Apr
15
Leon Cote asked:
While a free reverse mortgage calculator might be able to give you an idea of how much you could borrow, none will be able to tell you something that is far more important, and that is how much equity will be left in your home after a period of years. It’s crucial you are aware of this before you make any decision on whether to opt for this type of loan.
There are a number of calculators to be found online. However, you may find that the amounts illustrated differ from one website to another, even when the same dates and amounts are entered. If you are going to opt for either a Fannie Mae or FHA reverse mortgage, then the best (and free) reverse mortgage calculator can be found at either the AARP or National Reverse Mortgage Lenders Association (NRMLA) websites. Both are accurate, display identical figures and display most of the crucial information, such as how much you’d receive as a fixed monthly payment, a line of credit (and how much that line of credit would appreciate over 5 and 10 years for the FHA program) or how much you’d receive as a one-off lump sum.
But, if you opt for a jumbo program, you’ll need to use that company’s proprietary calculator. These calculators also give you the FHA and Fannie amounts though they tend to be slightly less accurate. The Financial Freedom calculator is the most widespread.
A reverse mortgage calculator works by using the equity value of your home, its location, your age (and partners), and current interest rates. It then performs the calculation and gives you an indicative illustration of what you’d receive.
What it won’t tell you is how much equity would be left in your home after a number of years. This is important. How this type of loan works is that the lender agrees to pay you a fixed amount over a period of time – usually as monthly payments. When you no longer live in your home, sell it or die, the loan – in its entirety – must be paid back. This is usually done by selling the home. Any money left after the loan is paid you get to keep.
However, the amount you will receive depends on two things; house prices (how much you could sell your home for in future years) and interest rates.
If house prices fall, you or you heirs would receive less money from the sale of your home or even none at all. Likewise a rise in interest rates would also be detrimental.
No calculator illustrates these two, what-if scenarios. Therefore, when using one, be aware that it will show you what you’ll receive but not the amount of loan that will have to be paid back in say 5, 10 or 15 years from now.
This is why you should speak to your local originator (broker) as soon as possible. Don’t be blinkered by what you get now, but think about what you’ll be left with in years to come. And, don’t say it doesn’t matter because you intend to stay put in your home until you die and you don’t care about your heirs; circumstances change. You must put some thought into this aspect of your reverse mortgage right from the start. It’ll be too late after you take it out and are receiving money.
BRADY
While a free reverse mortgage calculator might be able to give you an idea of how much you could borrow, none will be able to tell you something that is far more important, and that is how much equity will be left in your home after a period of years. It’s crucial you are aware of this before you make any decision on whether to opt for this type of loan.
There are a number of calculators to be found online. However, you may find that the amounts illustrated differ from one website to another, even when the same dates and amounts are entered. If you are going to opt for either a Fannie Mae or FHA reverse mortgage, then the best (and free) reverse mortgage calculator can be found at either the AARP or National Reverse Mortgage Lenders Association (NRMLA) websites. Both are accurate, display identical figures and display most of the crucial information, such as how much you’d receive as a fixed monthly payment, a line of credit (and how much that line of credit would appreciate over 5 and 10 years for the FHA program) or how much you’d receive as a one-off lump sum.
But, if you opt for a jumbo program, you’ll need to use that company’s proprietary calculator. These calculators also give you the FHA and Fannie amounts though they tend to be slightly less accurate. The Financial Freedom calculator is the most widespread.
A reverse mortgage calculator works by using the equity value of your home, its location, your age (and partners), and current interest rates. It then performs the calculation and gives you an indicative illustration of what you’d receive.
What it won’t tell you is how much equity would be left in your home after a number of years. This is important. How this type of loan works is that the lender agrees to pay you a fixed amount over a period of time – usually as monthly payments. When you no longer live in your home, sell it or die, the loan – in its entirety – must be paid back. This is usually done by selling the home. Any money left after the loan is paid you get to keep.
However, the amount you will receive depends on two things; house prices (how much you could sell your home for in future years) and interest rates.
If house prices fall, you or you heirs would receive less money from the sale of your home or even none at all. Likewise a rise in interest rates would also be detrimental.
No calculator illustrates these two, what-if scenarios. Therefore, when using one, be aware that it will show you what you’ll receive but not the amount of loan that will have to be paid back in say 5, 10 or 15 years from now.
This is why you should speak to your local originator (broker) as soon as possible. Don’t be blinkered by what you get now, but think about what you’ll be left with in years to come. And, don’t say it doesn’t matter because you intend to stay put in your home until you die and you don’t care about your heirs; circumstances change. You must put some thought into this aspect of your reverse mortgage right from the start. It’ll be too late after you take it out and are receiving money.
BRADY
Apr
5
Prith asked:
A large numbers of endowment mortgages policies have failed in paying back the loaned amounts due to mid way stoppage of premiums by policy holders. Whole market of endowment mortgages policies has suffered set back in performance as also on meeting commitments. Understandably, poor performing stock markets in recent times have much to be blamed about in financial performance scenario of the country. It is not a fault of normal people taking loans for lifetime investment to gather up conception of being sold endowment with wrong projection. They also believe that risks involved were not adequately conveyed to them for taking proper decision. Triggered market action is of large number of complaints and claims for compensation piling up with the offices of Financial Ombudsman Service.
Much needed course of action lead to working out a Mortgage Endowment Policy Reviews Code of Practice by the Association of British Insurers in September 1999. Message that was conveyed through this policy review was that holders treat these endowment mortgage policies for purpose of repaying principal amounts from receivable maturity amounts. Using money received in hand, they should pay back whole or remaining part loan amounts. Latest revision of this code was brought to effect on 1st June 2004. Norm was set to review all policies once in two years. Re-projection letters were made a part of obligation insurance companies had to follow. These letters are supposed to advice policy holders about performance of invested amounts, focusing upon holders’ status of loan repayment using policy. Green, Amber and Red Colour coded letters meant conveying ‘good payback possibilities’, ‘substantial risk’, and ‘high risk situations’ respectively of their mortgage investments.
Being well informed is of prime importance for proper decisions. In August 2005, The Financial Services Authority (FSA) did issue statement regarding procedure of making complaint about endowment mortgages. This procedure features consumer facesheet on Financial Ombudsman Service’s website. Procedure of complaint making was conveyed to professional Claims Management Companies working as consultants for lodging financial claims. From their findings on endowment mortgages relating to shortfalls of policies to payments, FAS issued a report in July 2005. Their further action came as “Will your investment or savings plan pay off your mortgage?” a published consumer oriented factsheet in April 2006. Relevant website has FAQs regarding mortgage endowments plans. Thus, FSA has officially given full guidance about set of action on the matter.
