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Thursday, August 26, 2004
Which Mortgage Should I Choose? Key Questions to Ask Yourself and Lenders When Shopping for a Mortgage! Traditional Fixed Rate Mortgage? Graduated-Payment Mortgage? Adjustable Rate Mortgage? FHA Mortgage? Two-Step Mortgage?
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sponsor: http://1-Mortgage.net
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You are wondering which kind of mortgage is best. The answer: There is no one correct answer. Deciding which type of mortgage will best fulfill your needs can be difficult. There are so many types of loans and different term lengths. Your choice is extremely important and can take some time and effort to research. While often neglected by homebuyers, a little research before choosing your mortgage can save you thousands of dollars in the long run.
There are several elements of a loan that should be analyzed. While one of these elements may suggest one type of loan, another may call for a different type. You must weigh each ingredient separately and collectively. You will find that your answers to the questions below will ultimately determine the type of mortgage that best fits your needs.
How long do you plan to stay in this home?
Five years? Ten years? Thirty years? The length of time you will be in the home will certainly play a part in determining which loan to apply for. If you only plan to be in the home for 5–7 years or less, you should seriously consider an adjustable rate loan. If you intend on staying 20–30 years, a fixed rate mortgage may be right for you.
How much risk are you willing to accept?
If you are the type of buyer that needs to know exactly what you will be paying each month for the term of the mortgage, a fixed rate mortgage will fulfill this need. The fixed rate loan, however, will also net a higher interest rate. If you are willing to take some risk of fluctuations in the interest rate, you may be able to receive a lower interest rate.
What are your income expectations?
Plan for the future. Do you anticipate a gradual or dramatic increase in your income in the next few years? If you expect a big increase, a graduated payment mortgage may be best for you.
How much cash do you have available for upfront costs?
If you have the resources, you may want to make a larger down payment to lower your monthly payment. By keeping a higher monthly payment however, you might be able to shorten the term of the loan to a 15-year loan in order to pay it off quicker.
Keep in mind that you’ll have closing costs and fees to pay in addition to your down payment. If you don’t have much cash saved for your upfront costs, don’t despair. You may be need to accept a higher monthly payment or even lower your monthly obligation by choosing an adjustable rate mortgage.
In addition to choosing a type of loan, you must also consider which lender to use. Once again, several factors will influence your decision.
Annual Percentage Rate (APR)
This is most likely the best way to make an "apples-to-apples" comparison of lenders. The APR reflects the cost of credit on a yearly rate and includes any points and fees in addition to the interest rate.
Interest Rate
Find out the rate the lender will commit and how long the lender will guarantee it. Get any commitments in writing. As with any transaction, if it isn’t in writing it doesn’t exist.
Points and fees
These factors will vary greatly. Look out for hidden fees. Make sure the lenders disclose all fees; ask what they charge and what is included and what is not.
Loan Approval
Both approval and funding time should be considered. You don’t want to lose a prospective home because your lender takes weeks to fund your loan. A lender should be able to fund the loan within ten days.
Lender Reputation
Don’t rely on solely someone else’s recommendation. You, not your friend, must feel comfortable with your lender. If you do feel good about your lender and trust him , it will be much easier to trust his advice on what kind of mortgage will best suit your needs.
We sincerely hope these tips and ideas will be of value to you. The types of loans mentioned above are only a few of the multitude of loan types available. If we may be of any further service please contact us: http://1-Mortgage.net
================================================================
sponsor: http://1-Mortgage.net
================================================================
You are wondering which kind of mortgage is best. The answer: There is no one correct answer. Deciding which type of mortgage will best fulfill your needs can be difficult. There are so many types of loans and different term lengths. Your choice is extremely important and can take some time and effort to research. While often neglected by homebuyers, a little research before choosing your mortgage can save you thousands of dollars in the long run.
There are several elements of a loan that should be analyzed. While one of these elements may suggest one type of loan, another may call for a different type. You must weigh each ingredient separately and collectively. You will find that your answers to the questions below will ultimately determine the type of mortgage that best fits your needs.
How long do you plan to stay in this home?
Five years? Ten years? Thirty years? The length of time you will be in the home will certainly play a part in determining which loan to apply for. If you only plan to be in the home for 5–7 years or less, you should seriously consider an adjustable rate loan. If you intend on staying 20–30 years, a fixed rate mortgage may be right for you.
How much risk are you willing to accept?
