Looking Into Home Equity Mortgage

By Author: Windsor Thompson
Total Articles: 34
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A home equity mortgage concerns selling your property, while still living in it. There are several methods that you may wish to consider. Each method has pros and cons to look at also.

Lifetime Mortgages

When you take out a lifetime mortgage your house is used as collateral for the loan. However, you never have to make any loan payments. You live in the house as long as you and your spouse live. Upon death of the surviving owner, the property is sold and proceeds are used to satisfy the loan. The loan may also be terminated, if the last owner is placed into a nursing care facility.

There are some downsides to taking out a lifetime mortgage. The house must not have any current loans against it. If so, you may need to check into refinancing or second mortgage options. Also, obtaining these types of loans may not be easy for those that are older. Another downside is, there will be less to pass on to your heirs.

When you take out your lifetime mortgage, you will still need to take care of the property. If you need a new roof or a window gets broken, you will be responsible. It will be as if you still ...
... own the property.

Home Equity Mortgages

When you take a home equity mortgage it is the just the opposite as a normal mortgage. Normal mortgages are used to borrow money, and they use real property as loan collateral. Reverse mortgages are used to allow someone to purchase your house. It may also be a portion of the property. Each month you will receive payments on the loan as long as you live. You also can live in the house for the rest of your life. It gives you an steady income each month, and may help to raise your current standard of living.

There are disadvantages to having a home equity mortgage, as you will not be able to use your property as loan collateral. For example, you may change your mind and wish to sell the house, and this may not be possible. It is also like a lifetime mortgage, as you will be responsible for all repairs and upkeep.

Interest Only Mortgage

An interest only mortgage allows you to have lower monthly payments on money that you borrow. You take out a loan on your house, and there is no principle to repay, only interest. Your loan balance will be settled upon your death.

You will find a few downsides to interest only mortgages. Although your payment will be lower, it will still include interest. Interest is often the largest part of mortgage payments in the first few years, so your payment may be higher than you think. Also, your home may be taken over by the lender upon your death.

Home equity release allows you to take some of the equity from your home in the form of a home equity mortgage. You can also take income via an annuity.