Appropriate time of action is important for any official proceeding. Procedure of informing shortfalls to the loan takers was okay, but there were hazy pictures about what to do and when to do. This bottleneck has been effectively settled now with procedural confirmations through FSA publications. Since, by rule insurers are obliged to inform the policy holders of how their invested money is working every two years, consumers’ complaint and claims can follow this timing logically. There may be shortfalls due to fluctuating stock market. But, complaints may not be attached only to shortfalls. It is widened up to cover broader scope of selling policies under wrong projection of prospects.
Endowment Mortgages
Mortgage Blog
EDGAR
A large numbers of endowment mortgages policies have failed in paying back the loaned amounts due to mid way stoppage of premiums by policy holders. Whole market of endowment mortgages policies has suffered set back in performance as also on meeting commitments. Understandably, poor performing stock markets in recent times have much to be blamed about in financial performance scenario of the country. It is not a fault of normal people taking loans for lifetime investment to gather up conception of being sold endowment with wrong projection. They also believe that risks involved were not adequately conveyed to them for taking proper decision. Triggered market action is of large number of complaints and claims for compensation piling up with the offices of Financial Ombudsman Service.
Much needed course of action lead to working out a Mortgage Endowment Policy Reviews Code of Practice by the Association of British Insurers in September 1999. Message that was conveyed through this policy review was that holders treat these endowment mortgage policies for purpose of repaying principal amounts from receivable maturity amounts. Using money received in hand, they should pay back whole or remaining part loan amounts. Latest revision of this code was brought to effect on 1st June 2004. Norm was set to review all policies once in two years. Re-projection letters were made a part of obligation insurance companies had to follow. These letters are supposed to advice policy holders about performance of invested amounts, focusing upon holders’ status of loan repayment using policy. Green, Amber and Red Colour coded letters meant conveying ‘good payback possibilities’, ‘substantial risk’, and ‘high risk situations’ respectively of their mortgage investments.
Being well informed is of prime importance for proper decisions. In August 2005, The Financial Services Authority (FSA) did issue statement regarding procedure of making complaint about endowment mortgages. This procedure features consumer facesheet on Financial Ombudsman Service’s website. Procedure of complaint making was conveyed to professional Claims Management Companies working as consultants for lodging financial claims. From their findings on endowment mortgages relating to shortfalls of policies to payments, FAS issued a report in July 2005. Their further action came as “Will your investment or savings plan pay off your mortgage?” a published consumer oriented factsheet in April 2006. Relevant website has FAQs regarding mortgage endowments plans. Thus, FSA has officially given full guidance about set of action on the matter.
Appropriate time of action is important for any official proceeding. Procedure of informing shortfalls to the loan takers was okay, but there were hazy pictures about what to do and when to do. This bottleneck has been effectively settled now with procedural confirmations through FSA publications. Since, by rule insurers are obliged to inform the policy holders of how their invested money is working every two years, consumers’ complaint and claims can follow this timing logically. There may be shortfalls due to fluctuating stock market. But, complaints may not be attached only to shortfalls. It is widened up to cover broader scope of selling policies under wrong projection of prospects.
Endowment Mortgages
Mortgage Blog
EDGAR
Feb
23
FAQ’s About Obama’s Affordability and Stability Loan Modification Program
Filed Under Mortgage | Leave a Comment
Walter Sigmore asked:
$75 billion has been established to assist American homeowners struggling to make their monthly mortgage payments under the Homeowner Affordability and Stability Plan created by President Obama. Qualified buyers must meet certain eligibility requirements in order to take advantage of loan modification options. Below are answers to the ten most frequently asked questions.
1. Does my mortgage have to be delinquent in order for me to qualify? No. You can apply proactively if you sense that you will soon be unable to meet your financial obligations and you can show that an extenuating circumstance has caused hardship. Extenuating circumstances might include job loss, interest rate increase, medical bills, or illness.
2. I’m already facing foreclosure, can I qualify? Loan modifications are intended to provide assistance to homeowners unable to make their monthly mortgage payments by lowering the monthly payment. This solution is a win-win for both homeowner and lender and a favored option over foreclosure.
3. What are the qualifications for the Homeowner Affordability and Stability Plan? The loan must be a first mortgage on the homeowner’s primary residence, the loan must be insured by Fannie Mae or Freddie Mac and the current monthly mortgage payment must exceed 31% of your gross monthly income.
4. Is there a charge for the loan modification plan cost? No, there is no fee or charge for the program, it is free.
5. Does my modification application have to be with my current lender? No, there are a number of mortgage lenders voluntarily participating in the loan modification program with whom you may apply.
6. What if I’ve already applied for loan modification with my local bank? If your application is already pending, ask your lender about considering it under the guidelines of the Homeowner Affordability and Stability Plan.
7. What if my house is worth less than I owe on it? At your bank’s discretion, the program has provisions for principal balance reduction.
8. How do I know if Fannie Mae or Freddie Mac is on my loan? You bank can tell you.
9. What information does my bank need? They need a hardship letter and a financial statement.
10. How do I apply for loan modification? Contact your local bank.
Federal guidelines must be met in order to get bank approval for loan modification. Take a moment to find out which of your local banks are participating in the program and apply now.
RICARDO
$75 billion has been established to assist American homeowners struggling to make their monthly mortgage payments under the Homeowner Affordability and Stability Plan created by President Obama. Qualified buyers must meet certain eligibility requirements in order to take advantage of loan modification options. Below are answers to the ten most frequently asked questions.
1. Does my mortgage have to be delinquent in order for me to qualify? No. You can apply proactively if you sense that you will soon be unable to meet your financial obligations and you can show that an extenuating circumstance has caused hardship. Extenuating circumstances might include job loss, interest rate increase, medical bills, or illness.
2. I’m already facing foreclosure, can I qualify? Loan modifications are intended to provide assistance to homeowners unable to make their monthly mortgage payments by lowering the monthly payment. This solution is a win-win for both homeowner and lender and a favored option over foreclosure.
3. What are the qualifications for the Homeowner Affordability and Stability Plan? The loan must be a first mortgage on the homeowner’s primary residence, the loan must be insured by Fannie Mae or Freddie Mac and the current monthly mortgage payment must exceed 31% of your gross monthly income.
4. Is there a charge for the loan modification plan cost? No, there is no fee or charge for the program, it is free.
5. Does my modification application have to be with my current lender? No, there are a number of mortgage lenders voluntarily participating in the loan modification program with whom you may apply.
6. What if I’ve already applied for loan modification with my local bank? If your application is already pending, ask your lender about considering it under the guidelines of the Homeowner Affordability and Stability Plan.
7. What if my house is worth less than I owe on it? At your bank’s discretion, the program has provisions for principal balance reduction.
