[H499]Home Equity Conversion Mortgage

You're lazing on the front porch during a warm summer shower. You feel a drop, and then another. The drops continue and you realize that the roof is leaking. Replacing a roof just isn't possible when every dollar of your income is already budgeted for monthly expenses. That's when you realize the power of a home equity mortgage.

For homeowners in need of a little extra cash, home equity mortgages are a real bonus. To fully grasp the concept of a home equity mortgage, you need to know about equity and understand how a mortgage works.

A mortgage, like any type of loan, involves borrowing money from a lender. As the borrower you are required to repay the borrowed amount, plus interest, to the lender. Mortgages require a series of weekly, bi-weekly or monthly payments. The mortgage will be amortized over a fixed period of time, usually twenty-five or thirty years. In essence, if you continue to pay your set mortgage payments over the period of amortization, your mortgage will be paid in full and you will be debt-free.

As you continually make your mortgage payments, the equity in your home begins to increase. Every payment causes the equity in your home to grow a little more. Over time, you "own" more of your property and owe less to the bank. The property becomes a major asset, and the more home equity you have, the greater financial power you possess.

Home equity mortgages are amounts of money borrowed against the value of your own equity. In essence, you are borrowing money against what you already own. There can be various reasons that people take out home equity mortgages, but all of them obviously involve a generation of cash.

Debt consolidation is one common reason for homeowners to take out a home equity mortgage. The rates paid on a mortgage are significantly lower than other types of credit. For example, your mortgage interest rate can be five percent, while the credit card company is gouging you at a whopping eighteen percent.

It only makes sense to borrow money at five percent and incorporate or 'consolidate' all of those high interest debts into one easy monthly payment at a lower rate. The effort is worth your reduced stress alone, as you're able to breeze through the month without facing a stack of overdue credit bills. Be careful and remember that home equity mortgages only work if you have sufficient home equity to provide enough cash after covering the costs associated with the additional mortgage.

You might also consider a home equity mortgage to cover the costs of improving your home, paying for a child's university costs, or virtually any other reason you need cash now. Some homeowners simply use home equity mortgages as a means to take advantage of lower interest rates. Lower prevailing market rates invite wise property owners to refinance the loan and lock in at the reduced rate, ultimately generating extra cash.

Home equity mortgages can also provide investment opportunities. You can borrow against your home, and then invest the funds into a plan that offers a higher rate of return.

Even if you haven't been saving for a rainy day, the cash that you need can be sitting right under your own roof. A home equity mortgage can provide the help you need, right when you need it.