How Do Reverse Mortgages Work - 5 First Steps For A Senior Newbie

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When you try to understand, how do reverse mortgages work, it is important to understand the basic system. The reverse mortgage is a loan, which will be taken against the equity of the home. This means, that the lender will not check the income nor the credit information. The loan will simply eat a part of the equity step by step.

1. How Much You Can Borrow?

The absolute maximum is $ 625.500, says the law. But a more typical system is to use three elements, which influence on the amount. The age of the youngest borrower, the appraised value of the home and the interest rate. Roughly speaking, the older the borrower, the lower the interest rate and the higher the home value, the more a borrower will get. If there are the maximum a mount of borrowers, three, then the age of the youngest is used.

The borrower will select, how he wants the lender to pay. The alternatives are one lump sum, the monthly payments, a credit line or the combination of all these. Concerning the taxes, it is wise to make sure, that the borrower will not have to pay taxes, especially if he will choose the lump sum alternative.

2. Will You Qualify?

If you are at least 62 and own your home, where you live permanently and where you have equity left you will qualify automatically. Some mobile homes are not accepted. If there are more than one borrower, three is a maximum amount, all must qualify, i.e. to be the owners of the home and live there permanently.

3. When Is The Time To Pay Back?

The target of reverse mortgage is to arrange cash money for the seniors. This means, that a senior has not to pay back anything during the loan running time. When a borrower, or the last borrower, will sell the home, move away or pass away, the home will be sold and the selling price is used to pay away the loan capital, accrued interests and all the costs. The obligatory mortgage insurance guarantees, that the other assets of the borrower, nor the heirs, will never be used to pay the reverse loan.

4. The Secret Is In The Facts You Know.

A senior must research, what are his financial needs and what products there is in the market, which would fit to him. Because he is not usually an expert, his role is to define his needs at the moment and in the future. Because we do not know the future, it is important to keep some reserves for it. After he has the need list, he must use experts, like the bank manager, other seniors, reverse mortgage counselor and to study by himself, how the reverse loan could serve him.

5. Are The Reverse Mortgages More Expensive?

They are, because the upfront fees are quite high. However, it depends on the needs. If the need is urgent and the home equity is the only source of the extra money, is there any other choice? And because the senior will stay as a home owner, the future home price increases will help quite a lot.

Juhani Tontti, B.Sc., Marketing, Helps The Seniors To Get A Picture About How Reverse Mortgages Work. And Do Reverse Mortgages Work Best In His Situation.

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Federal Housing Administration Mortgages Vs Traditional Loans - Which Actually Is More Advantageous?

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Before you get your hands on that home bank loan, you must fully grasp what your possibilities are: a fundamental knowledge in the variations among an FHA loan plus a Standard Financial loan is important. The phrase Traditional Loan includes all loans below the current FNMA and FHLMC lending limits.

Most of the people which have heard about FHA loans often affiliate them with purchasing funding transactions. Although purchases are essentially the most common use, FHA loans will also be offered for percentage rate and duration refinance loans too as cash out refinances.

Here's a short assessment of FHA vs Traditional financial loan:

FHA Loans Specifications - Reduce Down payment

The main benefit of the FHA vs traditional bank loan is that the FHA loan qualifications for a borrower are not as rigid as standard bank loan funding as well as the downpayment or equity needs are much less. In comparing a purchase money FHA mortgage from a Conforming or perhaps an A - paper bank loan, the FHA financial loan will commonly have the least amount of dollars required to close as well as the lower payment.

FHA Mortgage loan Qualifying criteria - Negative Credit history Not So Undesirable

FHA loans will enable the borrower that has had a handful of credit difficulties or those without a credit history to get a residence. An FHA underwriter will require a affordable explanation of those derogatories, and definitely will approach a person's credit history historical past with popular sense credit score underwriting. Such as, borrowers with extenuating conditions bordering a personal bankruptcy that was discharged two years ago could be accepted for optimum financing.

Traditional A Paper financing, however, would need four years to have went by to be qualified for consideration and relies heavily upon credit scoring. If your score is beneath the minimal standard, you'll not qualify.

FHA Enables Down Payment Gifted By Third Entities

A different advantage of a FHA vs Conventional loan is the fact that FHA is one of the few property home loan applications that enable a borrower to possess their down payment gifted from a household member, a governmental company, or non-profit organization. This allows residence consumers with no the essential capital to buy a dwelling right now.

Some Drawbacks Of FHA Towards Standard Loans

FHA requires mortgage insurance.