If you are the type of buyer that needs to know exactly what you will be paying each month for the term of the mortgage, a fixed rate mortgage will fulfill this need. The fixed rate loan, however, will also net a higher interest rate. If you are willing to take some risk of fluctuations in the interest rate, you may be able to receive a lower interest rate.
What are your income expectations?
Plan for the future. Do you anticipate a gradual or dramatic increase in your income in the next few years? If you expect a big increase, a graduated payment mortgage may be best for you.
How much cash do you have available for upfront costs?
If you have the resources, you may want to make a larger down payment to lower your monthly payment. By keeping a higher monthly payment however, you might be able to shorten the term of the loan to a 15-year loan in order to pay it off quicker.
Keep in mind that you’ll have closing costs and fees to pay in addition to your down payment. If you don’t have much cash saved for your upfront costs, don’t despair. You may be need to accept a higher monthly payment or even lower your monthly obligation by choosing an adjustable rate mortgage.
In addition to choosing a type of loan, you must also consider which lender to use. Once again, several factors will influence your decision.
Annual Percentage Rate (APR)
This is most likely the best way to make an "apples-to-apples" comparison of lenders. The APR reflects the cost of credit on a yearly rate and includes any points and fees in addition to the interest rate.
Interest Rate
Find out the rate the lender will commit and how long the lender will guarantee it. Get any commitments in writing. As with any transaction, if it isn’t in writing it doesn’t exist.
Points and fees
These factors will vary greatly. Look out for hidden fees. Make sure the lenders disclose all fees; ask what they charge and what is included and what is not.
Loan Approval
Both approval and funding time should be considered. You don’t want to lose a prospective home because your lender takes weeks to fund your loan. A lender should be able to fund the loan within ten days.
Lender Reputation
Don’t rely on solely someone else’s recommendation. You, not your friend, must feel comfortable with your lender. If you do feel good about your lender and trust him , it will be much easier to trust his advice on what kind of mortgage will best suit your needs.
We sincerely hope these tips and ideas will be of value to you. The types of loans mentioned above are only a few of the multitude of loan types available. If we may be of any further service please contact us: http://1-Mortgage.net
Saturday, August 14, 2004
What do creditors want?
http://www.debt-education.org/what-do-creditors-want.html
There's an old saying that you can't borrow money unless you can prove that you don't need it. While that technically isn't true, banks, retailers and other companies tend to be cautious about making credit available to their customers. When you understand what credit grantors are looking for, you can increase your chances of qualifying.
First and foremost, credit grantors want to be sure that you will pay them back. While creditors can recover unpaid money through legal action, it is costly. It's less risky for them to lend carefully in the first place. Although that stand seems to lacking in the credit card industry, who is granting credit to consumers who really shouldn't qualify at all.
How do creditors determine whether you'll be likely to pay them back? First, they generally look to see how well you've paid other creditors. Experience has shown that individuals who pay other creditors on time are more likely to pay them on time as well. That's why it's important to pay your bills on time.
Having too much credit is not viewed favorably by credit grantors. Numerous credit cards, loans and other debts on your credit record could mean potential repayment problems if you lose your job or experience other unforeseen circumstances.
Your employment and banking record also gives potential creditors insight into your financial lifestyle. Keeping the same job rather than frequently changing jobs and having money in the bank instill confidence that you will handle credit responsibly.
If your personal finances meet the criteria described here, you'll probably be able to obtain credit without too much difficulty. If not, start taking steps to improve your financial picture. Once credit grantors see the improvement and your commitment to do better, you should be able to get the credit you deserve.
http://www.debt-education.org/what-do-creditors-want.html
http://www.debt-education.org/what-do-creditors-want.html
There's an old saying that you can't borrow money unless you can prove that you don't need it. While that technically isn't true, banks, retailers and other companies tend to be cautious about making credit available to their customers. When you understand what credit grantors are looking for, you can increase your chances of qualifying.
First and foremost, credit grantors want to be sure that you will pay them back. While creditors can recover unpaid money through legal action, it is costly. It's less risky for them to lend carefully in the first place. Although that stand seems to lacking in the credit card industry, who is granting credit to consumers who really shouldn't qualify at all.
How do creditors determine whether you'll be likely to pay them back? First, they generally look to see how well you've paid other creditors. Experience has shown that individuals who pay other creditors on time are more likely to pay them on time as well. That's why it's important to pay your bills on time.
