates will trigger a correction in the UK (Aa3 negative) housing market,” Moody’s Investor Service said in a report.

Matt Cardy | Getty Images News | Getty Images

LONDON – The U.K.’s biggest bank temporarily withdrew mortgage deals via broker services on Thursday, as the effect of higher interest rates ripples through the British housing market.

HSBC told CNBC Friday that it was reviewing the situation regularly, but did not specify whether the new deals would differ from its previous offerings. Higher rates are a possibility, given that the Bank of England is continuing to increase interest rates.

It comes eight months after hundreds of mortgage deal offers were pulled in one day after market chaos at the time sparked concerns about rising base rates.

In a statement issued Friday, HSBC said: “We occasionally need to limit the amount of new business we can take each day via brokers. All products and rates for existing customers are still available, and we continue to review the situation regularly.”

The banking group said the protocol was in order to ensure it meets “customer service commitments” and stressed that it remains open to new mortgage business.

Soaring rates

The HSBC decision comes as analysts expect mortgage rates to soar and housing prices to plummet in response to the increased base rate.

A large number of fixed-rate mortgage deals is set to expire this year, leaving homeowners vulnerable to the impact of interest rate hikes, according to economic research company Capital Economics.

The organization made an upward revision to its mortgage rate forecasts, which showed borrowers would be “subject to a larger interest rate shock than … previously envisaged.”

“Those coming to the end of a 2-year fix will see a particularly large increase in the cost of their mortgage. While those refinancing a 5-year fix this month may see their mortgage rate jump from 2.1% to 4.9%, those on a 2-year fix will see an increase from 1.4% to 5.2%,” Capital Economics said in a note published Thursday.

There are also warnings that house prices will tumble in the next two years, with credit ratings agency Moody’s forecasting a 10% decline. 

“Persistently high inflation and the recent spike in lending rates will trigger a correction in the UK (Aa3 negative) housing market,” Moody’s Investor Service said in a report.

The Halifax House Price Index showed that U.K. house prices were flat in May after a 0.4% fall in April, while the average U.K. property now costs £286,532 ($360,000).

In February, U.K. house prices experienced their sharpest contraction since November 2012, according to building society Nationwide.

Watch CNBC's full interview with the Bank of England's Andrew Bailey

Prices tumbled 1.1% year-on-year, logging their first annual decline since June 2020.

The Bank of England raised its interest rate to 4.5% from 4.25% as the central bank attempts to tackle high inflation that currently sits well above the 2% target, at 8.7%. 

The Organization for Economic Cooperation and Development predicts the U.K. will have the highest inflation rate out of all advanced economies this year.

Lenders and homeowners will be watching the central bank closely for its next base rate decision on June 22. It is widely expected the bank will agree its thirteenth consecutive increase.

Source: cnbc.com

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Apache is functioning normally

June 9, 2023 by Brett Tams

First Home Mortgage has welcomed back former loan officer Jeff Modeski (pictured), who returns to the company’s Columbia, Md., office. Modeski will oversee day-to-day operations in Columbia in tandem with Chris Sittig, who has been serving as the location’s branch manager and will continue in that role, according to the company’s release. “On behalf of … [Read more…]

Posted in: Refinance, Savings Account Tagged: bar, build, columbia, company, excellence, experience, Financial Wize, FinancialWize, first home, goals, home, in, industry, loan, Loan officer, md, Mortgage, office, Operations, reach, returns, will

Apache is functioning normally

June 9, 2023 by Brett Tams

Done deal: The TJ Ribs location on Siegen Lane was sold for $2.5 million this week to SDP LA Baton Rouge 1 LLC, which shares an address with Streamline Development Partners of Oxford, Mississippi. Burke Moran, the son of founder TJ Moran, was the seller, as previously reported by Daily Report. While the restaurant still has a six-month lease, the new owner’s plans for the property have not been announced. 

Homebuying trends: Mortgage rates have fallen from recent highs, but demand for home loans dropped for the fourth straight week, declining by 1.4% last week compared to the week before, according to the Mortgage Bankers Association’s seasonally adjusted index. Applications to refinance a home loan fell 1% for the week and were 42% lower than the same week a year ago. CNBC has the full story.  

Plan B: Biden administration officials are quietly planning for the possibility that the Supreme Court will strike down President Joe Biden’s sweeping student loan forgiveness program. Should the court block the program, the administration would likely pursue more targeted policy options as well as measures aimed at helping borrowers who would be required to resume making payments on their loans. Read the full story from The Wall Street Journal.  