8. How do I know if Fannie Mae or Freddie Mac is on my loan? You bank can tell you.
9. What information does my bank need? They need a hardship letter and a financial statement.
10. How do I apply for loan modification? Contact your local bank.
Federal guidelines must be met in order to get bank approval for loan modification. Take a moment to find out which of your local banks are participating in the program and apply now.
RICARDO
Dec
13
Reverse Mortgage FAQs
Filed Under Mortgage | Leave a Comment
justin narin asked:
is a reverse mortgage?
A reverse mortgage is a loan product that allows homeowners 62 years of age and older to use their equity to generate tax-free income, without having to sell the home or take on a new mortgage payment. In fact the reverse mortgage is exactly what the title states, the reverse of a standard mortgage.
How is a reverse mortgage different from a standard mortgage?
With a standard mortgage, the borrower (or homeowner) makes monthly payments to the lender (or bank or mortgage company), in order to pay back the loan that the lender originally lent to for the purchase or refinance of the house. This payment includes interest that the lender charges the borrower for the loan. In a reverse mortgage, the situation is reversed; the lender makes monthly payments to the borrower. However, in both a standard and reverse mortgage, the lender secures their loan amount by using the house as collateral.
Do I make monthly payments on a reverse mortgage?
No monthly payments are due on the loan and the loan is repaid when the moves or sells the home, passes away, or ownership otherwise changes hands
What factors determine the amount of the reverse mortgage?
There are a few factors that determine how much money a borrower will receive from a reverse mortgage, such as the value of the home, borrower’s (and co-borrower’s) age, current interest rates and any lending limits that may be standard for your geographic area. As a rule of thumb, the older the borrower and the more valuable the home, the larger the available loan amount.
What can we use a reverse mortgage for?
The proceeds from the reverse mortgage can be used for anything, completely at the discretion of the borrower, though most borrowers use the funds for home repairs or modifications, health care expenses, to settle other debts, or for their long-planned vacation! Reverse mortgages are available for nearly all property types with the exception of co-ops, though co-op owners in some metropolitan areas, specifically New York, should have local options.
Can I receive a lump sum payment from a reverse mortgage?
Homeowners can choose how they want to receive their payments, either as a lump sum, monthly payments or as a line of credit. The line of credit is the most popular option, with nearly 60% of reverse mortgage borrowers choosing to the option to draw income or a lump sum off the line at the time of their choosing.
What happens if I decide to sell my house?
If the home is sold and the proceeds of the sale exceed the mortgage amount, the balance belongs to the borrower or their heirs.
What happens to my existing mortgage?
For reverse mortgage borrowers with an existing mortgage, that mortgage will need to be paid off completely, so that the new reverse mortgage will be the only lien on the house. If the proceeds from the reverse mortgage are not ample to pay off the existing mortgage, the borrower will need to access savings or other sources to pay off the rest of existing mortgage amount. In this scenario, the borrower won’t have access to any additional funds from the reverse mortgage; however, they will no longer have a mortgage payment!
Can I get expert advice before I get a reverse mortgage?
One very important facet of the reverse mortgage process is the consumer counseling that is required for borrowers contemplating a reverse mortgage. Your lender can help you find counseling agencies and most programs are approved and monitored by HUD and/ or A A R P. The counseling is required to make sure that the terms and risks of the program are clear to you. Counselors are obligated by law to review with you all of the implications of the new mortgage, and what your potential options are.
For more articles on Reverse Mortgage, visit: http://www.bills.com/reversemortgage
CARROLL
is a reverse mortgage?
A reverse mortgage is a loan product that allows homeowners 62 years of age and older to use their equity to generate tax-free income, without having to sell the home or take on a new mortgage payment. In fact the reverse mortgage is exactly what the title states, the reverse of a standard mortgage.
How is a reverse mortgage different from a standard mortgage?
With a standard mortgage, the borrower (or homeowner) makes monthly payments to the lender (or bank or mortgage company), in order to pay back the loan that the lender originally lent to for the purchase or refinance of the house. This payment includes interest that the lender charges the borrower for the loan. In a reverse mortgage, the situation is reversed; the lender makes monthly payments to the borrower. However, in both a standard and reverse mortgage, the lender secures their loan amount by using the house as collateral.
Do I make monthly payments on a reverse mortgage?
No monthly payments are due on the loan and the loan is repaid when the moves or sells the home, passes away, or ownership otherwise changes hands
What factors determine the amount of the reverse mortgage?
There are a few factors that determine how much money a borrower will receive from a reverse mortgage, such as the value of the home, borrower’s (and co-borrower’s) age, current interest rates and any lending limits that may be standard for your geographic area. As a rule of thumb, the older the borrower and the more valuable the home, the larger the available loan amount.
What can we use a reverse mortgage for?
The proceeds from the reverse mortgage can be used for anything, completely at the discretion of the borrower, though most borrowers use the funds for home repairs or modifications, health care expenses, to settle other debts, or for their long-planned vacation! Reverse mortgages are available for nearly all property types with the exception of co-ops, though co-op owners in some metropolitan areas, specifically New York, should have local options.
Can I receive a lump sum payment from a reverse mortgage?
Homeowners can choose how they want to receive their payments, either as a lump sum, monthly payments or as a line of credit. The line of credit is the most popular option, with nearly 60% of reverse mortgage borrowers choosing to the option to draw income or a lump sum off the line at the time of their choosing.
What happens if I decide to sell my house?
If the home is sold and the proceeds of the sale exceed the mortgage amount, the balance belongs to the borrower or their heirs.
What happens to my existing mortgage?
For reverse mortgage borrowers with an existing mortgage, that mortgage will need to be paid off completely, so that the new reverse mortgage will be the only lien on the house. If the proceeds from the reverse mortgage are not ample to pay off the existing mortgage, the borrower will need to access savings or other sources to pay off the rest of existing mortgage amount. In this scenario, the borrower won’t have access to any additional funds from the reverse mortgage; however, they will no longer have a mortgage payment!
Can I get expert advice before I get a reverse mortgage?
One very important facet of the reverse mortgage process is the consumer counseling that is required for borrowers contemplating a reverse mortgage. Your lender can help you find counseling agencies and most programs are approved and monitored by HUD and/ or A A R P. The counseling is required to make sure that the terms and risks of the program are clear to you. Counselors are obligated by law to review with you all of the implications of the new mortgage, and what your potential options are.