Having too much credit is not viewed favorably by credit grantors. Numerous credit cards, loans and other debts on your credit record could mean potential repayment problems if you lose your job or experience other unforeseen circumstances.
Your employment and banking record also gives potential creditors insight into your financial lifestyle. Keeping the same job rather than frequently changing jobs and having money in the bank instill confidence that you will handle credit responsibly.
If your personal finances meet the criteria described here, you'll probably be able to obtain credit without too much difficulty. If not, start taking steps to improve your financial picture. Once credit grantors see the improvement and your commitment to do better, you should be able to get the credit you deserve.
http://www.debt-education.org/what-do-creditors-want.html
Sunday, August 08, 2004
Refinancing
http://www.1-mortgage.org
Refinancing is a good financial move if the current interest rate on your mortgage is at least 2 percentage points higher than the prevailing market rate.
There are other considerations too, such as how long you plan to stay in the house. Most sources say that it takes at least three years to fully realize the savings from a lower interest rate, given the costs of the refinancing. Let us give you a FREE quote!
Refinancing can be a good idea if:
• You need to get out of a high interest rate loan or want to take advantage of lower rates being offered. But you should remain in the house long enough to make the additional fees worthwhile.
• You have an adjustable-rate mortgage (ARM) and want a fixed-rate loan to have the certainty of knowing exactly what the mortgage payment will be for the life of the loan.
• You want to convert to an ARM with a lower interest rate or more protective features (such as a better rate and payment caps) than the ARM they currently have.
• You want to build up equity more quickly by converting to a loan with a shorter term.
• You want to draw on the equity built up in your home to get cash a cash advance.
If you decide that refinancing is not worth the costs, ask your lender whether you may be able to obtain all or some of the new terms you want by agreeing to a conversion of your existing loan instead of a refinancing.
Should You Refinance Your ARM? In deciding whether to refinance an ARM you should consider these questions:
• Is the next interest rate adjustment on your existing loan likely to increase your monthly payments substantially? Will the new interest rate be two or three percentage points higher than the prevailing rates being offered for either fixed-rate loans or other ARMs?
• If the current mortgage sets a cap on your monthly payments, are those payments large enough to pay off your loan by the end of the original term? Will refinancing to a new ARM or a fixed-rate loan enable you to pay your loan in full by the end of the term?
http://www.1-mortgage.org/Refinancing.html
http://www.1-mortgage.org
Refinancing is a good financial move if the current interest rate on your mortgage is at least 2 percentage points higher than the prevailing market rate.
There are other considerations too, such as how long you plan to stay in the house. Most sources say that it takes at least three years to fully realize the savings from a lower interest rate, given the costs of the refinancing. Let us give you a FREE quote!
Refinancing can be a good idea if:
• You need to get out of a high interest rate loan or want to take advantage of lower rates being offered. But you should remain in the house long enough to make the additional fees worthwhile.
• You have an adjustable-rate mortgage (ARM) and want a fixed-rate loan to have the certainty of knowing exactly what the mortgage payment will be for the life of the loan.
• You want to convert to an ARM with a lower interest rate or more protective features (such as a better rate and payment caps) than the ARM they currently have.
• You want to build up equity more quickly by converting to a loan with a shorter term.
• You want to draw on the equity built up in your home to get cash a cash advance.
If you decide that refinancing is not worth the costs, ask your lender whether you may be able to obtain all or some of the new terms you want by agreeing to a conversion of your existing loan instead of a refinancing.
Should You Refinance Your ARM? In deciding whether to refinance an ARM you should consider these questions:
• Is the next interest rate adjustment on your existing loan likely to increase your monthly payments substantially? Will the new interest rate be two or three percentage points higher than the prevailing rates being offered for either fixed-rate loans or other ARMs?
• If the current mortgage sets a cap on your monthly payments, are those payments large enough to pay off your loan by the end of the original term? Will refinancing to a new ARM or a fixed-rate loan enable you to pay your loan in full by the end of the term?
http://www.1-mortgage.org/Refinancing.html
Saturday, August 07, 2004
Reverse Mortgages
http://www.1-mortgage.net/Reverse_Mortgages.html
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If you are age 62 or older and are house-rich, cash-poor, a reverse mortgage may be an option to help increase your income. However, because your home is such a valuable asset, you may want to consult with your family, attorney or financial advisor before applying for any reverse mortgage. Knowing your rights and responsibilities as a borrower may help to minimize your financial risks and avoid any threat of foreclosure or loss of your home. Reverse mortgages are considered risky because at the end of it you don't own your home anymore.
