The radio and TV commercials are full with wonderful
sounding pitches for reverse mortgages. It almost makes any
home owner want to buy one.

In case you are not familiar with the reverse mortgage
here is a quick review.

The home owner can get immediate cash for his house
based upon the amount of equity that has accumulated. If
there is little equity he will no qualify. 50% or more is a good
starting place. The age requirement is 62 or older and he
must own the house outright. No other financial requirements
are necessary. This is the difference from it and a home equity
line of credit.

It must be a single family home or 2 to 4 unit
non-commercial unit.

The amount the home owner may receive will depend
on his age and the value of the property, the current rate of
interest as well as the paid-for equity.

Home owners don’t need any third party to find a lender
to give them a reverse mortgage. That is some rip-off artist.
He is not necessary. The local bank will do it, but shop around.
The borrower (that is what the home owner is) can go directly to
HUD which will make a federally insured reverse mortgage.

The borrower can choose from several options with
the most popular being a monthly payment for life for himself
and his spouse. As long as one of them remains in the house
they can live forever and receive that payment which is
computed on an actuarial life expectancy table.

Before signing there is an important clause that should
be added to protect the borrower.

This is the pitfall in the contract. If inflation continues
that payment will buy less and less groceries or other services.
There is only one way to protect the borrower and that is to
include a yearly Cost of Living adjustment. So far this option is
not included by any lender.

It means the borrower must learn to live on a lower
life standard as the years go by. Will he be able to buy a
comparable amount of groceries and medications 10 years
from now with today’s check. He must pay his taxes and
insurance. Will they be the same in 10 years? Hardly.

These old folks (that’s what they are now) better have
some extra cash or they could lose the house. The lenders
could see these units fall into the subprime category as
they would not have the upkeep necessary (because of the
declining purchasing power of the dollar) to maintain the local
real estate property values

The smart lenders will bundle these contracts and
sell them as the subprime lenders have done.

When taking a long term look at reverse mortgages it
is not good for either the borrower or the lender.

By: Al Thomas

About the Author:

Caffeinated Content

There are at last signs that the mortgage market is beginning to ease its grip on its very restrictive lending criteria. There are now 7% more mortgage deals than in the previous month and there are now just under 100 deals that require a 10% deposit. The number of mortgages that require a 15% deposit has risen from 209 in December 2008 to 272 in May 2009 and there is similar jump for 20% deposit loans. Figures from the Bank of England show that mortgage approvals rose by 4% in March 2009.

These are small changes in a slumped market and in a time of recession, but at least these changes are moving in the right direction. They show that the banks are gradually beginning to lend again, and to lower the demands on their borrowers. As this continues and more buyers are able to enter the market house prices will begin to bottom out which will bring at least some stability to the market.

However, with continued rising unemployment, the news is not all good. House prices are still expected to fall this year, with some economists predicting a fall of another 6%. Having said this, estate agents have seen a continued increase of interest from potential buyers and sales levels have risen through February, March and April this year. This is somewhat unsurprising with house prices haven fallen so far and low mortgage rates together with it being Spring time, traditionally the busiest time for estate agents.

If you are considering getting a mortgage now, you would be wise to consider getting a fixed rate. The Bank of England is expected to keep interest rates at a record low 0.5% for some time to come. However, once the rates start to rise again they could rise quite quickly and those stuck on variable rates could see a sharp increase in their monthly payments.

Borrowers already show that they have this in mind: five-year deals are now more popular than two-year deals. Though when choosing your mortgage remember to compare the redemption penalty period as well as the mortgage length and rate. Often, with the longer fixed periods you have a longer fixed redemption period. So you need to consider and plan how long you expect to stay in your property. It is sometimes possible to move your mortgage with you if you do move within your fixed period but not always, and you may still have to pay a hefty fee.

The housing market is still in the doldrums and will be for sometime. However, with price falls slowing, record low interest rates and mortgages beginning to ease, buying property is becoming more attractive to mid to long term investors and to individuals whose employment prospects are safe.

By: Susy Copus

About the Author:

Create a video blog…instantly.

