About Reverse Mortgages is a free consumer resource for seniors who are interested in learning about the Home Equity Conversion Mortgage ( aka reverse mortgage ) this is a government insured loan has helped over 600,000 seniors qualify to eliminate their mortgage payments (and to release equity) all without the need for a monthly mortgage payment in retirement Mortgage Advisor Bury st Edmunds.
The reverse mortgage program allows seniors to borrow a portion of the homes equity without having to sell the property – move – have a mortgage payment – for those who are interested in improving their retirement’s cash flow the HECM loan can allow you to borrow a percentage of the home’s value without a mortgage payment.
Reverse Mortgage FAQ | Reverse Mortgage Frequently Asked Questions
- the reverse mortgage is a loan – this is not free government money – there are fees involved with this retirement option so please review all of your options.
- there are never obligatory monthly payments due – but you are able to pay down the interest which builds on the back-end of the loan if you so desire (there are never prepayment penalties fees involved).
- interest rates matter – right now rates are low so this is an advantage to you – savings on interest is extremely smart – if your current mortgage rate is higher than the HECM reverse that alone can be substantial.
- closing costs and fees vary drastically this is why mortgage brokers kettering we shop around to find you the best reverse mortgage loan for your specific scenario.
- you can qualify if you are over the age of 62 – own your home outright (or even if there is a mortgage on the home) – those who are not 62 need a co-borrower who is 62 to be on the loan – be careful and review the in’s and out’s of what happens when one borrower is not 62 (we can assist you in weighting the pros and cons of this decision).
Top Tips for Seniors Who Want the Best HECM Reverse Loans
- learn as much as you can – we are here if you want to have any questions answered – it is really important that you are comfortable understanding the entire program and most specifically how it fits into your retirement plans.
- receive a comparison for all 4 HECM options – while you may only be interested in a fixed rate option we recommend you consider all options to really get how the program works (both short term and for long term)
- lets About Reverse Mortgage compare up to 4 nationwide lenders on your behalf – in order to save the most money in closing costs and in fees (not to mention in interest rates charges) we do not charge the seniors for this service and we believe that the best way to shop for a HECM mortgage is to receive multiple reverse mortgage quotes.
lets start with the pros about the reverse mortgage loan
- interest rates in 2012 are still at all time lows – rates for the HECM program are at the lowest point in the history of the program (both fixed rates and adjustable rates have substantially been reduced due to the market conditions mainly a recession).
- there are never any monthly payments due – that is the main feature of the HECM reverse mortgage program which confuses seniors – as most are used to taking out equity but having an obligatory mortgage payment where in the case of the reverse there are never any payments due ( the lender will only get paid when both borrowers pass – that is when the loan becomes due and payable – if you sell the home or refinance the bank will also receive payment at that time).
- use the income or money you release from your home for any purpose you wish – there are never any restrictions on how you spend your equity.
- decide how you want to enjoy your income/equity – so you can select from receive 4 different proceeds options including monthly income which lasts for a lifetime – credit line which has a growth feature so your money grows with inflation – lump sum which means you can borrow the max and get it all upfront – and or a combination of the above.
- never pay any taxes on any funds you need to borrow – there are no income taxes which need to be paid if you take out a reverse loan – this is helpful as this is your money to begin with and the fact that the irs is not taking a percentage helps you by keeping more to spend in your retirement.
- no risk of foreclosure as long as you pay the property taxes and insurance – some seniors believe that there is a mortgage payment due but this not true – there are no mortgage payments which are due with the reverse mortgage – only way seniors can be foreclosed on is if they forget to pay for many months the homeowners insurance and taxes on the property (if you are in pre-foreclosure now the reverse loan can save your home if there is sufficient equity available).
- you can leave your heirs your home and any equity which is available – this is a huge concern among those who wish to leave behind a legacy the reverse program is not a way for banks to scam you and take your home (myth) instead any equity which has built up in the home will be available for your kids to receive (your estate can sell the home and keep the profits or take a forward refinance mortgage in order to then pay off this balance – they have 12 months from the time both borrowers pass away).