Traditional financing doesn't call for an upfront home loan insurance top quality every time a borrower closes on the mortgage. With FHA funding, that charge for a thirty yr financial loan is 1% with the bank loan quantity the borrower can wrap in to the mortgage

FHA Bank Loan Boundaries Reduced

One downside to FHA loans is the fact that the financial loan limits set for FHA loans are generally less as opposed to financial loan limitations for traditional funding in most elements from the nation. If a borrower is searching for a home loan that exceeds the FHA financial loan limitations for your region, the borrower would must place additional cash down on the house or finance below a conventional home loan, Subprime, Alt A or perhaps A Minus item. Underneath the 2008 stimulus bundle FHA bank loan limits happen to be elevated in numerous locations and FHA provide FHA Jumbo Loans.

A Federal housing administration bank loan enables the seller to pay up to 6 % of your closing charge and prepaid items. Another wonderful selling point of these kinds of lending options is even somebody that has experienced personal bankruptcy or has lots of other mortgage loans might be approved such a financial loan. An additional terrific advantage of these types of financial loans are that they are fully assumable.

Some great benefits of FHA's overall flexibility far outweigh any drawbacks. In recent times there has been various confusion from the real-estate market place with regards to FHA financing and very much apprehension amongst a handful of real-estate agents who imagine that Federal housing administration is often a more durable mortgage to get accredited. They feel that FHA is too strict with appraisals with respect to the condition of the premises. There was some fact to this assertion in that many years in the past Federal housing administration seemed to be extra restrictive on appraisals nevertheless that has since eased tremendously. Nowadays, Federal housing administration appraisals are not any far more restrictive compared to that of the traditional appraisal.

To find out more information about FHA vs Conventional or FHA versus Conventional Loans click the prior links.

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Are Reverse Mortgages Safe? Discover Whether Seniors Are in Danger of Falling for Mortgage Fraud

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As many consumers are aware, reverse mortgages have been widely criticized. Critics warn seniors that the industry is wrought with scams, unsavory lenders, and deceptive practices. These warnings have many seniors wondering are reverse mortgages safe? Discover how seniors can protect their reverse mortgage privacy and avoid falling for a mortgage scam.

Are Seniors at Risk of Falling for a Mortgage Scam?

Before the Economic Stimulus Act of 2008, loan officers were allowed to combine reverse mortgages with other financial products. Some lenders required their borrowers to purchase insurance or annuities in order to qualify for a loan. Unfortunately, some unscrupulous professionals took this opportunity to take advantage of struggling seniors and forced them to purchase expensive products they did not need. When critics compare these loans to a mortgage scam, they are commonly referring to this practice.

However, this practice has been outlawed since 2008. Lenders cannot require borrowers to purchase other financial products while getting a loan. Once borrowers have received their loan proceeds, they can use the funds however they wish. Still, if a lender is pressuring borrowers to purchase additional products, seniors should regard this as a sign of a mortgage scam.

How Seniors Can Protect Their Reverse Mortgage Privacy

During the loan process, there are several things seniors can do to protect their reverse mortgage privacy. The first is to ask questions. Before choosing a lender, seniors should ask their loan officer about the loan process, costs, and their other options. Loan officers who are unwilling to answer questions or disclose certain information should be avoided. To protect one's reverse mortgage privacy, seniors should avoid giving out private information until they trust their loan officer.

Seniors should also be weary of professionals who downplay the importance of mortgage counseling. Counseling is a borrower's chance to make sure they understand the immediate and future implications of getting a loan. Loan officers who minimize the importance of this step might have ulterior motives for discouraging borrowers against taking full advantage of counseling.

Another way for seniors to protect themselves is to get the terms of their loan in writing. Lenders are required to provide borrowers with several important documents. One such document is the Total Annual Loan Cost (TALC) disclosure. This disclosure explains exactly how much the loan will cost the borrower each year. Seniors should carefully review their TALC disclosure as well as all other written correspondence to ensure they understand all fees and terms of their loan.

When considering a reverse mortgage, seniors should be concerned with their reverse mortgage privacy. Taking the aforementioned precautions will help seniors avoid falling for a mortgage scam and keep them safe throughout the process. Still, seniors should realize that scams are few and far between. Because most lenders offer Home Equity Conversion Mortgages (HECMs), they are required to follow specific regulations. Fees are federally regulated, and borrowers are required to receive counseling from a third party before even applying for a loan. While all lenders are not created equal, the federal government has made an exceptional effort to ensure that the industry is a safe place for seniors.

Abby enjoys learning about new and innovative financial products that are designed to make people's lives easier. In her free time, she enjoys spending time with her friends and family. To see how much you can receive, visit this reverse mortgage calculator now!

