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Laura Hunt

Romance & Money

Creatively Paying For Your Upcoming Wedding

Creatively financing your wedding

Sara, Mesa, Arizona:
"My fiancĂ© and I have lived together for 6 years and have a $70,000.00 mortgage at an 8.5% interest rate on our $200,000.00 home. We have a few other small debts (under $5,000.00 total) that I have consolidated onto very low interest credit cards. We want to have a wedding and honeymoon, but he says we can’t afford it. I handle most of our finances, and I believe if we are creative, we can afford it. The wedding budget I am considering is about $15,000.00. In addition, our honeymoon will cost about $4,000.00. He thinks this is extravagant for us, and he thinks the additional debt would be painful, but I want to celebrate our life together with a dream wedding. What can I do to convince him we can afford this?"

Sara, you are right. If you are creative, you can do this with little to no financial pain and lots of romantic gain. It sounds as if you and your fiancĂ© agree that you want a special wedding celebration. However, you may not be in agreement about the size and style of this wedding. Before you resume your planning, be sure your vision for the event is in accord with your fiancĂ©’s. Discuss the design and scope of the wedding and preferences for the honeymoon, and then look at the finances.

You have an excellent equity position in your home, a six-year payment history on your mortgage, and a stable relationship. Given these facts, you have some viable options many other couples planning a wedding do not have. Since your current mortgage interest rate is 8.5% and the average market rate is below 7%, you may want to consider refinancing your home. If you do, you can pull some cash out of the new loan and use it for your wedding.

For example, for the $70,000.00 left on your mortgage at 8.5%, your monthly payment is approximately $534.00 (principal and interest only). If you refinance that amount and add the cost of your wedding, the honeymoon, and closing costs for the refinance, your new mortgage loan amount would be $91,000.00. At a mortgage rate of 6.75%, your monthly payment on this amount would be approximately $586.00 (principal and interest only). (This is at face value and is for example purposes only. There are many unknown variables like insurance and taxes that are not taken into consideration in this example.)

You add about $52.00 to your current monthly mortgage payment, reduce your mortgage rate, and take cash out for your wedding and honeymoon. Your mortgage loan has tax advantages, too. Obviously, rates and terms vary. Call a loan officer at a bank or mortgage company to get good faith estimates.

For comparison purposes, your budgeted wedding costs on a low interest credit card at around 9% would require a monthly payment about twice the $52.00 you are adding to your mortgage payment in the refinancing scenario. In addition, you are accruing finance charges on the credit card loan each month, and there would not be the same tax benefit to this consumer debt.

Once you explain the financial reality of paying for the romantic wedding you want, your fiancĂ© may agree that it’s worth every penny. Borrowing in this way also leaves a 55% equity position in your home, which is very important.

Caution to my readers: This couple can consider financing their wedding over a long period of time by rolling it into their new mortgage because they have a long, stable relationship and a proven record of financial responsibility. Their options are not available to every couple. One thing Sara does not mention is the accumulation of some savings. All couples should consider building savings, no matter their income level. Remember to increase savings as you increase your income.

Additional information on this topic:

Wedding plans? -- Financial considerations; where to start
How much debt is too much?
Paying for the wedding
Shared wedding costs

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