- there are no pre-payment fees in case you wish to sell your home – refinance – pretty much this is not a permanent decision that you can never turn back on – if for any reason there are new plans for you.
now what are the cons / disadvantages / negatives to the reverse mortgage program
- you have to be 62 to qualify or at least 60 days from your 62nd birthday – while this may not be a con for everyone there are added risks for a couple where one is not 62 to get a reverse mortgage – and it really just boils down to if anything happens while the non 62 year is not yet on the reverse mortgage the loan may become due and payable in 12 months from the time the borrower passes (this is a scare position to be in when your home is the only asset and now you have just lost your partner).
- the property taxes and property insurance continue – again this will be the case no matter what but it is something to keep in mind and to budget for. Some seniors are not told this and fall behind – falling behind on your taxes/insurance is not savy as fees will be involved and it could lead to you loosing your home – so this is a negative in our book but one that no one can avoid (even if your home is paid off you must pay these fees).
- there are closing costs – the reverse mortgage is a mortgage program – so just like a traditional forward refinance there are closing costs involved – there was a time when the reverse mortgage loan was a very expensive option – but now with the HECM Saver and with interest at all time’s low this is not longer the case. The HUD department which monitors these loans had introduced lower borrowing options including a saver program which dramatically reduces the upfront mortgage insurance from 2% to only .1%. – seniors need to understand that fees vary dramatically from different lenders hence we are a free comparison service which compares lenders within our network.
- there will be less equity available for your heirs/kids assuming that the home does not increase at a value which is higher than the interest rate charged by the lenders – in most cases we like to estimate that there is roughly break even in a 20 year period so that if you borrow now half of your equity you will still have the other half in 20 years but there are many factors involved ( bottom line is that by borrowing your equity now there will be less in the future – there could be more equity in the future if home prices continue to increase above the rate you borrowed at for the HECM program.
Reverse mortgages are a financial tool to release equity. It is available in the United States. This is a type of loan, available exclusively to seniors ages 62 and over. This type of mortgage is administered under a federel program done by HUD. It allows homeowners to access a certain portion of the equity in their house.
How much money can I get?
Reverse mortgages allow homeowners to tap a certain amount of the overall equity in their house. They can get a lump sump, or they can receive monthly payments over a period of time, over their their joint lifetimes, as a line of credit.
How do I know if a Reverse mortgage is right for me?
Reverse mortgages aren’t for everyone. You have to consider your unique financial situation and make a decision based on that. Know this – the reverse mortgage program is a federal program, meaning you will go through counseling first. In order to know if a reverse mortgage is right for you, you have to consider about all the factors that go into this and come as a result of it. First of all, is the time right? Do you really need the money? and of course the health of the seniors staying in the house, does your family agree with it? and do you need the money or simply want the money to enjoy life. In many instances, you need a second opinion from someone not in your family, and in those situations you can count on us to give you advice. Another issue you need to take into consideration is finding the right person who can give you the reverse mortgage. Even though there are numerous stringent government reforms, you’ll still run into reverse mortgage companies who will charge you more than they should just so they can line their own pockets. Even though lenders are under greater scrutiny, that hasn’t stopped people from misbehaving and taking advantage of seniors.
Pros and Cons of Reverse Mortgage
People 62 and over are taking advantage of the equity built in their house, by getting a reverse mortgage. This approach has pros and cons associated with it, just like all things. Depending on your situation, the reverse mortgage may not be for you. First of all, you need to make sure you even qualify. You have to own your home, and be of age. When you reach that ripe old age where you can’t work anymore, you don’t have a source of income anymore. At this point, you need to consider realistic sources of income that can supplement you. You need to stay in your home, and meet everyday costs – but how do you bridge the gap? Well, you do so by getting a reverse mortgages. The reverse mortgage is a loan that uses the equity in your house as collateral, payable only upon death or when you leave your house. The pros of the reverse mortgage is you do not have to pay back the loan while you live. No monthly payments, nothing. You can decide between getting a lump sump amount or you can get it in monthly payments. It’s entirely up to you, and your financial decision. Depending on what option you pick, this can help finance the lifestyle you wish to live. The downside to the reverse mortgages, is, the fact, that it’s still a loan. That means you’re taking money on credit, with the intent one day you’ll have to pay it back. Once the homeowner has passed away, or sold the home, the debt will get repaid at that point. With a reverse mortgage, because it still is a loan, it has interest as well.