Reverse Mortgages
There are three reverse mortgage plans available today: FHA-insured, lender-insured, and uninsured.
A reverse mortgage is a type of home equity loan that allows you to convert some of the equity in your home into cash while you retain home ownership. Reverse mortgages work much like traditional mortgages, only in reverse. Rather than making a payment to your lender each month, the lender pays you. Unlike conventional home equity loans, most reverse mortgages do not require any repayment of principal, interest or servicing fees for as long as you live in your home. Funds obtained from a reverse mortgage may be used for any purpose, including meeting housing expenses such as taxes, insurance, fuel and maintenance costs.
To qualify for a reverse mortgage, you must own your home. The reverse mortgage funds may be paid to you in a lump sum, in monthly advances, through a line-of-credit, or in a combination of the three, depending on the type of reverse mortgage and the lender. The amount you are eligible to borrow generally is based on your age, the equity in your home, and the interest rate the lender is charging.
Because you retain title to your home with a reverse mortgage, you also remain responsible for taxes, repairs, and maintenance. Depending on the plan you select, your reverse mortgage becomes due with interest either when you permanently move, sell your home, die or reach the end of the pre-selected loan term. The lender does not take title to your home when you die, but your heirs must pay off the loan. The debt is usually repaid by refinancing the loan into a forward mortgage or by using the proceeds from the sale of your home.
http://www.1-mortgage.net/Reverse_Mortgages.html
http://www.1-mortgage.net/Reverse_Mortgages.html
=====================================================
If you are age 62 or older and are house-rich, cash-poor, a reverse mortgage may be an option to help increase your income. However, because your home is such a valuable asset, you may want to consult with your family, attorney or financial advisor before applying for any reverse mortgage. Knowing your rights and responsibilities as a borrower may help to minimize your financial risks and avoid any threat of foreclosure or loss of your home. Reverse mortgages are considered risky because at the end of it you don't own your home anymore.
Reverse Mortgages
There are three reverse mortgage plans available today: FHA-insured, lender-insured, and uninsured.
A reverse mortgage is a type of home equity loan that allows you to convert some of the equity in your home into cash while you retain home ownership. Reverse mortgages work much like traditional mortgages, only in reverse. Rather than making a payment to your lender each month, the lender pays you. Unlike conventional home equity loans, most reverse mortgages do not require any repayment of principal, interest or servicing fees for as long as you live in your home. Funds obtained from a reverse mortgage may be used for any purpose, including meeting housing expenses such as taxes, insurance, fuel and maintenance costs.
To qualify for a reverse mortgage, you must own your home. The reverse mortgage funds may be paid to you in a lump sum, in monthly advances, through a line-of-credit, or in a combination of the three, depending on the type of reverse mortgage and the lender. The amount you are eligible to borrow generally is based on your age, the equity in your home, and the interest rate the lender is charging.
Because you retain title to your home with a reverse mortgage, you also remain responsible for taxes, repairs, and maintenance. Depending on the plan you select, your reverse mortgage becomes due with interest either when you permanently move, sell your home, die or reach the end of the pre-selected loan term. The lender does not take title to your home when you die, but your heirs must pay off the loan. The debt is usually repaid by refinancing the loan into a forward mortgage or by using the proceeds from the sale of your home.
http://www.1-mortgage.net/Reverse_Mortgages.html
Sunday, August 01, 2004
Reverse Mortgages
http://debt-education.org/reverse-mortgages.html
If you are age 62 or older and are house-rich, cash-poor, a reverse mortgage may be an option to help increase your income. However, because your home is such a valuable asset, you may want to consult with your family, attorney or financial advisor before applying for any reverse mortgage. Knowing your rights and responsibilities as a borrower may help to minimize your financial risks and avoid any threat of foreclosure or loss of your home. Reverse mortgages are considered risky because at the end of it you don't own your home anymore.
There are three reverse mortgage plans available today: FHA-insured, lender-insured, and uninsured.
A reverse mortgage is a type of home equity loan that allows you to convert some of the equity in your home into cash while you retain home ownership. Reverse mortgages work much like traditional mortgages, only in reverse. Rather than making a payment to your lender each month, the lender pays you. Unlike conventional home equity loans, most reverse mortgages do not require any repayment of principal, interest or servicing fees for as long as you live in your home. Funds obtained from a reverse mortgage may be used for any purpose, including meeting housing expenses such as taxes, insurance, fuel and maintenance costs.
