Why is the Length of Your Mortgage So Important?

The most commonly discussed variable in mortgages is the interest rate, and while interest rates definitely have a huge influence on the cost of a mortgage, the length of a mortgage is just as important. The majority of mortgages are set in 30-year terms or 15-year terms, and most people pay little attention to the differences, other than the number of years they will be paying it off. Anyone considering a new mortgage should know what the real differences are in mortgage terms in order to make the right decision for their situation and avoid wasting money.

The length, or term, of a mortgage is a very basic but critical mortgage decision. A mortgage term not only determines how long someone will carry payment obligations, but it also sets the amount of interest they will pay during the full term of the loan. This not only affects the total cost of the loan but also impacts an individual’s ability to build equity in their property. Of course, the longer period of time it takes to pay off a loan, the higher the amount of total interest will be and the longer it will take to build equity. However, many people take advantage of a longer mortgage to reduce the monthly payments. A mortgage length decision is greatly determined by a qualifier’s current financial situation.

Principally, homebuyers seek a mortgage based on the most amount of money they can qualify for at the lowest monthly payment. Depending on your income and living expenses, it is worth considering the amount of interest that will be paid off over the course of a loan and explore other mortgage lengths. The monthly payments on a fifteen-year mortgage will usually run around 25% higher than those of a thirty-year loan. However, if you can afford the extra monthly expense, you will be paying less interest in total and building equity into the home at a much faster pace.

To even think about making this decision, a buyer must determine their buying goals and consider the possibilities for reaching those goals. If it is a buyer’s principle interest to build equity in a property and pay lest interest overall, a shorter mortgage term will better serve their needs. Of course for some buyers who simply want to move into the home they want at the lowest monthly obligation, a longer mortgage is more appealing. There is no correct decision when it comes to choosing a mortgage term. Buyers must evaluate their circumstances and weigh the factors of interest and equity versus monthly payments. In today’s mortgage industry there are a number of loan types to choose from. Take the time to settle on the best one.

Mortgages Are Great Assets!

No one wants to be in debt, so when it comes to owning a home, people want to pay off mortgages and be "free and clear," but this is not necessarily the best scenario. In fact, having a big mortgage can actually be a huge asset. The value of a home will shift regardless of the amount of money you have in home equity. For this reason, all of that equity is really just sitting in your home without collecting any interest. If you had no equity, but invested the money elsewhere while having a huge mortgage, the appreciation of the home would still make you money, while all of that cash would collect interest at the very least.
If you use credit cards or have any other loans, you are paying a huge percentage to borrow that money. It is much more economically beneficial to borrow money against your home equity. If you have outstanding debts, pay them off using your equity because even at an 8 percent interest rate on a mortgage, the government subsidizes one third of the interest on your mortgage, lowing that to 5.4 percent. Who wouldn't rather pay 5.4 in interest on their loan versus 20% or even more? There is no reason to leave all of that equity in your home.
If you have paid off a home, or have a great deal of equity, take the money out now rather than waiting until it is needed. If you use that equity to invest in other endeavors or simply let it collect interest, you will still have the home and make regular mortgage payments. However, if a crisis arose or you suddenly needed the money, the only option would be to sell the home. This would simple give you back what you put into the home along with the appreciation, and if it is rushed, you might not get the best price. The worst part about this is that you lose the home. If you take the money out of the home beforehand, you can make interest on it or use it, while still securing the home with a monthly payment. Don't forget, you will still be making money on the appreciation of the home if and when you decide to sell.
Taxes are another great reason to keep a big mortgage. If you pay cash for a home or put down a sizable down payment, you are not paying interest on that purchase and therefore the interest is not tax deductible. Also, only the first $100K will be tax deductible if you decide to take out a home equity loan. However, if ninety percent of the home purchase was mortgaged, the entire amount would be deductible. If you then have the cash to pay of the mortgage, you can always return to a home equity loan.
Though mortgages and debt might seem dangerous to some, they are actually the best way of borrowing money. It is amazing how no one seems to be very scared of credit cards, while the interest rates are absolutely outrageous. Borrowing money through a mortgage is a great investments and is almost always much more secure.

About the Author: Peter Dellane is the President of Ability Mortgage Group, LLC, a leading provider of the great Maryland Mortgage rates and low costs zero point mortgages. For more information on the bestmortgage loans Maryland has to offer, please visit www.marylandsmortgage.com.

