Tuesday, September 26, 2006
Why have a mortgage?
Mortgages are a very important component of an individual's total financial picture. They are a debt instrument people use in order to buy a home, but after that the mortgage program is often ignored. People think of them as a bad thing, but in fact they can often be one of your greatest allies.
The US has long been a nation that believes debt is bad, and that you should always aspire to be debt free. In corporations, debt and the management there of, are often used as great tools to improve or fund other more important growth projects. For individuals it can be used to help fund other life events. Mortgages, if managed correctly afford you other freedoms. Having someone you trust to navigate the waters with you is imperative.
It is crucial to make sure you are in the right mortgage. It really has little to do with rate, and has everything to do with your goals. You see a 15 year rate will typically carry a lower rate than most other loans, but the payment will be much higher than other programs ( because it must be paid over 180 months) Somebody that wants to manage cash flow should run the other way when a 15 year loan is thrown out there.
On the other hand, an Option ARM loan allows clients to select their payment each month. One of the options is an interest only payment at 1.25%. That is as low of a rate as you can find, but it doesn't pay down your loan. In fact, if you continue to make that minimum payment your loan will negatively amortize, which basically means that your amount owed will increase over time. Thereby leaving you with even more debt to pay off. This loan is great for a seasonal worker, or somebody who makes a low base income and a bonus at year's end. This is not right for people who are looking to pay down their loans, or that are undisciplined. Again, this is why one must be educated on the mortgage process thoroughly.
Mortgages can help people manage their lives more effectively. Life changes, due to different factors and it is wise to make sure that your mortgage changes with you. Is your mortgage right for you? Will it be right for where you want to be? Happy to discuss if anyone's listening.
Adam...
The US has long been a nation that believes debt is bad, and that you should always aspire to be debt free. In corporations, debt and the management there of, are often used as great tools to improve or fund other more important growth projects. For individuals it can be used to help fund other life events. Mortgages, if managed correctly afford you other freedoms. Having someone you trust to navigate the waters with you is imperative.
It is crucial to make sure you are in the right mortgage. It really has little to do with rate, and has everything to do with your goals. You see a 15 year rate will typically carry a lower rate than most other loans, but the payment will be much higher than other programs ( because it must be paid over 180 months) Somebody that wants to manage cash flow should run the other way when a 15 year loan is thrown out there.
On the other hand, an Option ARM loan allows clients to select their payment each month. One of the options is an interest only payment at 1.25%. That is as low of a rate as you can find, but it doesn't pay down your loan. In fact, if you continue to make that minimum payment your loan will negatively amortize, which basically means that your amount owed will increase over time. Thereby leaving you with even more debt to pay off. This loan is great for a seasonal worker, or somebody who makes a low base income and a bonus at year's end. This is not right for people who are looking to pay down their loans, or that are undisciplined. Again, this is why one must be educated on the mortgage process thoroughly.
Mortgages can help people manage their lives more effectively. Life changes, due to different factors and it is wise to make sure that your mortgage changes with you. Is your mortgage right for you? Will it be right for where you want to be? Happy to discuss if anyone's listening.
Adam...
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