Make the most of your home mortgage
Mortgages need managing.
And that fact apparently is a surprise to lots
of homeowners, concludes a study by Harris Interactive
for Calabasas-based Countrywide Financial Corp.,
the nation's biggest mortgage lender.
The study, conducted from Oct. 10 through 12,
found that 91 percent of homeowners deemed equity
in their primary home an important financial asset.
Yet there was not much understanding of how to
wring the most out of a new or existing mortgage.
It takes more effort than just making the monthly
payment on time.
"A number of homebuyers and homeowners are
not factoring in the prominence of a mortgage
in their overall financial portfolio and do not
manage it as they would any other significant
investment," said Dan Hanson, managing director
of Countrywide Home Loans, said in a statement.
Greg McBride, senior financial analyst at Bankrate.com,
an Internet aggregator of financial rate information
and consumer advice, agrees that mortgages need
managing.
"It really pays to evaluate your mortgage
in the context of your overall financial situation,"
he said. "It's more a matter of monitoring
your mortgage relative to the environment of (interest)
rates. You don't want to be passing up an opportunity
to save a significant amount of money long term."
For example, an older couple approaching retirement
may think that paying off their mortgage makes
the most financial sense. But there may be other
options that have a better financial upside.
The study also found that homeowners are actually
conservative when it comes to their equity. Six
in 10 homeowners would consider tapping equity
as a source of funds and 70 percent of those say
they would use the money for home improvements.
Here's a mortgage management primer:
Understand the details of taking on a mortgage,
learn about financing options and make a realistic
assessment of your financial situation.
If your pay is commission based, you are self-employed
or get supplemental income like quarterly dividends,
loans with payment option features may allow flexibility
to pay the minimum required in leaner months and
fully amortized payments or more during periods
of increased income. But beware of the possibility
this could result in some added costs down the
road.
Refinancing may be smart when you have an adjustable
loan and rates are rising.
A cash-out refinance can leverage equity, providing
money to meet personal and financial goals, including
home improvements that may add to the property's
value in the long run.
Opening a home equity line of credit (HELOC)
to tap funds from available equity to be used
for multiple purposes, or in an emergency. Interest
rates and monthly payments are generally lower
than on credit card or installment loans and the
interest paid is often tax deductible (a tax adviser
should be consulted). Plus, payments are not usually
due until the money is used.
Using equity for the downpayment on a second
home or other investments can diversify your portfolio. |
