Now this is a hard question that will rely 100% on your point of view and preference. Do you want to own the real estate property and/or house in a shorter period and pay less interest or in a longer and instead invest extra money into the stock market to gain compounded 7%-12% gains or more. Lets test some theories.

Fixed-Rate Mortgage Term Viewpoints

• Shorter Term is Key – You will have higher monthly payments but equity will grow faster. You will actually own the home faster and would have had paid much less in interest.
• Longer Term for Well Rounded Benefits – With a longer term you pay way more accumulated interest and equity builds slowly. You also have cheaper monthly payments money left over for other things.Prepaying a mortgage versus investing money in the stock market. You can invest the additional money that you save per month into the stock market by investing in Exchange Traded Funds (ETFs). You will gain around 7%-12% compounded annually and this will dwarf the 5%-7% interest rate that you are willing to knock down. In 10 years you would have accumulated far more money in return on investment (ROI).Another factor is that paying interest is a huge tax reducer that many individuals use. Even though you can pay off in full for your house, don’t, you will give up this huge tax reducer if you do.
• Flexibility – As long as you don’t have any prepayment penalties, you can pay off you mortgage loan in much less time. If you get a 30 year, pay 10% of your monthly mortgage payment in principal and reduce your mortgage significantly. You can knock down a 30 year or 40 year down to 20 years or 15 years without problems.My Money Blog has a great post about choosing a fixed rate mortgage term. They even show the difference that extra payments towards principal will make.

Popularity: 73% [?]

A reverse mortgage is a loan only available to seniors aged 62 and over. What this type of mortgage does is release the home equity from the property into a lump some or into multiple payments . The home owner then lives their life in bliss without worries of repayment because the obligation to pay only factors in when the home owner dies, the property is sold or the the home owner leaves to go to a senior citizens home.

Requirements

The borrower must be at least 62 years old. There are no minimum income or credit requirements for this type of loan as like with other types. There must be no existing loan ore mortgage against the property at the time but if there is you can simply apply the new reverse mortgage money to payoff the existing mortgage loan amount. Lower valued property types such as mobile homes do not qualify and if there is a pending bankruptcy, the process may take a longer time. One final necessity is that the home owner must attend free financial counseling by the Department of Housing and Urban Development (HUD).

Reverse Mortgage Money Factors

There are five primary factors that must factored in to determine the amount that will be paid to the home owner.

1. The appraised value minus any repairs that must be paid and whether there are any existing liens on the real estate property.
2. The interest rate that is listed by the U.S. Treasury 10 year T-Bill or the LIBOR index.
3. The age of the home owner also determines the amount of return.
4. Line of credit does play a role because it will maximize the amount collected.
5. Location is another factor and whether the maximum loan amount is subject to the maximum loan limits.

Once the home owner cashes out then the funds can be sent to a type of escrow account. However if you do not take the option of a escrow account, then you must pay all taxes and/or insurance. If there is lapse of some sort, then you can be subject to default on the reverse mortgage.

Costs and Interest Rates

Cost vary but are typically like an insurance premium of 2% of the loan and a 2% origination fee in addition to the normal closing costs. These are usually several thousand dollars and other costs such as third-party costs like appraisal fees, title searches and so on do apply. So typically out of a $100,000 loan there would be $4,000 in costs besides the normal closing costs amount.

You can include all of these fees within the loan itself so that no costs are made immediately out of pocket in cash. This means that the initial loan principal will be more and the fees will accrue interest.

The interest rates on a reverse mortgage are similar to those of Adjustable Mortgage Rates (ARMs). They can be set on a annual, semi-annually or monthly basis.There are fixed interest rates now but they still are rare. While no payments are made during the home owners lifetime, the interest accrued is added to the principal of the loan.

Tax Related Info

According to the American Bar Association

• The Internal Revenue Service (IRS) does not consider the payments from a reverse mortgage as income.
• Annuity advances may be taxed partially.
• You cannot deduct interest until the end of the loan.

End of the Reverse Mortgage

So this means that the home owner has died, sold the property or moved out of the property for 12 months. The loan will be paid off from the sale of the house or after the heirs refinance. After the loan is paid of, the heirs may receive any excess funds or if there is no hier then the bank will take the difference.

This type of mortgage does have some major benefits but be warned, never miss the tax or insurance payments.

Popularity: 100% [?]

The debate is in and it is a very touchy and personal decision.

First let’s talk about the pure proud feeling of knowing that you finished paying off for your house. Another factor would be that you would be reducing your mortgage term significantly. Another factor that you have to include is that all interests that you pay towards your mortgage is tax deductible. Let’s say if you were to enroll yourself in bi-weekly payments and/or if you were to just add an additional 10% of your monthly mortgage payment just to principal you would cut down the term by about 3/5.

