Choosing the Right Mortgage (Housing Loan) for YOU

Article Title: Choosing the Right Mortgage (Housing Loan) for YOU

Shared by: Craig Lock
Category (key words): Personal Finance, Mortgage, Mortgages, Mortgage loans, Housing Loans, Financial Mortgages, Financial Success, Money, Money Management, Finance, Financial Independence, Mortgage, (stop - enough there now)

Web sites: http://www.creativekiwis.com and www.lulu.com/craiglock

Other Articles by the submitter are available at: http://www.selfgrowth.com/articles/user/15565

(Personal growth, self help, writing, internet marketing, spiritual, 'spiritual writings' (how 'airey-fairey'), words of inspiration and money management, how boring now, craig)

Publishing Guidelines:
We hope that the following article (an extract from one of Craig’s early manuscripts, ‘THE MAD MONEY BOOK’ may be informative and helpful to you.

We share what we know, so that you and your money may grow."

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CHOOSING THE RIGHT MORTGAGE (HOUSING BOND) FOR YOU

'Money isn't everything - but a lack of it is."

Author's Note:

The words 'mortgage' and 'housing bond' are interchangeable. South Africans generally use the term 'bond';
whereas Americans, New Zealanders, British, Canadians and Aussies (or "Ockers" as they are known)
use the word mortgage. "Japies"-the odd ones out... as usual!

Also the term Rand is the South African currency. For foreign readers substitute dollars ($)
or pounds or euros to replace the "arme ou randjie", which has been declining by the day.

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Which is the best type of home loan for you?

You - the customer - are in control. You with advice from the financial institution can decide HOW you
want your bond to be structured. There are usually a variety of options available to you.

Which one is the best for you depends on your ability to service the loan and whether you wish to pay it off
quickly and save interest costs, or spread repayments over a longer period and so take advantage of smaller
monthly or fortnightly repayments.

Put in a nutshell, the features of a shorter term loan are larger regular repayments and reduced total cost;
as opposed to a longer term bond, which has smaller regular payments and a larger total cost over the term.

TYPES OF LOANS:

Some of the common available loans are:

1. Reducing Loan:
Here you pay off a regular fixed amount of the principal loan, plus interest right from the start. As a result,
the principal reduces faster and the interest payments get smaller. This means that the total amount you owe
decreases every payment. Your interest payment decreases too; so that as time goes by your repayments get
smaller and smaller, which makes it very easy to service.

This is the option for you, if you can afford higher repayments and want reduced overall costs. If you are
fortunate enough to be in this position, this is the option I would recommend.

2. Standard or "Floating" Bond:

This means you pay the same amount every month or fortnight, calculated to pay off the loan plus interest
over a set period of time. Initially you are paying off interest plus a small amount of principal. Your repayments
are smaller at the outset than a reducing loan, so you can afford to borrow more. Fixed payments mean
budgeting is easier, however at the expiry of the term you will have paid more for the use of your money. The
interest rate may go up or down depending on market conditions. As already mentioned, you may be able to
choose a fixed interest rate for the first 12 months.

3. Flexible Bonds:

These are very useful. They are a unique account being a bond, overdraft, savings account and cheque
facility, all wrapped in one. Options one and two can usually also be flexible bonds.

By consolidating their financial accounts into one facility, the customer gets direct access to a credit line,
which offers up to about 75% of the market value of their home.

You can:
* increase, decrease or sometimes suspend monthly repayments to suit needs and changing circumstances.
* make lump sum payments and re-borrow at a later date, or extend the repayment term without penalty.
* repay the total loan at any time without penalty.

Flexible bonds allow you to adjust your lending to suit changes in your personal life. You can also use the
flexibility to repay more expensive debt (e.g.. credit cards).

4. Interest Only Bond:

This can be suitable for those people on very tight budgets, because it offers the minimum monthly
repayments. At first you pay interest only on the amount you have borrowed; so you are not paying off capital.
After a period of time you start paying the loan (principal) itself, as well as the interest. Your initial payments
start off much lower than the other options; but in the end you pay far more for the use of the money that you
have borrowed. I do NOT recommend this option, which is not very common (although it can help people on
very tight budgets).

5. Reverse Annuity Bonds:

These are popular overseas and are designed for older people who are asset-rich but cash-poor. Nice
sounding 'fancy' words, don't you think? The financial institution has the security and in effect commutes the
person's annuity or pension for a lump sum.

SUMMARY:

Most people are committed to the hilt when they first take out a housing bond, but as time goes by changing
personal circumstances often ensure that they can afford a higher level of repayments. As a result it is absolutely
essential that your bond is FLEXIBLE (see 4 above). My recommendations are options one and two, as long
as they incorporate the flexibility. So ask the lending institution about this.

If your payments are set too low, you might find out that you owe more than the original bond. With my
first home I was very surprised after a year or so, when I got a statement from the bank. My bond had
increased because I was not paying off any principal!

''Dummy!”

MASTER YOUR MORTGAGE OR IT WILL MASTER YOU

　

Shared by Craig Lock (Eagle Productions Books)

"Money is a terrible master, but an excellent servant."
- PT Barnum (American circus showman)

"Money can't buy you
happiness. But it helps you to be miserable in comfort."
- Woody Allen (I think)

About the Submitter:
Craig has worked for "many moons" in the financial services industry (in the days when he had a "proper job")...before becoming a writer (at least trying to). He has studied and written extensively on personal finance and money management.
"The Mad Money Book" - a simple guide for every-person in understanding and making the best use of your money. Written in a light and humorous style.
This ebook (as well as 'Master your Mortgage, or it will Master You') is available by contacting Craig at clock@slingshot.co.nz

http://www.craiglockbooks.com http://www.selfgrowth.com/experts/craig_lock.html

The various books that Craig "felt inspired to write" are available at http://www.creativekiwis.com and www.lulu.com/craiglock

All proceeds go to needy and underprivileged children -
MINE!

(Cut that out, how can you write about money matters with any credibility (big word) then, craig!)

"Together, one mind, one life at a time, let's see how many people we can impact, encourage, empower, uplift and perhaps even inspire to reach their fullest potentials."

Don't worry about the world ending today...
it's already tomorrow in "little" scenic and tranquil New Zealand