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Your finances are not always the same from month to month. Unexpected costs, surprises from the kids and
(even good news) such as Christmas bonuses do not occur every month. But, your mortgage payment does, right?
You know every month how much it will cost and when it is due. A pick-a-payment mortgage may be just what
you need to take some of the insanity out of managing your personal finances. With this option, you pick how
much you are going to
pay each month. You can choose from a number of different mortgage payments, based on what you want to pay.
The pick-a-payment mortgage is based on a 30-year fixed rate loan. But, that is not necessarily what you
have to pay each month. You may decide that the basic 30-year fixed payment works for you most months, and
you simply write the check as though you had a regular loan. In the months where you have a little extra
cash, though, you can make a payment based on a 15-year term instead, making up a little extra ground in
case you need to make
an interest only payment in the future. You can use a pick-a-payment program to fit your financial plan.
The disadvantage to a pick-a-payment mortgage is that inconsistent payments lead to inconsistent ownership.
With a regular 30-year or 15-year fixed rate, you can easily figure out how much equity you have in your
home - and how much longer you will have to pay a mortgage. The pick-a-payment takes the evenness out of
your payments, so you may not build equity at the rate you had hoped. If you decide to take this
route, keep a close eye on your payments and your loan balance. You don't want to be caught by surprise.
Self-employed people, especially, could benefit from pick-a-payment plan. Their income is not always
consistent; some months are much better than others. As a result, a flexible option could keep them from
getting into the kind of trouble that could cost them their homes. When money is tight, the self-employed
mortgage holder can pay just the interest, while stronger months may lead him to pay based on a 15-year
mortgage instead of a 30-year mortgage. All the
borrower has to do is check a box on the payment stub to tell the bank what type of payment he is making.
It's that easy!
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