Posts tagged with 'Traditional Mortgage'

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.

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 Can Benefit Elderly

  • Posted on October 25, 2010 at 9:17 am

Reverse mortgages are available through lenders insured by the federal government and can be of great benefit to those who are eligible to apply. There are three types of reverse mortgages currently available in the United States, including Home Equity Conversion Mortgages (HECM), Fannie Mae (FNMA) Home Keeper and Financial Freedom Cash Accounts. The basic premise of a reverse mortgage is that it allows homeowners over the age of sixty-two to convert part of the equity in their homes into tax-free income without having to sell the home, give up the title to the home, or take on a new monthly mortgage payment. The reverse mortgage is titled as such because lenders pay the borrower fixed payments or a lump sum over time as opposed to a traditional mortgage arrangement. Eligible property includes single-family dwellings, manufactured homes built after June 1976, condominiums and town houses.

The process for applying for a reverse mortgage is more involved than with a traditional mortgage. Aside from meeting the age and property type restrictions, applicants must discuss the loan with a counselor employed by the U.S. Department of Housing and Urban Development prior to signing. There are five different types of payment methods for each United States government insured loan available, allowing for flexibility to meet the needs of the applicants. These include monthly, quarterly, semi-annual and annual payments to the borrower for a fixed number of periods or a lump sum that can be invested.

Repayment terms also vary by the interest rate, as with traditional mortgages. Those who choose variable rate mortgages will pay over one percent less since the risk assumed by the borrower for agreeing to monthly adjustable rate calculations can greatly increase their risk over the life of the mortgage. The total of the mortgage is due when the house is no longer occupied by the borrower and can be paid by the borrower or by his or her heirs in the event of death.

While many consider borrowing to be a bad idea later in life, reverse mortgages simply allow seniors to enjoy the equity they have already established without carrying the risk of having to meet monthly payments while on a reduced or fixed income. This can substantially increase the quality of life for many older Americans and allow them to enjoy the fruits of their life long labor.

Reverse Mortgages and Government Benefits

  • Posted on October 18, 2010 at 9:17 am

Reverse mortgages are increasing in popularity as a way to turn home equity into a liquid asset. Before you jump on a reverse mortgage, you need to understand the impact it can have on government benefits.

Reverse Mortgages and Government Benefits

The beauty of home ownership is found in the value of time. The longer you own a home, the more valuable it becomes to you as an asset. On one hand, you are paying off the mortgage over time, which is increasing the equity you have in your property. On the other, real estate tends to appreciate over time. This double whammy is what makes home ownership so attractive.

As your grow older and retire, converting your home equity into usable cash becomes an issue. Reverse mortgages are touted as a solution. A reverse mortgage is essentially a loan against your equity that does not need to be repaid until an event happens, usually the sale of the home. Essentially, you have reversed the process of a traditional mortgage. The lender is now giving you money in exchange for a piece of your home equity. You can get payments in lump sums, monthly or through credit lines depending upon the particular package you go with. As time passes, the equity in your home is reduced, but you have a solid and predictable monthly revenue source.

In recent years, the government has tried to find methods for reducing the amount of benefits they pay out to citizens. One of the factors they like to use is the asset value you hold. If you have a certain amount of assets, your benefits are reduced or terminated because they government takes the position you do not need them. An analysis of government benefits is beyond the scope of this article, but reverse mortgages have an impact.

Generally, taking a reverse mortgage on your home will not affect Medicare or social security benefits. This is true, however, only so long as you spend the full amount you receive each month. The magic number in this equation is $2,000 for single homeowners and $3,000 for couples. The government is always playing with benefit issues, so make sure you get up to date information on the situation. You want to understand what you are getting into, particularly if you are heavily reliant on Medicare for the payment of medical bills.

In general, reverse mortgages do not impact most government benefits. That being said, make sure to get an informed opinion on exactly what will happen before you agree to a reverse mortgage.

Reverse Mortgages Benefits From Fed Governments

  • Posted on August 16, 2010 at 9:17 am

Reverse mortgages are increasing in popularity as a way to turn home equity into a liquid asset. Before you jump on a reverse mortgage, you need to understand the impact it can have on government benefits.

The beauty of home ownership is found in the value of time. The longer you own a home, the more valuable it become. On one hand, you are paying off the mortgage over time, which is increasing the equity you have in your property. The other finds your real estate appreciate over time. This double whammy is what makes home ownership so attractive.

Retirement and old age will become an issue when you need to convert your home equity into usable cash. Reverse mortgages are touted as a solution. A reverse mortgage is a loan against your equity that does not need to be repaid until an event happens, usually the sale of the home or your death.. Essentially, you have reversed the process of a traditional mortgage. The lender is now giving you money in exchange for a piece of your home equity. Payments are expedited in lump sums, monthly or through credit lines depending upon the particular package you go with. As the clock ticks, the equity in your home is reduced, but you will have a reliable and predictable monthly revenue source.

Over the years, the fed has tried to find ways to reduce the amount of benefits they pay out to citizens. One of the factors they like to use is the asset value you hold. If you have a certain amount of assets, your benefits are reduced or terminated because they government takes the position you do not need them. An analysis of government benefits is beyond the scope of this article, but reverse mortgages have an impact.