Getting Mortgage Help from Parents

In the United States, real estate prices have jumped dramatically in recent years adding half or doubling the price for similar size homes. This has come as quite a problem for many working young people who are finished with school, have a great job, but still cannot afford to get into a mortgage for a home or a condo. For this reason, many parents are stepping in to help their kids secure good mortgages in order to build their future financial security. Not only that, but parents can also benefit greatly by helping their children buy real estate by making some extra income through appreciation.
Even though the housing market flattened off slightly this year, credit application grew tougher, and young people are still finding it extremely difficult to secure a mortgage. Mortgages backed by parents are one of the simplest and healthiest ways for young people to get the mortgage they need while still making some extra retirement income for Mom and Dad. Unlike interest-only loans, piggyback mortgages, or adjustable-rate loans, a mortgage backed by parents is much less risky and will be much more affordable.
There are many different ways to go about setting up a parent-supported mortgage. Parents can agree on an equity-sharing arrangement based on certain terms. This should come in the form of a written contract that determines the responsibilities of both parties and can manifest in many ways. For example, the parents might agree to cover down payment in exchange for a percentage of the home's equity appreciation. Often times, the child will still cover the monthly payments, and in a zero down situation, the parents might simple require a percentage of the equity appreciation in exchange for making the loan possible with a co-signature. This way, both parties will make money, and the kid can move into a new house with payments they can afford. Sometimes parents co-sign for the loan and other times they only appear in the written contract, depending on the situation. If the child is having difficulty obtaining a loan with a good rate, then it is often necessary for the parent to co-sign.
This type of loan requires everyone to be extremely responsible and cannot work without a level of trust. Obviously, if the child cannot make the house payments, then the payments will fall on the parents, or go into foreclosure. There must always be clear communication, and it is not a bad idea to get an attorney involved to make sure the documents are drawn up correctly and are bound legally.
When it comes time to sell the house for a profit, everybody wins. This is a great way for young people to build some home equity (as well as credit), and it can be a very lucrative investment for parents. Think about sitting down as a family and discussing a mortgage to bring some financial security to the kids.

About the Author: Peter Dellane is the President of Ability Mortgage Group, LLC, A leading Maryland Mortgage company offering low costs zero point mortgages. For more information on Mortgage Maryland please visit www.marylandsmortgage.com.

Getting Ready for Closing?

You are so close that you can taste the end of the home buying process, and it is time to get ready to close the deal. Nobody wants to hit a snag or have any problems in these final stages, so it is important to make the right preparations. The goal is to have your real estate transaction finish smoothly and on time.
Take the time a few days before the closing date to go over your entire final closing statement. This might also be known as your HUD-1 Statement, depending on what area of the country you live in. Consider all of the calculations you see in this statement, and make certain that you receive credit for all deposits and any other credits the seller might owe through other agreements. Analyze all of the fees, including those associated with the lender, the title, and escrow, and make sure they line up with everything you have previously discussed and agreed upon. Though it may seem silly, you should also go ahead and check all of the arithmetic on the final statement. Believe it or not, mathematical errors actually do occur in closing documents.
Next, carefully review all documentation, looking for any inconsistencies. Look over the guarantee of title, reading all of the fine print about the description of the property, liens, encumbrances, or any other factors that might be included. If you find anything that you do not agree with, have it removed. The escrow or title agent should have the proper vesting that you have chosen so that you may take title in the way you choose. Changing the vesting takes a great deal of time, and if it is not noticed until closing, it can delay the entire transaction.
Even if you have looked at the property over a hundred times, make one last inspection to make sure everything is in order. Everything should be exactly how you are expecting it at this time. All agreed repairs and maintenance should be complete, so it is wise to double check so that you do not find a big surprise on move in day. If there are any conditions in your purchasing agreement, these things should be complete.
Protecting your interests in a real estate transaction is extremely important. A small miscalculation or oversight might end up costing a good deal of money and affect your entire mortgage. Double check everything from arithmetic to interest rates, to fees and the property itself. When you come across one small mistake, you will be glad you did.

About the Author: Peter Dellane is the President of Ability Mortgage Group, LLC, A leading Maryland Mortgage company offering low costs zero point mortgages. For more information on Maryland mortgage rates please visit www.marylandsmortgage.com.