For more articles on Reverse Mortgage, visit: http://www.bills.com/reversemortgage
CARROLL
Sep
26
Is the Reverse Mortgage Different
Filed Under Mortgage | Leave a Comment
Leon Cote asked:
Payments to the householder can be made in a multiple of ways. How is a reverse mortgage different from a home equity loan? Home equity loans are paid back over a period of booked payments for a fixed number of years. Borrowers who’ve got a high debt to revenue proportion or poor credit could also find reverse mortgages appealing as the equity in the home and the value of the home are far more applicable factors than credit report. Whether or not the borrower in a reverse mortgage outlives the loan the home will never be taken and the loan not paid off till the house is sold or the borrower dies. Many pensioners have an enormous quantity of equity in their houses.
As in all cases of monetary lending, the pliability comes at a cost.
To be accepted for forward mortgage, you’ve got to have a steady source of earnings. When the last home loan payment is created, the house is yours. The major condition is the house is the property of the candidate.
As well, reverse mortgages must be the sole debt against your home.
Differing from a standard “forward mortgage”, your debt increases together with your equity.
If the loan is over a lengthy period of time, when the mortgage comes due, there may be a big amount due. Similarly , if the cost of your house decreased, there won’t be any equity left over. Failing to pay your property taxes or insurance on the home will definitely lead to a default too. Many older citizens have a massive quantity of equity in their houses. What are the needs to get a reverse mortgage? The home being mortgaged must be owner occupied. Often single family homes and little apartments and city houses are also suitable for a reverse mortgage. How will a reverse mortgage affect my estate? When the borrower of a reverse mortgage dies, the estate must pay back the loan or the proceeds of the sale of the home will pay back the loan.
Any remaining equity will be given to the successors of the estate. How can I am getting additional information on Reverse Mortgages? Contact any reputable broker to get additional information.
It may be sensible to consult an estate or estate planning lawyer to make certain a reverse mortgage is right for you.
HANS
Payments to the householder can be made in a multiple of ways. How is a reverse mortgage different from a home equity loan? Home equity loans are paid back over a period of booked payments for a fixed number of years. Borrowers who’ve got a high debt to revenue proportion or poor credit could also find reverse mortgages appealing as the equity in the home and the value of the home are far more applicable factors than credit report. Whether or not the borrower in a reverse mortgage outlives the loan the home will never be taken and the loan not paid off till the house is sold or the borrower dies. Many pensioners have an enormous quantity of equity in their houses.
As in all cases of monetary lending, the pliability comes at a cost.
To be accepted for forward mortgage, you’ve got to have a steady source of earnings. When the last home loan payment is created, the house is yours. The major condition is the house is the property of the candidate.
As well, reverse mortgages must be the sole debt against your home.
Differing from a standard “forward mortgage”, your debt increases together with your equity.
If the loan is over a lengthy period of time, when the mortgage comes due, there may be a big amount due. Similarly , if the cost of your house decreased, there won’t be any equity left over. Failing to pay your property taxes or insurance on the home will definitely lead to a default too. Many older citizens have a massive quantity of equity in their houses. What are the needs to get a reverse mortgage? The home being mortgaged must be owner occupied. Often single family homes and little apartments and city houses are also suitable for a reverse mortgage. How will a reverse mortgage affect my estate? When the borrower of a reverse mortgage dies, the estate must pay back the loan or the proceeds of the sale of the home will pay back the loan.
Any remaining equity will be given to the successors of the estate. How can I am getting additional information on Reverse Mortgages? Contact any reputable broker to get additional information.
It may be sensible to consult an estate or estate planning lawyer to make certain a reverse mortgage is right for you.
HANS
Sep
16
Basic Reverse Mortgage FAQ
Filed Under Mortgage | Leave a Comment
Leon Cote asked:
A reverse mortgage is a loan against your house that you don’t have to repay for so long as you live there. It can be paid to you all at the same time, as a regular monthly advance, or at times and in amounts that you select. You pay the cash back and interest when you die, sell your house, or permanently move out of your house.
Who’s Eligible All owners of the home must make an application for the reverse mortgage and sign the loan papers. All borrowers must be at least 62 years old for most reverse mortgages. Owners sometimes must occupy the home as a principal residence ( where they live the bulk of the year ). Single family one-unit dwellings are eligible properties for all reverse mortgages. Some programs also accept 2-4 unit owner-occupied dwellings, together with some condominiums, cooperatives, planned unit developments, and made homes. Mobile houses are often not eligible. How they’re employed Reverse mortgage loans typically need no repayment for so long as you live in your house. But they must be paid back in full, including all interest and other charges, when the last living borrower dies, sells the home, or permanently moves away.
As you make no standard payments, the balance you owe grows larger over a period. As your debt grows bigger, the quantity of money you would have left after selling and clearing the loan ( your “equity” ) usually grows smaller. But you typically can’t owe more than your house’s worth at the time the loan is repaid. Reverse mortgage borrowers continue to have their houses. So you’re still in charge of property taxes, insurance, and repairs. If you fail to execute these responsibilities, your loan might become due and payable in full. What You Get These loans can be paid to you all at the same time in a single one-off sum of money, as a regular monthly loan advance or as a creditline letting you decide how much money to use and when to use it. Or you can select any mix of these payment plans. Some reverse mortgages are offered by state and local central authorities.
These “public sector” loans sometimes need to be used for categorical purposes, for example paying for house maintenance or property taxes. Other reverse mortgages are offered by banks, mortgage corporations, and savings associations. These “private sector” loans can be employed for any reason. The amount of money you can get from a personal sector reverse mortgage usually relies on your age, your house’s value and location, and the price of the loan. The best money amounts often go to the oldest borrowers living in the most costly houses on loans with the lowest costs. The quantity of money you can get also relies on the specific reverse mortgage plan or program you select. The variations in available loan amounts can change significantly from one plan to another.
Most owners get the biggest money advances from the federally insured Home Equity Conversion Mortgage ( HECM ). HECM loans frequently provide much bigger loan advances than other reverse mortgages.
What You Pay The lowest cost reverse mortgages are offered by state and local regimes. They sometimes have low or no loan charges, and the rates are generally low or moderate too. Non-public sector reverse mortgages are extremely costly, and include a number of costs. An application fee generally includes the price of an appraisal and a credit history. Other loan costs sometimes include an origination fee, closing costs, insurance, and a monthly servicing fee. These costs often can be paid with loan advances, which mean they are added to your loan balance ( the balance you owe ). Interest is due on all loan advances. Reverse mortgages are most pricey in the early years of the loan, and then become less dear over a period. The price tag can be really high in the near term, and is least expensive if you live longer than your life outlook. The federally insured Home Equity Conversion Mortgage ( HECM ) is in generally less costly than other personal sector reverse mortgages.
Buyers considering a personal sector reverse mortgage other than a HECM should punctiliously think about how much more it may cost before applying. Other articles in the fundamentals section of this site’s Reverse Mortgages info provide more details on measuring and comparing the final cost of these loans. Taxes, Estates, and Public Benefits Reverse mortgages might have tax results, affect suitability for help under Fed and State programs, and effect on the estate and successors of the householder.