Source: businessreport.com

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Apache is functioning normally

June 8, 2023 by Brett Tams

Fannie Mae has tapped Chetlur S. Ragavan to serve as a member of its board of directors, as well as its risk policy and capital committee and nominating and corporate governance committee. Ragavan, the founder and principal of advisory and consulting firm Risk Response, comes to the role with decades of experience in enterprise risk … [Read more…]

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Apache is functioning normally

June 8, 2023 by Brett Tams

National mortgage rates were mostly lower compared to a week ago, according to data compiled by Bankrate. Rates for 30-year fixed, 15-year fixed and jumbo loans moved lower, while rates for adjustable rate mortgages rose.

The Federal Reserve has lifted rates 10 times in a row, most recently at its May 3 meeting. Rates now are at a 15-year high, but the consensus is that inflation is finally cooling and the central bank might halt raising rates.

”Mortgage rates have settled into a new normal of around 6.5 percent on a 30-year fixed-rate loan,” says Lisa Sturtevant, chief economist at Bright MLS, a large multiple listing service in the Middle Atlantic region. ”With growing recession risks, we could see mortgage rates dip lower, but we will not be returning to the 3 percent level seen during the height of the pandemic.”

Rates last updated on June 7, 2023.

The rates listed above are marketplace averages based on the assumptions indicated here. Actual rates listed across the site may vary. This story has been reviewed by Suzanne De Vita. All rate data accurate as of Wednesday, June 7th, 2023 at 7:30 a.m.

>>Check out historical mortgage interest rate trends, from the 70s to today

You can save thousands of dollars over the life of your mortgage by getting at least three rate quotes. Comparing mortgage offers from multiple lenders is always a smart move, but shopping around grew especially critical during the interest rate run-up of 2022, according to research by mortgage giant Freddie Mac. It found the payoff for bargain-huntng borrowers doubled last year.

“All too often, some homeowners take the path of least resistance when seeking a mortgage, in part because the process of buying a home can be stressful, complicated and time-consuming,” says Mark Hamrick, senior economic analyst for Bankrate. “But when we’re talking about the potential of saving a lot of money, seeking the best deal on a mortgage has an excellent return on investment. Why leave that money on the table when all it takes is a bit more effort to shop around for the best rate, or lowest cost, on a mortgage?”

Mortgage rates for home purchase

30-year mortgage rate dips, -0.11%

The average 30-year fixed-mortgage rate is 7.02 percent, down 11 basis points since the same time last week. A month ago, the average rate on a 30-year fixed mortgage was lower, at 6.89 percent.

At the current average rate, you’ll pay $666.65 per month in principal and interest for every $100,000 you borrow. That’s a decline of $7.41 from last week.

15-year fixed mortgage falls,-0.11%

The average rate you’ll pay for a 15-year fixed mortgage is 6.38 percent, down 11 basis points since the same time last week.

Monthly payments on a 15-year fixed mortgage at that rate will cost roughly $865 per $100,000 borrowed. The bigger payment may be a little harder to find room for in your monthly budget than a 30-year mortgage payment would, but it comes with some big advantages: You’ll come out several thousand dollars ahead over the life of the loan in total interest paid and build equity much more rapidly.

5/1 ARM rate rises, +0.02%

The average rate on a 5/1 adjustable rate mortgage is 6.06 percent, ticking up 2 basis points over the last 7 days.

Adjustable-rate mortgages, or ARMs, are home loans that come with a floating interest rate. In other words, the interest rate can change intermittently throughout the life of the loan, unlike fixed-rate mortgages. These types of loans are best for those who expect to sell or refinance before the first or second adjustment. Rates could be substantially higher when the loan first adjusts, and thereafter.

While borrowers shunned ARMs during the pandemic days of super-low rates, this type of loan has made a comeback as mortgage rates have risen.

Monthly payments on a 5/1 ARM at 6.06 percent would cost about $603 for each $100,000 borrowed over the initial five years, but could increase by hundreds of dollars afterward, depending on the loan’s terms.

Jumbo mortgage interest rate moves down, -0.08%

The average rate for the benchmark jumbo mortgage is 7.03 percent, a decrease of 8 basis points over the last week. A month ago, the average rate was below that, at 6.93 percent.

At the average rate today for a jumbo loan, you’ll pay $667.32 per month in principal and interest for every $100,000 you borrow. That represents a decline of $5.39 over what it would have been last week.

