Posts tagged with 'Repayments'

The Last Option – Reverse Mortgage

  • Posted on November 22, 2010 at 9:17 am

Home buyers often save rigorously for their home, forgoing expenditures and making sacrifices to pay down the mortgage and save for retirement. At retirement they get to enjoy their dream home debt-free. The only problem with this scenario for a lot of retirees is that they live on a fixed, and often not very large, income.

One option is to take a reverse mortgage – a loan against the home, which brings you money while you still live in your home.

It is the norm that borrowers can usually getYou can 10% to 40% of the value of your home depending on your age. A reverse mortgage loan requires no repayment for as long as you live in your home and you will never owe more than the value of your home.

This loan is different from a traditional mortgage in two ways. In order to qualify for a traditional mortgage, the bank checks your income to see how much you can afford to repay each month, but with a reverse mortgage there are no monthly repayments. With most loans, if you fail to make your repayments, you are in trouble. With a reverse mortgage, you don’t have any repayments. Thus, the debt grows larger as you keep getting cash advances and the interest is added to the amount you owe. This is why a reverse mortgage is called a “rising debt, falling equity” loan. As the amount you owe expand, your equity value of your will get smaller.

You can receive income from your reverse mortgage in two ways. One, you can take the loan and invest it in an annuity and in return it will provide you with the income needed until your death. The second alternative is to receive monthly income from your reverse mortgage provider. Here you simply increase the size of your loan on a regular basis in order to receive income.

There major disadvantage to all of this – you can still owe money on your home. The total amount you will owe at the end of the loan will equal the loan plus all the interest accrued. All the interest can be a substantial amount of money.

When considering a reverse mortgage it is best advised to discuss your options with your family members. Remember that a reverse mortgage will always reduce the size of the equity value in your final estate.

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 Mortgage In A Nutshell

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

Reverse mortgages are becoming popular among the senior citizens. They give seniors cash in lieu of the part ownership of their home property

If you want to go for a reverse mortgage, the information below will help you:

For senior citizens above 62 years, lenders offer instant cash without any monthly repayments by converting the equity that has been build up overtime in the seniors’ home into cash.

This mortgage allows you to stay in your own home and get a monthly income which will help you sustain a comfortable standard of living.

The cash received from the mortgage is non-taxable since it is a loan and not income. The advantages seem to be very attractive but in the long term the risks far outweigh the benefits. Unlike a traditional mortgage, the lender pays you money based on the equity in the home. The lender will of course impose some strict conditions on you. You can only get a reverse on a primary residence. If you die, sell home or move out from your existing residence, you need to pay back the loan along with the accrued interest. To do that, you will have to sell off the home. Besides, if you want to leave the house as an inheritance, you will not be able to do so.

How much mortgage will I get?

You can get any amount between 10 to 40% of the value of home obtained after appraisal depending on your age, the present rate of interest and the value of the property.

Online reverse mortgage quotes can be obtained through the internet. There are lots of reverse mortgage websites,whether it be a fed site or a private lender site, which would be useful to you.

Hud Reverse Mortgage : Who is eligible?

  • Posted on May 3, 2010 at 9:17 am

When looking for additional funds for retirement, seniors can turn to a financial tool called HUD reverse mortgages. Seniors can have access to their equity from their homes without the worries of making monthly repayments.

In order to be eligible for a HUD reverse mortgage, there are a few basic requirements to fulfill. Homeowners must meet the following criteria in order to be eligible for a HUD reverse mortgage:

1.) The home must be a principal residence.

2.) Homeowner must be age 62 or older.

3.) The home must be owned free and clear or have a mortgage balance that can be paid from equity.

4.) The property must be a single-family home, a one-to-four unit dwelling with one unit occupied by the applicant, a manufactured home (mobile home), or a unit in condominiums or Planned Unit Developments.

5.) The property must meet minimum property standards.

Homeowners that qualify can receive payments in a lump sum, on a monthly basis, or on an occasional basis as a line of credit. At a later date the payment options can be restructured if circumstances change.

The amount that can be borrowed on a HUD reverse mortgages is determined by the borrowers age which in any case the older the borrower the more that can be borrowed against the value of the home and the lower the interest rate the more that can be borrowed.

There is no hard limit for home value to qualify for a HUD reverse mortgage, but the amount that may be borrowed is capped by the maximum FHA mortgage limits for an area. This means that owners of a high priced home can’t borrow any more than the owners of homes valued at the FHA limit. There are no asset or income limitations on borrowers receiving a HUD reverse mortgage.

Unlike ordinary home loans, a HUD reverse mortgage does not require repayment as long as the home remains the borrowers primary residence. When the home is sold the Mortgage company recovers their principal, plus interest, and the remaining value of the home goes to the homeowner or to his or her survivors. Should the sales proceeds not cover the amount owed, HUD will pay the mortgage company for any shortfall.

Benefits Of A Reverse Mortgage

  • Posted on April 5, 2010 at 9:17 am

A home loan that you do not have to pay back for as long as youre alive or for as long as you live there? That sounds too good to be true, but thats what reverse mortgages do.

A reverse mortgage is a loan that you make where you do not have to pay back anything for as long as you still own that property you have bought. Reverse mortgages provide you with money for you to invest. By turning the value of your home into cash, reverse mortgages gives you virtually unlimited funds without having to move and even without repaying the loan every month.

There are several ways tthe cash is given out from reverse mortgages. You can get cash from a reverse mortgage all at once or in a single lump sum. With a reverse mortgage, you can also opt to receive a fixed monthly cash pay out.

In addition, a reverse mortgage can offer you cash as a credit extension to your account. This creditline account from will let you get the amount of money you want whenever the need arises. And if none of these suits you, reverse mortgage cash may be given to you using any combination of the abovementioned.

Whether or not you want your cash from a reverse mortgage be paid to you in lump or in installment, the main thing is that you do not have to pay anything back until you die, sell your home, or permanently move. Reverse mortgages usually cater to homeowners who are 62 years old and older.

Reverse Mortgage vs. Other Home Loans

In most other loans, a systematic check on your income and assets is done in order to pre-qualify for the mortgage. This is done as an assurance to the lender that you will be able to afford the monthly payments tied with a loan. Since reverse mortgages do not involve any monthly repayments, you not have to go through these prequalification procedures. To qualify there is no minimum income required and no monthly repayments.

In every story, there is always the other side of the coin. While reverse mortgages have their advantages, they also have its ugly side. As you know already, reverse mortgages do not require monthly paybacks. This means that you are actually taking out equity from your home and turning it into cash.

Heres how it works. Other mortgages require a person to make a down payment when buying a home. As years go on, they use their income to pay back the money they borrowed in making the purchase which decreases their debt and increases the value of their home.

With a reverse mortgage, everything works in the other way round. You have your home. You convert its equity value into cash. And then you take out that cash as and when you need it and this will increase your debt steadily and reduce your home equity as you go.

This is not always the case with reverse mortgages. If your home value grows quite consistently or you only have one particular loan on your home, theres every chance that your equity could increase over time.

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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