Posts tagged with 'Loan Term'

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.

Effects of Low Mortgage Rate

  • Posted on April 19, 2010 at 9:17 am

Recently we have witnessed a boom in the mortgage industry. With increasing real estate values and a very low inflation, interest rates have touched an all time low. Since inflation is running extremely low at present, economists feel that mortgage rates will remain low in the near future also. As an obvious consequence homeowners are giving serious thoughts to the effects of low mortgage rate.

Usually, mortgage lenders offer a variety of combinations of interest rates and points. For example, 6.0% and 2 points, 6.5% and 1 point or 7.0% and no points. Points are a one-time upfront payment that the borrower makes to the lender at the time of closing the mortgage. It is a fee like the interest and not a part of the down payment. A drop in mortgage interest rates reduces the cost of borrowing and should logically result in an increase in prices in a market where most people borrow money to purchase a home (for instance, in the United States), so that average payments remain constant.

One of the direct effects of low mortgage rate is that the homeowners opt for greater savings through refinancing. Hence the cost to savings ratio is exceeded. Refinancing can be a boon in several situations since some of the main reasons to refinance are: – Lower interest rate – Consolidate 2nd mortgage loan – Lower loan term – Lower monthly payments – Payoff other personal loans and – Take cash out from equity

One of the most intriguing effects of low mortgage rate is the dilemma faced by the borrowers about whether to reduce their payments or the length of the loan term itself. Lower rates allow you to reduce your mortgage from say 25 years remaining to 15 years remaining with the same monthly payment. The next thing you would like to do is refinance again so that you will be able to reduce it to 10 years.

Another common rationale for refinancing and taking the equity out of your house as an effect of low mortgage rate is to be able to pay off credit card debt. You can also opt for a debt consolidation loan. By reducing your payment you will be able to pay off higher rate debt like credit cards. But try to eliminate interest payments wherever possible. The average credit card will have an interest rate of 18% to 25%. You can actually get rid of those high rate credit cards by taking advantage of the low mortgage rates. Also by lowering your debt you will be actually saving for the future.

It is also vital to understand that in most cases the loans are adjustable rate mortgages. The adjustment period may vary significantly depending on the loan program you are considering. You might not realize the effects of low mortgage rate unless you consider the stability and vulnerability of the interest rate that you are required to pay throughout the repayment tenure. Hence it is important to bear in mind that not only the current effects of low mortgage rate, but also effects of any future rise in interest rates should be considered when opting for a variable rate mortgage.

California Home Mortgage Companies How Much House Can You

  • Posted on April 12, 2010 at 9:17 am

California Home Mortgage Companies How Much House Can You Afford?

Because of rising home prices, many homebuyers are forcibly purchasing homes they cannot afford. While many are able to handle the mortgage payments, they are unable to keep up with utilities and other household expenses. There are ways that you can avoid being house broke. Before applying for a home loan, it is wise to consult a mortgage professional and determine how much you can realistically afford to spend on a new home.

Live Within Your Means

To receive the most enjoyment from owning a home, it is essential to live within your means. Sadly, many people splurge on new homes. When this occurs, you must either find a way to generate extra cash or downside to a smaller home.

Then again, some homebuyers do not fully understand how much money it takes to run a household. However, it is important to remember that bigger homes require more electricity and so forth. Take this into consideration before buying a new home. If you can afford the mortgage payment, but have little disposable cash for utilities and other unexpected expenses, it may be wise to select a less expensive home.

Take Advantage of Mortgage Calculators

Various mortgage lenders offer online mortgage calculators to give future homebuyers an idea of future mortgage payments. These calculators are not exact. Most do not calculate taxes and insurances. If using a mortgage calculator, simply input home price, interest rate, and loan term. Instantly, the calculator will provide an estimated monthly payment. Usually, taxes and insurance are about an extra 200 to 250.

Use a Reputable Mortgage Broker

Due to steady rises in home prices, many mortgage companies and lenders will approve homebuyers for loans that do not fit into their budget. Purchasing a home that you cannot afford creates many problems, especially if you are a first time home buyer. Some lenders will advise clients wisely. On the other hand, there are lenders who have a practice of persuading homebuyers to purchase homes that are way beyond their means. If a mortgage broker or loan company appears too pushy, deny their offer.

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