What Do Mortgage Points Mean?

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What does it mean when someone pays with points? How does that help me as a potential buyer? A friend of mine just did it when he was purchasing a home but I do not understand the benefits.
 
Points represent a percentage of the loan amount. People pay points in order to lower their mortgage rate for the loan term, and in turn, save money.  The one important thing to consider when looking at points is how long it will take for the monthly savings to equal the money you are laying out in points. If you intend to stay in the house longer than that, you are probably in good shape.

How old do you need to be to qualify for a reverse mortgage? Do you need to own the home without a current mortgage payment? I am trying to figure out if this scenario makes sense for my elderly parents.
 
You need to be at least 62 years old to get a reverse mortgage. Also, you can have a mortgage on your current home. The reverse mortgage pays off the current mortgage and, depending on how it is structured, then offers a line of credit or monthly check to the borrower. The older the borrower is, the more money they can potentially qualify for.

My husband and I have a 30 year fixed mortgage--we have lived in our home for 7 years. When we got our recent statement we see that we have paid well over $200,000, however we will be paying over a million dollars for a home we bought for $650,000 and none of that seems to be going to our "home ownership equity". How are the payments generally structured? At what point will we stop paying interest?
 
All mortgage loans are frontloaded with interest upfront. Every month, there is a little more that should go toward principal, however, you don't begin paying more principal than interest until close to year 20.  One thing people often do is accelerate payments toward principal, if you are able to do that. Accelerating payments will lower the overall amount of interest you pay and will shorten the life of the loan.

Is it still difficult to get home equity loans? I need to do some renovations to my home and right now I can't do it without a loan. Can I build it into my current mortgage as we are almost done paying that off?
 
Home equity loans (or lines of credit) carry a process very similar to a regular mortgage. Full documentation is requested, and reviewed along with a valuation of the property. If you are prepared and work with a professional, the process should be reasonable. Should you choose to build this into your current mortgage, such is a full refinance. The advantage of doing this is the rate is stable and can go out for 30 years, which few home equities offer.

I want to provide financing to the buyer that purchases my home - I am just not sure what that entails. How do I make sure I get paid each month? Is that an advantage when selling your home? Do you think it is a good idea, or better to have them secure a loan through a bank?

Doing something like seller-financing can be a great thing if you don't need to sell to obtain a down payment for your next property. It could offer very positive cash flow. However, you are acting as a bank. If someone doesn't pay, you need to chase after them to either collect or to foreclose. Be forewarned: Foreclosing on a property can be a very long, expensive process.


Dottie Herman is CEO of Douglas Elliman. If you have a real estate question for Dottie, please send it to: Reporters@WPCnews.com