Other Mortgage Structures

Hi,
Some of the remaining mortgage structures are 15, 20, 40 or 50 year mortgages. In addition some financial institutions are utilizing reverse mortgages. 15 and 20 year mortgages are generally used when people do not want the burden of a 30 year mortgage and want to realize the savings of a shorter term. Either one of these mortgages saves the borrower tens of thousands of dollars over the term of the loan. In some instances, certain institutions are not allowed to give over a 20 year mortgage due to credit guidelines. The trade-off in either one of these mortgages is that for a slightly higher payment the borrower realizes substantial savings. The interest rates on these loans are usually comparable to those of the 30 year fixed mortgage. 40 and 50 year mortgages evolved to allow high credit risks the ability to purchase property and in some cases, borrowers to purchase a more expensive home than they normally would be able to afford. These mortgages generally come with a variety of payment options including interest only payments. While this sounds attractive on the surface, the borrow is not building any equity in his or her home as long as the principal remains unpaid. Interest only mortgage payments are suitable for buyers with substantial but erratic incomes. It allows these buyers to remain current on their mortgage payments while paying down the principal whenever funds are available to them. Reverse mortgages are one of the newer financial instruments available to people. A reverse mortgage is that a financial institution agrees to buy an home for a specific amount of money and pay the owner in monthly installments. One reason for the evolution of this financial instrument is that people are living longer and want to remain in their homes. They find themselves without an adequate income, but with equity in their homes. The downside to reverse mortgages is that in most cases appreciation in the properties is lost. It is important for all borrowers to be aware of unusual additions to their mortgages. These include, but are not limited to, excessive points, finance charges and balloon payments. Tomorrow I'm going to talk about leases.
Until then,
Alan