Tag Archive | "reverse mortgage"

Does Reverse Mortgage Really Work?

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Although reverse mortgage has existed since 1960s, but recently it has started appearing as a very feasible debt instrument for public. But the main question is how reverse mortgages can be very harmful to people in different situations in spite of its convenience.

Defining Reverse Mortgage:

Reverse Mortgage

The reverse mortgage is defined as the mortgage that gives homeowners the ability to have the equity in the homes devoid of the regular payments each month. The both options of either a single lump sum or a monthly payment of the proceeds exists that is very useful for the customers who need to pay medical or other such bills.

Suitability of Reverse Mortgage

It presents the advantages below for the people that fit in its criteria.

  • Absence of the downside risk  for a homeowner
  • No Constraint on free of tax funds
  • Absence of credentials of income
  • Stretchable repayment choices

In loads of cases the customers who plan to live in their house until the time of their death are the suitable applicant for whom it is feasible to lessen the income from selling off their homes by the amount of mortgages. Along with this, clients that look for decreasing the taxable domains are also the ones involved in this type of loan.

There are certain obligations for a reverse mortgage. For instance, many of the reverse mortgages obligate the homeowners to maintain a fine condition of their homes until the length of the term. It gets difficult for those who have a health and other physical problem of the kind and all those who are unable to meet this clause then are likely to face foreclosure. Furthermore, those who live on a fixed income; it gets problematic for them to maintain the condition. Thus, to know exactly what a lender needs in terms of maintenance and upkeep it’s crucial for a reverse mortgage to review this problem. Read the full story

Reverse Mortgage for Retirees

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You can convert the equity in your home into cash if you are a 62 year older retiree or own your personal home. In simpler words, you can take out a substantial amount of loan against the equity in your home with the help of a reverse mortgage loan. You will not be required to pay off the loan as long as you live in your home and don’t sell it. You can increase your existing funds for your retirement period with the help of reverse mortgage.

Working of Reverse Mortgage

Reverse Mortgage for Retirees

When you take out reverse mortgage, your lender pays you on the basis of the percentage of the equity in your home. If you lose the ownership of your home your lender sells out your property to recover the payments that he/she had paid to you.

Types of Reverse Mortgage

There are various types of reverse mortgage loans. Some of these are offered by private lending institutions and some are offered by federal government or state. All these types share the features listed below.

  • Larger loan amounts are offered to elder homeowners. Larger loans are also provided for the more expensive homes.
  • A reverse mortgage loan must always be a primary loan against the equity in the home. Other lending institutions must be paid off or agree to supplement their debts to the primary loan carrier.
  • The cost of the loan may include the financing fees.
  • If you fail to keep the possession of your property in your hands then your lender may ask you to make repayments.

Home Equity Conversion Mortgage

This type of reverse mortgage is insured by federal government and it is the commonest type of reverse mortgage loan. Read the full story

A Safe Haven for Real Estate Investors-Canada

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Canada is a new frontier that real estate investors are exploring. The laws are quite liberal, in the sense that you do not have to be a Canadian resident to own property in Canada. The business can be quite profitable if you understand the laws fully and act accordingly.

Citizenship or residency is not a requirement for owning property in Canada. You can even own property in Canada if you are a non-resident. You will only have to pay the annual tax returns. You can also own a Canadian property on a temporary basis. You only have to comply with the immigration requirements if you want to become a permanent Canadian resident.

Rental Property Tax Values:

Rental Property Tax Values

A property owner is required to have twenty-five percent of the gross property rental income remitted each year. This is due to Canadian Income Tax Act. Non-residents can opt for a second plan. They can fill out an NR6 form and pay twenty-five percent of the net rental income after expenses. If the property incurs losses, then the previous taxes can be collected back.

It matters in taxes if you are a partner or co-owner. It also depends on whether your property is considered business or rental.

Property Tax Values:

There is a provincial property tax when you buy your property. This tax is different for different provinces. You can be exempted by these if you are buying a first property in Canada. There are also annual property taxes by the municipalities. There is also the federal Goods and Services Tax for the purchase of new homes.

Loan (Home Equity):

For a residential property in Canada, you can get your home equity loans with a home equity line of credit (HELOC) or a reverse mortgage.

