Negative equity mortgage situation is one of the most complicated financial situations to solve. Negative equity mortgage is also known as underwater mortgage or upside down mortgage, which means a person, owes more money to the lender than the current house is worth.

For example if a homeowner bought a home for $300,000 and placed the 20% down payments of $60,000, he got $240,000.

When the real estate markets crashed at 2009 and properties lost their value, in our example the homeowner is left with nearly $240,000 mortgage but if the home value decreased by 30% to $200,000 the lender owns a home worth less than the borrower had borrowed.

If the borrowers fail to pay, they will lose the house and the lender lose a lot of money.

Unfortunately at the financial crisis of 2009 millions of Americans fell into such awkward situations, when the value of their homes dropped steeply, while their mortgage loan stayed as it was. It is estimated that there are 3-4 Million homeowners nationwide with underwater mortgages.

Together with the crisis the national interest rates decreased too, this was a life saver for those who could refinance their mortgage and lower their monthly payments or shorten the mortgage term by a few years.

While Millions of homeowners took advantage from the crisis outcomes and refinanced, homeowners with negative equity mortgage not only lost their home value, but they were not able to refinance, since the home value is less than their loan.

The federal administration tried to launch some programs to help those with underwater mortgages. This effort is part of the 14 Billion dollars the Treasury Department funds for the Troubled Asset Relief Program. It was released as ‘FHA short refinance’ program.

Until lately saving underwater mortgages with the FHA short refinance’ program was not very successful, because not many lenders joined the plan. This may be changing soon, as Wells Fargo and Ally Financial have both stated they will join a pilot program.

The basic guidelines for Negative Equity Mortgage Refinancing are:

• That the borrower must be living in the property;
• The borrower must be current on their mortgage payments;
• The mortgage processed should not be an FHA backed mortgage;
• Borrower with credit score above 500
• Loan to Value should not be over 97.75%

There are many reasons why the FHA short refinance program did not succeed until now, the main one is that it is up to the lenders to decide to join. Many lenders did not join this program even though there where some federal incentives invested by the government.

Lenders were reluctant to join because they need to write off at least 10% of the current borrower’s principle on the underwater mortgage.

Since FHA requirement is that the homeowners will be the ‘perfect borrowers’ which are never late on their payments, lenders didn’t want to lose principle on those who were paying on time.

In case there are two mortgages on the same property, both of the lenders need to agree to the FHA short refinance guidelines.

As you can see, the FHA strict borrower’s terms and the lenders requirement made the underwater mortgage refinancing program, too specific to really solve the negative equity to the Millions of homeowners who need it. The entrance of two major mortgage players Wells Fargo and Ally Financial may bring new hope to more homeowners.

Winter is almost over and Spring is just around the corner. For many families that means it’s time to start planning the annual family vacation. However for more families it means no money to spend on a week long vacation. Vacations don’t have to be extravagant and expensive. There are many ways to spend your vacation week other than at the beach or at a fancy resort. Here are some cheap, fun ways to plan a vacation for the family.

1. Take a hike. There are many national parks that offer great entertainment options and many of them are free. You can even save money on lodging by bringing along tents. Camping is a great way to relax with the family and safe camp sites can be rented for just a few dollars per night. Entertainment ideas include hiking, fishing, hunting, campfires, and many other opportunities.

2. Visit your family or friends. The biggest expense in planning a vacation is usually lodging. If you can find friends or family to provide a free place to stay, your biggest expense is covered. Even if it’s not the beach you can always find some local entertainment and visit somewhere new.

3. Find creative things to do in your own hometown. It might not sound very exciting but think of how much fun stuff you could do in your hometown if you didn’t have to pay for a hotel/resort and transportation. You may even consider doing a priceline hotel for a few nights where you live. You get to experience all the fun of being away from home such as the pool and spa, but without the transportation costs.

4. Visit national parks, museums or similar attractions. There are hundreds of these types of places to visit. Entry fees are usually very small or even free. Not only will you get away from the hustle and bustle of life for a few days, but you might learn something.

5. Check some last minute travel websites for great deals. I know this won’t fit into everyone schedules, but you have a flexible vacation time you may want to consider this. Often days or even a few weeks before hotels and airlines give great discounts. Do some last minute shopping and you may find yourself going somewhere tropical for pennies on the dollar.