Sometimes the best-laid plans just don’t pan out. You spend almost a lifetime struggling to put away as much money as you can for retirement or savings but then life throws you some curve balls. Perhaps you find yourself short of cash for your child’s semester tuition payment, or your daughter’s wedding requires funds you just don’t have or medical expenses put you in debt or a you lost your job or credit card debt has gotten out of control or so on and so on.

Like many people, you may find yourself dipping into your savings or your retirement funds in order to pay off these obligations and by the time you are ready to retire all you have to show for your life’s efforts is the equity you have in your home. The problem is you still need to live in your home and the idea of moving to a far away, affordable place does not work for you. Where can you turn if you’re retired and strapped for cash? After exhausting all other possibilities, you may respond to an intriguing pitch for a “reverse mortgage.”

Reverse mortgages allow older homeowners to convert part of the equity in their homes into cash without having to sell your home or take on additional monthly debt payments. You can then use the money to reduce other debts, help finance a grandchild’s education, pay for unforeseen expenses, or simply to survive. In a regular mortgage, you make monthly payments to the lender. In a reverse mortgage, you receive money from the lender and generally do not have to pay it back for as long as you live in your home.

Instead, the loan must be repaid when you die, sell your home, or no longer live there as your principal residence. To qualify for a reverse mortgage, you must be at least age 62. If the home is owned jointly, both you and your spouse must meet the age-62 requirement. Unlike a traditional mortgage, you don’t have to demonstrate earning capacity. Best of all, the IRS treats payments received from a reverse mortgage as a tax-free return on your investment.

Types of Reverse Mortgages:

Single-Purpose Reverse Mortgages
These types of reverse mortgages generally have very low costs but are not available everywhere and can only be used for one purpose, such as home repairs, improvements or to pay property taxes. In order to qualify for these loans your income must be low or moderate.

Home Equity Conversion Mortgages (”HECM”)
These types of reverse mortgages have high up-front costs in the form of origination fees, closing costs, and servicing fees, but are widely available, have no income or medical requirements and can be used for any purpose at all. They are federally insured and require that you meet with a government approved counselor, who will explain the financial implications of taking out a reverse mortgage. You have loan options, such as receiving payments of a fixed monthly amount, a line of credit or a combination of both. Most reverse mortgages are of the HECM variety and are available in all fifty states, the District of Columbia and Puerto Rico.

Proprietary Reverse Mortgages
Like HECM’s, these reverse mortgages come with hefty up-front costs, are widely available, have no income requirements and can be used for any purpose. They are, however, not federally insured, but backed by the private institution that underwrites the mortgage. The costs of these private loans are generally greater than all other reverse mortgage-types. Whereas all HECM reverse mortgages must follow HUD rules, Proprietary Reverse mortgages do not.

There are a number of factors that affect how much you can borrow, such as your age, the appraised value of your home, current interest rates and where you live. In general, the older you are, the more valuable you home, and the more equity you have in your home. This translates into more money you will be able to borrow in a reverse mortgage.

By: Thomas Corley

About the Author:

Caffeinated Content

California Reverse Mortgages are a different kind of mortgages that are proving to be very popular with senior citizens. A Reverse Mortgage allows the property owner to stay in the house, unlike the regular kind of mortgage that dictates that the homeowner move to a different place when the property is mortgaged.

As with regular mortgages, the loan is provided based on the property equity of the homeowner. However, in this case, even with the equity secured the homeowner can still enjoy the benefits of staying in the mortgaged home while paying the EMI to the mortgage lender. A Reverse Mortgage is a very good option for retired individuals over 62 years of age who would hate to move from home while the same is being mortgaged. Also they need not change their lifestyle, as the Reverse Mortgage amount would provide sufficient funds to maintain the existing one.

Reverse Mortgages provide financial security while enjoying the comfort of one’s home after retirement. However, they must be chosen with care. Reverse Mortgages are handled by the companies and lenders handling the regular and multiple mortgages. Customers can negotiate for a good deal after providing them with the requisite data for setting up the initial groundwork for the deal.

