When it comes to finding a home, is it better to rent or to buy?

*Please enjoy this guest post by Les from moneysupermarket.com; who writes about all things finance including savings, loans and credit cards. *

Whether you are moving out from mom and dad's house or you are just trying to weigh up your options, you may be deciding between buying and renting. While looking at a mortgage calculator can help you make your decision, there are plenty of other things to consider. Adding numbers to the mortgage calculator will let you know just how much money you need.

Advantages to Owning a Home

When you put money down and continue to make payments on your mortgage you "own" your own home. For some people just the mere thought of this is enough to keep them moving towards this goal. It gives people a sense of pride and makes them feel a sense of accomplishment.

Homeownership is also important financially. Each payment that you make gets you closer to owning your home outright. This is almost like stashing money away for yourself. When the home is paid off you can sell it and, in theory, get some of the money back that you have been paying.

When tax time comes it can benefit you to have a home. The interest that you pay on your mortgage can be a deduction on your income taxes. While this isn't usually a life-changing amount, it is a side benefit that you may not have realized.

Disadvantages to Owning a Home

If you ask US homeowners right now, you will get a list of disadvantages to owning your own home. With the market in shambles, many people now realize that they are never going to get the money they put into their homes back again. They owe more than the home is worth and there is no way to recover the funds.

It can be expensive to own a home. Aside from the mortgage, the home needs to be insured and if you didn't pay enough of a down payment at the beginning, you are probably paying PMI as well. Then there are the taxes that are due.

Advantages to Renting

Right now, one of the biggest advantages to renting is the lack of obligation. While you usually sign a lease, it is in no way as binding as a mortgage. You can wait a few months and upgrade, move to a better part of town, or even move in with a friend without worrying about what you are leaving behind. It makes you more mobile and lessens the amount of roots that you need to put down.

When something goes wrong with your home or apartment there is someone else that needs to take care of the problem. When the air conditioning goes out, the landlord is the person footing the bill. When you can't seem to get the heater to run correctly, the call to the maintenance person isn't paid for by you.

Disadvantages to Renting

While you may be paying less than a mortgage payment and you aren't handling all of the cost yourself, there is one problem with the money that you are paying. It is going into someone else's pocket. You are paying off their mortgage. You aren't tucking money away for yourself. You own nothing. It is someone else's property and they are benefiting from your rent payments.

Considering Buying?

If you do want to buy a house a mortgage calculator can help give you an idea of how much it will cost. You can compare this to what you are paying for rent. Remember that there are some added costs that you may not be used to paying.

You can also use a mortgage calculator to figure out how much of a down payment you will need. You can change these numbers to see how it will affect your house payment and how much you are going to owe overall.


***Mysti's Note:  Please remember that there is more to owning a home than the mortgage.  Taxes, maintenance, home improvement.  Take all of this into consideration when you are making your decision.***

Bad credit credit cards - do they work?

*hopefully we are still around and haven't been blown off the map by Hurricane Irene.  Just in case.... please enjoy this guest post by Less from moneysupermarket.com; who writes about all things finance including savings, loans and credit cards. *

Credit cards designed specifically for individuals with a bad credit rating often attract widespread criticism for their extremely high interest rates but can there ever be justification for owning such a card?

Carrying out a search for credit cards for bad credit at moneysupermarket or any other comparison website will return a long list of companies willing to consider those with a lower than average credit score.  Acceptance criteria varies but inevitably, those willing to accept applicants with the lowest score charge the highest interest rate.

Statistically, individuals with the lowest credit score tend to have the biggest financial problems, so is applying for a bad credit credit card ever a good idea?

For those who have had difficulties in the past, obtaining a credit card can feel like an uphill battle and many mainstream lenders will not consider an application, especially in the current economic climate.

But being without a credit card means that many of the best offers – such as internet-based deals – can be out of reach, leaving those who need to economize the most without the means to access the cheapest products.

Therefore, if a credit card with a higher rate of interest is the only available option, it can be a way to be able to pay for goods where card payments are the only means accepted.  However, if you opt to use a high interest credit card, it is essential that you do not treat it like a regular credit card, but more akin to a debit card.

This means that you do not use the card to fund purchases you cannot afford and you repay the balance in full each month with your paycheck. By doing this, the high interest charges will never reach your account.

If you opt to go down this route, it is essential that you are able to discipline yourself not to use the card for borrowing as this can end up very costly indeed, resulting in further debts which could be difficult to pay off due to the level of interest charged.

The other benefit to using the credit card in this manner is that valuable ticks will start to build up in your credit file and start to boost your credit score which, in time, will mean that you will be able to access regular credit with a more competitive rate of interest.

Lenders base their decision on whether to offer credit – and what rate of interest to charge – based on information held in the credit files.

By adding only positive entries to your credit file, you will be increasing your chances of being offered cheaper loans or mortgages in the future.

One of the most-used methods for credit scoring in the US is the FICO score, which bases 35% of its total value on credit payment history, meaning that taking out a high interest credit card and repaying it each month will quickly help to build points.

For those who want the benefits of a credit card but without the temptation of overspending, a prepaid card could be the answer. This is where funds are pre-loaded onto the account and the holder can only spend the money they have, just like drawing money out of a bank account.

However, the disadvantage of prepaid cards is that as they have no element of borrowing, they do not have a big impact on your credit history, meaning that it is not possible to rebuild a credit rating based solely on use of these cards.