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Using Your RRSPs - One of the Benefits to Canadian Mortgages

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Canada has a lot of good programs that help homeowners through things such as heating rebates and tax incentives for energy-efficient appliances. But, one of the biggest benefits the Canadian government gives its homeowners is a perk that comes even before a home is purchased - and that's with the Home Buyer's Plan, the program that allows you to tap into RRSPs and use them as a down payment on Canadian mortgages. And, unlike if you had withdrawn the funds for other purposes, withdrawing the money does not affect your income taxes.

The Home Buyer's Plan is a program that was created by the Canada Customs & Revenue Agency (CCRA) to assist homebuyers in obtaining the down payment for their first home. Initially, the program allowed homebuyers to withdraw up to $20,000 from their RRSP to use as a down payment towards their mortgage. But, federal changes to the budget in 2009 increased that amount to $25,000. Multiple people can each withdraw up to the maximum amount from their RRSPs and put it towards the same mortgage down payment. This is often most beneficial for couples that want to purchase a home, because they can each withdraw from their RRSPs and be able to give a bigger down payment.

Using RRSPs for Canadian mortgages is tax-free but that is because under the Plan, a homebuyer must be able to repay the money, beginning with the year after the money is taken out. After that time, the homeowner then has 15 years to put the money back into the RRSP, before the money becomes taxable and other penalties are added. At least 1/15 of the funds must be replaced every year for the 15 years and if not, the remaining overdue balance will be charged as income for that year. The time left to pay back the loan does not start at the time the loan is given, but one year after the withdrawal date.

There are a few other requirements that homebuyers must comply to, such as that they must be a first-time homebuyer, and only Canadian mortgages are eligible under the Plan. In addition to that, the homebuyer must also have purchased or built the home prior to October 1 the year after the RRSP withdrawal is made. Also, only RRSP contributions that were made 90 days prior to the withdrawal date, or before, are eligible.

The Home Buyer's Plan is a great program that opens up the doors of home ownership to many people. However, the program can be somewhat confusing, especially for first-time homebuyers who are already feeling a little overwhelmed. Finding a mortgage broker that can help guide you through the process of using your RRSP for a down payment is a great way to make sure that you're getting the most out of doing so, and that you'll actually be able to reap the benefits of this program for Canadian mortgages.

Bryan J is the author of this article. For more information about Canadian Mortgages and Canadian Mortgage rates please visit canadianmortgagesinc.ca.

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Reverse Mortgages - The Loan That You Don't Have to Pay Back

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Many are not aware that these types of mortgages exist, but I can assure you they are real. Technically, you do have to pay back a reverse mortgage in some form or another. The borrower may not have to pay the loan back directly, but it could affect your loved ones later.

What is a Reverse Mortgage?

A Reverse Mortgage is a type of loan offered to U.S. citizens over the age of 62 who have built a considerable amount of equity in their homes. Most of these loans are administered and regulated by the United States Department of Housing and Urban Development. In a normal fixed-rate mortgage the borrower takes a loan against his or her credit and is required to pay back this loan with monthly installments. However, in the case of a reverse mortgage the borrower is not required to make any payments on the loan until one of the following circumstances is met; the home borrowed against has not been the place of residence for over 364 days, the home borrowed against has been sold, or the borrower dies. I know that is quite grim but it should have been obvious. If the borrower dies then the spouse, next of kin, or person(s) appointed in the will has the choice to either, refinance the house and continue to live in it or allow the lender to sell the home in order to account for the loan, plus some interest of course.

The Three types of Reverse Mortgages

Each one of the three types of reverse mortgages has it pros and cons just like anything. The first type is the Single-Purpose Reverse Mortgage. This type allows for the borrower to get the loan at a low interest rate, but in exchange the money may only be used toward a single purpose such as home repairs, paying off another mortgage, or pay for property taxes. It can be very beneficial but they are not available in every state.

The other two types, Home Equity Conversion Mortgage (HECM) and Proprietary Reverse Mortgages (PRM), are very similar in how they operate. An HECM is federally insured and backed by the Department of Housing and Urban Development. While a PRM is backed by the private lender, thus giving them the ability to amend the criteria of the loan so be careful! Both of these types of mortgages tend to be more expensive than the conventional home loan and the upfront costs such as origination fee and underwriter's fee can get steep pretty quickly. Please be sure to consider these things if you do not plan on staying in that particular house anymore or borrow small amount. The borrower might actually end up losing quite a bit of equity by overlooking details like these.

Typically, there is not an income restriction as the loan does not require a monthly payment to be made. Every qualifying loan is tax-free.