Reverse Mortgages are for Seniors
Seniors over the age of 62 looking to supplement their retirement with another source of income, should, and can, get a reverse mortgage loan. In these harsh economic times, many seniors who had invested in the stock market have seen their investments dwindle in value. The fluctuations of the stock market have virtually eliminated retirement nests. In order to replace this lost income, seniors can use the equity in their house as collateral, and not have to worry about the problems associated with normal loans, like losing ones house. There are some costs associated with reverse mortgages, but these costs are pennies when compared to the benefits of living in your own home!
Reverse Mortgages FAQ
We often get asked numerous questions and so we decided to list them all here, for your reading pleasure.
1. How much money can I receive with my reverse mortgage?
The overall amount of money you are eligible to receive is based on numerous factors, for example, it depends on how old you are, and how old your youngest marital partner is. In addition, it also depends on the homes appraised value, the current rates of interest, and the limit in your area of maximum lending. Generally speaking, the older you are + the more your house is worth, the more money you get!
2. How do I know my home qualifies?
In order to be eligible for a reverse mortgage, your must meet certain property requirements set forth. Single families, pre-fabricated home that have been manufactured after 1976, properties with 2-4 units, and townhouses/condo’s are eligible.
3. What are the payment options
Homeowner can elect to receive the funds from a reverse mortgage in one of two ways. Monthly payments or lump sum. It all depends on your financial needs, it’s your choice. Most homeowners opt to have the loan in the form of a line of credit. This makes it so you can draw money from the loan as you choose/need.
Irrespective of whether the quantum of money available with a person is small or large, he must ensure that this money is not dormant; he must manage the money in such a way that it is put to the maximum advantage by giving the maximum return on investment. Checking accounts that give the least amount of interest or no interest must have the minimum amount of funds which are necessary for their current needs.
In case you do not require the money immediately you must put it into high interest yielding deposits. There is no point in getting satisfaction with minimum return on investments. You might be able to get higher interest rates over the advertised rates of the banks if you take pains to negotiate with them. Some people invest on revenue-producing real estate or land which is not affected by inflation. You should be very cautious and careful while investing on these items.
You must have the expertise on this field. However, these items yield better ROI than what you can get out of a savings bank account. In addition you may have to pay income tax on the interest on your saving bank deposits whereas capital gains either have no taxes or lower taxes. While calculating your ROI you must take into account the impact of income tax. If your investment is high you should take assistance from experts.
Nowadays it is becoming more and more difficult as well as complex to manage your assets. It is not possible to have a simple straightforward formula for this. However you should learn the fundamentals and apply it as per requirement. It may be difficult to follow principles of sound management under these circumstances; however it is well worth it because good management can affect not only your future but also that of your loved ones.
Making Your Home Comfortable Without Money Woes: Appreciate Refinancing Home Improvement Mortgage Programs
Most of the home owners are interested in getting maximum comfort from their homes; hence in order to reach the desired level of comfort they try to apply a lot of innovation and development to their homes. Some of these things are creation of new house features, addition of modern furniture and equipments, modernizing the interiors etc. These innovations and developments ensure that each of these homes look better, gives effective relaxation, comfort and security.
If you manage your budget well you might not have any problems in getting a refinancing home improvement mortgage program which are offered by your financial provider institutions. You might be in a position to have a comfortable livable home by taking assistance from a refinancing home improvement mortgage program.
It is for you to decide whether you want to enroll in a refinancing home improvement mortgage program or not. In order to do that you could use a refinancing home mortgage calculator that could help you to deal with your home improvement financing needs successfully.
You are very keen to purchase a home for yourself and family; you do not have full cash to pay for the house. What would you do? You may opt for getting a mortgage. Having decided to get a home mortgage refinancing lender, you have to follow certain steps to get the best lender. This requires going through four easy steps. If you have a bad credit score you may have to go to a bad credit home mortgage lender; but still the steps required are the same.