A HELOC offers a secure loan for your property or a credit line. It is a second mortgage on your home. It is a far more flexible option than the regular mortgage. You can make the payment at any time. However, the interest rates are a little bit higher than those of conventional mortgages.

A reverse mortgage is an ideal option for those over the age of sixty. It allows the homeowner to with draw payments regularly. These payments should total up to be forty percent of the current appraised value of the house. These proceeds are all free of taxes. Read the full story

Drawbacks of Reverse Mortgage

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Reverse mortgage is the ideal tool for retired or elderly citizens to take out an income in any form i.e., installments or lump sum by putting equity which they have raised in their homes. It is really helpful for elderly citizens who are in great need of income to meet their everyday expenses, but still it has some drawbacks. These drawbacks are listed below:

High Fees & Charges

Reverse Mortgage

Individuals taking out reverse mortgage loan putting the equity on their home, but still banks charge them a high fee to initiate their transactions. In reality, ReverseMortgage.Org stated that as a portion of a reverse mortgage, homeowners may sometimes be required to pay of an initiation fee that is $2,000 or 2% of the total amount of loan. Many homeowners add this fee into the amount of loan and pay off it with interest on loan over the term of loan.

In addition to this fee, there are several other fees that homeowners are required to pay off. These fees include appraisal fee that can be of several hundred dollars, a recording and credit report charge that is about $200, a flood certification and a pest inspection fee that is about $150. Homeowners may be responsible to buy mortgage insurance coverage and for this they have to pay off a service fee that ranges from $30 to 435 per month.

Transfer of Your Family Home to Your Children

Usually parents want to pass their family home onto their offsprings. However, with reverse mortgage even though the lenders do not take the home’s title, borrower has to pay off the mortgage within a given period of time with interest. In most of the cases, borrowers repay the loan by selling their home and after that they turn over the proceeds or a part to their bank.

Many families buy an insurance coverage on the homeowner and they use their adult child or the lender as the beneficiary. This strategy helps such families to repay the bank without having to sell their home upon the death of the homeowner. It is advisable to you to consult with an authentic and expert insurance agent to find out the best option to make sure that if such insurance policy is good enough to fulfill the outstanding debt.

Affect on Future Financing Abilities

An individual is said to be creating a big liability when they start a reverse mortgage. It is because they have to repay the loan with interest. However, many borrowers do not realize that they are more likely to hurt their future financing ability by establishing a reverse mortgage.

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Reverse Loan Rates

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If you as a senior is willing to refinance your home with the reverse home loan than you should know about the two different interest rates on that loan. The only available loan variant at the current time is the HECM reverse home loan. You may already be aware that usually the HECM loans are supported by the Federal Housing Administration. This feature of HECM loan provides great protection to seniors. There are certain facts about reverse mortgage loans, which you should be aware of and some of these facts are given below.

First Reverse Loan Rate

First Reverse Loan Rate

These rates are also referred to as the Current or Initial Rate. The HECM loan requires its senior borrowers to the buy the mortgage coverage. This insurance has its cost that is eventually added to the senior’s account. A senior has to select between a monthly and annually interest rate adjustment period for his/her loan. This adjustment period is non-variable and borrower cannot request to change it later.

Expected Interest Rate

In the reverse mortgage loan, expected rates are used in the event when the maximum amount of the loan that is being borrowed is calculated. The expected rate is inversely proportional to the borrowing amount. In other words, lower expected means that there will be bigger borrowing amount available for the borrower. The expected are equally to the ten years US Treasury Rate that are added by the lenders margin.

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Advantages of Reverse Mortgage

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There comes a point in life where you need to save enough for your post retirement period. This is essential for all those serving in the service sector or serving their country. The post retirement period is one where families live on pensions and other funds which they might have saved. This might include a home which is the first and foremost priority for the elderly. The reason for this is that every person has to retire one day as its inevitable.

Reverse Mortgage

During the post retirement period, when a family owns a home, then they might consider reverse mortgage. The reason for is that their incomes are so low that paying for the mortgage payments because a difficult task. Therefore going through the process of reverse mortgage would help making their life easier. There are various advantages which are linked with reverse mortgage and are explained below.