Rate review: How mortgage rates have shifted

  • 30-year fixed mortgage rate: 7.02%, down from 7.13% last week, -0.11
  • 15-year fixed mortgage rate: 6.38%, down from 6.49% last week, -0.11
  • 5/1 ARM mortgage rate: 6.06%, up from 6.04% last week, +0.02
  • Jumbo mortgage rate: 7.03%, down from 7.11% last week, -0.08

Refinance rates

30-year mortgage refinance drops, –0.08%

The average 30-year fixed-refinance rate is 7.11 percent, down 8 basis points over the last seven days. A month ago, the average rate on a 30-year fixed refinance was lower, at 7.02 percent.

At the current average rate, you’ll pay $672.71 per month in principal and interest for every $100,000 you borrow. That’s down $5.40 from what it would have been last week.

Where mortgage rates are headed

The days of sub-3 percent mortgage interest on the 30-year fixed are behind us, and rates have so far risen beyond 7 percent in 2022.

“Low interest rates were the medicine for economic recovery following the financial crisis, but it was a slow recovery so rates never went up very far,” says McBride. “The rebound in the economy, and especially inflation, in the late pandemic stages has been very pronounced, and we now have a backdrop of mortgage rates rising at the fastest pace in decades.”

Comparing different mortgage terms

The 30-year fixed-rate mortgage is the most popular loan for homeowners. This mortgage has a number of advantages. Among them:

  • Lower monthly payment: Compared to a shorter term, such as 15 years, the 30-year mortgage offers lower payments spread over time.
  • Stability: With a 30-year mortgage, you lock in a consistent principal and interest payment. Because of the predictability, you can plan your housing expenses for the long term. Remember: Your monthly housing payment can change if your homeowners insurance and property taxes go up or, less likely, down.
  • Buying power: With lower payments, you can qualify for a larger loan amount and a more expensive home.
  • Flexibility: Lower monthly payments can free up some of your monthly budget for other goals, like saving for emergencies, retirement, college tuition or home repairs and maintenance.
  • Strategic use of debt: Some argue that Americans focus too much on paying down their mortgages rather than adding to their retirement accounts. A 30-year fixed mortgage with a smaller monthly payment can allow you to save more for retirement.

That said, shorter-term loans have gained popularity as rates have been historically low. Although they have higher monthly payments compared to 30-year mortgages, there are some big benefits if you can afford the upfront costs. Shorter-term loans can help you achieve:

  • Greatly reduced interest costs: Because you pay off the loan faster, you’ll be able to pay less interest overall.
  • Lower interest rate: On top of less time for that interest to compound, most lenders price shorter-term mortgages with lower rates.
  • Build equity faster: The faster you pay off your mortgage, the faster you’ll own value in your home outright. That’s especially handy if you want to borrow against your property to fund other spending.
  • Debt-free sooner: A shorter-term mortgage means you’ll own your house free and clear sooner than you would with a longer-term loan.

How do mortgage rates affect homebuyers?

In a housing boom, low mortgage rates can present pros and cons for borrowers. One pro: Low rates give borrowers more buying power. A $300,000 loan at 4 percent equates to a monthly payment of $1,432. If rates fall to 3 percent, the payment plunges to $1,265.

However, that sort of decline also can help push up home prices — and values indeed have jumped in recent months.

Here’s an example to show how soaring home prices and plunging mortgage rates can have offsetting effects. Let’s say you chose not to buy a $300,000 home a year ago, when the 30-year mortgage rate was around 3.75 percent. Your 20 percent down payment would’ve been $60,000 and your monthly payment would’ve been $1,111.

The price of the same house has jumped to $335,000 today. However, you can get a 30-year mortgage at 3 percent. As a result, your monthly payment rises only slightly, to $1,130. However, you’ll have to come up with an extra $7,000 to make a 20 percent down payment.

Learn more:

Today’s featured lenders, June 7, 2023

Source: bankrate.com

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Apache is functioning normally

June 8, 2023 by Brett Tams

Mortgage default risk has remained generally consistent for Freddie and Fannie acquisitions, down from 3.53% to 3.44% quarter over quarter. This brings the share of loans likely to be delinquent (180 days or more) to 3.44%.  Read next: Debt ceiling debate hurts housing market Looking at borrower risk, GSE-backed loans remained relatively unchanged at 1.58%, … [Read more…]

Posted in: Refinance, Savings Account Tagged: About, acquisitions, author, debate, Debt, debt ceiling, environment, Financial Wize, FinancialWize, GSE, Housing, Housing market, in, interest, interest rates, Loans, low, making, market, More, Mortgage, Mortgages, or, Originations, principal, PRIOR, Purchase, Purchase loans, rate, Rates, Refinance, risk, stable, Underwriting

Apache is functioning normally

June 8, 2023 by Brett Tams

If you have a mortgage, you may be unknowingly participating in a mortgage-backed security (MBS). That is, your humble home loan may be part of a pool of mortgages that has been packaged and sold to income-oriented investors on the secondary market.

