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3 Home Loan Myths to Watch Out For

Surely you have heard that no words rhyme with orange and silver. Everyone knows that, right?

Well, it’s a myth. The truth is that both of these words have rhymes but the words that rhyme with them are rare. Sporange rhymes with orange and chilver rhymes with silver.

While knowledge of this will hardly help you buy or sell a house, or qualify you for a home loan, there are some other myths worth knowing about. In this post, we will discuss 3 home loan myths and help you understand what the truth actually is.

 

The importance of understanding these myths is to avoid making costly mistakes that can be difficult to rectify later. In all areas of life, we may be operating under certain presumptions that are actually not true. We want to make sure you make the right decisions when it comes to your home loan.

If you have further questions after reading this, we invite you to contact us so we can help you with your money matters.

Myth #1: The lowest rate is the best rate

Truth: The lowest rate might appear the most appealing, but there could be strings attached like higher fees and lower flexibility, or the cheap rate might only last for a short period of time.

First, work out what product type and features best suits your lifestyle and financial needs and objectives, and then focus on cost.

Myth #2: A fixed rate loan is better than a variable rate loan

Truth: Similar to the above, the fixed vs. variable decision simply depends on which type of loan best meets your needs. Fixed loans provide repayment certainty and can save you money if interest rates rise (or lose you money if rates fall). But they can also be costly to exit during the fixed rate term and they lack the flexibility of variable rate loans.

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Myth #3: Paying the minimum loan repayment each month is the way to go

Truth: If you want to reduce your interest costs and get your loan paid off as fast as possible paying more than the minimum repayment each month is the way to do it. The interest you owe is calculated daily and charged according to your repayment cycle, so the more you pay off the more you’ll save, especially in the first few years of your loan. But, if this is a strategy you’re considering make sure your lender allows for repayments above the minimum or for lump-sum payments without penalty.

When you need any help in your money decisions, please reach out and contact us.

Toys for Tots

Please help bring the joy of Christmas to a needy child!  Midstate is proud to be a drop off location.  Please drop off new unwrapped gifts or toys at 6810 York Road during our regular business hours.  We will be accepting these donations thru December 5th.

How to Finance a College Education

In a 2013 survey, nearly two thirds of the 1,602 polled undergraduates planned to use grants and scholarships to pay for college tuition. The reason? Increasingly cost-conscious parents. The recession not only took a toll on our bank accounts, but also on our mental understanding of finances. With more and more students seeking scholarships to fund their college education, it’s more important than ever to have a plan. Here are a few tips to help you find the financing you and your family will need:

1.)    Seek Out the Free Money First

Often times, students don’t know how much aid there is available to them. That’s why it’s important that involved parents are aware of the resources and options.

Online scholarship databases can give you an idea of what’s available to students. However, that’s nowhere near the end of the list. Search for outside resources. For example, does your child share a unique heritage? Are they skilled in a unique sport or extra-curricular activity? Does your company offer any educational grants? All of these are areas to investigate for potential scholarship or grant funds.

2.)    Don’t Fear the Loan

Of course, for many parents this is not ideal, but if it is a necessity, than there are options to look in to.

Federal loans are usually the less expensive route, as they carry lower interest rates and the repayment plans tend to be more flexible. There are three levels of federal college loans – Perkins loans, subsidized Stafford loans, and unsubsidized Stafford loans. The Perkins and subsidized Stafford loans each come with a set of qualifications, but the unsubsidized Stafford loan is available to any applicant. Each carry fairly low interest rates and offer a repayment plan that should be fairly easy to achieve, with most deferring repayment until several months after receiving a diploma.

Private loans can be a bit trickier. Lenders will base the loan amount off of your credit score, so if you have any gaps or snags affecting your number, ask us how to get them resolved as quickly as possible, and try to avoid applying for your loan until you’re able to clear things up.

Helping your child to enhance their future through higher education may be daunting, but it is possible. If scholarships and grants won’t be enough to fund college tuition, come in to talk with a qualified bank representative to help you sort out a financial plan that can get you on the right path.

Saving Spells Trouble for U.S. Economy

ImageHistorically, Americans have been saving and spending on a fairly even level, but it seems that may all be changing. And, although that is great for people, it’s not so great for the U.S. economy.

In 2008, when the U.S. economy took a nose dive, an unfortunate amount of Americans found that their “rainy day” funds weren’t large enough or just didn’t stretch for the length of time needed. Fast forward six years: The economy is again showing promise, but it appears that Americans are going to be forever jaded by the event. In a recent poll, 62% of people were more likely to put aside money for savings, rather than spending it. In addition, the amount of Americans actively attempting to spend less has jumped, as well. Many of the poll participants concluded that although the initial effort was a necessity, it’s now the new normal and they have no plans to change their way of spending.

All of this may be great for individuals. Smart financial planning means you’ll be more prepared for life’s little pitfalls, but the shift in attitude has affected banking and spending behavior on a national level. For the U.S. economy, which relies on consumer spending for nearly two thirds of the national GDP, this is troubling. Debt is at a 30-year all time low and it seems the largest section of Americans really willing to take financial risks are college-aged students and parents in need of student loans.

One research institute has predicted that further impact on the U.S. economy will be dependent on income growth. The argument essentially boils down to the fact that if consumers are pulling in more money, their bills and debts are being saved for in the same way, but they won’t need to pool such a large percentage of their total income to cover said savings, thus leaving a larger piece of the pie for consumer buying.

No matter your thoughts on the correct solution, never underestimate the importance of good financial planning. Our financial experts at Midstate Community Bank can help you decide what sort of banking options are suited to helping you reach your goals. Talk to a representative today!