Congratulations on your new mortgage! You’ve joined approximately 65% of Americans who own their own homes! Now that you have a mortgage, how can you make the most of the mortgage that you have? Once you know about mortgages and how to make the best of the mortgage, you’ll be able to use your mortgage as a springboard to investments and other opportunities. Here’s some information about mortgages and how to get the most out of your home mortgage.
What Is A Mortgage?
A mortgage is a contract between you and a lender. Your lender makes an agreement with you to loan you the money to buy your home. You agree to pay the mortgage back in a certain period of time, plus the interest you and the lender agree on. The interest is a fee the bank charges you for lending the money.
Tip #1: Pay On Time, Every Time
Paying your mortgage on time every time helps you in several ways. First, if you pay your mortgage on time, your credit score continues to improve. You will actually be improving your credit score as you pay on your mortgage. Improving your credit score makes you look more inviting to creditors. This means you get a lower interest rate, which helps your bottom line in the long run. By paying on your mortgage, you may really be able to tap into credit that you haven’t had before.
Tip #2: Paying Off Your Mortgage Early Is A Good Idea
Many homeowners wait to pay off their mortgage, because they believe that they’ll be able to use the interest rate on the mortgage as a tax deduction. While the tax deduction is helpful, you may gain more money in the long run by paying off your mortgage. The earlier you pay off your mortgage, the less interest you have to pay, and the more money you’ll save. You may be able to use this mortgage as leverage with lending companies to acquire a vacation home, second home or business.
Tip #3: Use the Early Payoff to Invest
If you are able to pay off your mortgage early, you may want to consider using your paid-off house to do a reverse mortgage. Reverse mortgages are a way for you to acquire a haul of cash you can use for different things. A reverse mortgage works very much like a regular mortgage, with a couple of changes. You most likely started with a loan amount based on this calculator. Once you know your total amount, you acquire a sum of money for your home, usually close to market value. The reverse mortgage company then keeps the title of your home, and take possession of your home when you die or when you need to move. You will make no mortgage payment on your reverse mortgage.
This notion of a reverse mortgage gives you a lot of options. You could use your pot of money to invest in, which would give you an income stream during retirement. You might also choose to put the money in a savings account. You could even buy another house with the money you make during a reverse mortgage. No matter what you choose, there will be extra money for you to use if you need it.
Of course, like with any investment, you have to be cautious. The last thing you want to do is take out a reverse mortgage without the ability to pay it back. A reverse mortgage will have a lower interest rates than personal and installment loans since you have the house as equity, but plan accordingly.
Tip #4: You Can Get a Home Equity Line of Credit
If you are in the process of paying off your mortgage quickly, you are acquiring equity in your home. Equity is the amount of money your home is worth on the current market plus the amount of money you have paid towards the mortgage. Once you have a significant amount of equity, you can borrow on the equity in your home with a home equity line of credit. Usually, these lines of credit on the equity in your home do not carry a high interest rate, and you can take years to pay off your line of credit. If you choose to sell your home, your home equity loan will be paid, as well as the remainder of your mortgage, and the rest of the money is yours. You can use your home equity line of credit to go on a once-in-a-lifetime vacation, renovate your home, or pay for your daughter’s wedding.
No matter what you choose to do with your mortgage, you’ll want to get as much out of it as possible. Paying on time and paying off your mortgage can really improve your credit rating, and open you up to all different kinds of products you can use to become financially stable. Who doesn’t want a little more stability in these uncertain times?