I have been originating mortgage loans for the past 12 years.
Coaching seniors concerning the possibilities of a great retirement is my passion.
It is incredibly rewarding to demonstrate to a retired person the approaches to make their retirement one they desired.
You can get a Free Reverse Mortgage Quote to find you how much you can qualify for.
If you own a manufactured home and are unsure whether your home meets the requirements mentioned above, we will do the hard work for you.

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The Current State of Mortgages in the United States - Past, Present and Future

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United States is a consumer driven economy and for many years this economy is fueled by the ability of consumers to tap in the equity of their homes. As homes in United States appreciated, the consumer was able to cash out more and more of this equity. This made the mortgage industry in Unites States, one of the most important industries in the economy.

The mortgage industry in U.S.A. is so interconnected within the economy so even the people that are not a homeowner are indirect participants of this major finance sector. Although you might never hold a mortgage; through your pension plan or your 401k investment plans, there is a very good chance you might be financing mortgages in United States.

Mortgage industry in U.S. is a leveraged industry and most of mortgages generated by the mortgage broker are sold back in the market as MBS (mortgage backed securities). This gives the ability to mortgage brokers to leverage their funds over and over again. MBS are than sold to investors and mutual funds, and make up a considerable amount of the investment world.

Investments on your pension plans are most of the times in mutual funds which are participants in MBS. Since the mortgage industry in United States runs so deep in everyday life of almost everyone, the housing crisis in 2008 had a ripple effect in all economies.

To promote homeownership, the U.S. government created several government sponsored programs to guarantee the mortgages generated the banks. Most of the outstanding mortgages in United States today are guaranteed by Freddie Mac and Fannie Mae. Since the loans were guaranteed by the government of United States, banks eased many requirement of obtaining a mortgage. Individuals not only were able to get a mortgage with less than 20% down, but in many cases they were able to get a mortgage for more than the value of the home. Such practices created the housing bubble.

Today, after the crisis of 2008 the mortgage industry has reinstated many of the rules and have made harder to obtain a mortgage; however there are still many government programs that allow for first time home buyer to purchase a home with as little as 3% down. The mortgage industry in United States is going through a transition faze, where many new rules are being written to avoid a repeat of 2008 housing crisis.

With over 30 years experience in the financial world Mark Mancino currently runs a very successful merchant service company.

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Fixed Rate Mortgages Are Now Nearly Non-Existent

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For many years long-term fixed rate mortgages have been the backbone of the UK mortgage market, ensuring your repayments remain the same for ten years or longer, allowing you to budget easily for your monthly repayments to the bank or Building Society. However, recent research shows that these long-term fixed rate mortgages have all but disappeared and those that took out such long term mortgages may have paid out thousands more than they needed to in interest charges over the years.

Figures for the UK from summer 2011 showed that there were just three fixed-rate mortgage deals available for for ten years or longer on the market, compared to 125 similar deals back in 2008. This is despite there still being a huge demand for such a product. When one particular UK Building Society launched a ten year fixed rate mortgage product earlier this year [2012], it had to close the offer after just 2 weeks having sold the full quota.

But while long term fixed rate mortgages offer security in terms of knowing what you will have to pay each month and for how long, there are drawbacks, mainly that the borrower ends up paying far more in interest than if they had taken a two year fixed term mortgage and then reverted back to the lenders variable rate after the initial fixed period. There are also usually early redemption charges. And of course most of us do not really know what we will be doing or what our financial position will be in 5 to 10 years time so is it really a good idea to lock yourself into a specific mortgage interest rate for this long a period.

On the other hand over a million people who had opted for a standard rate variable mortgage with Halifax suddenly found in March 2012 that the bank was significantly increasing its standard rate by 0.50%. The Royal Bank of Scotland/Natwest group also announced its Standard Variable rate would go up by around 0.25%, affecting around 200,000 borrowers and a couple of other lending institutions also announced hikes in interest rates. Fixed mortgage rates had been at an all time low back in the summer of 2011 but are slowly creeping back up. Those now looking around for a better deal and to switch their mortgage are finding that to benefit from a lower interest rate they need to be able to provide at least 15% equity, and in some cases as much as 40%.

Whether moving to a new mortgage product is the right more for you will depend on your personal circumstances. Certainly, if a borrower is paying a standard variable rate of 4 per cent or more and they have a reasonable amount of equity in their property, then a move to a life-time tracker mortgage could save a decent amount from monthly repayments and ensure the interest rate only rises when the base rate does.

