See: Mortgage.
We’d love to add some flair to our home mortgage, and also possibly pay it off a lot faster than 30 years, which is why we’re all about the mortgage accelerator loan.
Imagine that a checking account and a home equity loan had a baby. We take out a loan for the amount we need, just as we do with a normal mortgage. But instead of having fixed payments every month that we have to pay out of our checking account, it works a little differently. Our paychecks go directly into the mortgage account, and then we pay our other bills out of that. At the end of the month, whatever's leftover goes toward the mortgage.
Pretty ingenious, eh? At least...it is if we’re making more money than we’re spending. If we’re not, then we risk not paying enough toward the mortgage every month, and eventually taking a lot longer than 30 years to pay off the loan. Also, though mortgage accelerators are crazy common in places like Australia and the UK (and they’re gaining popularity here as well), we need to take a careful look at the interest rate before we get too excited. Since it's such a flexible type of loan, the interest rates can be a lot higher than they would be on a standard 30-year mortgage. And if we’re not in a position to put a nice chunk of change toward the loan amount every month, those interest charges could add up really fast.
Related or Semi-related Video
Finance: What is a Reverse Mortgage?6 Views
Finance allah shmoop What is a reverse mortgage All right
people let's start with a normal mortgage You put one
hundred grand down borrow three hundred grand and are the
proud new owner of this baby in palo alto california
You make payments for thirty years at five percent interest
and then you retire their debt free So that's a
mortgage but what's a reverse mortgage Like one of these
egg trump Well kind of at least financially the payments
go in the opposite direction of a normal mortgage Like
you're old you just want to live out your remaining
years with the basic comforts Shower seats stair lift high
absorption adult diapers You own all of your home No
mortgage on it You paid it all off The home
is now worth a million box Nice shoebox There you
can do a reverse mortgage pledging your home is an
asset and basically just receiving a payment of l say
five grand a month from that reverse mortgage and you'll
get to deduct interest costs as you go Justus if
it were a normal mortgage well after forty months you
you know croak in that time period you've taken out
Forty times five grand or two hundred grand in loans
plus some interest and you sell your home for a
cool million Rather your heirs dio So what happens now
Well they just take the million bucks from the sale
write a check for two hundred grand and change to
the bank to pay off the reverse mortgage that you
had accrued while you were you know wasting away to
nothing and your heirs end up happy like they miss
you But you know a free stair lift Who are 00:01:37.997 --> [endTime] you
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