Finance and Business Info

Being able to buy that house you have always wanted probably means that you will need to get a mortgage. Another word for a mortgage is loan – which you usually get from a bank or other lending agency. Since most people are not able to buy their house with cash, a loan is the most common practice. Here are some things to help you understand mortgage basics.

Length Of The Mortgage

The size of a mortgage makes the length necessarily longer. Common lengths of mortgages can fall anywhere between ten and thirty years. This means, that if you pay according to the terms of the mortgage, that you will have it entirely paid off at the end of that time. Generally, the lower amount of payment you can afford, the longer the time you will need to pay off the mortgage.

Interest On A Mortgage

The interest rates on buying a house or property change every day – sometimes even more than once a day. It depends on the economy, and the area you live in. You need to shop around and get the lowest amount of interest that you can because even one percent over 30 years means a difference of over tens of thousands of dollars.

Two Types Of Mortgages

All mortgages will fall into one of two types. It will be either a fixed rate mortgage, or an adjustable rate mortgage. The fixed rate mortgage is one where the interest and payment amounts are “fixed.” That means it is always the same until the mortgage is paid in full. The other, an adjustable rate mortgage, is, like the name implies – adjustable. That means that the amount of your payments changes in an unpredictable way – according to the economy. If the economy is doing well, then your interest rates on the mortgage are lower – and so are your payments. But remember, it may cover a thirty-year period. No one can see that far ahead. A bad economy also means that your payments can become very high – maybe even too high. These are excellent when the economy is doing well, but you may need to get another mortgage if the economy goes bad.

Paying Off The Mortgage

The best type of mortgage will enable you to increase your payments, or make additional payments in order to reduce the amount you owe. This means that you will be able to pay off the mortgage early, and save a lot of money. Most mortgages, however, have clauses in them that will limit how much you can pay extra each year, or may not allow it at all. You may need to negotiate with the lender in order to get this put in the agreement.

When going for your mortgage, the best thing you can do to help yourself is to understand as much as possible about mortgages. Then, with that knowledge, shop around and get online quotes so you can compare various offers in order to get the best deal.

Once youíve done your research on reverse mortgages and gained a more complete understanding of the product, the next step is to decide if a reverse mortgage is right for your situation. If youíre eligible (a homeowner 62 years of age or older with equity in your principal residence), this may be a quick decision or one that requires a bit more consideration. As with any decision, itís always helpful to get the perspectives and experiences of others who have faced similar situations and asked themselves the same questions. So for those other folks who have decided to get a reverse mortgage, what were their reasons? Weíve asked some of our readers and site visitors and below are the top 5 reasons people get reverse mortgages:

1.Retire in style! ñ Most homeowners getting close to retirement age have spent that last thirty years or more making mortgage payments; depending on where you live, this monthly obligation could be anywhere from a few hundred dollars a month to a few thousand dollars a month and beyond ñ phew! Every month that one big check goes out the door to the bank and leaves you with that much less cash to save, invest or spend on the items you need and want. How great is it to finally turn the tables on Main Street Bank, where they now send you a check each month? Most retirees have steady monthly costs, such as housing, medical, insurance and other necessary expenses. For non-working retirees, those expenses are managed with a fixed income from retirement accounts, pension plans, social security or other plan. The reverse mortgage allows a retiree to increase their fixed income and provide cash to do some things that they might otherwise not be able to afford to do. Typically, the personal quality of life is the number one reason people get reverse mortgages.

2.Pay hospital or medical bills ñ For many older Americans and retireeís medical issues are an increasing reality in their daily lives. With the ever rising cost of healthcare, this can put tremendous demands on a fixed income. Ongoing medical treatments, prescription drug regimens, or a large one-time (possibly unforeseen) medical bill are all top reasons that people get reverse mortgages.

3.Improve or modify a home ñ While this may not be an expansion of the home, the early part of retirement is a great time to re-purpose your house to accommodate the way you will be living for the next ten, twenty, thirty years and on. Maybe itís time to expand the kitchen, widen the hallways or remove some steps, or exchange the old pool in the backyard for a beautifully landscaped garden. As we get older, a top reason people get reverse mortgages is to outfit their house for their new lifestyle.

4.Dream vacation anyone? ñ What better time to just get away than when your working days are behind you and the weather turns a bit gloomy? Proceeds from a reverse mortgage have allowed many homeowners to take that vacation theyíve always dreamed about, but never had the time or resources to take. Bon voyage!

5.Pay off high interest rate or problematic debts ñ With the large amount of debt that the American consumer accumulates over a lifetime, it should be no surprise that this is a top reason people get reverse mortgages. Whether its high interest rate credit cards, a relativeís student loan debt, or even a potential foreclosure that must be dealt with, reverse mortgages can be a very effective way to get a large sum of cash to manage other debts.

These are the top 5 reasons people get reverse mortgages ñ once youíve made a decision to move forward with a reverse mortgage, send us your top reasons and weíll add them to the list!