While 91 percent of homeowners deem equity in their primary home as an important financial asset, a nationwide survey released today reveals that many may overlook their home as a useful financial management tool — indicating a gap in Americans’ understanding of how to make the best use of a new or existing mortgage. For example, an older couple approaching retirement may think that paying off their mortgage makes the most financial sense. However, depending on their future plans and expected financial situation…

“While 91 percent of homeowners deem equity in their primary home as an important financial asset, a nationwide survey released today reveals that many may overlook their home as a useful financial management tool — indicating a gap in Americans’ understanding of how to make the best use of a new or existing mortgage. For example, an older couple approaching retirement may think that paying off their mortgage makes the most financial sense. However, depending on their future plans and expected financial situation, there may be various mortgage solutions that, in fact, help them manage and achieve their changing financial goals. The study was conducted from October 10-12, 2006, by Harris Interactive(R) for Countrywide Home Loans, Inc.

While many Americans closely monitor and manage other investments within their portfolios, some are not using their mortgages as a viable financial tool. Many homeowners feel that they are tied to their original loan and underestimate their ability to use changes in their home loan strategies to meet short-term or long-term goals and match their current life stage. These homeowners may think of their mortgage as something they are stuck with until they sell their home.

“There’s a prevalent misperception about mortgages that may prevent many Americans from realizing their home’s full financial potential,” said Dan Hanson, managing director of Countrywide Home Loans. “A number of home buyers and homeowners are not factoring in the prominence of a mortgage in their overall financial portfolio and do not manage it as they would any other significant investment.”

Conservative Consumers amid reports of some Americans’ reckless financial habits, the study portrays a more conservative consumer who prefers not to leverage their home’s equity. Six in 10 homeowners would consider tapping equity as a source of funds and 70 percent of those say they would use the money for home improvements.

“There is a sense that many people are pulling cash out of their homes to pay for luxury items, but our survey found the opposite to be true,” said Hanson. “In fact, most Americans are quite conservative and do not want to be heavily leveraged. While that is a positive trait, it also showed us that there is still room to educate homeowners about ways to make their home’s financing work to their greatest advantage.”

The array of loan programs available can enable both prospective home buyers and existing homeowners to better manage their mortgage to fit their lifestyle and financial situation. To help home buyers better understand the mortgage process, Countrywide, America’s #1 home loan lender,* highlights the following tips.

Steps for Home buyers
In order to help them find the right mortgage that could play an important part in enhancing their overall financial picture, home buyers may take a few initial steps:

1. Seek to be Savvy. It is critical that home buyers understand the
details of this significant transaction and are ready to take on the
responsibility. Home buyers should learn about financing options
relative to their unique situation and honestly assess their ability
to manage finances.

2. Evaluate Earnings. Beyond determining current income, it’s important
for home buyers to realistically evaluate future earning potential.
If an anticipated increase in pay can accommodate possible higher
monthly mortgage payments, then adjustable rate mortgages (ARMs) or
fixed-period ARMs with lower initial interest rates may make sense.

3. Factor in Fluctuations. Income fluctuations from commission-based
jobs or self-employment should be taken into account, as well as
supplemental income (e.g., alimony, quarterly dividends, etc.). Loans
with payment option features may allow flexibility to pay the minimum
required in leaner months and fully amortized payments or more during
periods of increased income — as long as home buyers understand
potential added costs from minimum payments resulting in deferred
interest, rising interest rates, or re-amortizing of option ARM and
interest-only loans.

4. Estimate Equity. Home buyers can factor in how quickly they hope to
build equity in their new home. Typically, loan balances decrease
fastest with 15-year fixed-rate mortgages. In addition, conditions
such as the rate of appreciation or depreciation in home values in
home buyers’ local market should be factored in the analysis.

Managing Your Home Loan
Homeowners may want to take a closer look at their monthly mortgage statement. Their current home mortgage may be leveraged as a strong financial management tool with options including:

1. Investigating Interest. Obtaining a new loan may be a smart move when
homeowners have a current mortgage with an adjustable interest rate
that’s on the rise. They may consider loans with a lower rate, a
fixed payment, a different loan term or other features that match
their current financial situation or long-term goals.

2. Considering Cash-Out. A cash-out refinance can leverage equity as a
source of funds needed to meet personal and financial goals, including
home upgrades that may add to the property’s value in the long run.

3. Unlocking the HELOC. Homeowners may choose to open a home equity line
of credit (HELOC) to tap funds from available equity to be used for
multiple purposes, or in an emergency. Interest rates and monthly
payments are generally lower than on credit card or installment loans
and the interest paid is often tax deductible (a tax advisor should be
consulted). Plus, payments are not usually due until money is
accessed, so the unused line of credit provides a safety net for
emergencies.

4. Aiming for Another Home. Using equity from a first home can help
homeowners springboard into a second home or other investment property
to significantly build assets.

5. Reflecting on Reverse Mortgages. Homeowners at least 62 years old may
consider a reverse mortgage to access equity as a source of additional
funds. These programs can allow seniors to remain in their homes for
as long as they wish, while receiving tax-free loan proceeds (a tax
advisor should be consulted). And typically, the final amount owed
does not exceed the home’s appraised market value at time of loan
maturity.

Interestingly, the survey also suggested the continued need for consumers to learn more about the home buying process. In fact, some of those surveyed said that programming a DVR/TiVo/VCR (55 percent); taxes (28 percent) or understanding the opposite sex (18 percent) are all easier to understand than the home buying process. As with any financial decision,
consumers should carefully evaluate their options and fully understand the advantages and disadvantages before making a change.

To learn more tips and tools for managing a mortgage, home buyers and homeowners can call 800-570-9888.