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% [?]

While consulting a tax adviser I was given some pointers on some common tax deductions that can be made but sometimes are over looked. Some need to be itemized while others do not need to be itemized.

Common Federal Tax Deductions that needn’t be itemized

1. Capital losses which are realized losses that can offset unlimited capital gains or $3,000 in income.
2. Retirement contributions such as Traditional or SEP-IRA, 401(k), etc.
3. Student loan interest that are up to $2,500 per year and only on qualified student loans.
4. Business expenses which are for business owners and employees with certain un-reimbursed expenses.

Common Federal Tax Deductions that need to be itemized

1. Home equity loan deduction in which you can deduct interest paid during the whole year.
2. Home mortgage deduction in which you can deduct interest paid during the whole year.
3. Medical expenses where you can deduct those in excess of 7.5% of your AGI and I recommend getting help on this one.
4. State and local taxes or sales tax.
5. Charitable contributions such as cash and property donated to qualified organizations.
6. Personal casualty and theft losses where you deduct your loss minus insurance payments.

Popularity: 41% [?]

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% [?]

A house or real estate property is by far the best investment to make if you can afford to right now.

Benefits of Owning a House or Real Estate Property

1. Forces you to put away money in the form of mortgage payments.
2. Houses generally and mostly do not go up and down as the stock market does.
3. Most of the time a house always continues to build up equity.
4. If you live in the house, you get the added benefit of enjoying it as well.
5. Later on you can sell it and cash in or turn it into a revenue generating cash box.

If you cannot afford one right now, you should save as much as you can on a weekly basis or a paycheck basis. Save like 20%-5% into a secret account in which you pretend to forget about then throw that money into the stock market and the bonds market.

Simply invest 40% into iShares Lehman US Aggregate Bond Fund (AGG) and put the other 60% into SPDR Trust, Series 1 (SPY).

Keep saving and compounding and you will get there.

Popularity: 29% [?]

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% [?]

Snowflaking is a more basic and simple approach to the snowball effect to debt reduction. When you think of snowballing, you think dollars a day while when you think of snowflaking, you think of pennies a day.

With this approach, even a dollar a day extra can accumulate to a large reduction in time. I would use this to pay off the higher interest debt first. Adding the snow flake effect as extra monthly principal.

You can take income from minor second income ventures as well.

Ebay.com – One approach is to sell items on ebay.

Craigslist.org – craigslist then take the extra income to apply it to snow flakes.

Survey Online – Another approach would be to take surveys online.

Yard Sale – Even old methods such as yard sales can deem valuable and effective to the cause.

You can use any of these methods to gain extra income and you should send payments immediately or as soon as your permitted to.

Popularity: 40% [?]

The buzz is that there is a contender to Quicken and it is web based and free. You can check your finances anywhere and at anytime you wish. It has a nice look and feel with speed from the Ajax backend that it was built on. I am no super finance guru but I will give the review that I feel best with for average to intermediate users.

Advantages

• Fast.
• Free.
• A rival to Quicken even in its beta stage.
• Easy setup.
• Accessible anywhere.
• Beautiful Ajax design.
• Tons of graphs and charts.
• Easy way to see trends.
• Nice feature named “Ways to Save.”

Truly one of the best rivals to Quicken and it is free to use with no installs to worry about. It is built on a web technology that allows it to load various parts of the web page in an auto update way. I just added my user name and password for my various accounts and waited a short minute or less for account history to be updated; then I was ready to rock. They added a plethora of charts and graphs to show spending habits in a glance. You can even check spending habits as easy as just viewing your personalized trend reports page. Mint.com truly tries to make personal finance as easy as checking your email. A good feature that I really like is the “Ways to Save” money section. I love it because what it proposes to do is automatically check different banks and get you the best rates that it can find all automatically. I feature still has some bugs but it shows a lot of promise.

Disadvantages

• Didn’t know my credit card info like interest rate and total rewards.
• Misclassified a Countrywide Mortgage Payment as an Electronic Boutique Purchase.
• Still in Beta.
• Suggestions to save money section named “Ways to Save” needs work.

With all good things there are the disadvantages or the minor short comings. I plugged in my information for one of my credit cards and up to now it doesn’t know the exact interest rate or APR. Mint.com also tries to categorize all info automatically but still false short in this aspect as well. One of my mortgage payments was classified as a Electronic Boutique purchase but was then replaced by transfer. The suggestions to save money is still a major point but however still needs some work as well. I don’t want to be too mean because the web application is still in beta.

Conclusions

All I can say is try it out and see what you can get from it. It’s free and over round pretty good. Just remember that it is in beta still so don’t go by everything that it has to say without first thinking it thoroughly through. That goes especially for the ways to save money section.

Popularity: 76% [?]

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% [?]