The reverse mortgage is the type of mortgage loan that a homeowner can borrow against the value of his/her home. There is no requirement of repayment of mortgage till the homeowner dies or the home is sold. After accounting for the initial loan amount, and other important factors, the transaction is structured so that the loan amount does not exceed the home value over the life of the loan. There are many mortgage companies those provide such mortgage loans. Due to the increasing demands of people, there has been emergence of many private mortgage providers. Hence, when you are applying for the mortgage, it is important to make necessary inquiry for the reputation of the loan provider or you may end in trouble.
Loans are required for satisfying the immediate needs of the people. With the help of the mortgage loans, they get the complete amount at a time for fulfilling their sudden demands and they can pay back the loan amount later with the charge of some pre-decided interest rates. Reverse mortgage is one such type of mortgage that is given to senior citizens above the age of 62. One doesn't have to repay the loan amount till he dies or sells the home.
To be eligible for the reverse mortgage loan, the person should possess his own house and he should be aged more than 62. He should have the single family home or a 1-4 unit home with one unit occupied by the borrower.
Reverse Mortgage
Reverse mortgage is the income that people can strike into for their retirement. Its major advantage is that the loan provider will not check the borrower's credit history for lending the loan as borrower doesn't have to make any payments. As the home serves as the guarantee for the mortgage loan, it is sold for repaying the loan amount after the owners death.
Reverse Mortgage Features
Any house owner above the age of 62 is eligible for getting the reverse mortgage loan. The loan amount is 60% of the total value of your home
The maximum loan period for the property mortgage is 15 years as decided by the bank or a housing finance company.
Amount received from the reverse mortgage is considered as loan and not as income. Hence you will not be charged for any tax amount on such loan.
The reverse mortgage rates are fixed or floating. Hence, they will vary according to the market condition and depend on the interest rate chosen by the borrower.
The reverse mortgage loan can be in the name of two borrowers (generally husband and wife). If any one of the spouses dies, the other can still continue to live in the house. If both of them die, bank provides two options for their heirs? Either they can settle the entire loan and retain the house or bank will sell the house, settle the loan and give the remaining share to the heirs.
This kind of mortgage loans are best for the people possessing homes but don't have anyone to care for them. Such loans can help to fulfill their needs when they lose their earning ability.
Reverse Mortgage and Why You Should Think Twice
A reverse mortgage is a loan secured by a house, but unlike a conventional mortgage that decreases over time, a reverse mortgage increases over time.
Reverse mortgages are designed for older homeowners who have a house with equity, and they want to unlock that equity and turn it into cash so they can use it for other purposes, like home repair or to pay off other debts.
With a reverse mortgage the homeowner borrows money, but does not have to repay it as long as they live in their house, so it can be used as a form of debt consolidation.
Each month interest is added to the principal amount of the loan, and when the homeowner moves, they either repay the loan, or the house is sold and the proceeds go to the reverse mortgage lender.
While a reverse mortgage may be a good idea for some people, here are five reasons a reverse mortgage may not be a good idea for debt consolidation loan purposes:
First, reverse mortgages are much more expensive than traditional mortgages, so a traditional mortgage may be a better method of debt consolidation.
Second, reverse mortgages are a form of debt; many older people want to avoid debt, particularly as they get older, so repaying debt may be a better option than debt consolidation.
Third, reverse mortgages must be paid off upon the death of the homeowner, or if the borrower has not lived in the home for 12 months. This could be an issue if the borrower is placed in a nursing home and then recovers, only to find the home sold.
Fourth, while regular Social Security and Medicare benefits are not effected, other programs such as Medicaid and Supplemental Security Income (SSI) may be affected.
Finally, there are significant up front costs, so reverse mortgage are generally only a good idea for people who intend to live in their homes for at least five years
Reverse mortgages are designed for older homeowners who have a house with equity, and they want to unlock that equity and turn it into cash so they can use it for other purposes, like home repair or to pay off other debts.
With a reverse mortgage the homeowner borrows money, but does not have to repay it as long as they live in their house, so it can be used as a form of debt consolidation.
Each month interest is added to the principal amount of the loan, and when the homeowner moves, they either repay the loan, or the house is sold and the proceeds go to the reverse mortgage lender.
While a reverse mortgage may be a good idea for some people, here are five reasons a reverse mortgage may not be a good idea for debt consolidation loan purposes:
First, reverse mortgages are much more expensive than traditional mortgages, so a traditional mortgage may be a better method of debt consolidation.
Second, reverse mortgages are a form of debt; many older people want to avoid debt, particularly as they get older, so repaying debt may be a better option than debt consolidation.
Third, reverse mortgages must be paid off upon the death of the homeowner, or if the borrower has not lived in the home for 12 months. This could be an issue if the borrower is placed in a nursing home and then recovers, only to find the home sold.
Fourth, while regular Social Security and Medicare benefits are not effected, other programs such as Medicaid and Supplemental Security Income (SSI) may be affected.