.
JOEL
A reverse mortgage is a loan against your house that you don’t have to repay for so long as you live there. It can be paid to you all at the same time, as a regular monthly advance, or at times and in amounts that you select. You pay the cash back and interest when you die, sell your house, or permanently move out of your house.
Who’s Eligible All owners of the home must make an application for the reverse mortgage and sign the loan papers. All borrowers must be at least 62 years old for most reverse mortgages. Owners sometimes must occupy the home as a principal residence ( where they live the bulk of the year ). Single family one-unit dwellings are eligible properties for all reverse mortgages. Some programs also accept 2-4 unit owner-occupied dwellings, together with some condominiums, cooperatives, planned unit developments, and made homes. Mobile houses are often not eligible. How they’re employed Reverse mortgage loans typically need no repayment for so long as you live in your house. But they must be paid back in full, including all interest and other charges, when the last living borrower dies, sells the home, or permanently moves away.
As you make no standard payments, the balance you owe grows larger over a period. As your debt grows bigger, the quantity of money you would have left after selling and clearing the loan ( your “equity” ) usually grows smaller. But you typically can’t owe more than your house’s worth at the time the loan is repaid. Reverse mortgage borrowers continue to have their houses. So you’re still in charge of property taxes, insurance, and repairs. If you fail to execute these responsibilities, your loan might become due and payable in full. What You Get These loans can be paid to you all at the same time in a single one-off sum of money, as a regular monthly loan advance or as a creditline letting you decide how much money to use and when to use it. Or you can select any mix of these payment plans. Some reverse mortgages are offered by state and local central authorities.
These “public sector” loans sometimes need to be used for categorical purposes, for example paying for house maintenance or property taxes. Other reverse mortgages are offered by banks, mortgage corporations, and savings associations. These “private sector” loans can be employed for any reason. The amount of money you can get from a personal sector reverse mortgage usually relies on your age, your house’s value and location, and the price of the loan. The best money amounts often go to the oldest borrowers living in the most costly houses on loans with the lowest costs. The quantity of money you can get also relies on the specific reverse mortgage plan or program you select. The variations in available loan amounts can change significantly from one plan to another.
Most owners get the biggest money advances from the federally insured Home Equity Conversion Mortgage ( HECM ). HECM loans frequently provide much bigger loan advances than other reverse mortgages.
What You Pay The lowest cost reverse mortgages are offered by state and local regimes. They sometimes have low or no loan charges, and the rates are generally low or moderate too. Non-public sector reverse mortgages are extremely costly, and include a number of costs. An application fee generally includes the price of an appraisal and a credit history. Other loan costs sometimes include an origination fee, closing costs, insurance, and a monthly servicing fee. These costs often can be paid with loan advances, which mean they are added to your loan balance ( the balance you owe ). Interest is due on all loan advances. Reverse mortgages are most pricey in the early years of the loan, and then become less dear over a period. The price tag can be really high in the near term, and is least expensive if you live longer than your life outlook. The federally insured Home Equity Conversion Mortgage ( HECM ) is in generally less costly than other personal sector reverse mortgages.
Buyers considering a personal sector reverse mortgage other than a HECM should punctiliously think about how much more it may cost before applying. Other articles in the fundamentals section of this site’s Reverse Mortgages info provide more details on measuring and comparing the final cost of these loans. Taxes, Estates, and Public Benefits Reverse mortgages might have tax results, affect suitability for help under Fed and State programs, and effect on the estate and successors of the householder.
.
JOEL
Sep
6
FHA Streamlined Refinance FAQs
Filed Under Mortgage | Leave a Comment
justin narin asked:
If you already have an FHA loan and interest rates have fallen, or you have an adjustable-rate FHA mortgage and would like a fixed-rate mortgage, you may be eligible for an FHA Streamlined Refinance.
What is the Streamlined Refinance?
The FHA has permitted streamlined refinance loans since the 1980s. A streamlined refinance is the same as a conventional refinance, but with reduced paperwork. It does not eliminate all of the fees or costs associated with refinancing. Some fees and costs may be reduced or eliminated, however, because of the reduced paperwork and lower number of requirements that must be met.
What are the requirements to qualify for a streamlined FHA refinance?
To qualify for a streamlined refinance, you must meet the following basic qualifications:
* You already have an FHA-insured mortgage
* The mortgage payments are current
* You want to reduce your interest rate or monthly payments
* You don’t want a cash-out refinance
Can I get a no-cost FHA refinance?
Some lenders offer streamlined refinancing, however it simply means that you don’t pay cash out of your own pocket to cover the fees. Instead, the fees are bundled into the loan via a higher interest rate than would receive with a mortgage requiring cash. You could also opt to include the closing costs in the new mortgage balance, but you need to have sufficient equity in the house to cover those closing costs. You can’t refinance the home for more than it’s currently worth.
How do I pull out cash?
If you want to borrow against your equity, then you’ll either need to go through the full underwriting process to receive a new mortgage with a higher balance, or apply for a home equity loan.
Do I need an appraisal?
Streamlined refinancing can be done without an appraisal if you’re not increasing the original loan balance by including closing costs. If you do include the closing costs in the loan, then an appraisal is needed to determine whether there is sufficient value to cover them.
How do I apply?
Start by contacting your lender to confirm that they are still an FHA-approved lender and offer streamlined refinancing. If you’re able to refinance through your current lender, you may be able to avoid some fees, such as title insurance. If your lender doesn’t offer FHA refinancing, contact additional FHA-approved lenders for help refinancing.
How long does FHA refinancing take?
A streamlined refinance is usually takes much less time than either a new mortgage on a new home or a conventional refinance. Some can be closed in as little as two weeks, but times vary. Your lender can advise you about the timeframe and what is expected of you during the process.
How do I know if refinancing is right for me?
Only you can decide whether refinancing your mortgage is the right choice. If you currently have a high mortgage rate or an adjustable-rate mortgage that will soon adjust to a much higher rate, then refinancing could save you money. It may also be worthwhile if you can reduce the interest rate slightly and plan to stay in the home for several more years. However, if you plan to move in a few years, the costs of refinancing may be more than you would save by continuing to pay the mortgage at the current rate.
Can I do a streamlined refinance if my house is worth less than the loan balance?
It may be possible if you choose to pay costs at closing in order to avoid an appraisal, but only a lender can tell you whether you’re likely to qualify for a new loan in this circumstance.
