Posts tagged with 'Loan Advances'

Types Of Reverse Mortgage Options

  • Posted on December 27, 2010 at 9:17 am

There are many different reverse mortgage options: single purpose reverse mortgages, federally insured reverse mortgages, and proprietary (private sector) reverse mortgages. Every option has its fair share of pros and cons that need to be considered.

Single-Purpose Reverse Mortgages

A single purpose reverse mortgage is the lowest-cost type of reverse mortgages to obtain, but as the name indicates it can only be used for one specified purpose. These type of mortgages are expedited by state or local government agencies. These loans a great for individuals who need cash for a purposes like paying property taxes or fixing up their own residence. Here are descriptions for several different types of single purpose reverse mortgages:

Property tax deferral (PTD) mortgages are reverse mortgages that provide loan advances for paying property taxes.

Deferred payment loans (DPLs) home improvement reverse mortgages provided in a lump sum disbursement method.

Federally Insured Reverse Mortgages

This type of reverse mortgage is only iinsured by the Federal Housing Administration (FHA). These reverse mortgage are perhaps one of the cheaper multi-purpose reverse mortgages currently available. Overall they typically provide the largest total cash benefits of all the reverse mortgage options.These loans are also known as HECM or Home Equity Conversion Mortgages.

Proprietary Reverse Mortgages

A proprietary reverse mortgage is a mortgage product owned by a private company. These type of loans are more costlier then the other reverse mortgage types and you are advised to approach with caution. Those interested in these type loans should get a comparison with a similiar HECM. The benefit of proprietary reverse mortgages are of its ability to offer higher home value within its limitation.

the higher home value limits. So, if you live in a home that is worth a lot more than the average home value in your county, a proprietary loan may give you greater loan advances than a Home Equity Conversion Mortgage (HECM).

Just like any other financial decision, you should get professional help to decide which option is best for your current situation. Reverse mortgage counselors can help you evaluate each of your options and help you make an informed decision.

Qualifying for a Reverse Mortgage

  • Posted on June 7, 2010 at 9:17 am

To qualify for a reverse mortgage, you must be at least 62 and have paid off all or most of your home mortgage. Income is usually not a factor, and no medical tests or medical histories are required. If you seek an HECM, you also must undergo mortgage counseling from a government-approved “housing agency.” Other financial institutions offering proprietary reverse mortgages require similar counseling or homeowner education.

Your age becomes the major deciding factor of how much you can borrow. Apart from that the value of your home, and the current interest rate are also considered. If it’s an HECM reverse mortgage, the federal law limits the maximum amount that can be paid out.You can be paid in cash on a lump sum, in monthly instalments, over a line of credit, or a combination of all three.

Common Features
Reverse mortgages offer special appeal to older adults because the loan advances, which are not taxable and do not affect Social Security or Medicare benefits. Depending on the plan, reverse mortgages allow homeowners to retain title to their homes until they permanently move, sell their home, die, or reach the end of a pre-selected loan term. Basically, a move is considered permanent when the homeowner has not lived in the home for 12 consecutive months. So, for example, a person could live in a nursing home or other medical facility for up to 12 months before the reverse mortgage would be due.

Here are some points you have to take note:

Reverse mortgages tend to be more costly than traditional loans because they are rising-debt loans. The interest is added to the principal loan balance every end of the month. In other words – compounded interests.

Reverse mortgages uses up a good portion or all of the equity in a home which will at the end of the day eaves fewer assets for the homeowner and his or her heirs.

Lenders will charge origination fees and closing costs; some charge servicing fees which can vary from one lender to another.

Interest on is not deductible on income tax returns until the loan is paid off in part or whole for reverse mortgages.

Because homeowners retain title to their home, they are still responsible for taxes, insurance, fuel, maintenance, and other housing expenses in regard to that property.

Top

Copyright © Mortgageclassic