Posts tagged with 'Hud'

The Mechanism Of A Reverse Mortgage

  • Posted on November 29, 2010 at 9:17 am

Homeowners over the age 62 may find reverse mortgage as a benefitial option and should discuss with a lender or counselor before deciding on taking up one. These types of loans offer a way to borrow against the equity in your home to create a stable, continuous and tax free source of usable income or a substantial source of supplemental income, all without having to change your current living conditions.

The good news is that you arent required to repay any amount on the loan as long as you live in your house and do not breach any of the terms and conditions set forth. However it is important that you are diligent in researching this unique loan product as it may not be right for every situation. This is why we encourage any potential borrower interested in a reverse mortgage to investigate their options first with a HUD certified counselor or lender.

While simple to understand in theory, it is important to know how reverse mortgages work. The reverse mortgage loan product got its name due to the fact that instead of making mortgage payments, the lender actually pays the borrower creating a kind of inverse relationship compared to the traditional mortgage product. The source of funds for the money received is the equity stored in your home. The unique feature of this loan is that unlike conventional mortgages where the loan balance becomes smaller each moth you make a payment, the loan balance of a reverse mortgage grows larger over time.

The principal on the loan increases with each payment received, this includes interest and other charges accrued each month on the total funds advanced to you. You retain ownership of your home in all reverse mortgages, and many do not require repayment for as long as you occupy your home, pay your property taxes and hazard insurance charges, and continue to maintain the property.

When you leave your home permanently your loan balance becomes due. It is also important to note that your legal obligation to repay the loan cannot be more than the market value of your house at the time you leave the property. This means that your lender can never require repayment of the loan from your heirs or from any asset other than the property itself.

Today the two major types of reverse mortgage loan provided by the Fannie Mae (Federal National Mortgage Association) are the HECM and Home Keeper. These loans see to it that the borrower will never owe more than the loan balance or the value of its real estate, whichever is less,and no assets other than the home must be used to repay the debt.

Reverse Mortgages For Seniors

  • Posted on November 8, 2010 at 9:17 am

Reverse mortgage has become popular in America these days, these are special type of mortgage that helps an homeowner to convert his home equity into cash, this boost up the American older financial security by helping them to meet unexpected medical expenses, home improvement and many more.

The homeowners should be 62 years and older who has already settled any mortgage they have already got it or has remaining small amount of mortgage balance are the eligible people to take up this Reverse mortgage by HUDs.

Homeowners would be able to receive the payment in a lump sum or can receive on monthly basis for a fixed period of time or as long as they live in the house, this mortgage can be changed according to the circumstances of the homeowners, unlike other mortgages the HUDs reverse mortgage for seniors do not require repayments from the borrowers as long as they live in that home, the lender will recover the principal amount along with the interest at the time of the house being sold out, and the balance amount will be paid to the house owner or her or his survivors, incase the amount received by selling the house is not sufficient to pay the amount that has been borrowed , HUD will take up the responsibility to pay the shortage amount to the lender. The Federal Housing Administrations that is a part of HUD is responsible to collect the insurance premium from the borrowers for providing the coverage.

The amount of reverse mortgage for seniors will be decided based on the age, interest rate and the value of the house of the borrower, in this type of mortgage the older the borrower the greater the amount that is lent. For instance based on todays rate of interest 9% approximately a 65 yrs old person can borrow 26% of the value of his home and 75 yrs old person could get 39% of the value of the home and 85 yrs old man get 56% of the value of the home.

To get this reverse mortgage from the HUD you need not present any income proof or show any kind of asset, and there is also no limitation for the value of the homes that is being qualified under HUDs reverse mortgage. The home owners are charged 2% of the value of the home as up front fees plus one half percent of the balance loan amount every year and this amount can be usually paid by the lender and further charged in the principal amount borrowed by the home owner.

Reverse Annuity Mortgage

  • Posted on June 21, 2010 at 9:17 am

Reverse annuity mortgages (RAM) were created to allow senior Americans to tap into the equity of their paid for or nearly paid for home. Homeowners receive a tax-free payment each month, with the mortgage paid out and when the home is sold. Before you choose a RAM, make sure you have evaluated the risks since this option can limit future housing plans.