No-one can really predict what will happen to mortgage interest rates over the next couple of years. The recent interest rate hikes by certain lenders has shown the risk associated with taking a standard variable rate and you are at the mercy of the lender. But with continuing economic gloom and doom, interest rates are likely to stay low, but a fresh recession dip or new credit crunch could see rates rise again.

The problem for borrowers is that there is no way of knowing whether interest rates have hit the bottom or whether they will continue to fall. There is no doubt still a little room for lenders to lower rates if they wish but lenders are boosting their rates to cover the risk of people not being able to afford their repayments and the fact that financial regulators are demanding the lenders have enough capital to cover themselves adequately for mortgage loans. The fear factor from both borrowers and lenders is currently the underlying principles dictating whether mortgage rates rise or fall.

Rachel Gawith runs TheTravelBug website for independent advice on buying in Bulgaria, gained for her 5 years experience in the property market there and on the ground experience of living in central Bulgaria for close to three years. Rachel also run a Permanent Property Exchange service to allow people to swap their UK terraced house for a place in the sun or help expats abroad move back home.

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The Different Types of Mortgages Available to the Home Buyer

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There are many different types of mortgages available to the house buyer, and as well as different mortgage products, there are various ways in which interest on the mortgage is calculated and repaid. It can be very complicated and difficult to decide which mortgage best suits a home buyer's particular financial circumstances. The type of mortgage that will be most suitable will also depend on the house buyer's future plans for the property; whether they intend to sell within a short period of time, whether they intend to rent out the property (most standard mortgages do not allow the home owner to rent the property and so a particular mortgage for landlords is required).

Most people decide to take out a fixed rate mortgage so that the interest rate is fixed at a particular percentage of the loan for the entire length of the mortgage period. This ensures that the borrow knows exactly what he or she must pay each month and it is much easier to budget for the mortgage repayments. This type of mortgage is therefore the most popular for this reason and about 75% of all mortgages taken out are fixed rate type mortgages. The mortgage period can be ten years, fifteen years or even thirty years. The advantage of this type of loan is that the borrower knows exactly what she or he must repay each month for the set time frame. The disadvantage is that these types of mortgages usually have a higher interest rate than other mortgage products and because the interest rate is fixed for a set number of years, if in that time the interest rate goes down, the home owner is stuck making higher payments than might be available with other mortgage products.

An Adjustable Rate Mortgage or ARM typically has a set time period at the start of the loan (usually a year or two) when the interest rate is fixed and often at a lower rate than the current market interest rates. However after this period the interest rate changes with the market rate and so repayments after the initial introductory period will be higher. With a one year adjustable rate mortgage, the interest rate changes each year after the initial fixed rate period. This type of mortgage carries a lot more risk as the borrower does not know from one year to other what the interest rate will be and consequently what his or her monthly repayments will be. This makes budgeting for the mortgage repayments much harder. Because this type of mortgage carries an additional risk, the house buyer can usually borrow more money and so afford a more expensive house. Often caps are put in place so that the interest rate cannot go up or down outside certain parameters. There are also three and five-year adjustable rate mortgages.

For those considering reselling or refinancing within a short period of time, a two-step mortgage might be a better option. This type of mortgage has a fixed interest rate for the initial phase of the loan and then another interest rate for the remainder of the loan period. The interest payable will be determined by the current market rates and so the home buyer risks the interest rate going up after the initial fixed period. But if the borrow is planning on selling the property before this adjustment date then this might be a good option to secure a mortgage at a low interest rate.

Home buyers can also decide to go for an interest only mortgage whereby he or she only pays back the interest on the loan each month. The principle loan amount is not paid back at all during the mortgage period and so when the mortgage expires, the borrower still owes the full capital amount of the loan. This has the advantage of lower monthly repayments, however at the end of the mortgage period, the home owner must find a way to pay back the original loan amount, usually through the means of some investment product such as life insurance or an endowment policy. However, if the investment product has not performed well or the market as a whole has suffered, the home owner may not get enough funds from the investment vehicle to repay the loan. This was the case with many peep mis-sold endowment policies in the 1980's and 1990's. Usually borrowers are given the option to have an interest only mortgage plan for a set period at the start of the loan but then after this time, the home owner must start paying back the principle loan as well as the interest and so repayments will rise steeply. Usually this type of mortgage has a higher interest rate than a standard repayment mortgage because of the interest only period at the start.

It is vitally important that anyone considering taking out a mortgage speaks to a qualified mortgage advisor about their options and what mortgages are available to them and most suited to their particular circumstances.

Rachel Gawith runs TheTravelBug website for independent advice on buying in Bulgaria, gained for her 5 years experience in the property market there and on the ground experience of living in central Bulgaria for close to six years.

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