Reverse Mortgage lenders provide the mortgage either as a lump sum or a credit line, as per the customer’s requirements. California mortgage lenders provide Reverse Mortgages in three categories, viz., Home Equity Conversion Mortgage, Single Purpose Reverse Mortgage, and Proprietary Reverse Mortgage. The first category is federally insured and the other two are offered by the agencies licensed by the government and by banks or private financial mortgage lending institutes.

Homeowners can get the equity appraised by a licensed agent and then apply for the Reverse Mortgage. Since they allow the customers to stay in their homes after the same has been mortgaged, they charge a higher rate of interest compared to the regular mortgage rates. Fee charged by the lender is also more expensive as many kinds of fee such as the appraisal fee, recording fee, origination fee etc., build up into a large amount.

Choosing the best plan would prove to be beneficial in the long run. Since mortgage plans are long-term plans, they must be chosen with care to avoid any hassles during the tenure. A financial adviser would be able to provide an insight on the pros and cons of a Reverse Mortgage. Also, mortgage lenders provide all the available plans, and some quality negotiations would help the customer get the best Reverse Mortgage deal.

One disadvantage of Reverse Mortgage loans is that they can become very expensive if the homeowner decides to move to a different place within the first five years of the tenure. However, they are very useful for people who have no intention of moving, since the entire amount loaned is tax-free and so can be enjoyed to the full extent.

By: Kevin Stith

About the Author:

Kansieo.com

A guide to 15 different types of mortgages on offer in the UK. From Standard Variable Rate mortgages to more unconventional mortgages such as Current account and self certification mortgages

1. Standard Variable Mortgage

The most common type of mortgage. Mortgage payments depend on the lenders SVR. This is usually influenced by the Bank of England Base Rate.

2. Fixed Rate Mortgage

A mortgage with a period of 2-4 years where the interest rate on mortgage payments is fixed. There may be a slight premium for security, but it avoids interest payments becoming un affordable.

3. Capped Mortgage

This is like a fixed rate mortgage. It states a maximum interest rate but it can fall under some circumstances.

4. Self Certification Mortgage

A mortgage where there is not any need to prove your income through published accounts. Often taken by self employed.

5. Repayment Mortgage

A mortgage where you pay both, interest on the loan and capital repayments. Most mortgages are repayment mortgages. It means at the end of your mortgage term you will have paid off your mortgage debt.

6. Interest Only Mortgage

Mortgage where you only pay interest on loan and do not repay any capital. This requires a separate investment plan to be able to pay off the mortgage capital at the end of the mortgage term

7. Investment Mortgage.

A type of interest only mortgage but where taking out a mortgage also involves taking out a complementary investment plan to be able to pay off the mortgage debt.

8. Endowment Mortgages

Similar to an investment mortgage. There were many problems with endowment mortgages in the UK because often the investment failed to be sufficient to pay off debt.

9. Base Rate Tracker Mortgage

Similar to a standard variable rate mortgage. This is a mortgage where the interest rate is fixed to a certain discount compared to the Bank of England Base Rate

10. 100% and 125% mortgages

Usually it is necessary to pay a deposit of upto 10% of the house price. However with rising house prices many lenders are now offering a mortgage for the full amount. In some cases lender offer more than 100% to enable spending on the house itself.

11. Joint Mortgage

A Joint mortgage involves buying a house with others to increase the chance of getting a mortgage. Also known as co buying mortgages.

12. Adverse Credit Mortgages

Help for people looking for mortgages with bad credit ratings

13. The Never Ending Mortgage

A new and quite small type of mortgage where there is no necessity to pay off the mortgage at all. Instead you can pass your mortgage onto your children.

14. Reverse Mortgage

This is where you can receive income from the value of your house in return for the lender receiving an increasing share of the value of your house.

15. Buy to Let Mortgages

This involves getting a mortgage to buy a house with the specific intention of renting it out. These mortgage are more dependent upon the state of the Housing market

16. Offset / Current Account Mortgage

This is when your mortgage is combined with your current account at a bank or building society. If you have savings in your current account these are automatically used to reduce the mortgage capital you owe and therefore lower the level of mortgage interest payments.

By: Richard Pettinger

About the Author:

Caffeinated Content