Finally, there are significant up front costs, so reverse mortgage are generally only a good idea for people who intend to live in their homes for at least five years
Mortgage Refinancing
Mortgage is a long term loan and the mortgage monthly payments form a major monthly expense. A lower mortgage rate means lower monthly mortgage payments. This is one reason why people hunt for low interest rates on a mortgage.
As we know, there are two types of mortgage rates i.e. fixed and floating, and different people prefer different types of rate. Again, the prevailing market rate keeps changing all the time. So it's quite possible that you entered a mortgage at a rate that is higher than the current rate. This is when you start thinking of mortgage refinancing. By mortgage refinancing we mean full payment of the current mortgage loan by entering into a new mortgage loan at a lower rate. So mortgage refinancing starts making sense as soon as the difference in the mortgage rates becomes significant (say 1.50-2% points) i.e. prevailing market rate comes down significantly as compared to the mortgage rate on your current mortgage.
Mortgage refinancing decision would, of course, also depend on the remaining term of your mortgage (for mortgage refinancing would make no sense if you had just a short period of say 4-5 years remaining on your current mortgage). These criteria for mortgage refinancing are based on the various costs associated with mortgage refinancing. These mortgage refinancing costs include prepayment costs for the current mortgage, closing costs of the new mortgage and other fees etc. Generally, people use mortgage refinancing as a tool to move from a higher adjustable rate mortgage to a lower fixed rate mortgage. Though the reverse is possible too in some cases but adjustable rate mortgage to fixed rate mortgage is generally the case.
Another reason for mortgage refinancing is 'need for money'. So, if you have built a significant home equity, you can use mortgage refinancing to get a home mortgage loan that will generate cash for you (by bartering your home equity). This money generated from mortgage refinance can be used for various purposes like financing the education of children, debt consolidation or home renovation. Debt consolidation is one big reason for mortgage refinancing. You can use mortgage refinance for creating money to get rid of high interest debts (like credit card debt, personal loans etc) and hence save money and your credit rating too.
By mortgage refinancing you can save thousands of dollars in terms of the total interest you pay over the term of loan. So mortgage refinancing is surely a good option but must be exercised only after proper evaluation of the situation and of your own needs.
As we know, there are two types of mortgage rates i.e. fixed and floating, and different people prefer different types of rate. Again, the prevailing market rate keeps changing all the time. So it's quite possible that you entered a mortgage at a rate that is higher than the current rate. This is when you start thinking of mortgage refinancing. By mortgage refinancing we mean full payment of the current mortgage loan by entering into a new mortgage loan at a lower rate. So mortgage refinancing starts making sense as soon as the difference in the mortgage rates becomes significant (say 1.50-2% points) i.e. prevailing market rate comes down significantly as compared to the mortgage rate on your current mortgage.
Mortgage refinancing decision would, of course, also depend on the remaining term of your mortgage (for mortgage refinancing would make no sense if you had just a short period of say 4-5 years remaining on your current mortgage). These criteria for mortgage refinancing are based on the various costs associated with mortgage refinancing. These mortgage refinancing costs include prepayment costs for the current mortgage, closing costs of the new mortgage and other fees etc. Generally, people use mortgage refinancing as a tool to move from a higher adjustable rate mortgage to a lower fixed rate mortgage. Though the reverse is possible too in some cases but adjustable rate mortgage to fixed rate mortgage is generally the case.
Another reason for mortgage refinancing is 'need for money'. So, if you have built a significant home equity, you can use mortgage refinancing to get a home mortgage loan that will generate cash for you (by bartering your home equity). This money generated from mortgage refinance can be used for various purposes like financing the education of children, debt consolidation or home renovation. Debt consolidation is one big reason for mortgage refinancing. You can use mortgage refinance for creating money to get rid of high interest debts (like credit card debt, personal loans etc) and hence save money and your credit rating too.
By mortgage refinancing you can save thousands of dollars in terms of the total interest you pay over the term of loan. So mortgage refinancing is surely a good option but must be exercised only after proper evaluation of the situation and of your own needs.
5 Good Reasons To Consider Mortgage Refinancing
Here's a great article by Ashton Field
Mortgage refinancing may be a great opportunity to restructure your finances and raise much needed money for home improvements or a large family expense such as a wedding. The mortgage refinancing market is a very competitive market at the moment. People no longer keep a mortgage until it has been fully paid off. Here we take a look at the various reasons for mortgage refinancing and the options on the market available to you today. So what are some of the reasons for thinking about mortgage refinancing?
To 'fix' a lower interest rate.
As you know, interest rates are at an all time low at the moment. However, a few mortgage experts are predicting that rates will begin to rise in the coming months and years. This obviously means more expensive mortgage repayments. By remortgaging your variable rate mortgage to a fixed rate mortgage refinancing you can protect your repayments against any rises in the interest rate for several years to come.
To find a mortgage better deal.
