Posts tagged with 'Origination Fees'

Reverse Mortgages Eligibility Information

  • Posted on August 23, 2010 at 9:17 am

Reverse mortgages can be a great solution for seniors who wish to remain in their home but are having difficulty making their monthly payments and meeting other financial obligations. If you own your own home and is 62 years of age, the bank will actually pay you money so you can stay in your home, rather than the other way around. It is crucial to collect and understand as much reverse mortgage information as possible before deciding on whether to take out the loan.

Your home must be a single family residence in a one to four unit dwelling, a condominium or some type of manufactured home. While ccoperatives and most mobile homes are not eligible for this type of loan. The home must be at least one year old and you have to first meet with an authorized counselor.

The loan can be obtained as a lump sum payment, a fixed monthly amount or as a line of credit and the money can be used for just about any purpose such as paying property taxes or medical bills, home repairs and improvements, paying off credit cards or just daily living expenses.

The approval of loan amount depends upon your age, the amount of equity in the home, its appreciated value and current interest rates indications.

The reverse mortgage loan does not require you to pay anything until you sell the home, permanently move out, or pass away. Your loan could also become due if you do not maintain as agreed or you fail to pay property taxes/ hazard insurance and if if the last surviving borrower does not occupy the home for 12 months in a row due to illness.

The fees involved in a reverse mortgage loan are quite similar to those you would incur with a regular mortgage. These include origination fees which cover the lenders operating expenses and are currently capped at the greater of $2,000 or 2% of the maximum FHA loan limit. Apart from that you will be required to take out a mortgage insurance and pay an appraisal fee. Other costs include fees for credit reports (usually under $20), flood certification, closing and title search, document preparation, recording, courier, pest inspection and a land survey. In addition, a monthly service of $30-35 per month will be charged.

Your counselor will be your principal guide to getting correct information on reverse mortgages and should be consulted for advise before making final decisions.

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.

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.

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