To qualify for a reverse mortgage, you must own your home. The reverse mortgage funds may be paid to you in a lump sum, in monthly advances, through a line-of-credit, or in a combination of the three, depending on the type of reverse mortgage and the lender. The amount you are eligible to borrow generally is based on your age, the equity in your home, and the interest rate the lender is charging.
Because you retain title to your home with a reverse mortgage, you also remain responsible for taxes, repairs, and maintenance. Depending on the plan you select, your reverse mortgage becomes due with interest either when you permanently move, sell your home, die or reach the end of the pre-selected loan term. The lender does not take title to your home when you die, but your heirs must pay off the loan. The debt is usually repaid by refinancing the loan into a forward mortgage or by using the proceeds from the sale of your home.
What to consider about reverse mortgages:
• Reverse mortgages are rising-debt loans. This means that the interest is added to the principal loan balance each month, because it is not paid on a current basis. Therefore, the total amount of interest you owe increases significantly with time as the interest compounds.
• All three plans (FHA-insured, lender-insured, and uninsured) charge origination fees and closing costs. Insured plans also charge insurance premiums, and some impose mortgage servicing charges. Your lender may permit you to finance these costs so you will not have to pay for them in cash. But, these costs will be added to your loan amount.
• Reverse mortgages use up some or all of the equity in your home, leaving fewer assets for you and your heirs in the future.
• You generally can request a loan advance at closing that is substantially larger than the rest of your payments.
• Your legal obligation to pay back the loan is limited by the value of your home at the time the loan is repaid. This could include increases in the value (appreciation) of your home after your loan begins.
• Reverse mortgage loan advances are nontaxable. Further, they do not affect your Social Security or Medicare benefits. If you receive Supplemental Security Income, reverse mortgage advances do not affect your benefits as long as you spend them within the month you receive them. This is true in most states for Medicaid benefits also. When in doubt, check with a benefits specialist at your local area agency on aging or legal services office.
• Some plans provide for fixed rate interest. Others involve adjustable rates that change over the loan term based upon market conditions.
• Interest on reverse mortgages is not deductible for income tax purposes until you pay off all or part of your total reverse mortgage debt.
--------------------------------------------------------------------------------
The three types of reverse mortgages, FHA-insured, lender-insured and uninsured, vary according to their costs and terms. Although the FHA and lender-insured plans appear similar, important differences exist.
FHA-insured: This plan offers several reverse mortgage payment options. You may receive monthly loan advances for a fixed term or for as long as you live in the home, a line of credit, or monthly loan advances plus a line of credit. This reverse mortgage is not due as long as you live in your home. With the line of credit option, you may draw amounts as you need them over time. Closing costs, a mortgage insurance premium and sometimes a monthly servicing fee is required. Interest is charged at an adjustable rate on your loan balance; any interest rate changes do not affect the monthly payment, but rather how quickly the loan balance grows over time.
The FHA-insured reverse mortgage permits changes in payment options at little cost. This plan also protects you by guaranteeing that loan advances will continue to be made to you if a lender defaults. However, FHA-insured reverse mortgages may provide smaller loan advances than lender-insured plans. Also, FHA loan costs may be greater than uninsured plans.
Lender-insured: These reverse mortgages offer monthly loan advances or monthly loan advances plus a line of credit for as long as you live in your home. Interest may be assessed at a fixed rate or an adjustable rate, and additional loan costs can include a mortgage insurance premium (which may be fixed or variable) and other loan fees.
Loan advances from a lender-insured plan may be larger than those provided by FHA-insured plans. Lender-insured reverse mortgages also may allow you to mortgage less than the full value of your home, thus preserving home equity for later use by you or your heirs. However, these loans may involve greater loan costs than FHA-insured, or uninsured loans. Higher costs mean that your loan balance grows faster, leaving you with less equity over time.
Some lender-insured plans include an annuity that continues making monthly payments to you even if you sell your home and move. The security of these payments depends on the financial strength of the company providing them, so be sure to check the financial ratings of that company. Annuity payments may be taxable and affect your eligibility for Supplemental Security Income and Medicaid. These reverse annuity mortgages may also include additional charges based on increases in the value of your home during the term of your loan.
