Mortgage calculators are available online and can be very easily used to ascertain how much will be your interest component you will be incurring on the loan amount or how big a mortgage can you afford. But here are a few things you should be very well aware of and consider while calculating your mortgage.
There are a number of misconceptions floating around out there as to what exactly goes in a mortgage payment. This does not help when you are trying to calculate what you owe or will owe in the near future. There are a number of expense which are taken as part of the total mortgage payment. The principal amount and the interest component of course are the major expenses. But mortgage companies also tend to collect on any insurance for the amount, property and estate taxes if applicable and general insurance charges for the entire property. You can look for specific mortgage calculators, which will factor in all these expenses to give you an accurate estimate.
The interest rate you are about to incur on any mortgage taken is influenced by a number of factors. You might not know this, but a slight change in any one of the factors can cause you to pay more or less depending on the type of surge it was. The type of mortgage you have opted for, any previous debts which might be paid or unpaid, your total earnings in a year that is income from all sources, the location where you are planning to take up a home, the actual cost of the home which is again dependent on a number of factors, your credit score and finally the amount of down payment you have agreed to pay for the mortgage. These are all vital factors which will influence the interest rates to a significant extent.
Closing costs are part and parcel of any deal, it is an expense which has to be incurred no matter what. These costs are again dependent on the type of mortgage availed and the location of the property.
Another factor is the taxes that you end up paying, which can actually be shown as deduction to help you lower the effective interest rate. Often people don’t factor in the taxes they are paying, which can be very beneficial when it comes to calculating your mortgage.
A number of mortgage calculators can be found online and on websites of official financial institutions, but be sure to check whether the above mentioned costs are being taken into account while giving you an estimate.
A reverse mortgage is a type of loan that allows homeowners to receive payments on their house as opposed to them making payments to the lender. At first glance, this option seems too good to be true. But, before committing to it, there are some nitty-gritty details that people must consider when opting for this type of financing. So, here is some information regarding the pros and cons to consider when getting a reverse mortgage.
Advantages
Disadvantages
A reverse mortgage is a loan that allows individuals older than 62 to improve their financial well-being. They can convert part of their home equity into lump sum cash, fixed monthly payments, or line of credit, according to their preference. The money can be used to pay for medical bills, in emergencies, or to pay off a mortgage. Here’s what you should know about reverse mortgages in case you’re looking for one.
How much can you borrow?
For reverse mortgages, the loan amount can’t exceed the value of the property against which it is borrowed. Federal regulations require lenders to ensure that the loan amount doesn’t exceed the value of the house by structuring the transactions accordingly. Additionally, these regulations state that the owner/borrower is not liable to pay off the balance amount in case it exceeds the property value.
How are reverse mortgages paid for?
A reverse mortgage is payable when the borrower sells the house, relocates permanently, or dies. Unlike forward mortgages, reverse mortgages don’t need the borrower to make any monthly payments. They are only liable to pay interest on the money received, which is rolled back into the loan balance. While the owner gets to keep the title to the home, their home equity reduces over the loan tenure.
Who can take a reverse mortgage?
This type of loan is ideal for seniors and retirees whose net worth comes mostly from the value of their home. Seniors who don’t qualify for a home equity loan or can’t refinance due to limited cash flow or poor credit can opt for reverse mortgages. Home Equity Conversion Mortgage (HECM) for purchase is a reverse mortgage that allows seniors to buy another property. That said, it is complex, and you should study the risk factors before getting one.
What are the risks associated with reverse mortgages?
Reverse mortgage scams are not unheard of. Unreputable vendors could offer to help seniors secure reverse mortgages by undertaking house repairs. They don’t provide quality results and get away with the homeowner’s money instead. For spouses living together in a home with only one spouse named as a borrower on a reverse mortgage, the other spouse can lose the home if the borrowing spouse dies first. Besides, reverse mortgage lenders charge fees and closing costs and may also charge mortgage insurance premiums for federally-insured HECMs.