The FHA refinance program has helped thousands of homeowners reduce their interest rates and mortgage payments quickly and easily. Contact a lender today to see if you qualify. For more articles on FHA Streamlined Refinance, visit: http://www.bills.com/fha-refinance/
LON
If you already have an FHA loan and interest rates have fallen, or you have an adjustable-rate FHA mortgage and would like a fixed-rate mortgage, you may be eligible for an FHA Streamlined Refinance.
What is the Streamlined Refinance?
The FHA has permitted streamlined refinance loans since the 1980s. A streamlined refinance is the same as a conventional refinance, but with reduced paperwork. It does not eliminate all of the fees or costs associated with refinancing. Some fees and costs may be reduced or eliminated, however, because of the reduced paperwork and lower number of requirements that must be met.
What are the requirements to qualify for a streamlined FHA refinance?
To qualify for a streamlined refinance, you must meet the following basic qualifications:
* You already have an FHA-insured mortgage
* The mortgage payments are current
* You want to reduce your interest rate or monthly payments
* You don’t want a cash-out refinance
Can I get a no-cost FHA refinance?
Some lenders offer streamlined refinancing, however it simply means that you don’t pay cash out of your own pocket to cover the fees. Instead, the fees are bundled into the loan via a higher interest rate than would receive with a mortgage requiring cash. You could also opt to include the closing costs in the new mortgage balance, but you need to have sufficient equity in the house to cover those closing costs. You can’t refinance the home for more than it’s currently worth.
How do I pull out cash?
If you want to borrow against your equity, then you’ll either need to go through the full underwriting process to receive a new mortgage with a higher balance, or apply for a home equity loan.
Do I need an appraisal?
Streamlined refinancing can be done without an appraisal if you’re not increasing the original loan balance by including closing costs. If you do include the closing costs in the loan, then an appraisal is needed to determine whether there is sufficient value to cover them.
How do I apply?
Start by contacting your lender to confirm that they are still an FHA-approved lender and offer streamlined refinancing. If you’re able to refinance through your current lender, you may be able to avoid some fees, such as title insurance. If your lender doesn’t offer FHA refinancing, contact additional FHA-approved lenders for help refinancing.
How long does FHA refinancing take?
A streamlined refinance is usually takes much less time than either a new mortgage on a new home or a conventional refinance. Some can be closed in as little as two weeks, but times vary. Your lender can advise you about the timeframe and what is expected of you during the process.
How do I know if refinancing is right for me?
Only you can decide whether refinancing your mortgage is the right choice. If you currently have a high mortgage rate or an adjustable-rate mortgage that will soon adjust to a much higher rate, then refinancing could save you money. It may also be worthwhile if you can reduce the interest rate slightly and plan to stay in the home for several more years. However, if you plan to move in a few years, the costs of refinancing may be more than you would save by continuing to pay the mortgage at the current rate.
Can I do a streamlined refinance if my house is worth less than the loan balance?
It may be possible if you choose to pay costs at closing in order to avoid an appraisal, but only a lender can tell you whether you’re likely to qualify for a new loan in this circumstance.
The FHA refinance program has helped thousands of homeowners reduce their interest rates and mortgage payments quickly and easily. Contact a lender today to see if you qualify. For more articles on FHA Streamlined Refinance, visit: http://www.bills.com/fha-refinance/
LON
Apr
18
Joseph Kenny asked:
If you are unsure about any part of your mortgage agreement, it is essential that you contact your solicitor. However, it you just need a simple explanation of some of the terms they use to describe the mortgage contract you may check down this list for a simple description of a word or phrase.
* APR, is an abbreviation of the phrase Annual Percentage Rate and will represent the figure that is the total amount you are being charged for the credit.
* Assignment, this is where legal rights to a property transferred to a third party such as a mortgage lender.
* Certificate of Title, is a document that will be prepared by a solicitor for the land, confirming all the details are in order prior to completion.
* Charge, this refers to the mortgage company having security against your house.
* Completion, this is the end of the transaction, when all the money is handed over and the legal side is completed.
* Contract, this is a legal agreement drawn up between the seller and the purchaser. Each party must sign the document, then, the obligation to sell the property and for the other party to buy it is legally binding.
* Conveyance, this document transfers the ownership of the land.
* Disbursements, these are the various amounts of money that your solicitor has to payout to many different people and organisations, for services they have provided in connection with the house transaction.
* Endowment, this is an insurance policy that when combined with the mortgage should provide for paying off the loan at the end of the mortgage, life.
* Equity, this is the difference between how much you owe on the mortgage, and how much the house is worth.
* Freehold, means that you own the land the house stands on.
* Ground rent, the amount you have to pay annually if you do not own the land that the house sits on.
* Interest rates, this relates to how much interest you are charged each month on your mortgage payment.
* Land Registry fee, this amount of money is paid to the government land Registry to pay to have the property registered in your name.
* Lease, this is a contract between you and the owner of the land if the house is not freehold.
* Local authorities search; this refers to the search made by the buyer’s solicitor at the local council offices. The intention of the search to find out every detail about the surrounding area. Such as, if the property is legally connected to the drains and especially any proposed planning situations that may affect the purchase of the house.
* Mortgage, the loan, by which will pay for your house.
* Mortgage offer, this document will tell you that the mortgage company is prepared to offer your mortgage and will give exact details of their offer.
* Remortgage, this is a new loan on a property that you already own.
* Retention, and amount of money back at the mortgage company until you have completed repairs to the property.
* Stamp duty, this is a tax imposed by the government that varies depending upon the price you paid for the property.
* Standard offer conditions, these are the terms under which the mortgage company offers to lend you money to buy your house.
* Title, this refers to your right to own the property and is controlled by the government.
* Title deeds, documents which prove that you your home which are recorded at the Land Registry.
* Transfer, a document that transfers details of the ownership of the property
* Transfer of equity, the process of adding and removing names from a mortgage document.
* Valuation report, this is a report prepared on behalf the person buying a house, and deals with the condition of the property, and relates to how much the mortgage company will be prepared to loan to the potential homebuyer.
BEN
If you are unsure about any part of your mortgage agreement, it is essential that you contact your solicitor. However, it you just need a simple explanation of some of the terms they use to describe the mortgage contract you may check down this list for a simple description of a word or phrase.
* APR, is an abbreviation of the phrase Annual Percentage Rate and will represent the figure that is the total amount you are being charged for the credit.
* Assignment, this is where legal rights to a property transferred to a third party such as a mortgage lender.
* Certificate of Title, is a document that will be prepared by a solicitor for the land, confirming all the details are in order prior to completion.
* Charge, this refers to the mortgage company having security against your house.
* Completion, this is the end of the transaction, when all the money is handed over and the legal side is completed.
* Contract, this is a legal agreement drawn up between the seller and the purchaser. Each party must sign the document, then, the obligation to sell the property and for the other party to buy it is legally binding.