Being part of an MBS won’t change much (if anything) about how you repay your home loan, but it’s helpful to understand how these investment products work and how they impact the mortgage and housing industries.

Key takeaways

  • A mortgage-backed security is an investment product that consists of thousands of individual mortgages.

  • Investors can purchase MBSs on the secondary market from the banks that issued the loans.

  • When MBS prices fall, residential mortgage rates tend to rise – and vice versa.

What is a mortgage-backed security?

A mortgage-backed security (MBS) is a type of financial asset, somewhat like a bond (or a bond fund). It’s created out of a portfolio, or collection, of residential mortgages.

When a company or government issues a traditional bond, they are essentially borrowing money from investors (the people buying the bond). As with any loan, interest payments are made and then principal is paid back at maturity. However, with a mortgage-backed security, interest payments to investors come from the thousands of mortgages that underlie the bond — specifically, the repayments in interest and principal the mortgage-holders make each month.

Mortgage-backed securities offer key benefits to the players in the mortgage market, including banks, investors and even mortgage borrowers themselves. However, investing in an MBS has pros and cons.

How do mortgage-backed securities work?

While we all grew up with the idea that banks make loans and then hold those loans until they mature, the reality is that there’s a high chance that your lender is selling the loan into what’s known as the secondary mortgage market. Here, aggregators buy and sell mortgages, finding the right kind of mortgages for the security they want to create and sell on to investors. This is the most common reason a borrower’s mortgage loan servicer changes after securing a mortgage loan.

Mortgage-backed securities consist of a group of mortgages that have been organized and securitized to pay out interest like a bond. MBSs are created by companies called aggregators, including government-sponsored entities such as Fannie Mae or Freddie Mac. They buy loans from lenders, including big banks, and structure them into a mortgage-backed security.

Think of a mortgage-backed security like a giant pie with thousands of mortgages thrown into it. The creators of the MBS may cut this pie into potentially millions of slices — each perhaps with a little piece of each mortgage — to give investors the kind of return and risk they demand. Mortgage-backed securities typically pay out to investors on a monthly basis, like the mortgages underlying them.

Types of mortgage-backed securities

Mortgage-backed securities may have many features depending on what the market demands. The creators of MBSs think of their pool of mortgages as streams of cash flow that might run for 10, 15 or 30 years — the typical length of mortgages. But the bond’s underlying loans may be refinanced, and investors are repaid their principal and lose the cash flow over time.

By thinking of the characteristics of the mortgage as a stream of risks and cash flows, the aggregators can create bonds that have certain levels of risks or other characteristics. These securities can be based on both home mortgages (residential mortgage-backed securities) or on loans to businesses on commercial property (commercial mortgage-backed securities).

There are different types of mortgage-backed securities based on their structure and complexity:

  • Pass-through securities: In this type of mortgage-backed security, a trust holds many mortgages and allocates mortgage payments to its various investors depending on what share of the securities they own. This structure is relatively straightforward.

  • Collateralized mortgage obligation (CMO): This type of MBS is a legal structure backed by the mortgages it owns, but it has a twist. From a given pool of mortgages, a CMO can create different classes of securities that have different risks and returns (like different size slices, if we use our pie metaphor again). For example, it can create a “safer” class of bonds that are paid before other classes of bonds. The last and riskiest class is paid out only if all the other classes receive their payments.

  • Stripped mortgage-backed securities (SMBS): This kind of security basically splits the mortgage payment into two parts, the principal repayment and the interest payment. Investors can then buy either the security paying the principal (which pays out less at the start but grows) or the one paying interest (which pays out more but declines over time). These structures allow investors to invest in mortgage-backed securities with certain risks and rewards. For example, an investor could buy a relatively safe slice of a CMO and have a high chance of being repaid, but at the cost of a lower overall return.

How do mortgage-backed securities affect mortgage rates?

The cost of mortgage-backed securities has a direct impact on residential mortgage rates. This is because mortgage companies lose money when they issue loans while the market is down.

