Understanding The Difference Between Mortgage And Construction Loans

Construction loans are a type of mortgage that allows buyers to borrow some or all of the money needed to purchase or construct a home. 

A mortgage lender typically offers the loan, and most construction loans require a 20% down payment in addition to monthly payments based on the property's anticipated value. 

However, not every house requires a construction loan. A construction loan is usually required when the property's estimated value exceeds the mortgage amount. 

Here are the underlying differences between a construction loan and a mortgage:

1. Safety

A construction loan is usually more expensive than a mortgage because of the interest cost. However, the increased interest costs can be covered with the building's profits and later selling off the property. 

The risk of paying larger sums early in life is offset by the benefits that building adds to your income and asset bases. The construction loan period is usually shorter than the mortgage, sometimes only 12 to 18 months.

On the other hand, a mortgage is a long-term loan with an amortization period of 30 years and payment periods of 10 to 30 years. Longer amortization periods require more initial payments, and thus it is costlier for the buyer.

2. Purpose

A construction loan is used to finance the purchase of real estate, a new building, and other equipment that adds value to the property. 

During the construction phase, a mortgage will not cover the property's value because it only has to do with an existing property. Construction loans are often used for large purchases such as flipping houses or large purchases for rental properties.

Mortgages are available to buyers who intend to live in their homes after purchasing them from builders or sellers. Mortgages are also available for buyers who intend to flip a home to a conclusion. 

The difference is that when you take out a mortgage, the house will be yours at the end of the mortgage period. Otherwise, if you need to get a construction loan, the property will be resalable after your payment is over.

3. Interest Charged

The interest on a construction loan is generally higher than the mortgage. This is because the construction loan has a higher risk factor than the mortgage. 

If something goes wrong and the home's value is less than anticipated, it can lead to financial losses for you and your bank. To prevent financial loss, banks will require you to spend a higher interest rate for borrowing money for construction.

Mortgage interest is lower than a construction loan because the bank has no risk of losing money unless you fail to make your monthly payments. Unlike with a loan for a building, banks have no risk of losing money with a mortgage. 

With the money for construction, you can lose thousands of dollars without receiving any benefits if you do not make your payments.

In conclusion, there is a difference between a construction loan and a mortgage, which is the risk factor. Construction loans have higher interest charges than mortgages, especially for buyers who do not intend to live in the house. 

You might be unable to sell your home or flip it after construction is done, so you lose money in the process. A mortgage is a safer way of buying a home because you will own the home after making your payments.

Cashing In: How to Reap the Rewards of Your Investments in Your Golden Years

To live comfortably in your golden years, it's best to make smart decisions early in life. Many pathways can lead to success in retirement, and you may need to seek advice from a financial planner to get on a good course and keep moving forward. 

Here are four pieces of advice to ensure you reap maximum rewards when you reach your golden years.

Start Early

When you start saving early, you can benefit from compounding interest for years. When you invest early and continue no matter the economic climate, you can benefit from dollar cost averaging—investing a fixed amount regularly rather than trying to find the perfect time to invest. 

Starting early also means your portfolio has time to recover from any mistakes you make. Save and invest as much as possible, but never use a credit card for investing because the return may not exceed the interest you pay.

Diversify

Sometimes, specific sectors of the economy fail while others continue to do well. Some investment products weaken or fall out of favor over time too. 

When you diversify your investments, you invest across a range of industries and investment types to make sure that failures don't have too much of a negative impact on your retirement funding. 

Investment diversification is a risk management tool that prevents you from being exposed to the full volatility of an investment type or industry.

Consider the LTSE

The LTSE (Long Term Stock Exchange) is a new national securities exchange focused on long-term investing. Some financial planners may not understand the LTSE if trained several years ago. 

Proposed in 2011 and launched in September 2020, the LTSE is an SEC-registered platform that trades stock in companies focused on long-term success for stakeholders. Businesses listed on the LTSE also commit to a list of sustainable and inclusive business practices.

Eliminate Debt

Your financial plan can fall apart if you must make large debt payments in retirement. As your golden years approach, focus on eliminating as much debt as possible to reduce the amount of income needed for monthly bills. 