Building up a Contingency Fund

*while I am away, recharging my batteries, please enjoy this guest post by Andreas from moneysupermarket.com; who writes about all things finance including savings, loans and credit cards. *

Financial experts advise that everyone should have a contingency fund in place for life's unforeseen events. But what is a contingency fund and how do you create one? A contingency fund is simply a pot of money that is normally kept separate from everyday finances and is used in emergency situations. Governments and businesses also have contingency funds.

Contingency funds are similar to savings, but are there to be used only in extreme circumstances. It is a good idea to have a separate account for your contingency fund and moneysupermarket.com details many providers.

The idea to separate your money is so that, whereas with savings you can dip in and out, contingency funds should be left untouched until an emergency arises.

According to statistics published by Bankrate's Financial Security Index Poll in 2010, twenty-four percent of Americans have no contingency fund at all and only twenty-two percent have limited funds. These limited funds would stretch to cover three months living expenses at the most, when financial experts suggest six months expenses are a minimum amount to have in a contingency fund.

This may sound like a huge amount of money, but the financial implications of an unexpected emergency can escalate quickly. The loss of wages due to redundancy or reduced hours can be the start of difficult times. Since the global economic recession of 2008 began, millions of Americans have lost their homes to foreclosure and many more have declared bankruptcy because of financial issues.

Besides unemployment and wage freezes, individuals every day become ill or suffer an injury or accident that prevents them from earning but creates additional expenses such as medical bills.

The slowing of the economy and the rise in food prices has meant that Americans have to do more, with less. For some individuals, this means borrowing heavily on credit cards just to pay day-to-day living expenses.

Those individuals who have a contingency fund can draw on this pot of money to help through these most difficult times. It can be a financial lifesaver and an emotional one too. The stress of money worries affects people in many physical and psychological ways. A contingency fund can provide a sense of reassurance and security that is invaluable.

It does take time to build a contingency fund, but the best time to start is right now. Even if you start with a small deposit into your fund, it is still a start. From small acorns great oak trees grow, so make a regular effort to contribute to your fund and find the best interest rate that will help it increase.

Aim for a month's living expenses and remember to include the small costs such as bus fares. It is a great idea to make changes to your spending so that you can deposit more money into the fund.  After you have saved a month's expenses, aim for three months and then six months. You will feel great satisfaction and a peace of mind that should the unexpected occur, you will be ready.

Mysti's Notes:  Many of you Dave Ramsey fans will recognize this as an Emergency Fund.  Emergencies WILL happen.  Be prepared!!  You may want to start even smaller than Andreas suggests...save $500.  Then work up to $1,000.  Then go for a month's worth of expenses!  Per Dave Ramsey, baby step 4 is a fully funded EF of 3-6 months of expenses.  You can't afford to NOT do this.  

And don't forget....there is a difference between a real emergency, and things that you should be planning for.  Car repairs WILL happen.  Christmas is December 25 every year.  Water bills, car taxes....these are all things you know are coming.  Don't dip into your EF for those...plan for them!! 

Are you saving money this summer?

This is a guest post by Andreas from moneysupermarket.com; who writes about all things finance including savings, loans and credit cards.

The economic climate during the last couple of years has caused people to be a bit more frugal during the months when we’re normally most likely to spend more money.

Many people get carried away with their spending during the summer months, but I see it as a great time to save money. The sun is shining during the summer months (depending on where you’re based) and you can use the hot weather to your advantage to save some money. 

Hang Your Clothes Outside  
Whilst the sun is shining during the summer period you should hang your clothes outside instead of using the conventional dryer. 

Hanging your clothes outside should help you to save money on electricity, and if you’re green minded you’ll be happy to know that you’re doing your bit for the environment too. 

Go on a Holiday Closer to Home 

I normally go abroad once a year but last year I decided to vacation at home in the UK and I did save a lot of money. Often referred to as a “staycation”, going on vacation locally is becoming much more popular as it’s a cheaper alternative to going abroad.  

As long as you feel like you’ve traveled far enough away from home then you will still feel like you’ve had a holiday experience. Do some research and see what areas you could travel to where you have never been before and try something new.

 

Try Not to Use Air Conditioners 

Using air conditioners during the summer can seriously inflate your electric bill; try to circulate the air around your home more effectively. You can use portable or ceiling fans and you can open all of your windows to try and generate a breeze. If you really feel like you need an air conditioner, make sure the one you choose has an energy star rating for being energy efficient.

 

Try to Avoid Using Your Car 

Instead of jumping in your car and heading off to enjoy the summer weather somewhere, why not consider jumping on the train and taking your bicycle with you? You’ll save money on petrol and do your bit for the environment too.

 

Grow Your Own Fruit and Veg or Visit a Farmers Market 

Take advantage of the hot weather and grow your own fruit and veg during the summer, you may be surprised by how green fingered you actually are. Foods like tomatoes, cucumbers, beans and even corn grow fantastically well so try them out. 

One other thing you could do is pay a visit to any local farmers markets in your area; they can be a great resource for fresh produce at great prices so see what they have to offer.

I hope I’ve outlined some ways in which you can save money during the summer period, if you have anything that you think I’ve missed be sure to let me know in the comments section.

Mysti's Note:  Thanks to Andreas for this post.  The thing I love about this post is that despite the fact that Andreas lives "across the pond" from me, in the UK, the ideas are still the same!