Personal Finance

How to Calculate Internal Rate of Return (IRR)

Knowing how to calculate internal rate of return (IRR) can benefit both investors and business people as it provides a measure of investment performance expressed as an annual return. By definition, the IRR is the annualized rate of return that brings the net present value of a future payment stream to zero. The [...]

Mortgage Loan Payment Calculator

The mortgage loan payment calculator below can help you determine what your monthly mortgage payment will be given the interest rate available to you, the amount you are borrowing, and the number of years over which you are financing the your mortgage. All prospective new homeowners must ask themselves how much house they can [...]

Debt-to-Income Ratio Calculator

Debt-to-income ratio (DTI) provides lenders with an important measure of a potential borrowers’ credit-worthiness. Mortgage lenders, for example, will use the ratio to determine whether a potential borrower presents too high a risk for lending. Individuals and families can use the debt-to-income ratio to help them gauge whether they are spending too much money [...]

How and Why to Calculate Your Personal Net Worth (Includes Calculator)

Any good financial planner will tell you that the first step toward developing a long-term financial plan is calculating your personal net worth. Net worth is a better measure than your annual income or your credit score as it provides a snapshot of your current financial state; it is the difference between the assets [...]

The Wealth Effect and Consumer Spending

The Wealth Effect is the term used to describe spending increases that tend to accompany an increase (or perceived increase) in wealth. The wealth effect premise says that when stock portfolio, real estate, and other personal wealth values increase, consumer spending tends to rise as people feel more secure about their wealth. To [...]

The Impact of LIBOR Rates on Personal Finance

LIBOR, the London Interbank Offered Rate, is the most active interest rate market in the world. The LIBOR is fixed on a daily basis by the British Bankers’ Association and serves as a widely used short-term interest rate benchmark. LIBOR is designed to indicate the cost of borrowing between the world’s largest and most [...]

What Are Mortgage Qualifying Ratios?

Qualifying ratios are a set of ratios used by lenders to compare a borrower’s income to their proposed monthly mortgage expense. Lenders use these guidelines to determine the credit-worthiness of potential home buyers, taking into consideration all monthly housing expenses including the mortgage principal, interest payments, homeowner’s insurance and property taxes. Depending on [...]

Investing in Certificates of Deposit (CDs)

A Certificate of Deposit (CD) is a time deposit that entitles the holder to receive interest that is typically higher than traditional savings accounts. CDs pay these higher rates of interest because the holder of the CD agrees to a set term. Certificates of deposit are offered by most banks, credit unions and [...]

The New Standards for Mortgage Loan Approval

With the recent, widely reported, problems in the subprime mortgage market, lenders have developed more stringent standards when considering mortgage loan applications. While people who can demonstrate good credit history are not being dramatically impacted, borrowers with flawed credit are being more closely scrutinized, especially now that the lender cannot count on rising home values [...]

What is Subprime Lending?

Subprime lending, also known as second chance or near-prime lending, is the practice of extending credit to borrowers in ways that do not meet “prime” standards. Subprime borrowers may be classified as such due to bad credit or a lack of credit history, maxed-out credit, or less than desirable debt to income measures; any [...]