Re-Financing to Consolidate Debt

Some homeowners opt to re-finance to consolidate their existing debts. With this type of option, the homeowner can consolidate higher interest debts such as credit card debts under a lower interest home loan. The interest rates associated with home loans are traditionally lower than the rates associated with credit cards by a considerable amount. Deciding whether or not to re-finance for the purpose of debt consolidation can be a rather tricky issue. There are a number of complex factors which enter into the equation including the amount of existing debt, the difference in interest rates as well as the difference in loan terms and the current financial situation of the homeowner.

This article will attempt to make this issue less complex by providing a function definition for debt consolidation and providing answer to two key questions homeowners should ask themselves before re-financing. These questions include whether the homeowner will pay more in the long run by consolidating their debt and will the homeowners financial situation improve if they re-finance.

What is Debt Consolidation?

The term debt consolidation can be somewhat confusing because the term itself is somewhat deceptive. When a homeowner re-finances his home for the purpose of debt consolidation, he is not actually consolidating the debt in the true sense of the word. By definition to consolidate means to unite or to combine into one system. However, this is not what actually happens when debts are consolidated. The existing debts are actually repaid by the debt consolidation loan. Although the total amount of debt remains constant the individual debts are repaid by the new loan.

Prior to the debt consolidation the homeowner may have been repaying a monthly debt to one or more credit card companies, an auto lender, a student loan lender or any number of other lenders but now the homeowner is repaying one debt to the mortgage lender who provided the debt consolidation loan. This new loan will be subject to the applicable loan terms including interest rates and repayment period. Any terms associated with the individual loans are no longer valid as each of these loans has been repaid in full.

Are You Paying More in the Long Run?

When considering debt consolidation it is important to determine whether lower monthly payments or an overall increase in savings is being sought. This is an important consideration because while debt consolidation can lead to lower monthly payments when a lower interest mortgage is obtained to repay higher interest debts there is not always an overall cost savings. This is because interest rate alone does not determine the amount which will be paid in interest. The amount of debt and the loan term, or length of the loan, figure prominently into the equation as well.

As an example consider a debt with a relatively short loan term of five years and an interest only slightly higher than the rate associated with the debt consolidation loan. In this case, if the term of the debt consolidation loan, is 30 years the repayment of the original loan would be stretched out over the course of 30 years at an interest rate which is only slightly lower than the original rate. In this case it is clear the homeowner might end up paying more in the long run. However, the monthly payments will probably be drastically reduced. This type of decision forces the homeowner to decide whether an overall savings or lower monthly payments is more important.

Does Re-Financing Improve Your Financial Situation?

Homeowners who are considering re-financing for the purpose of debt consolidation should carefully consider whether or not their financial situation will be improved by re-financing. This is important because some homeowners may opt to re-finance because it increases their monthly cash flow even if it does not result in an overall cost savings. There are many mortgage calculators available on the Internet which can be used for purposes such as determining whether or not monthly cash flow will increase. Using these calculators and consulting with industry experts will help the homeowner to make a well informed decision.

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What You Need to Know About Seller Finance in Australia

As soon as you are done reading this you’ll have greater knowledge of seller financing in Australia!

It is often referred by solicitors as vendor finance, parents see it as seller finance. This has been around Australia from the late 1800s and has been the trend throughout the country, ever since.

Seller finance takes places whenever a seller moves his property’s financing structure to a potential buyer.

The Industry is as huge! It is as gigantic as the “titanic” and it is still growing. In reality, a lot of areas and companies in Australia took advantage of this seller financing since because it is an excellent option.

One of the largest apartment developers called Meriton, has embarked on vendor financing since it has started. Up to now, they are still successful in building their luxury apartments.

There have been four areas sold, based on the records of the Land Titles Office in Sydney. These areas were North Sydney, Chatswood in Sydney, Blue Mountains and Newcastle.

Without a doubt, more and more people jumped on the bandwagon of vendor financing. Developers even admitted that they are redoing project homes through vendor financing. Today, majority of the houses have been bought at low deposits because of the wonders of vendor financing.

There are 70% of people from the market who initially try to save the deposit for getting a property, then they would also loan from the bank. The obvious disadvantage of this set up is, the banks will still require for deposits even when the First Home Owner no longer functions. This is the perfect time for seller financing to come in. Rather than catering to the 70% of the population, seller financing opens up a wider opportunity for prospective buyers from 70% to 100% of the market.

There are many folks out there who may have good jobs but don’t actually have sufficient savings history that can qualify them to get a loan from the bank. However they do have income to sustain the mortgage payments and the need and eagerness to buy a property. Since the traditional method of property selling can’t help these folks, seller financing will definitely help them out by assisting them with their needs. While the traditional method of selling is only applicable to 70% of the market, seller financing exceeds that by servicing 100% of the market.

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Process, Function, Mechanism, Procedure – Which One?

In the world of Business Modelling one of the greatest areas of confusion is the terminology used to name the activities performed by an enterprise.

What is the correct term for these activities, Process, Function, Mechanism or Procedure?

The simple answer is “all of the above”. Does this mean that these terms are synonyms? No they are not. All of these activities are carried out by the enterprise but they are not all the same thing.

The problem is that too many people, even those who should know better, are so lax in their use of terms that the correct meaning has become obscured. Many newcomers stand no chance of learning the correct terminology as they have nobody to learn from.

Business Modelling Basic Definitions

The core activities of every enterprise, those that define WHAT an enterprise OUGHT to be doing, are Business Functions.

If you need to know the order in which Business Functions need to be carried out in order to arrive at a specified outcome in a response to a specific trigger then you build a Business Process. Each step in a process will be a function. So, without functions there would be no processes! A good reason to start by modeling the functions!

Functions can be carried out by various means, using different systems, paper forms, etc. These different means are called Mechanisms. So Functions are the “What” and Mechanisms are the “How”.

As Mechanism is to Function, so Procedure is to Process, in that procedure describes the means by which Process are performed. A single Process can be carried out using various Procedures.

Another major terminology error is referring to a Department within an enterprise as a Function! A Function is a core business activity and NOT a department.

The “Finance Function” is NOT the Finance Department!! Rather, it is that set of ACTIVITIES needed to be carried out in order to enable an enterprise to comply with its financial commitments.

Being disciplined in our use of terms is not just being pedantic, it actually results in far higher quality business models.

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