* Conveyance, this document transfers the ownership of the land.
* Disbursements, these are the various amounts of money that your solicitor has to payout to many different people and organisations, for services they have provided in connection with the house transaction.
* Endowment, this is an insurance policy that when combined with the mortgage should provide for paying off the loan at the end of the mortgage, life.
* Equity, this is the difference between how much you owe on the mortgage, and how much the house is worth.
* Freehold, means that you own the land the house stands on.
* Ground rent, the amount you have to pay annually if you do not own the land that the house sits on.
* Interest rates, this relates to how much interest you are charged each month on your mortgage payment.
* Land Registry fee, this amount of money is paid to the government land Registry to pay to have the property registered in your name.
* Lease, this is a contract between you and the owner of the land if the house is not freehold.
* Local authorities search; this refers to the search made by the buyer’s solicitor at the local council offices. The intention of the search to find out every detail about the surrounding area. Such as, if the property is legally connected to the drains and especially any proposed planning situations that may affect the purchase of the house.
* Mortgage, the loan, by which will pay for your house.
* Mortgage offer, this document will tell you that the mortgage company is prepared to offer your mortgage and will give exact details of their offer.
* Remortgage, this is a new loan on a property that you already own.
* Retention, and amount of money back at the mortgage company until you have completed repairs to the property.
* Stamp duty, this is a tax imposed by the government that varies depending upon the price you paid for the property.
* Standard offer conditions, these are the terms under which the mortgage company offers to lend you money to buy your house.
* Title, this refers to your right to own the property and is controlled by the government.
* Title deeds, documents which prove that you your home which are recorded at the Land Registry.
* Transfer, a document that transfers details of the ownership of the property
* Transfer of equity, the process of adding and removing names from a mortgage document.
* Valuation report, this is a report prepared on behalf the person buying a house, and deals with the condition of the property, and relates to how much the mortgage company will be prepared to loan to the potential homebuyer.
BEN
Apr
14
Kevin Bilberry asked:
In Part 1 a general understanding of mortgages was explored. Part 2 investigates the many different types of mortgages which can generally be classified into two groups: changeable and static. Static allows you to budget more effectively as you know the figures that you will be dealing with each month. This raises the question of why so many people appeared to choose changeable and lose their homes as their rates zipped up.
It is difficult for many borrowers to resist the initial lower monthly repayments that are often offered on the changeable mortgages. This gives new home owners extra cash to repair and redecorate and sometimes an optimistic outlook can over-rule prudence. There are also genuine cases where a variable mortgage is advantageous; understanding mortgages can clarify these choices.
Mortgages have both similarities and differences; interestingly most of the similarities are favorable for the borrower.
-For instance you can usually move (called portering) a mortgage to a new property if you move house. This means that you will not have to pay a penalty for terminating the mortgage earlier than agreed.
-Another advantage is that often when you sell your house and do not want to keep the mortgage on it, the prospective buyer can ‘assume’ the balance of your mortgage; this can make it easier to sell.
-Renewal is automatic once you have been accepted into a mortgage scheme.
-You can usually pay off a lump sum every year on the anniversary of your mortgage date.
However, similarities aside, it is the differences between mortgages that are usually the deciding factors, and there is more variety of choice in the changeable or variable mortgages. These changeable mortgages come in several different forms, the most popular being:
Adjustable Rate Mortgages (ARMS) start at a low rate (perhaps it is a giveaway that this is called the teaser rate!) and moves up to a higher rate after an interim period, usually of six months. There are also steady and/or irregular increases, which make it difficult for the home owner to keep up. These increases are also difficult to estimate as they are calculated on a formula based on the Lender’s Index and Margin.
Two Step Mortgages lock the interest rate in for about seven to ten years; this later adjusts to a higher rate. This can be advantageous if you plan to stay in one place and know that your salary will increase drastically in the future i.e. if you are on an apprenticeship course).
Lender Buy Down is a similar idea, with the interest rate gradually increasing and can be practical for the same reasons as above. All the above mortgages start off with a lower monthly repayment which increases over time. Any of these mortgages could be subject to the whim of the financial markets and/or a Lender’s formula.
This means that they can change and if this means a big increase it could be insurmountable for the home owners. A mortgage broker can explain the positives or the negatives of a variable mortgage which will reflect your own particular set of circumstances.
One of the alternatives to the above choices and one which is easier to understand is a Fixed Rate Mortgage, sometimes called a ‘locked in rate’ mortgage which means that once the term has been agreed, your monthly payment will stay the same for the duration of the term or contract.
The contract can be for five years, or three or twenty or thirty. The interest rate will most likely be different for each term. A mortgage is usually amortized (completed) over a thirty year period, so you may have several terms in the life of your loan.
When you first start paying off a mortgage almost all of it is simply paying down the interest, but as the years pass, your monthly amount will start to pay off more of the principal and less of the interest.
This happens regardless of how many short or long terms you sign up for, as long as you are renewing each time with the same Lender. However, because of the high interest repayments in the beginning of a mortgage, it may be cheaper to rent if you plan on staying only two or three years in a new town.
With a mortgage that has a locked in interest rate, even though the rate at which you are paying down the balance of your property is changing, your monthly amount does not change because you have signed for a fixed rate of interest for a fixed time. This static payment can buy a large amount of peace of mind!
MAYNARD
In Part 1 a general understanding of mortgages was explored. Part 2 investigates the many different types of mortgages which can generally be classified into two groups: changeable and static. Static allows you to budget more effectively as you know the figures that you will be dealing with each month. This raises the question of why so many people appeared to choose changeable and lose their homes as their rates zipped up.
It is difficult for many borrowers to resist the initial lower monthly repayments that are often offered on the changeable mortgages. This gives new home owners extra cash to repair and redecorate and sometimes an optimistic outlook can over-rule prudence. There are also genuine cases where a variable mortgage is advantageous; understanding mortgages can clarify these choices.
Mortgages have both similarities and differences; interestingly most of the similarities are favorable for the borrower.
-For instance you can usually move (called portering) a mortgage to a new property if you move house. This means that you will not have to pay a penalty for terminating the mortgage earlier than agreed.
-Another advantage is that often when you sell your house and do not want to keep the mortgage on it, the prospective buyer can ‘assume’ the balance of your mortgage; this can make it easier to sell.
-Renewal is automatic once you have been accepted into a mortgage scheme.
-You can usually pay off a lump sum every year on the anniversary of your mortgage date.
