Posts tagged with 'Home Equity'

Reverse Mortgages Benefits From Fed Governments

  • Posted on August 16, 2010 at 9:17 am

Reverse mortgages are increasing in popularity as a way to turn home equity into a liquid asset. Before you jump on a reverse mortgage, you need to understand the impact it can have on government benefits.

The beauty of home ownership is found in the value of time. The longer you own a home, the more valuable it become. On one hand, you are paying off the mortgage over time, which is increasing the equity you have in your property. The other finds your real estate appreciate over time. This double whammy is what makes home ownership so attractive.

Retirement and old age will become an issue when you need to convert your home equity into usable cash. Reverse mortgages are touted as a solution. A reverse mortgage is a loan against your equity that does not need to be repaid until an event happens, usually the sale of the home or your death.. Essentially, you have reversed the process of a traditional mortgage. The lender is now giving you money in exchange for a piece of your home equity. Payments are expedited in lump sums, monthly or through credit lines depending upon the particular package you go with. As the clock ticks, the equity in your home is reduced, but you will have a reliable and predictable monthly revenue source.

Over the years, the fed has tried to find ways to reduce the amount of benefits they pay out to citizens. One of the factors they like to use is the asset value you hold. If you have a certain amount of assets, your benefits are reduced or terminated because they government takes the position you do not need them. An analysis of government benefits is beyond the scope of this article, but reverse mortgages have an impact.

Basically, be assured that taking a reverse mortgage on your home will not affect Medicare or social security benefits. This is true, however, only so long as you spend the full amount you receive each month. The government is always playing with benefit issues, so make sure you get up to date information on the situation. You will want to understand what you are getting into, particularly if you rely heavily on Medicare for the payment of medical bills.

In general, reverse mortgages do not impact most government benefits. That being said, make sure to get an informed opinion on exactly what will happen before you agree to a reverse mortgage.

Reverse Mortgage A Seniors Financial Tool

  • Posted on June 28, 2010 at 9:17 am

Reverse mortgage is a financial tool for retiree homeowners living in their twilight years to carry on with life without having to worry about their daily expenses. But some prefer to see this as an opportunity to maximize a dream lifestyle of their choice. It is a method of acquiring cash from their home equity.

By using this type of borrowing method senior citizens can come up with money that they can use any way they want without the need to pay it back during their lifetime. If these elderly Americans can qualify they can turn their home equity into money.

The purpose of a reverse mortgage is to allow senior citizens the opportunity to receive the extra cash they require without the necessity of having to sell their house. The cash they get can provide them with the additional financial security they require and also give them a chance at enjoying their remaining years by reducing their money worries. There are several ways to receive this money including regular monthly payments, a lump sum or even as a credit line. A line of credit is the most common method people use to receive money from a reverse mortgage. Some retired persons get their money by using a combination of these methods. It’s possible to receive monthly payments while also getting a big chunk of money up front too.

The term reverse mortgage is a simple way of “reversing” a mortgage. Rather than being forced to make monthly payments by taking out a home loan people can actually receive monthly payments themselves. It’s a method for retired homeowners to increase their comfort of living by taking advantage of the equity they have built up in their home. The loan amount depends on many factors including the value of their residence, how old they are, how much equity is in the home along with other factors.

To qualify for a reverse mortgage the applicant must be 62 years of age or older. They must also own a home (single family residence), manufactured home built on or after June 1976, town home or condominium. And of course they must have a certain amount of home equity. It is not necessary to have the house paid off completely, but there must be equity in it. In other words you can still qualify for a reverse mortgage even if you have an outstanding mortgage loan.

The loan cannot exceed the home’s value, but there are no monthly income requirements and no medical prerequisites for qualification. There are few requirements, one of which is that the applicant must first meet with an approved counselor to discuss the loan or other possible options for their situation. Other than that there are very few requirements.

There are no monthly income requirements and no medical prerequisites for qualifications but with one condition that the loan cannot exceed the value of the property. Before approval of any reverse mortgage loans, it is required that the applicant must first meet with an approved counselor to discuss other possible options before taking up a reverse mortgage. Other than that there are very few requirements for its eligibility.

4 Major Disadvantages Of Reverse Mortgages

  • Posted on March 15, 2010 at 9:17 am

A reverse mortgage can be an attractive option for many home-owning seniors that are having a hard time making ends meet. With a reverse mortgage, a senior homeowner will receive money for their home equity from a lender without having to make repayments for as long as they live in their home. So with the right reverse mortgage a senior homeowner can maintain their standard of living while retaining ownership of their home.

There are many differences that have to be understood between reverse mortgage’s and traditional mortgage loans because if no effort is done , they can cause financial problems for reverse mortgage borrowers.

Disadvantage No.1 – The relative cost of a reverse mortgage. Reverse mortgages tend to be costlier than a conventional mortgage. This is due to the rising-debt nature of reverse mortgages. A typical reverse mortgage may provide a homeowner with a 300 per month payment with a yearly interest rate of 12 percent compounded monthly. Over the course of ten years, the homeowner will rec
eive 36,000 in payments, but will owe almost 70,000-almosttwice as much as received.

Disadvantage No.2 – The complex and confusing contracts of reverse mortgages, that can have a tremendous impact on the overall cost of a reverse mortgage to the borrower. Due to the complexities in the written contract, this often allow lenders and third parties involved in arranging reverse mortgages to not fully disclose the loan’s terms or fees.

These numerous other front-end and/or back-end fees can also quickly drive up the cost of a reverse mortgage. These fees include origination fees, points, servicing fees, mortgage insurance premiums, closing costs, shared equity and shared appreciation fees.

Out of all these fees, the shared equity and appreciation fees should be avoided, it can raise the cost of the mortgage without providing any benefit to the borrowers. As an example, a shared appreciation fee can give a lender an automatic 50% interest in the difference between the current value of the home when the loan is signed and the appreciated value of the home when the loan is terminated. What makes the fees unfair is the fees have no relation to the amount that is borrowed.

Disadvantage No.3 – The reverse mortgage payments can affect eligibility for supplemental Social Security income, old age pensions or Medicaid

Senior’s may not even realize this problem until after they already have their reverse mortgage, and only then do they find out that this can have the opposite affect on a seniors finances then what they were trying to accomplish in the first place by taking out the reverse mortgage.

Disadvantage No.4 – The fact that reverse mortgages reduce the value of a senior’s assets and estate. This will largely affect the amount that will be given to the borrower’s heirs when they depart.

Top

Copyright © Mortgageclassic