Saturday, July 22, 2006
repaying a mortgage
If you’re looking for a mortgage, whether it’s a first mortgage, second , or refinance mortgage, there are several ways of repaying it, which is something most people often forget. So you shouldn’t just take the first offer, but look at the different options available:
Interest and Capital is the most common way for repaying your mortgage, because you pay each month on the capital, or principle, of the loan. This can take from 10 to 50 years, depending on who’s the lender and where you’re currently living. The money you give to the mortgage company each month take a percentage and place it towards the interest with the rest going towards the capital of the loan. At the beginning of the loan, most of the payment goes toward the interest and towards the end most of it goes to the capital.
Interest only repayment is used a lot in the United Kingdom, but rarely in the US. In this case, the capital isn't repaid through the term of the loan, instead, you make regular 'payments' to an investment account or to a plan that helps you to build up a large sum that will in turn repay the mortgage completely at the end of the loan. This is called an “investment-backed mortgage”, “Personal Equity Plan Mortgage”, “Individual Savings Account Mortgage”, or “Pension Mortgage”. So now you know what those terms are about. These mortgages have huge tax advantages, so ask about them.
If you’re old, no interest or capital payments might be good for you.
Sometimes you’ll be offered a “reverse mortgage”, “lifetime mortgage” or an “equity release mortgage”, it just depends on where you’re living and where your motrgage company is located. Basically this is compounded each year, with the interest rolled up into the capital. Of course there’s a problem because the debt increases each year of the mortgage being open. These are good for older people because the mortgage is not paid until they’ve passed away.
Of course there are also other, less common ways of repayment that might be good for you, so don’t focus too much on these options.
Interest and Capital is the most common way for repaying your mortgage, because you pay each month on the capital, or principle, of the loan. This can take from 10 to 50 years, depending on who’s the lender and where you’re currently living. The money you give to the mortgage company each month take a percentage and place it towards the interest with the rest going towards the capital of the loan. At the beginning of the loan, most of the payment goes toward the interest and towards the end most of it goes to the capital.
Interest only repayment is used a lot in the United Kingdom, but rarely in the US. In this case, the capital isn't repaid through the term of the loan, instead, you make regular 'payments' to an investment account or to a plan that helps you to build up a large sum that will in turn repay the mortgage completely at the end of the loan. This is called an “investment-backed mortgage”, “Personal Equity Plan Mortgage”, “Individual Savings Account Mortgage”, or “Pension Mortgage”. So now you know what those terms are about. These mortgages have huge tax advantages, so ask about them.
If you’re old, no interest or capital payments might be good for you.
Sometimes you’ll be offered a “reverse mortgage”, “lifetime mortgage” or an “equity release mortgage”, it just depends on where you’re living and where your motrgage company is located. Basically this is compounded each year, with the interest rolled up into the capital. Of course there’s a problem because the debt increases each year of the mortgage being open. These are good for older people because the mortgage is not paid until they’ve passed away.
Of course there are also other, less common ways of repayment that might be good for you, so don’t focus too much on these options.
# posted by Morgan @ 3:12 AM 