Uninsured: This reverse mortgage is dramatically different from FHA and lender-insured reverse mortgages. An uninsured plan provides monthly loan advances for a fixed term only, a definite number of years that you select when you first take out the loan. Your loan balance becomes due and payable when the loan advances stop. Interest is usually set at a fixed interest rate and no mortgage insurance premium is required.
If you consider an uninsured reverse mortgage, carefully think about the amount of money you need monthly? How many years you may need the money? How you will repay the loan when it comes due? And, how much remaining equity you will need after paying off the loan?
If you have short-term but substantial cash needs, the uninsured reverse mortgage can provide a greater monthly advance than the other plans. However, because you must pay back the loan by a specific date, it is important for you to have a source of repayment. If you are unable to repay the loan, you may have to sell your home and move.
--------------------------------------------------------------------------------
One of the best protections you have with reverse mortgages is the Federal Truth in Lending Act, which requires lenders to inform you about the plan's terms and costs. Be sure you understand them before signing. Among other information, lenders must disclose the Annual Percentage Rate (APR) and payment terms. On plans with adjustable rates, lenders must provide specific information about the variable rate feature. On plans with credit lines, lenders also must inform you of any charges to open and use the account, such as an appraisal, a credit report, or attorney's fees.
If you are interested in obtaining a current list of lenders participating in the FHA-insured program, sponsored by the Department of Housing and Urban Development (HUD), or additional information on reverse mortgages and other home equity conversion plans, write to:
AARP Home Equity Information Center American Association of Retired Persons 601 E Street, N.W. Washington, D.C. 20049
For additional information, you also may contact the:
National Center for Home Equity Conversion 7373 - 147 St. West, Suite 115 Apple Valley, MN 55124
This organization requests that you send a self-addressed stamped envelope.
http://debt-education.org/reverse-mortgages.html
http://debt-education.org/reverse-mortgages.html
If you are age 62 or older and are house-rich, cash-poor, a reverse mortgage may be an option to help increase your income. However, because your home is such a valuable asset, you may want to consult with your family, attorney or financial advisor before applying for any reverse mortgage. Knowing your rights and responsibilities as a borrower may help to minimize your financial risks and avoid any threat of foreclosure or loss of your home. Reverse mortgages are considered risky because at the end of it you don't own your home anymore.
There are three reverse mortgage plans available today: FHA-insured, lender-insured, and uninsured.
A reverse mortgage is a type of home equity loan that allows you to convert some of the equity in your home into cash while you retain home ownership. Reverse mortgages work much like traditional mortgages, only in reverse. Rather than making a payment to your lender each month, the lender pays you. Unlike conventional home equity loans, most reverse mortgages do not require any repayment of principal, interest or servicing fees for as long as you live in your home. Funds obtained from a reverse mortgage may be used for any purpose, including meeting housing expenses such as taxes, insurance, fuel and maintenance costs.
To qualify for a reverse mortgage, you must own your home. The reverse mortgage funds may be paid to you in a lump sum, in monthly advances, through a line-of-credit, or in a combination of the three, depending on the type of reverse mortgage and the lender. The amount you are eligible to borrow generally is based on your age, the equity in your home, and the interest rate the lender is charging.
Because you retain title to your home with a reverse mortgage, you also remain responsible for taxes, repairs, and maintenance. Depending on the plan you select, your reverse mortgage becomes due with interest either when you permanently move, sell your home, die or reach the end of the pre-selected loan term. The lender does not take title to your home when you die, but your heirs must pay off the loan. The debt is usually repaid by refinancing the loan into a forward mortgage or by using the proceeds from the sale of your home.
What to consider about reverse mortgages:
• Reverse mortgages are rising-debt loans. This means that the interest is added to the principal loan balance each month, because it is not paid on a current basis. Therefore, the total amount of interest you owe increases significantly with time as the interest compounds.
• All three plans (FHA-insured, lender-insured, and uninsured) charge origination fees and closing costs. Insured plans also charge insurance premiums, and some impose mortgage servicing charges. Your lender may permit you to finance these costs so you will not have to pay for them in cash. But, these costs will be added to your loan amount.
• Reverse mortgages use up some or all of the equity in your home, leaving fewer assets for you and your heirs in the future.
• You generally can request a loan advance at closing that is substantially larger than the rest of your payments.
• Your legal obligation to pay back the loan is limited by the value of your home at the time the loan is repaid. This could include increases in the value (appreciation) of your home after your loan begins.
