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Most people know what a mortgage is, due to the fact that many people have one. But, do you know how the mortgage itself came about? Here is some basic history on the mortgage and where it came from:

In the beginning, a mortgage was just a conveyance of land for a fee. The buyer paid the seller a set rate, with no interest, and the seller would sign over the land to the buyer. There were usually conditions that had to be met before the land would be the property of the buyer, just like today, but usually it was based upon the assumption that the land would produce the money to pay back the seller. So, a mortgage was written due to this fact, and the mortgage stayed in effect no matter if the land produced or not.

But this old arrangement was very lopsided in that the seller of the property, or the lender who was holding the deed to the land, had absolute power over it and could do whatever they liked, which included selling it, not allowing payment, refusing payoff, and other issues which caused major problems for the buyer, who held no ground at all. With time, and blatant abuse of the mortgage system, the courts began to uphold more of the buyer’s rights so that they had more to stand on when it came to owning their land. Eventually, they were allowed to demand the deed be free and clear upon the payoff of the property. There were still steps taken to ensure that the seller still had enough rights to keep their interest safe and make sure that their money was paid.

In the U.S., some states have created their own version of the mortgage, which is why they are referred to as “lien states”. In England and Wales, the Law of Property Act of 1925 created a close parallel to the U.S.’s stance on mortgages. In 1934, mortgages began to be widely used again in the U.S., and the Federal Housing Administration helped to lower the down payments on homes to make it easier for buyers to purchase a home. During that time, around 40% of people in the United Sates owned homes. Now, that number is closer to 70%, due to the lower interest rates.

Although mortgages today have evolved into many different forms, they are still basically the same essential contract that they were in the beginning. Now, there are many more laws and regulations to help protect the buyer, seller, and creditor. There are also many different ways to lock in a low interest rate, you just need to talk to your mortgage broker about what the rates are now and what kinds of programs they offer to keep those interest rates low throughout the life of your loan.

Connie Barker is the owner of several financial websites including those that deal with Home Loans

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If you are over 62 and own your single family home, townhouse or condominium you might be eligible for a dependable source of monthly income through a “reverse mortgage.”

As the name suggests, a “reverse” mortgage is the opposite of a “forward” (or regular) mortgage.

In regular mortgages, you pay back the loan in monthly installments as the equity in your property goes up with each payment.

In reverse mortgage, you have no monthly payments to make to the lender. But as you spend the mortgage money for a vacation, home improvement or for any other personal reason, the equity in your home decreases until no equity is left.

The borrowed amount is paid back when the mortgage holder dies or moves out of the principal residence.

Reverse mortgages are paid to the borrower either as lump sum, as monthly “line of credit,” or a combination thereof.

Fannie Mae, the nation’s largest mortgage wholesaler, has a special reverse mortgage program called Home Keeper.

Home Keeper allows senior homeowners to buy a new house even if they do not have enough cash. This program allows to use the equity in the new house as “reverse mortgage” security.

For example, let’s say you are 70 years old, you sold your existing house for $200,000 and pocketed $150,000 in equity after paying off your $50,000 mortgage debt.

If you want to buy another house down in Florida which costs again $200,000 but do not want to take out a $50,000 new first mortgage, you can do so if you are eligible for a Fannie Mae’s Home Keeper program. By withdrawing cash against the new property’s equity, you can get into your new house without a “forward” mortgage.

Consult with your mortgage broker or real estate attorney to learn the many ways in which you can make the best of your home equity in your senior years.

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Ugur Akinci, Ph.D. is a Creative Copywriter, Editor, an experienced and award-winning Technical Communicator specializing in fundraising packages, direct sales copy, web content, press releases, movie reviews and hi-tech documentation.

He has worked as a Technical Writer for Fortune 100 companies for the last 7 years.

In addition to being an Ezine Articles Expert Author, he is also a Senior Member of the Society for Technical Communication (STC), and a Member of American Writers and Artists Institute (AWAI).

He is dispensing million-dollar plot ideas on a daily basis at his screenwriting blog SCRIPT BOILER (http://scriptboiler.blogspot.com).