Everyone should look forward to time away from life; however you don’t have to spend thousands and thousands of dollars to do it. Search around, plan ahead and you can have a wonderful vacation while keeping the budget in check.

This post is part of our series of “Fix your personal finances in 30 days“. A series dedicated to helping you improve your personal finance situation in 3o days without having to make any major adjustments to your lifestyle.

Today’s assignment is to carefully look over your current retirement savings, makes plans for your future retirement, and find ways to increase your retirement contributions.

If you are old enough to be reading this post you are old enough to start thinking about your retirement. No matter what financial expert you ask about retirement they will all tell you it’s never to young to start planning for your retirement. Most will probably disagree about how much money you need to retire, but simply put if you started saving just $50 per week when you turned 16 you would be a millionaire when you turn 60.

Look over your current retirement situation. Maybe you haven’t even started saving for retirement. If you have already started then analyze how much money you have in all your retirement accounts. Once you have this number There are many websites that can help you find out if you are on track for retirement. Do a quick Google search to see how you stand with your current situation.

Once you see where you stand  you need to start making plans for your retirement. It’s okay to dream, especially if it gets you motivated to save. Where do you want to retire? Do you want to travel when you retire? How much money do you want to take out of retirement each year/month? Do you want to live a better life in retirement than you currently do? All these questions need to be answered so you get an even better idea of where you currently stand in your retirement savings.

Finally, you need to find ways you can save more money toward retirement. Even if it’s just a few dollars extra per week it will quickly add up over the years. The more money you stash away now, the more money you will have when you are ready to retire. The power of compounding interest will grow your money many times if you get the money invested early.

The main goal of today’s exercise is just to realize where you currently stand with your retirement, your future goals, and find ways to increase your contributions so you will reap the rewards when you retire.

This post in part of our series of “Fix your personal finances in 30 days“. A series dedicated to helping you improve your personal finance situation in 3o days without having to make any major adjustments to your lifestyle.

Almost everyone has one habit they can drop or reduce in order to save some money. The most expensive and common habits include: smoking cigarettes, drinking alcohol, the coffee shop, soda machine and the vending machine. Each of these habits require a chunk out of the monthly budget and all of them are bad for your health.

Smoking causes lung disease, heart and blood vessel disease, cancer, and many other illness. The average smoker pays close to $5 per pack for cigaretts and smokes almost a pack per day. That’s $150 per month cigarette budget! Can you imagine what you could do with this money? If you are a smoker try limiting yourself to half the number of cigarettes per day for a savings of $75 per month. Eventually try to stop smoking all together and stop burning money.

Drinking alcohol in excess can also lead to many health problems. Vital organs such as kidneys and liver can be damaged by too much alcohol. Specialty drinks in restaurants can cost upwards of $7 and $8, even a beer on average will cost $3 and $4. Drinking 4 drinks per week in a restaurant would cost around $80 per month. Again if you must have a drink try cutting normal consumption in half or make a commitment to not drink alcohol in restaurants. Buying alcohol at the grocery store is much cheaper than a restaurant.

The coffee shop sits next to the road on your way to work, tempting you every morning. You are getting ready to spend the entire day in the office, you deserve a $4 coffee, right? That’s another $80+ per month habit. If coffee is your addiction then skip the specialty shop and drink at the office or make a pot of coffee before you leave for work. Sure it may not taste as good but you will save a ton of money and still get your morning caffeine. You may even be able to convince the office to purchase a specialty coffee for the break room if everyone is willing to chip in a few bucks.

Last but not least on my list is the soda and vending machine habit. The average American drinks about 2 sodas per day. I’m willing to bet at least one of those is purchased at work from a vending machine. Usually strategically placed next to the soda machine is a vending machine. A snack and soda per day from the vending machines will cost at least $1. That’s another $25 per month habit added to the budget.

If you have more than one of these nasty savings draining habits you can see how it impacts your budget. It may be money that you don’t even realize you are spending. Take a minute today and figure out how much you spend each month on habits. You may clear up a great deal of cash and improve your health at the same time!