However, similarities aside, it is the differences between mortgages that are usually the deciding factors, and there is more variety of choice in the changeable or variable mortgages. These changeable mortgages come in several different forms, the most popular being:
Adjustable Rate Mortgages (ARMS) start at a low rate (perhaps it is a giveaway that this is called the teaser rate!) and moves up to a higher rate after an interim period, usually of six months. There are also steady and/or irregular increases, which make it difficult for the home owner to keep up. These increases are also difficult to estimate as they are calculated on a formula based on the Lender’s Index and Margin.
Two Step Mortgages lock the interest rate in for about seven to ten years; this later adjusts to a higher rate. This can be advantageous if you plan to stay in one place and know that your salary will increase drastically in the future i.e. if you are on an apprenticeship course).
Lender Buy Down is a similar idea, with the interest rate gradually increasing and can be practical for the same reasons as above. All the above mortgages start off with a lower monthly repayment which increases over time. Any of these mortgages could be subject to the whim of the financial markets and/or a Lender’s formula.
This means that they can change and if this means a big increase it could be insurmountable for the home owners. A mortgage broker can explain the positives or the negatives of a variable mortgage which will reflect your own particular set of circumstances.
One of the alternatives to the above choices and one which is easier to understand is a Fixed Rate Mortgage, sometimes called a ‘locked in rate’ mortgage which means that once the term has been agreed, your monthly payment will stay the same for the duration of the term or contract.
The contract can be for five years, or three or twenty or thirty. The interest rate will most likely be different for each term. A mortgage is usually amortized (completed) over a thirty year period, so you may have several terms in the life of your loan.
When you first start paying off a mortgage almost all of it is simply paying down the interest, but as the years pass, your monthly amount will start to pay off more of the principal and less of the interest.
This happens regardless of how many short or long terms you sign up for, as long as you are renewing each time with the same Lender. However, because of the high interest repayments in the beginning of a mortgage, it may be cheaper to rent if you plan on staying only two or three years in a new town.
With a mortgage that has a locked in interest rate, even though the rate at which you are paying down the balance of your property is changing, your monthly amount does not change because you have signed for a fixed rate of interest for a fixed time. This static payment can buy a large amount of peace of mind!
MAYNARD
Apr
12
Kevin Bilberry asked:
Not all mortgages are created equal; this seems to be one lesson that we have all learned in the last two years, even if only indirectly. For those who have suffered through an unpaid mortgage and lost a home, the importance of small print need not be further emphasized.
There are few debts that can actually leave a family homeless and this possibility makes it critical that borrowers understand the terms of their mortgage.
A mortgage is just another name for a house-purchasing loan. The home that you are attempting to purchase will be the ‘guarantee’ for you to borrow the money. The Lender is paying for the house that you have chosen and he (she) is holding it in his possession as insurance until you have paid him back the full price plus agreed interest.
This means, of course that if you do not make the legally agreed payments then the Lender is permitted to take the home as you did not give him the money that he lent you to buy it.
It has not always been the case that Lenders have taken back ownership of a house, there are odd instances where the buyers have moved out and voluntarily given up their home. This may be because they did not put any of their own savings down as a deposit and the price of the house dipped drastically.
For instance, if they borrowed $300,000 to buy a house and the realty market says this house is now worth only $200,000, families have chosen to walk away. This is not advisable as it does adversely affect credit ratings etc.
So on the face of it, a mortgage system seems fair, you think? However, the first thing is that there can often be variables in the mortgage that you may not know about. These may never come to your attention, or you may have skimmed over their importance, but in troubled times they may have dire consequences.
Secondly, any time you are required to lie to get a mortgage (and you can get away with it) a red flag should go up in your mind’s eye.
The Financial Services Authority has initiated what they called ‘one of the biggest crackdowns in history’ after being alerted to systematic loan abuse. They have so far investigated the ethical practices of 345 mortgage firms in the USA. Some have been closed down or fined and some have been asked to produce past records.
Although you will almost certainly deal with one of the thousands of Lenders out there who only want to do honest business, it is still smart to protect yourself by becoming better informed about mortgages.
There are many different types of mortgages but they fall into two main categories: the ones that change and the ones that do not change. Obviously if you choose one that does not change then you probably will feel safer as you will know what your budget will be – so why doesn’t this happen?
Well, there is a temptation to choose the changeable one because it starts off at a lower rate of interest and this means you will not be so broke moving into your new home. There are also good reasons why borrowers in certain situations will benefit from one of the variable choices.
Similarities and differences of mortgage types are explained in ‘Meandering Thru The Mortgage Maze’ – Part 2.
WILFORD
Not all mortgages are created equal; this seems to be one lesson that we have all learned in the last two years, even if only indirectly. For those who have suffered through an unpaid mortgage and lost a home, the importance of small print need not be further emphasized.
There are few debts that can actually leave a family homeless and this possibility makes it critical that borrowers understand the terms of their mortgage.
A mortgage is just another name for a house-purchasing loan. The home that you are attempting to purchase will be the ‘guarantee’ for you to borrow the money. The Lender is paying for the house that you have chosen and he (she) is holding it in his possession as insurance until you have paid him back the full price plus agreed interest.
This means, of course that if you do not make the legally agreed payments then the Lender is permitted to take the home as you did not give him the money that he lent you to buy it.
It has not always been the case that Lenders have taken back ownership of a house, there are odd instances where the buyers have moved out and voluntarily given up their home. This may be because they did not put any of their own savings down as a deposit and the price of the house dipped drastically.
For instance, if they borrowed $300,000 to buy a house and the realty market says this house is now worth only $200,000, families have chosen to walk away. This is not advisable as it does adversely affect credit ratings etc.
So on the face of it, a mortgage system seems fair, you think? However, the first thing is that there can often be variables in the mortgage that you may not know about. These may never come to your attention, or you may have skimmed over their importance, but in troubled times they may have dire consequences.
Secondly, any time you are required to lie to get a mortgage (and you can get away with it) a red flag should go up in your mind’s eye.
The Financial Services Authority has initiated what they called ‘one of the biggest crackdowns in history’ after being alerted to systematic loan abuse. They have so far investigated the ethical practices of 345 mortgage firms in the USA. Some have been closed down or fined and some have been asked to produce past records.
Although you will almost certainly deal with one of the thousands of Lenders out there who only want to do honest business, it is still smart to protect yourself by becoming better informed about mortgages.
There are many different types of mortgages but they fall into two main categories: the ones that change and the ones that do not change. Obviously if you choose one that does not change then you probably will feel safer as you will know what your budget will be – so why doesn’t this happen?
Well, there is a temptation to choose the changeable one because it starts off at a lower rate of interest and this means you will not be so broke moving into your new home. There are also good reasons why borrowers in certain situations will benefit from one of the variable choices.
Similarities and differences of mortgage types are explained in ‘Meandering Thru The Mortgage Maze’ – Part 2.
WILFORD