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One of the great mysteries of our time concerns the matter of when to refinance. It used to be that borrowers would refinance only when rates fell by 2 full percentage points, a standard which makes no sense in today’s marketplace.

Now you can refinance quickly at almost any time: No less important, refinancing no longer takes a ton of cash.

It was in June 2003 when mortgage rates hit a low not seen in decades: 5.21 percent according to Freddie Mac. In the first quarter of 2006 rates are roughly 1.25 percent higher, a big difference in terms of monthly payments.

Refinancing when rates are falling is easy to understand, but why refinance when rates are rising?

The answer works like this: Some borrowers should refinance in full, some should refinance in part and some should not refinance at all. The trick is to know which option best meets your needs.

If you were fortunate enough to finance or refinance with a fixed-rate mortgage in the summer of 2003 or thereabouts you certainly want to hold onto such debt for as long as it makes sense. However, there are situations where even borrowers with loans at great rates should look at refinancing options.

Cashing-Out

According to the National Association of Realtors, a typical home cost $165,400 in 2003. As of January 2006, that same home was worth $211,000 — an increase of $45,600.

Growing home values tell us two things: First, if you want to refinance you likely have far more equity then even a few years ago. Second, that additional equity means you can get a lot of cash from your home without touching your current loan. This is great news if you have low-rate financing you don’t want to touch.

Go back to that 2003 home. Imagine it was bought with 5 percent down. That means a $165,400 house was financed with $8,270 in cash and a first mortgage worth $157,130. At 5.5 percent interest, two years later the loan balance has been reduced to $152,585. If the house is worth $211,000 today then the available equity is roughly $58,415.

You could get cash out of the house by getting a new loan for $211,000. However, if you refinanced for $211,000 it means the old loan would be paid off and replaced by a new loan at a higher rate. That’s not good.

The better choice is this: Get a fixed-rate second loan or a home equity line of credit (HELOC), a form of financing which usually involves an adjustable interest rate. Such additional financing leaves the first loan in place and untouched. By getting a second mortgage you hold on to the old loan and its low rate plus you get additional cash.

The other attraction of second mortgage loans is that they are often available with little or no cash out of pocket. This is not to say such loans are “free” or nearly free, instead what happens is that the lender pays most or all closing costs.

In exchange for closing help the mortgage lender charges a somewhat higher rate. In addition, loans that require little or no cash up front often have a pre-payment penalty. If the loan is refinanced with another lender or the property is sold within two or three years then a penalty may be due. Ask lenders for specifics.

Safeguarding the Future

It may be that your current financing has a low interest rate or a small monthly payment — for the moment. But borrowers with interest-only loans, option or flexible ARMs, or loans that convert from a fixed rate to an adjustable-rate mortgage after three to five years should be checked for potential payment shock.

In other words, a 5/1 ARM may have allowed you to acquire a property that has appreciated in value — a property that could not be financed at the time with a fixed-rate loan. Because you could get the loan you could get the property. In turn, because the value of most homes has risen substantially in the past five years, getting that 5/1 ARM a few years ago has greatly increased your net worth.

But the loan which was terrific a few years ago, the loan that was the right financing at the time, may soon become overly expensive if rates go higher. In such circumstances, refinancing now to a fixed-rate loan can be the smart move to defend your finances.

Consider a $300,000 two-step ARM made a few years ago. There’s a 5.5 percent start rate that lasts for five years then the loan converts into a one-year ARM for the remaining 25 years of the loan term.

The monthly cost for this loan during the first five years is $1,703.37 for principal and interest. In year six, let’s say the new rate is 6.50 percent and the mortgage balance has been reduced to $276,949.78. The new monthly payment for principal and interest will be $1,869.98.

Is the higher monthly cost a problem? If your income has risen over five years, then no. But what if rates go higher than 6.5 percent? At 7.5 percent — not a high rate by the standards of the past 25 years — the monthly payment will be $2,046.63 for principal and interest. Insurance and taxes are extra, of course.

Like cars, loans are bright and shiny when new but they can become outmoded over time. At the very least, it’s appropriate to see if the loan that worked so well a few years ago is the right loan for today — or for tomorrow.

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Peter G. Miller is a syndicated real estate and personal finance columnist who appears 70 newspapers.

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