• Reverse mortgage loan advances are nontaxable. Further, they do not affect your Social Security or Medicare benefits. If you receive Supplemental Security Income, reverse mortgage advances do not affect your benefits as long as you spend them within the month you receive them. This is true in most states for Medicaid benefits also. When in doubt, check with a benefits specialist at your local area agency on aging or legal services office.
• Some plans provide for fixed rate interest. Others involve adjustable rates that change over the loan term based upon market conditions.
• Interest on reverse mortgages is not deductible for income tax purposes until you pay off all or part of your total reverse mortgage debt.
--------------------------------------------------------------------------------
The three types of reverse mortgages, FHA-insured, lender-insured and uninsured, vary according to their costs and terms. Although the FHA and lender-insured plans appear similar, important differences exist.
FHA-insured: This plan offers several reverse mortgage payment options. You may receive monthly loan advances for a fixed term or for as long as you live in the home, a line of credit, or monthly loan advances plus a line of credit. This reverse mortgage is not due as long as you live in your home. With the line of credit option, you may draw amounts as you need them over time. Closing costs, a mortgage insurance premium and sometimes a monthly servicing fee is required. Interest is charged at an adjustable rate on your loan balance; any interest rate changes do not affect the monthly payment, but rather how quickly the loan balance grows over time.
The FHA-insured reverse mortgage permits changes in payment options at little cost. This plan also protects you by guaranteeing that loan advances will continue to be made to you if a lender defaults. However, FHA-insured reverse mortgages may provide smaller loan advances than lender-insured plans. Also, FHA loan costs may be greater than uninsured plans.
Lender-insured: These reverse mortgages offer monthly loan advances or monthly loan advances plus a line of credit for as long as you live in your home. Interest may be assessed at a fixed rate or an adjustable rate, and additional loan costs can include a mortgage insurance premium (which may be fixed or variable) and other loan fees.
Loan advances from a lender-insured plan may be larger than those provided by FHA-insured plans. Lender-insured reverse mortgages also may allow you to mortgage less than the full value of your home, thus preserving home equity for later use by you or your heirs. However, these loans may involve greater loan costs than FHA-insured, or uninsured loans. Higher costs mean that your loan balance grows faster, leaving you with less equity over time.
Some lender-insured plans include an annuity that continues making monthly payments to you even if you sell your home and move. The security of these payments depends on the financial strength of the company providing them, so be sure to check the financial ratings of that company. Annuity payments may be taxable and affect your eligibility for Supplemental Security Income and Medicaid. These reverse annuity mortgages may also include additional charges based on increases in the value of your home during the term of your loan.
Uninsured: This reverse mortgage is dramatically different from FHA and lender-insured reverse mortgages. An uninsured plan provides monthly loan advances for a fixed term only, a definite number of years that you select when you first take out the loan. Your loan balance becomes due and payable when the loan advances stop. Interest is usually set at a fixed interest rate and no mortgage insurance premium is required.
If you consider an uninsured reverse mortgage, carefully think about the amount of money you need monthly? How many years you may need the money? How you will repay the loan when it comes due? And, how much remaining equity you will need after paying off the loan?
If you have short-term but substantial cash needs, the uninsured reverse mortgage can provide a greater monthly advance than the other plans. However, because you must pay back the loan by a specific date, it is important for you to have a source of repayment. If you are unable to repay the loan, you may have to sell your home and move.
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One of the best protections you have with reverse mortgages is the Federal Truth in Lending Act, which requires lenders to inform you about the plan's terms and costs. Be sure you understand them before signing. Among other information, lenders must disclose the Annual Percentage Rate (APR) and payment terms. On plans with adjustable rates, lenders must provide specific information about the variable rate feature. On plans with credit lines, lenders also must inform you of any charges to open and use the account, such as an appraisal, a credit report, or attorney's fees.
If you are interested in obtaining a current list of lenders participating in the FHA-insured program, sponsored by the Department of Housing and Urban Development (HUD), or additional information on reverse mortgages and other home equity conversion plans, write to:
AARP Home Equity Information Center American Association of Retired Persons 601 E Street, N.W. Washington, D.C. 20049
For additional information, you also may contact the:
National Center for Home Equity Conversion 7373 - 147 St. West, Suite 115 Apple Valley, MN 55124
This organization requests that you send a self-addressed stamped envelope.
http://debt-education.org/reverse-mortgages.html