How to Do it
The first step for getting a home mortgage refinancing lender is to apply to them to find out their response. Before doing this you may have to select the best lender from whom you want to go for mortgage refinance; you can do this by comparing offers from various banks/ financial institutions. One thing that you should remember at this juncture is that you can put in your application through online; this takes a few minutes of your time and this can be done for a fixed rate up to a period of four months. In case the rates go down in this period the lowest rate will be applicable for you.
The second step in getting a home mortgage refinancing lender is to finalize the approval documentation. The banks/ lender to whom you have applied for a home mortgage will send you a mortgage approval letter after going through your application and find that everything is in order. This letter will give you the details of mortgage approval, terms and conditions of approval etc. It is advisable that you hire a professional who can go through the approval letter and terms and conditions and make sure that everything given in these documents are in order. It is absolutely essential that you understand what you are signing.
The third step in this process is finalization of the legal documentation and terms of loan. In this phase you will be working with the banker/ lender who is giving you your home mortgage refinancing; you may also have to consult a lawyer to finalize the legal aspects to make sure that all documentation are final. The mortgage documentation after finalization will be signed by you as well as your lender. This process normally will get completed in 3 to 5 business days.
The last and final step in this process is to thank your home mortgage refinancing lender and move into your new home. One thing you must remember is to make sure that your home mortgage refinancing lender is kept fully informed about the important information as regards to your mortgage. They are supposed to be involved throughout this process starting from processing of your application and help you whenever you have any problem.
It is not all that difficult or complicated to get a mortgage as well as purchasing your first home; however you should understand what you are doing and also follow these steps diligently.
It would be an advantage to know which method your proposed lender uses for calculation of the interest and thus the repayments to be made against your mortgage. It is not generally realised that different accounting methods adopted by different lenders may result in a difference in both the monthly repayment and the total amount repayable even though, apparently, the same rate of interest is being quoted and charged over the same projected term of repayment.
Surprisingly, this point is one that is very rarely taken into consideration and yet it could make a significant difference to the total amount you repay. For example, a 5,000 repayment mortgage over 25 years at 7.5% per annul calculated on an annual basis could result in paying over 200 more than if it had been calculated on a daily basis!
The three main types of interest calculations are:
- Annual rest
- Monthly rest
- Daily rest
By this method interest is calculated on the balance outstanding and debited to the account at the start of each financial year. This gives the capability to the borrower of knowing precisely what his outgoings will be over the next year, as any changes in rates in that time will not be taken into account until the next annual calculation. If interest rates go up, however, as the monthly repayment does not change, the increased charges are building up and will be added to the balance for the next annual review. This may well result in disproportionate increases in monthly payments for the following year. Equally, if the borrower wished to pay in an additional sum, perhaps as the result of a windfall, he may not get the benefit of the reduction in the balance until the year end. In this situation, it is better to invest the windfall, earning interest, until just before the start of the lender’s next financial year. At that time pay the accumulated sum into the credit of your mortgage account, thereby reducing the balance on which the interest will be calculated for the next year.
Incidentally, not all lenders have the same year end, although 31st December is the most common, but do establish what date is used by your lender to ensure that you get the full benefit at the appropriate time.
Although this method of accounting is the traditional way, in recent times it has come in for some criticism in the financial media and some lenders have now adopted other policies for calculating interest charges.
In this instance the interest is calculated monthly on the balance outstanding which means, if the account is paid up to date on a repayment basis, it is being calculated on the balance. This is being reduced each month by the capital element of the repayment. It follows that if you pay in an additional sum the benefit will be realized within the month and interest adjusted accordingly (ensure that the lender does not make a charge for accepting payments over and above the monthly sum required).
It also means, of course, that the borrower will be penalized in the same time scale should he be late in making his repayment.
Many lenders have already adopted this method of accounting. They are particularly appropriate to flexible mortgages which are becoming more popular and which may give the additional facility of drawing out further sums provided there is sufficient equity in the property acting as security. As the term suggests, the interest is calculated from day to day but the normal mortgage repayments would still be made on a regular calendar monthly basis. In concept it is not dissimilar to that method used with credit cards and has the same effect of rewarding early payers and penalizing late payers.