Tying the Knot: What’s the Smartest Way to Pay?
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However, of those respondents, fewer than nine percent considered using a
home equity line of credit to help cover wedding expenses. This could be a
missed opportunity for homeowners, considering that interest rates are still
bargains and remain near 40-year lows. Most banks offer a wide range of home
equity products, including loans and lines of credit, which can offer greater
flexibility in access and in payment than do other vehicles.
Some couples like the convenience of credit cards when making wedding-related
purchases. In theknot.com survey, 15 percent of respondents preferred this way
to pay. Many credit cards offer rewards packages, such as airline miles or hotel
points, which might be used to help pay for a honeymoon. Yet credit cards often
carry higher interest rates than home equity products.
Morris suggests leveraging financing options, using a combination of savings,
home equity and credit card vehicles. This enables consumers to take advantage
of the unique benefits that different vehicles offer. For example, many couples
may choose to pay for larger-ticket items with a product that has a lower
interest rate and more flexibility in paying off debt, such as a home equity
line of credit. Meanwhile, they can pay for other items with products, such as
many credit cards, that offer rewards, which can be used for honeymoons and
family visits.
After the Honeymoon
Of course, expenses don’t end with the reception. Most newlyweds spend on
furniture and household items to set up their new life together. In addition,
according to theknot.com, more than 32 percent of respondents who do not own
their own homes plan to buy one within five years -- representing their
intentions to make what is often one of life’s biggest investments.
According to Morris, longer-term considerations are important here as well.
In the current low rate environment, many couples are choosing to buy a home now
rather than later, he says. “They’ve got the right idea. Even one percentage
point can make a difference of more than $1,000 in monthly principal and
interest payments on a 30-year loan of $150,000.”
“The complexity of combining finances -- and the importance of examining
financial goals -- makes it even more important that engaged couples understand
the services their banking institution offers. They should meet with a
representative who can be a trusted advisor,” says Beverly Clark. “With a
firm financial foundation, newlyweds are much better prepared to face the
wonderful opportunities and inevitable challenges that come with setting up a
life together.”
Additional information, including a learning center and calculators, is at
www.bankofamerica.com.
Courtesy of ARA Content
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