Pay off credit card debts first because they can have the highest interest rates. Paying old debt in retirement means you may not have the money for traveling and other retirement activities.

To make a retirement plan that works for you, consider all your options and get help when needed to ensure that your choices are the best. When you make a plan that includes maximum savings and a smart range of investments, your golden years can be your best.

How to Stay Financially Buoyant During a Divorce

Divorce can lead to financial hardship and even bankruptcy if you aren't prepared. If you are going through a divorce or expect a divorce soon, you need to take these steps to protect yourself financially.

Here's how to stay financially buoyant during a divorce, so you don't have to start over with nothing.

Hire a Divorce Attorney

An experienced divorce attorney, like those at John D Wieser Esq, PC, can help make sure you get to keep the assets you've worked so hard for. You may not get to keep every last dime, but your lawyer can help negotiate a fair, better deal in court.

Learn to Be Frugal

You may be tempted to treat yourself and kickstart your life as a single person, but now is not the time to go crazy buying expensive clothes, beauty treatments, vacations, and dinners out. Save your money if you need to purchase a new home or vehicle after the divorce.

Get Financial Advice

An accountant or financial advisor can help you tremendously during this time, especially if your spouse has been the only one handling the household finances. You need to learn the basics of money management so you can succeed on your own.

Downsize

After your divorce, you may not be able to afford the mortgage payment on your large home. You may need to buy a smaller house to accommodate your new income level. 

Selling stuff, you don't need and reducing expenditures is also a great way to save money and simplify your life during this hectic time.

Lean on Friends and Family

If you've been kicked out of your house, you may want to ask a friend or family member for a place to stay instead of booking an expensive hotel. 

This is only temporary until you find a new home or apartment, but it can save you thousands. It can be hard to swallow your pride and move back in with mom and dad, but your wallet will thank you.

Determine Your New Budget

One of the most important things you should do when you get divorced is determining your new budget. Since your household income will be reduced, your expenses will also have to decrease. 

Cut out unnecessary expenditures and create a new monthly budget that includes the costs associated with your divorce.

Going through a divorce can be a long, arduous process. You may not come out completely unscathed, but by following these tips, you can keep your finances in order and end your marriage without going broke.

Baby's First Crypto: 5 Important Questions to Ask About Custodial Investments

Cryptocurrency can be an excellent investment for your child's future. You can open an account for your child at a custodial investment firm and let them grow their money.

Before you invest, it's important to do your research and ask these five critical questions to do it right.

What Fees Are Associated With the Investment?

You should always know what fees you are being charged for an investment. There may be account setup fees, management fees, and transaction fees with custodial assets. 

Understanding all the fees before you invest is essential, so there are no surprises down the road. Fees can eat into your investment returns, so it's important to understand what you're paying. 

Know if there are fees charged for setting up the account and if there are any ongoing management fees.

What Are the Risks and Rewards Associated With Custodial Investments?

Before investing, it's important to understand the risks and rewards associated with custodial investments. The biggest threat is that your investment could lose money. 

However, if the market goes up, your investment will also grow. It's important to have realistic expectations for the risks and rewards of any investment before you put your money in.

How Will You Protect Your Child’s Investment?

Once you've decided to invest in a custodial investment for your child, it's crucial to consider how you will protect that investment. One way to do this is by choosing a firm with good customer service and security features. 

You should also ensure that the account is adequately diversified so that your child's money is not all invested in one thing.

What Are the Tax Implications of Investing in Cryptos for Minors?

Crypto for minors has a few tax implications you should be aware of. First, any gains your child makes on their investment will be taxed at the child's tax rate. 

Second, if you withdraw money from the account to pay for college expenses, those withdrawals may be subject to taxes and penalties. Talking to a tax advisor about the implications of investing in cryptos for minors is vital before you do it.

How Will You Know When It’s Time To Sell?

One of the hardest things about investing is knowing when to sell. With a custodial investment, you may have the ability to set up automatic sell orders so that your child's money is automatically sold when it reaches a certain price. 