When the prices of mortgage-backed securities drop, mortgage providers generally increase interest rates. Conversely, mortgage providers lower interest rates when the price of MBSs goes up.

So, what causes mortgage-backed securities to rise or fall? Everything from stock market gains to higher energy prices and even unemployment numbers have the ability to influence the prices. A variety of factors that affect the course of mortgage-backed securities, and lenders are constantly monitoring it.

Mortgage-backed securities and the housing market

Why do mortgage-backed securities make sense for the players in the mortgage industry? Mortgage-backed securities actually make the industry more efficient, meaning it’s cheaper for each party to access the market and get its benefits:

  • Lenders: By selling their mortgages, lenders save on maintenance costs, and receive money they can then loan out to other borrowers, allowing them to more efficiently use their capital. They often require borrowers to meet conforming loan standards so that they can sell mortgages to aggregators. They can also sell the loans they might not want to keep, while retaining those they prefer.

  • Aggregators: Aggregators package mortgages into MBSs and earn fees for doing so. They may give mortgage-backed securities features that appeal to certain investors. A steady supply of conforming loans allows aggregators to structure MBSs cheaply.

  • Borrowers: Because aggregators demand so many conforming loans, they increase the supply of these loans and push down mortgage rates. So, borrowers may be able to enjoy greater access to capital and lower mortgage rates than they otherwise would.

Of course, easier access to financing is beneficial for the housing construction industry:  Developers can build and sell more houses to consumers who are able to borrow more cheaply.

Investors like mortgage-backed securities, too, because these bonds may offer certain kinds of risk exposure that the investors, mainly big institutional players, want to have. Even the banks themselves may invest in MBSs, diversifying their portfolios.

While the lender may sell the loan, it may also retain the right to service the mortgage, meaning it earns a small fee for collecting the monthly payment and generally managing the account. So, you may continue to pay your lender each month for your mortgage, but the real owner of your mortgage may be the investors who hold the mortgage-backed security containing your loan.

Pros and cons of investing in MBSs

No investment is without risk. MBS have their advantages and disadvantages.

For instance, mortgage-backed securities typically pay out to investors on a monthly basis, like the mortgages behind the securities. But, unlike a typical bond where you receive interest payments over the bond’s life and then receive your principal when it matures, an MBS may often pay both principal and interest over the life of the security, so there won’t be a lump-sum payment at the end of the MBS’ life.

Here are some of the other advantages and disadvantages of investing in MBSs.

Pros

  • Pay a fixed interest rate

  • Typically have higher yields than U.S. Treasuries

  • Less correlated to stocks than other higher-yielding fixed income securities, such as corporate bonds

Cons

  • If a borrower defaults on their mortgage, the investor will ultimately lose money

  • The borrower may refinance or pay down their loan faster than expected, which can have a negative impact on returns

  • Higher interest rate risk because the cost of MBSs can drop as soon as interest rates increase

History of mortgage-backed securities

The first modern-day mortgage-backed security was issued in 1970 by the Government National Mortgage Association, better known as Ginnie Mae. These mortgage-backed securities were actually backed by the U.S. government and were enticing because of their guaranteed income stream.

Ginnie Mae began providing mortgage-backed securities in an effort to bring in extra funds, which were then used to purchase more home loans and expand affordable housing. Shortly after, government-sponsored enterprises Fannie Mae and Freddie Mac also began offering their version of MBSs.

The first private MBS was not issued until 1977, when Lew Ranieri of the now-defunct investment group Salomon Brothers developed the first residential MBS that was backed by mortgage providers, rather than a federal agency. Ranieri’s MBSs were offered in 5- and 10-year bonds, which was attractive to investors who could see returns more quickly.

Over the years, mortgage-backed securities have evolved and grown significantly. As of May 2023, financial institutions have issued $493.9 billion in mortgage-backed securities.

Mortgage-backed securities today

While mortgage-backed securities were notoriously at the center of the global financial crisis in 2008 and 2009, they continue to be an important part of the economy today because they serve real needs and provide tangible benefits to players across the mortgage and housing industries.

Not only does securitization of mortgages provide increased liquidity for investors, lenders and borrowers, it also offers a way to support the housing market, which is one of the largest engines of economic growth in the U.S. A strong housing market often bolsters a strong economy and helps employ many workers.

Mortgage Market

Bankrate insights

As of 2021, 65% of total home mortgage debt was securitized into mortgage-backed securities.