Now let’s say that you were to instead invest that extra money into a index fund or better yet an Exchange Traded Fund (ETF) in the stock market. For one point, the 10%-14% that you could have compounded within the years would have been greater then paying down the mortgage of a 5%-7& interest rate.

That is the question that you must ask yourself. Is the interest on your mortgage a comparable rate when compared to the stock market returns of a index fund that is well diversified. If you are looking to gain upwards of 4% and are willing to test the waters and have a good risk tolerance for long investments then by all means then you should invest in the stock market.

You would be able to invest and after say 10 years you would have a great deal more net worth and capital then if you decided to just prepay your mortgage instead.

If this article has intrigued you then please go to Investing Versus Paying Ahead on Your Mortgage: Which Makes More Sense? and Question From a Reader: What to do With My Mortgage?

Popularity: 27% [?]

I recently had a huge problem with a home that I purchased in Orlando, Florida. About 6 months they raised my house taxes and my mortgage payments jumped by $800.00 per month. Talk about a disaster because that is enough to be another rent payment.

Now fast forward to today and when I logged into my Countrywide account to schedule the next payment, I saw a $400.00 decrease per month. I jumped for joy and called my wife immediately

After the mortgage mess houses started going up for foreclosures left and right. Then apparently the feds decided to drop house taxes and instead start charging taxes on services that are not necessary. No problems there for me since that is not my primary residence.

Countrywide pays my taxes through my escrow so I received the rebate immediately. Now I can take a breather to see my next move.

Should I sell the house or keep it until the economy sorts itself out? The economy might take close to 2-4 years to sort itself. I will weight my options then see my next step.

Popularity: 27% [?]

Bank of America will be buying Countrywide Financial for $4 billion in stock. This will be both saving the country’s biggest mortgage lender and will also save the feds from having to devalue the American dollar any more then it already has.

This will help calm fears of a recession and inflation. Saving the over all economy and becoming the nation’s biggest mortgage lender and loan servicer.

If your like me and have shares in Countrywide, you will receive 0.1822 of a share in Bank of America stock in exchange for every share in Countrywide.

It is believed that this will increase earnings per share for Bank of America in 2009.

Countrywide shareholders gained 51.4 percent on Thursday due to possible reports that were then confirmed today.

Lets see what will happen now that I have to start paying Bank of America for my Mortgage.

Popularity: 42% [?]

The best way to acquire wealth is to purchase a home. But when you do actually get the house you must use a mortgage lender in order to finance the purchase. They love to lend you money because they gain up to 3x times the amount back on the interest that they originally helped finance. The goal is to pay back this money with the least amount of interest payments that you can. You can win the lotto but for the realistic this is not an option. There are some strategies that you can incorporate to cut your loan term down by as much as 2/3 of the time thus paying back less interests.

The 10% Principal Rule

This is one of the simplest ways to cut the term by as much as 66% less and save you a bunch in interests costs. Simply every month that you pay your mortgage, add 10% – 20% extra and add it to the principle. Lets say that you have a mortgage of $2000.00; add $200.00 and make it an additional payment towards your principle.

Another slower way is that you can do this once a year like around the time that get your tax return back. So lets say that you still have a $2000.00 mortgage, at the end/beginning of the year send a one time payment to go towards principle only for $2400.00.

Advantages

1. You are in control.
2. Limited possibilities for late payment.
3. You decide how much or when to pay extras.

Disadvantages

1. Not automatic, all responsibility is left on you and your discretion.

This is the absolute simplest and safest way to reduce your mortgage term. I used this method on a property and sometimes I put the extra towards principle every month but I also put extra in bulk one time a year. The property is a little over a year old and I reduced my years by 3 1/2. My monthly interests deductions from my mortgage payments has reduced and my regular monthly principle monthly has increased.

Bi-Weekly Factor

This is a method that makes it automatic but some lenders charge hidden fees for this so be careful. All you have to do is set it up with your mortgage lender that you want to pay basically twice a month. This will hit your cash flow a little hard and it will become mandatory to pay this at said times.

Advantages

1. All automatic.

Disadvantages

1. You are not in control.
2. Increased possibilities for late payments.
3. Everything is fixed.

I love looking at my monthly statement and realizing that I am cutting down my mortgage on a monthly basis. I personally use the 10% Principle Rule combined with an extra month worth of mortgage paid directly toward principle. Use these steps and pay off for your home in no time so that you can start on your new home/property purchase.

Popularity: 73% [?]