July 2010 Archives
California Reverse Mortgage is a loan where the lender either pays you a lump sum at one go, makes regular monthly payments, extends a line of credit, or a combination of the three. You continue to own your home and pay property taxes, operating expenses and maintenance. But because you make no regular pay outs on the loan, the balance owed rises each month with the interest applied to it. In the event of your death, your heirs would be responsible for paying the total debt, which is often done by selling or refinancing the house. There are a number of pros and cons for the various California Reverse Mortgage Payment Options.
A.Line of Credit: This is when the access funds are at your discretion. The Pros and Cons of this type of California Reverse Mortgage payment are as follows
Pros: Flexibility – One of the Pros of this Reverse Mortgage Payment is that you can access funds anytime, whenever you need them.
Potential – Another Pro of this Reverse Mortgage Payment is its growth feature. The unused balance grows. This does not mean you are earning interest. The growth factor takes into consideration that your home has appreciated in value over the past 12 months and that you are one year older.
Extra Income – You can use your equity to supplement your retirement income. You can take a lump sum of cash and a monthly check. You can also take a monthly payment and have a line of credit you can write checks on as you need.
Cons: Spending lure – One of the Cons of this Reverse Mortgage Payment is that is that the funds can be easily exhausted.
Red tape – To access your funds, you must submit a written request to the loan servicer managing your account. It includes several rounds of official documents and meetings to get the amount approved.
B. Term: here you receive fixed monthly payments for a set period of time. The Pros and Cons of this type of California Reverse Mortgage payment are as follows:
Pros Instant transfer – Funds are instantly and automatically deposited to your bank account meeting your instant finance or emergency needs.
Regular money generated – You can receive large monthly advances helping in planning out your regular expenses.
Cons Fixed amount – The amount of funds you receive each month is fixed, so if you need additional funds, you will have to request a payment plan change which is a time consuming process.
A major disadvantage of this Reverse Mortgage Payment is that monthly advances are not indexed for inflation.
C. Tenure: here you receive fixed monthly payments for as long as you live in your home. The Pros and Cons of this California Reverse Mortgage Payment are as follows:
Pros
Worth it – The monthly advances continue for as long as you live in your home, even if the total amount you receive exceeds the value of your home. Despite this, you will never owe more than what your home is worth.
No money worry – You can keep receiving payments for as long as you live. Your spouse will keep receiving the payments if he or she is still alive. You never have to sell your home even if you outlive the equity. The income you receive is tax-free.
Cons The amount of funds you receive each month is fixed, so if you need additional funds, you will have to request a payment plan change.
You leave less equity for your children if you choose the wrong program.
Seniors would want to enjoy their golden years but are usually left stranded with decreasing income or the inability to increase their monthly income. One of the better ways to overcome this problem is by obtaining a loan called a reverse mortgage. A reverse mortgage enables homeowners older than sixty two years of age to convert the equity in their homes into tax-free income while they continue to live in that property. Seniors will be paid by the lender according to the current value of the property, in contrast with a traditional mortgage where monthly payments are made to the lender.
How do you know if a reverse mortgage is right for you and that you would not end up sleeping on the streets? Reverse mortgages are indeed an excellent option for many living in their twilight years, but will take careful planning and consideration. Since the pay out terms can be structured in a variety of ways, it is essential to look at the amount you are able to get from your home and your long term financial needs.There are of course no restrictions on the use of funds, meaning you can do anything you like with the proceeds of a reverse mortgage, including home improvements and daily expenses.
Reverse mortgages won’t affect regular Social Security or Medicare benefits. MedicAid eligibility may be affected in some instances. Counseling is a mandatory for those who wish to apply for a reverse mortgage. Look for a counselor from a government sponsored lending agency if you need them to answer all your questions convincingly or those related to benefit reductions.
Reverse mortgages is a very effective method in supplementing your post retirement income but you must be aware of how the pay out structure can positively lessen your worries on the long term financial picture. Make an informed decision. Simply view all the information available before taking up a reverse mortgage. The good news is for those who have paid the majority or their entire home, their post retirement lifestyle need not be hampered by a lack of cash flow.
Reverse mortgages are becoming popular among the senior citizens. They give seniors cash in lieu of the part ownership of their home property
If you want to go for a reverse mortgage, the information below will help you:
For senior citizens above 62 years, lenders offer instant cash without any monthly repayments by converting the equity that has been build up overtime in the seniors’ home into cash.
This mortgage allows you to stay in your own home and get a monthly income which will help you sustain a comfortable standard of living.
The cash received from the mortgage is non-taxable since it is a loan and not income. The advantages seem to be very attractive but in the long term the risks far outweigh the benefits. Unlike a traditional mortgage, the lender pays you money based on the equity in the home. The lender will of course impose some strict conditions on you. You can only get a reverse on a primary residence. If you die, sell home or move out from your existing residence, you need to pay back the loan along with the accrued interest. To do that, you will have to sell off the home. Besides, if you want to leave the house as an inheritance, you will not be able to do so.
How much mortgage will I get?
You can get any amount between 10 to 40% of the value of home obtained after appraisal depending on your age, the present rate of interest and the value of the property.
Online reverse mortgage quotes can be obtained through the internet. There are lots of reverse mortgage websites,whether it be a fed site or a private lender site, which would be useful to you.
Reverse mortgages are available through lenders insured by the federal government and can be of great benefit to those who are eligible to apply. There are three types of reverse mortgages currently available in the United States, including Home Equity Conversion Mortgages (HECM), Fannie Mae (FNMA) Home Keeper and Financial Freedom Cash Accounts. The basic premise of a reverse mortgage is that it allows homeowners over the age of sixty-two to convert part of the equity in their homes into tax-free income without having to sell the home, give up the title to the home, or take on a new monthly mortgage payment. The reverse mortgage is titled as such because lenders pay the borrower fixed payments or a lump sum over time as opposed to a traditional mortgage arrangement. Properties that are eligible include single-family dwellings, manufactured homes built after June 1976, town houses and condominiums.
The process for applying for a reverse mortgage is more involved than with a traditional mortgage. Aside from meeting the age and property type restrictions, applicants must discuss the loan with a counselor employed by the U.S. Department of Housing and Urban Development before the signing of the terms agreement. There are 5 different types of payment methods for each fed government insured loans, allowing for flexibility to meet the needs of the applicants. These include monthly, quarterly, semi-annual and annual payments to the borrower for a fixed number of periods or a lump sum that can be invested.
Like traditional mortgage, the interest rates can vary accordingly. Those who choose variable rate mortgages will pay over one percent less since the risk assumed by the borrower for agreeing to monthly adjustable rate calculations can greatly increase their risk over the life of the mortgage. The mortgage is due when the house is no longer occupied by the borrower and will be paid by the borrower or heirs in the event of death.
While many consider borrowing to be a bad idea later in life, reverse mortgages simply allow seniors to enjoy the equity they have already established without carrying the risk of having to meet monthly payments while on a reduced or fixed income. This can substantially increase the quality of life for many older Americans and allow them to enjoy the fruits of their life long labor.
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