Bottom line on mortgage backed securities

While you might not deal with a mortgage-backed security in your daily life, your mortgage may be part of one. And if so, it’s a cog in the machinery that keeps the financial system running and helps borrowers access capital more cheaply. It can be useful to understand that the MBS market ultimately has a powerful influence over qualifications for mortgages, resulting in who gets a loan — and for how much.

Source: finance.yahoo.com

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Apache is functioning normally

June 7, 2023 by Brett Tams

United Wholesale Mortgage CEO Mat Ishbia may no longer financially support Michigan State University (MSU) athletes to “avoid conflict” with Ishbia’s professional sports teams, the Phoenix Suns and Phoenix Mercury. UWM said it has decided to end its name, image, and likeness (NIL) deal with MSU at the end of June. The Pontiac-headquartered wholesale mortgage … [Read more…]

Posted in: Refinance, Savings Account Tagged: 2021, actual, Basketball, CEO, company, Financial Wize, FinancialWize, football, in, interest, Mat Ishbia, Michigan, Mortgage, mortgage lender, new, or, Phoenix, Sports, united, United Wholesale Mortgage, UWM

Apache is functioning normally

June 7, 2023 by Brett Tams

Funding education with student loans is extremely common, thanks to the high cost of earning a degree. But while it may be essential to borrow to pay for things like tuition and living expenses, there are some things it doesn’t make sense to buy with loan money.

While I borrowed money to earn both my undergraduate degree and my law degree, there were four things I made sure never to spend my student loans on — even as some of my peers splurged more than I was comfortable with. Here’s what they are. 

Two adults looking at financial paperwork.

Image source: Getty Images.

1. Vacations

It was tempting to fund spring-break trips or trips home from school to see family with my student loans. But the reality is, student loans typically come with long repayment terms of a decade or more. It didn’t make sense to pay for a vacation — and incur interest costs — for a 10-year period of time for a vacation that would be over in a week or two. 

2. A car 

Having transportation would have been very convenient while in school, but I wasn’t willing to pay for a car with a student loan.

Like with a vacation, it didn’t make sense to fund a vehicle purchase with a loan I’d be repaying for so many years. In fact, there was a substantial likelihood I’d still be paying my student loans even after the car got too old to drive, so I’d ultimately have been paying for a vehicle I no longer even owned. 

If you can qualify for one, a car loan can be a better option than a student loan if you absolutely must borrow to buy a vehicle while in school. These loans have shorter payoff times and sometimes lower interest rates than student loans, so they can end up being more affordable.

Instead, you can do what I did: Rely on public transportation until you can afford to buy a car with cash or make car payments from your paycheck, rather than your loan checks. 

3. TVs and video game systems

While I was in school, some of my friends bought televisions, video game systems, and other expensive electronics with their “extra” student loan funds. But this was something I wasn’t willing to do. The technology would have been obsolete before the loans were paid off, and I know I would have regretted making this decision. 

4. Dining and drinking at restaurants and bars 

Finally, spending money on fancy restaurants and drinks at bars was another common thing people did with student loan money. While it makes sense to spend time making these types of memories in college, borrowing to do it isn’t the best idea.

Every extra dollar of student loan payments can make it more expensive and difficult to pay back these loans later. A few drinks at the bar may not be worth having to wait to buy a house or start a family or begin saving for retirement because of lingering debt. 

Ultimately, you are not supposed to spend your student loan money on these types of expenses. These loans are intended to be for educational costs only. While your lender isn’t checking your bank account to make sure you didn’t take a trip to the Bahamas with your loan funds, there’s a reason that you’re restricted to borrowing up to the cost of attendance.

You don’t want to trap yourself in a ton of debt just to “enjoy” your college years, only to end up spending the next decade or two of your life struggling. I made the decision early on to borrow the minimum necessary for the essentials, and others who need to rely on student loans may want to do the same. 

Source: fool.com

Posted in: Savings Account Tagged: 2, affordable, Bank, bank account, bar, before, best, Borrow, borrowing, Buy, buy a house, car, car loan, College, cost, Debt, decision, dining, earning, education, Electronics, Essentials, expenses, expensive, Family, Financial Wize, FinancialWize, fund, funds, home, house, in, interest, interest rates, Law, Life, Living, living expenses, loan, loan money, Loans, LOWER, Make, making, memories, money, More, or, Other, paycheck, payments, Purchase, Rates, repayment, restaurants, retirement, Saving, Saving for Retirement, School, Spending, Spring, student, student loan, Student Loans, Technology, time, Transportation, tuition, vacation, vacations, Video
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