Qualification Requirement

Since a person who has the mortgage running on their name is an elderly person then at that age they would have the enough qualification required for this process to go through. The process reverse mortgage does not require anything fancy as its requirements are very basic and are easily met by those facing retirement or already retired. The entire process undertakes the age of the person and the property they own while it ignores their income.

Possession of the Property

The most important aspect which is also considered to be an advantage of reverse mortgage is that the person gets to keep their house. For instance, if a person does not have adequate amounts of funds to pay for their mortgage then their lender is not eligible for forcing them to sell their property to pay the loan amount back.

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Advantages & Disadvantages of Reverse Mortgage

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The advantages and disadvantages of reverse mortgage have become favorite topic in the United States. This is due to its increased demand. This home loan is specially designed for the senior citizens of United States. To take out this mortgage, you must be 62 or more years of age. This mortgage provides financial aid to the senior citizens. The amount which is gained from this loan can be used for various things such as; you can invest it to home renovation, to raise your living standards etc. Due to all these things, people are now more interested in taking out this loan. You might find them asking about the advantages and disadvantages of reverse mortgage loan. Before knowing its pros and cons, you must know what reverse mortgage is.

Reverse Mortgage or Long Life Mortgage

Reverse mortgage is also referred to as the long life mortgage. It is a loan for citizen aged 62 years or above and they possess houses. Another type of loan is called the Home Equity Conversion Mortgage (HECM) that is federally insured.

Structure of Reverse Mortgage

With reverse mortgage loans, borrowers are not required to make payments to the lenders. Amount of interest is also accumulated on property and lien on it. It is necessary for you to pay off all other liabilities before talking out reverse mortgage loan. The maximum amount of loan that you can borrow with reverse mortgage is $625,000 regardless of the value of the property. The mark up value depends on the appraisal value and mode of loan processing.

Benefits of Reverse Mortgage

  • It is one of the best financial tools for senior citizens to meet their financial needs.
  • Senior homeowner can have lump sum amount of money, credit line or via monthly payments.
  • There are no periodic or monthly payments associated with reverse mortgage.
  • There are no tough and strict requirements to qualify for the loan. That’s because credit score and income of homeowner doesn’t matter. Read the full story

Reverse Mortgage

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A reverse mortgage also known as a lifetime mortgage that is specially applicable to senior citizens who are to use it as a release of the home equity in the form of a lump sum taken from the bank. Reverse mortgage does not enforce a person to repay back the loan, provided he lives there till the day he dies or he leaves the house. When he dies, his house is sold and the money goes back to the loan, or in the second option, when he leaves the house, he has to pay back the loan.


When taking the reverse mortgage, one has to research on many things and also understand the requirements. The initial condition of applying for  a reverse mortgage is that the citizen must be of age 62 and above. The older the lender’s age is, the easier it is for him to qualify for a reverse mortgage.

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Comparing Mortgages

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In order to compare mortgages, one can find the best deal on a home loan among various choices in an ever growing and lending market. The rates of mortgage can basically vary widely therefore in order to learn that how to compare the rates of mortgage can also save a lot of money. When comparing the mortgages, the home buyers should begin researching the current interest rates. Because these rates can usually fluctuate widely over around thirty day period by watching the current mortgage market trends which can help all the consumers on the best deals. If the interest rate is lower then the monthly payment will also be lower.

All the loan shoppers should also try to take some time in order to contact with several lenders. Then try to compare the mortgage options from the commercial banks, from the credit unions, the mortgage companies, and even by some mortgage brokers. The rates of all these different institutions also vary and it therefore affects the results.

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Things You should Know about Reverse Mortgage

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A reverse mortgage or lifetime mortgage is a type of loan available to senior people, allowing them to transfer a portion of the home equity in to cash. This can be taken either in one go or multiple payments, which ever suits you. reverse mortgage

The money that you have built up in years, by paying the home mortgage payments is paid back to you. The repay of this loan continues till the home remains your principal residence.

Moreover, you can remain in your home, even if you live longer than the life of the loan. The lender cannot take your home away from you. You do not even need to repay the loan by the time you or one of the borrowers continues to live in the house, and keeps property taxes and insurance up to date.

If you decide to sell your home, then either you or your estate will repay the cash you received from the reverse mortgage plus interest and other fees, to the lender. The remaining equity in your home, if any, belongs to you or to your heirs.

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