This can take the emotion out of deciding when to sell and help you get the most out of your investment.

Custodial investments are long-term investments. They can be a great way to grow your child's money, but it's important to do your research and understand the risks before you invest. 

By asking these five key questions, you can ensure that you make the best decision for your child's future.

4 Common Types of Insurance and How They Work

Insurance is something you don't necessarily have to pay for, but you will be very glad you did when you need it. The highs and lows of life both come as surprises and making sure you're prepared for them is one of the keys to a good, long life.

Some insurance options are more immediately important than others, so it's a good idea to review the most common ones.

Auto Insurance

There are only two states where car insurance is not mandated by law for drivers. That means you'll need it, but what exactly gets covered?

• Liability Insurance covers any injuries, damage to property, or legal defense if you're found to be at fault
• Underinsured Driver Insurance comes in handy if someone with an illegally low level of coverage causes an accident with you
• Collision Insurance repairs your vehicle after a collision, or makes a replacement if repair is impossible

Home Insurance

There are no state laws requiring homeowner's insurance. That being said, if you finance your home, there's a good chance your lender will insist on you purchasing insurance so that their interests are protected. 

Without this insurance, you are responsible for any damage your home incurs from fires, floods, molds, or other instances.

Medicare Insurance

Medicare is a country-wide government-controlled health insurance program. It covers people 65 years of age or older, as well as some exceptions, like the disabled. 

In general, Medicare insurance helps cover the costs of hospital stays, medical bills, and prescription drugs. Be sure to check with your state marketplace site to find out your eligibility.

Life Insurance

This one is especially important if people depend financially on you. If the primary earner in your home passed away, would those that remain face financial hardship? The aim of life insurance is to prevent that.

Life insurance can be divided into two categories:

1. Term coverage locks your rate in for a certain time - 5 years, 10 years, etc. Once the policy ends, you can renew it, although the rates will probably start out higher than before.

2. Permanent coverage, as the name implies, extends throughout your life. Alongside the benefit delivered after passing, there's a cash value figure involved. As the value grows, you can take money out via a withdrawal or a loan. You can obtain the entire cash value if you end the policy but be prepared for charges and fees.

Figuring out what insurance you need and which plans to go with can overwhelm you. Fortunately, insurance brokers can come in handy by helping you make a more informed decision before you start spending money.

What to Do With Your Old Car Before You Retire

The day of reaching retirement could lead to many new steps, including purchasing a new car. However, you may want to handle your old vehicle before making the next purchase.

Like most individuals, you could be searching for the best options, including selling the automobile or giving it to someone close to your family. 

Regardless of your choice, there are many options, each designed to suit someone directly, including those soon to retire.

Keep It

If you have decided to make a new purchase once you retire, you have the option to keep your old car as well. This allows you to drive the older vehicle and only take your new automobile out when necessary or on joy rides. 

Putting more wear and tear on your older car can prevent you from causing automotive issues in your recent purchase.

Sell the Vehicle

Many dealerships and companies are in the business of purchasing older vehicles, taking the task off you. Instead of fixing the car and preparing advertising methods, you can look for options like Quick Cash for Junk Cars to get rid of your vehicle while earning some money. 

These businesses will take the automobile off your hands, allowing you to use the quick cash acquired on a newer car or your other needs post-retirement.

Give it to Your Child

Selling the car is not always a choice for some; instead, they prefer to give the vehicle to their children new to driving or those who have gone to college. 

Regardless, giving your child an older car could save you money during retirement by reducing the need to purchase an automobile with your savings. 

If you don't have children, you could also pass the vehicle down to your siblings, family members, and close friends in need of a car.

Recycle

Recycling may be a good idea if your vehicle doesn't drive or you fail to locate someone who wants to trade. You can choose from various environmentally-friendly options that give you peace of mind. 

You can sometimes continue to earn cash when recycling, but this is not guaranteed. Local companies could have programs that recycle and pick the vehicle up from your home, preventing you from doing too much work to get the automobile in the right hands.

These tips can help you take care of your vehicle before retirement. Although the car may be old, there are many options to choose from, ensuring you select something that suits you best.