Types Of Reverse Mortgages

RAM programs are developed by HUD.To be eligible you must be 62 or older, use the property as your residence, and have paid off your mortgage in full. The fed government will then insure your mortgage.

You might want to talk to private lenders as an option. You will want to review their terms and conditions very carefully to be sure that you are getting the full value of your home and not paying unnecessary and exhorbitant fees.

Both types of RAM will never let you owe more than what your home is worth. When you decide to move out of the property, the loans principal, interest, and fees will be due and any equity remaining from the sale of your home will be yours or can be based onto heirs.

Difference Between A Reverse Mortgage and A Home Equity Loan

The major difference between a RAM and a home equity loan is when the loan balance is due. With a RAM, the mortgage balance will need to be fully paid once you stop living in the property. You dont have the monthly payments of an equity loan and it is much easier to qualify for the mortgage since you dont have to show any prove of income to make monthly payments.

Payouts Options

There are several payout options that you can choose from. A ‘tenure policy’ provides equal monthly payments to the borrower as long as he or she lives on the property itself. A “term policy’ gives fixed monthly payments for a set period of time. A line of credit enable the borrower to withdraw funds only when needed. A modified tenure combines a line of credit with life long monthly payments while a modified term provides a line of credit with fixed monthly payments.

Beware Of Scams

There are several scams related to reverse mortgages that you should be aware of. You should not pay thousands for information about a RAM and should get them from HUD and legitimate mortgage lenders. You should also avoid any terms that require payments before you sell or that sell your house within so many years.

Avoiding A Reverse Mortgage Scam

  • Posted on March 29, 2010 at 9:17 am

Reverse mortgages are gaining in popularity as more senior’s start looking for ways to supplement their retirement incomes. And as the interest in reverse mortgages increase, so are the cases of reverse mortgage fraud and scams. Many seniors are finding that they have been conned of their hard earned equity to these reverse mortgages scams. Since reverse mortgages typically involve your most valuable asset (your home), this type of fraud can have a serious effect on your retirement.

Reverse Mortgage Scams

The are several types of reverse mortgage scams that can end up costing you thousands and even tens of thousands of dollars in equity in your home if you become a victim.

Several estate planning companies have been charging thousands of dollars for information provided free from HUD. Typically these companies charge for this information as part of an estate planning program. Seniors that take up these programs are unaware that these firms are collecting huge sums of money by charging a fee of 6 to 10 percent of the total amount borrowed. HUD has recently issued a directive to lenders that issued reverse mortgages insured by the Federal Housing Administration (FHA) to stop doing business with these companies.

Pushing reverse mortgages as a way to pay for purchases

Some companies that sell large ticket items or services, like annuities or insurance products, may try to suggest using a reverse mortgage as a way fund these purchases.

When the extra cost of the reverse mortgage is hidden into the purchase, it often ends up costing the homeowner more than its benefits.

Unethical reverse mortgage terms

Some lenders slip in excessive fees and terms into their contracts. These terms can have a a detrimental effect on a Seniors’ equity. In some cases, lenders have used shared equity or shared appreciation terms, which gives the lender the right to collect a portion of the appreciation when the home is sold or refinanced. These type provisions can run into a cost of tens of thousands as the home appreciates in equity value. These rising cost provisions swallow up equity without providing any additional benefit to the homeowner.

Protecting yourself from reverse mortgage scams

If you are looking into reverse mortgages, there are several things that you can do to protect yourself from falling victim to these types of scams.

1. Contact a HUD approved reverse mortgage counselor. The counselor will help you understand reverse mortgages and help you evaluate your situation.

2. Obtain several offers from different reverse mortgage lenders in order to compare different options. The rule of thumb is to get three separate propsals in order to mark a good comparison.
3. You will need to understand all the terms and conditions within the reverse mortgage contracts with your mortgage counselor assisting you in elaborating the details.

4. You generally have 3 business days after signing the loan document to cancel it for any reason.

File a complaint with your State Attorney General’s office, banking regulatory agency and the Federal Trade Commission (FTC) at www.ftc.gov if you suspect that a company violating the law.

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