The Advantages And Disadvantages Of Mortgages

By Justin Keck

The following article includes pertinent information that may cause you to reconsider what you thought you understood about the advantages and disadvantages of mortgages. The most important thing is to study with an open mind and be willing to revise your understanding if necessary.

Lenders make money through interest, so if you pay off the principle of the loan early, you are avoiding paying the rest of the interest that would have compiled. When you have a fixed interest rate, you will likely be responsible for a penalty that covers a percentage of the interest you would have had left. Lenders base ARM rates on a variety of indices, the most common being rates on one-, three-, or five-year Treasury securities. Another common index is the national or regional average cost of funds to savings and loan associations.

Congratulations to everyone who is taking advantage of the lower interest rates. I also traded in my 30 for a 15 year mortgage some years ago and have not regretted it one bit. Content topics include financial news and personal finance, consumer product reviews, personal growth, advanced learning strategies, innovative marketing solutions, and search engine optimization consulting. Lewi likes to spend his free time composing music and exploring remote areas of the great southwest. Contrary to common wisdom, we find a positive relationship between mortgage rate volatility and home mortgage loans. Further investigation indicates that this is due to volatility in the bond market.

If you base what you do on inaccurate information, you might be unpleasantly surprised by the consequences. Make sure you get the whole story on the advantages and disadvantages of mortgages from informed sources.

Lenders give lock in periods for both rates and points. Lenders will accept as low as 5%, but the mortgage rate will be higher. A down payment of 20% or more will get the consumer the best home loans mortgage rate possible. Lenders come in several forms, from credit unions and banks to mortgage brokers. Mortgage originators introduce and market loans to consumers.

Bad credit home loans are often associated with high mortgage rates. The fact that you have bad credit makes mortgage lenders think that you are likely to default on your home loan. Bad prices promote bad behaviour. We as a nation are addicted to bad behaviour.

Locking in a rate for a length of time frequently proves to be a good idea for a borrower. This applies to either interest rates or points. Locking means that the lender commits that the price at closing will be the lock price, even if the market price is higher at closing than it was on the lock date. The price commitment holds for a specified period, usually 30 to 90 days, with longer periods priced higher. Locking in your rate keeps the terms of your agreement consistent prior to close. Your lender won't increase your interest rate for a limited period of time, though they also won't decrease it if rates fall.

Take time to consider the points presented on the advantages and disadvantages of mortgages above. What you learn about mortgage amortization calculator resources that may help you overcome your hesitation to take action.

Time for a Money Makeover

Q: This 2010, I hope to be more responsible when it comes to handling money. That's what our church has been reminding us - to be good stewards of the financial resources given to us. I must admit I need a total overhaul in this department. Can you help me please? - Janet

A: One of the best things you can do for yourself and your family is indeed to be a good steward of your finances. Being a good steward means being a good manager, and this calls for some goal-setting and devising of strategies.

This may seem like something a professional can do for you. Although you can tap a financial adviser to help you sort out your finances, you can very well do a money makeover by yourself. Just follow our simple tips down below.

1. Visualize your goal. Plans require a goal, and a financial plan is no exception. Be honest with yourself and identify what goal or goals you want to achieve in the future. Such goals may include getting out of debt, investing in a condominium unit, or establishing a retirement fund. Whatever your goal/s is/are, write it down to help you remember it.

2. Have a money notebook or file. If you are the pen-and-paper type of person, buy a nice notebook or journal. If you are high tech and prefer to go paperless, start with a spreadsheet on your computer. These files, whether on paper or electronic form, should contain your budget, a record of actual expenses, a list of your payables, and your payment plan for debts.

3. Write down your budget. Every person desiring to be financially secure should have a working budget which would set down the parameters of one's spending. Based on your income, make provision for savings (at least 10 percent), then allot the rest for your usual expenditure items. Put a spending limit on each expense item. Be guided by your budget throughout the month.

4. List down your expenses-everything, from candy to big-ticket purchases and bills. By listing down your expenditures, you will be able to compare your spending against your budget. If you are overspending, find out the reason and take steps to curb the habit.

5. Have a monthly spending limit. Put a monthly spending limit on your purchases. It should be an amount you can afford, taking into account your other budgeted expenses monthly. If you own a credit card, make sure you don't spend more than you can afford to pay. It is good to have a credit card as you will be able to purchase items even if you don't have the cash on hand as of the moment, but use it wisely.

6. If you are heavily in debt, stop spending. You may do so literally (some have done so) to stop yourself from further burying yourself in debt. Stick to the essentials, and forego luxuries from now, even small things like taking a taxi to work, when there are cheaper means of transportation available.

7. Shop in bulk for items you need regularly. Great bargains may be had at warehouse clubs or discount stores. If the number of items per bulk purchase is too much for your small household, split the purchase with a family member or friend.

8. Prepare for the future. Take out health insurance and life insurance, especially if you are the breadwinner of the family. This will protect your family from financial burden if you get sick or when you pass away.

9. Have a "money buddy." Ask your spouse or best friend to regularly check on your money habits and hold you accountable for your money makeover steps. By having someone check on you, chances are you will be more motivated to meet your goals.

10. Spend less. It's a simple rule that most people ignore. But it really works if you want to be financially secure. Before buying anything-that goes for literally anything, from grocery items to cars-compare prices. Choose the best quality at the lowest cost. Check the Internet or newspaper advertisements for prices of items you are interested to buy. And when you see a promotion, take advantage of it if it will bring you added benefits. Be a smart shopper.

These are only some money makeover tips you can easily do. Start doing them this week; don't delay. We wish you the best!


*Disclaimer: Readers are solely responsible for their own investment decisions and should thus conduct their own research and due diligence and obtain professional advice. INQUIRER.net will not be liable for any loss or damage caused by a reader's reliance on information obtained from our web site. INQUIRER.net receives no compensation of any kind from companies or industries or funds that are mentioned here.