Is your current mortgage rate the best one available ? The market is very competitive these days because so few people are considering mortgage refinancing compared with past years. Mortgage refinancing providers and lenders are very keen to attract new customers by offering special offers to those who mortgage refinancing with them. As well as a lower interest rate and therefore lower monthly repayments, remortgaging could offer special deals such as no repayments for three months, money saving vouchers, cash back offers , free days out, leisure deals and other 'freebies' depending on the provider you choose.
To consolidate debt.
Today, we as a nation and indeed worldwide are in debt to a level never seen before. Even Governments are not immune! Easy access to relatively cheap credit providing the temptation to 'live now and pay later' has fueled this trend. However the money must be repaid eventually. Credit cards are a very expensive way of 'long term' borrowing. Taking out a mortgage refinancing which is big enough to cover your mortgage and your other loans and credit cards will help your finances. This usually leaves you with a smaller single monthly repayment to make which is ideal. This is the aim!
To change your mortgage type
What might have been an ideal mortgage a few years ago when you initially took out the mortgage might not be the most suitable for your current circumstances. You may wish to change from an interest-only mortgage to a capital repayment one. You might want to take advantage of some of the more recent features of mortgages such as flexible payments or offsetting. Mortgage refinancing can give you the chance to choose a package which suits you current needs.
To Release Equity
As house prices have increased over the past two decades or so, some people find they have a large amount of equity in their home - the difference between how much their house is worth and what the current outstanding mortgage balance is. Taking out a mortgage refinancing will pay off your current mortgage and also give you some extra money. This is an effective way of unlocking some stored capital, providing you with cash for home improvements, a holiday, wedding, or any large expense. It is very often cheaper to raise the money with mortgage refinancing than, for example, by taking out a loan.
In Summary
Mortgage refinancing may seem like the perfect way forward for releasing money and restructuring your finances. It is essential to seek the advice of a properly qualified mortgage advisor if you are unsure and arm yourself with all the information you need to make the right decision for you. It is very important to remember that the decision to mortgage refinancing is to be taken seriously. You could be putting your home at risk if you make the wrong decisions now. There are many mortgage refinancing advisors and mortgage refinancing companies available so do your homework and shop around. The ball is in the customer's court at the moment so make the most of it.
Mortgage refinancing may be a great opportunity to restructure your finances and raise much needed money for home improvements or a large family expense such as a wedding. The mortgage refinancing market is a very competitive market at the moment. People no longer keep a mortgage until it has been fully paid off. Here we take a look at the various reasons for mortgage refinancing and the options on the market available to you today. So what are some of the reasons for thinking about mortgage refinancing?
To 'fix' a lower interest rate.
As you know, interest rates are at an all time low at the moment. However, a few mortgage experts are predicting that rates will begin to rise in the coming months and years. This obviously means more expensive mortgage repayments. By remortgaging your variable rate mortgage to a fixed rate mortgage refinancing you can protect your repayments against any rises in the interest rate for several years to come.
To find a mortgage better deal.
Is your current mortgage rate the best one available ? The market is very competitive these days because so few people are considering mortgage refinancing compared with past years. Mortgage refinancing providers and lenders are very keen to attract new customers by offering special offers to those who mortgage refinancing with them. As well as a lower interest rate and therefore lower monthly repayments, remortgaging could offer special deals such as no repayments for three months, money saving vouchers, cash back offers , free days out, leisure deals and other 'freebies' depending on the provider you choose.
To consolidate debt.
Today, we as a nation and indeed worldwide are in debt to a level never seen before. Even Governments are not immune! Easy access to relatively cheap credit providing the temptation to 'live now and pay later' has fueled this trend. However the money must be repaid eventually. Credit cards are a very expensive way of 'long term' borrowing. Taking out a mortgage refinancing which is big enough to cover your mortgage and your other loans and credit cards will help your finances. This usually leaves you with a smaller single monthly repayment to make which is ideal. This is the aim!
To change your mortgage type
What might have been an ideal mortgage a few years ago when you initially took out the mortgage might not be the most suitable for your current circumstances. You may wish to change from an interest-only mortgage to a capital repayment one. You might want to take advantage of some of the more recent features of mortgages such as flexible payments or offsetting. Mortgage refinancing can give you the chance to choose a package which suits you current needs.
To Release Equity
As house prices have increased over the past two decades or so, some people find they have a large amount of equity in their home - the difference between how much their house is worth and what the current outstanding mortgage balance is. Taking out a mortgage refinancing will pay off your current mortgage and also give you some extra money. This is an effective way of unlocking some stored capital, providing you with cash for home improvements, a holiday, wedding, or any large expense. It is very often cheaper to raise the money with mortgage refinancing than, for example, by taking out a loan.
In Summary
Mortgage refinancing may seem like the perfect way forward for releasing money and restructuring your finances. It is essential to seek the advice of a properly qualified mortgage advisor if you are unsure and arm yourself with all the information you need to make the right decision for you. It is very important to remember that the decision to mortgage refinancing is to be taken seriously. You could be putting your home at risk if you make the wrong decisions now. There are many mortgage refinancing advisors and mortgage refinancing companies available so do your homework and shop around. The ball is in the customer's court at the moment so make the most of it.
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