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 Mortgage?345 Views
Finance allah shmoop shmoop What is a mortgage Well people
a mortgage is just dead it's alone but one with
special tax treatment For most people simply put Any interest
you pay on a mortgage to buy a home is
tax deductible Morty morton's inputs down a hundred thousand bucks
to buy a home that costs four hundred big ones
his mortgages three hundred grand at five percent interest per
year So that's fifteen thousand dollars a year he pays
to rent the money from the bank which he uses
to buy his dream home with the loop de loop
waterslide Morty earns one hundred grand a year and pays
tax on his last fifteen thousand of earnings soas faras
The irs is concerned since morty can deduct his fifteen
thousand dollars in interest against his earnings he does not
in fact earn taxable wages of one hundred grand annually
Instead he earns taxable wages of eighty five thousand dollars
a year Essentially with government is doing is sharing in
some of the cost of renting the money Taub i'm
ortiz home well why would the u s government be
so charitable Well because home ownership has been integral part
of the american dream since the u s of a
i po'ed in seventeen seventy six easy access to mortgages
and then home buying can be a hugely beneficial asset
In the vast majority of cases homes create family stability
a store of wealth and tax dollars for local schools
in the form of real estate taxes So don't feel
bad about splurging on that water slide there Morty Just 00:01:42.93 --> [endTime] remember you're doing it for the kids Hello
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