Basically, be assured that taking a reverse mortgage on your home will not affect Medicare or social security benefits. This is true, however, only so long as you spend the full amount you receive each month. The government is always playing with benefit issues, so make sure you get up to date information on the situation. You will want to understand what you are getting into, particularly if you rely heavily on Medicare for the payment of medical bills.

In general, reverse mortgages do not impact most government benefits. That being said, make sure to get an informed opinion on exactly what will happen before you agree to a reverse mortgage.

Reverse Mortgages Basics

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

Reverse mortgages are loans against your home that require no repayment for as long as you live there. As opposed to traditional mortgage loans, reverse mortgages does not require proof of income and are based solely on the equity of your home. There are no monthly payments to make as the mortgage will only due when the borrower moved out from the property or in the event of death.

US seniors over the age of sixty two are eligible for reverse mortgages provided they have their own single family dwelling. No health requirement is needed, and you get to keep your Social Security and Medicare benefits if your reverse mortgage is approved. Some benefits, however, such as Supplemental Security Income (SSI) and Medicaid can be reduced under specific circumstances. Tax liability for monies received through a reverse mortgage are a non-issue, as loan advancements are not taxed, although interest on the loan is consequently not tax deductible.

There are no income requirements to be eligible for a reverse mortgage loan. You may be eligible for a reverse mortgage even if you still owe money on an existing mortgage. The reverse mortgage loan must be substantial enough to pay off the existing loan completely, however.

The benefits of a reverse mortgage include increased cash flow almost immediately while many other options are on a fixed monthly income. This way it will fully utilize the equity value in your home. Several options exist to help seniors to plan for their advances so that they can fit into their budgetary concerns and cash flow needs.

Most may feel that borrowing against their home is a risky action to take, especially when they are in their twilight years.
Since they are not borrowing against future income, reverse mortgage does indeed hold minimal risk and many who choose this type of mortgage are able to enjoy what they have worked all their lives for in their post retirement years.

Reverse Mortgage is For You

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

Seniors would want to enjoy their golden years but are usually left stranded with decreasing income or the inability to increase their monthly income. One of the better ways to overcome this problem is by obtaining a loan called a reverse mortgage. A reverse mortgage enables homeowners older than sixty two years of age to convert the equity in their homes into tax-free income while they continue to live in that property. Seniors will be paid by the lender according to the current value of the property, in contrast with a traditional mortgage where monthly payments are made to the lender.

How do you know if a reverse mortgage is right for you and that you would not end up sleeping on the streets? Reverse mortgages are indeed an excellent option for many living in their twilight years, but will take careful planning and consideration. Since the pay out terms can be structured in a variety of ways, it is essential to look at the amount you are able to get from your home and your long term financial needs.There are of course no restrictions on the use of funds, meaning you can do anything you like with the proceeds of a reverse mortgage, including home improvements and daily expenses.

Reverse mortgages won’t affect regular Social Security or Medicare benefits. MedicAid eligibility may be affected in some instances. Counseling is a mandatory for those who wish to apply for a reverse mortgage. Look for a counselor from a government sponsored lending agency if you need them to answer all your questions convincingly or those related to benefit reductions.

Reverse mortgages is a very effective method in supplementing your post retirement income but you must be aware of how the pay out structure can positively lessen your worries on the long term financial picture. Make an informed decision. Simply view all the information available before taking up a reverse mortgage. The good news is for those who have paid the majority or their entire home, their post retirement lifestyle need not be hampered by a lack of cash flow.

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.

Reverse Mortgage Benefits To Seniors

  • Posted on July 5, 2010 at 9:17 am

Reverse mortgages are available through lenders insured by the federal government and can be of great benefit to those who are eligible to apply. There are three types of reverse mortgages currently available in the United States, including Home Equity Conversion Mortgages (HECM), Fannie Mae (FNMA) Home Keeper and Financial Freedom Cash Accounts. The basic premise of a reverse mortgage is that it allows homeowners over the age of sixty-two to convert part of the equity in their homes into tax-free income without having to sell the home, give up the title to the home, or take on a new monthly mortgage payment. The reverse mortgage is titled as such because lenders pay the borrower fixed payments or a lump sum over time as opposed to a traditional mortgage arrangement. Properties that are eligible include single-family dwellings, manufactured homes built after June 1976, town houses and condominiums.

The process for applying for a reverse mortgage is more involved than with a traditional mortgage. Aside from meeting the age and property type restrictions, applicants must discuss the loan with a counselor employed by the U.S. Department of Housing and Urban Development before the signing of the terms agreement. There are 5 different types of payment methods for each fed government insured loans, allowing for flexibility to meet the needs of the applicants. These include monthly, quarterly, semi-annual and annual payments to the borrower for a fixed number of periods or a lump sum that can be invested.

Like traditional mortgage, the interest rates can vary accordingly. Those who choose variable rate mortgages will pay over one percent less since the risk assumed by the borrower for agreeing to monthly adjustable rate calculations can greatly increase their risk over the life of the mortgage. The mortgage is due when the house is no longer occupied by the borrower and will be paid by the borrower or heirs in the event of death.

While many consider borrowing to be a bad idea later in life, reverse mortgages simply allow seniors to enjoy the equity they have already established without carrying the risk of having to meet monthly payments while on a reduced or fixed income. This can substantially increase the quality of life for many older Americans and allow them to enjoy the fruits of their life long labor.

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