Here are three articles on mortgages for you on a Monday.  The terms you are able to lock in on a mortgage can be equivalent of over $10,000 in sales price so it's good to take a look at your options when buying a home.

1.  More and more seniors are getting reverse mortgages to use the equity in their home.  A reverse mortgage lets someone 62 or older use the equity in their home to secure a loan.  Every month they receive a check and the loan is not due until they sell their home or die.  Another advantage is that the IRS considers it a loan so the money is not taxable.  It definitely seems like an idea that is picking up steam as nationally there were nearly 400% more of these loans originated in 2005 as there were just five years prior in 2000.  Although Austin is thought of as a relatively 'young' city, this is still an idea that many residents could use if it makes financial sense.

2.  Energy efficient mortgages are an idea that has been around for a while but sound more appealing than ever.  The gist behind it is that if the monthly amount of energy you save from a repair you make with the loan is equivalent to the monthly payment for that repair then the loan is approved (obviously all the other loan conditions must be met as well).  This is a great way to get new windows, insulation, heating and/or air for your home and also take a step toward reducing the amount of energy you consume.  I will look into whether this can be combined with the City of Austin energy rebates and incentives, which would make it an even better home investment.

3. Saved the most universal topic for last - Mortgage Insurance.  Eck.  Just the words make me think of money flying out the window.  Simply put, mortgage insurance is put into place to mitigate the lender's risks/costs if the buyer were to default on the loan.  Private mortgage insurance (PMI) is basically required for anyone putting less than 20% down on the home.  The buyer/homeowner pays for it and the lender gets the benefit.  One way we in the real estate industry helped our clients around PMI was to suggest a second lien of anywhere between 5-15% depending on how much the buyer was putting down.  Most commonly you hear these referred to as 80/10/10s or some such.  The first number, in this case 80, is the first lien of 80% of the sales price.  The second number is the second lien and the third number is the buyer's downpayment.  By taking out a second lien the first lien meets the 80% criteria (helping to mitigate the lender's risk) and the buyer is able to avoid having to pay mortgage insurance.  Typically over the past few years it has made financial sense for buyers to do this as, with interest rates low, the interest being paid on the second lien was less than the mortgage insurance.  Changes in the packaging and terms of mortgage insurance as well as increases in the interest rate have caused this not to always be the sure-fire way.  Given these changes, make sure you examine carefully which of the two options (second lien vs. mortgage insurance) makes the most sense when buying your new Austin area home. 

If you have any questions about this or any other item related to Austin area homes and real estate, please don't hesitate to call me or email me.  I would be happy to help you determine whether mortgage insurance or a second lien makes the most financial sense for your new home purchase.