If you are researching mortgages online, it is likely that you will come across a thing known as a mortgage calculator. Mortgage calculators can be found on a number of websites. Many of these websites are run by mortgage lenders and others are run by those who just wish to supply internet users with valuable information. If you have never used a mortgage calculator before, you may be wondering exactly what one can do for you.
Are you a senior homeowner looking for a way to get extra funds during your retirement years? Well, you may have heard about a reverse mortgage, but are wondering how does a reverse mortgage work? Here's a closer look at the basics to help you know if a reverse mortgage is right for you.
There's no doubt that reverse mortgage loans have become increasingly popular today. You may have seen the growing number of commercials by lenders promoting these home loans, but exactly what is a reverse mortgage?
What Is A Reverse Mortgage?
A reverse mortgage is a unique loan program available to seniors over 62 that lend you the equity in your home. But, unlike a regular home equity loan or line of credit, you do not make loan payments or pay back the loan until you move from your home, sell it outright, or pass away.
The reverse mortgage loan will never be a burden that is passed onto your heirs because the loan will automatically be paid off from the sale of your home.
The amount of money that is available to you with this type of loan is based upon the amount of equity in your home among other factors. Government regulations also cap the total amount that can be loaned to approximately $200,000. Fannie Mae offers a reverse mortgage loan program that increases this amount to $400,000.
Since your home is probably your largest single investment, it's smart to know more about reverse mortgages, and decide if one is right for you. Reverse Mortgages are not for everyone, but everyone 62 years or older should know what a reverse mortgage can do for them. Reverse mortgages offer a unique way to move forward into your retirement with extra income. They Can Enhance Your Retirement; people may want to consider the reverse mortgage as a way to generate cash flow. As they are becoming more and more popular, all senior citizens should understand how they work in order to make the right financial decisions.
What Is A Reverse Mortgage
Reverse mortgages are a special type of home loan that lets a homeowner convert the equity in his/her home into cash; they vary considerably in features, benefits, and costs. Reverse Mortgages are even more complicated than conventional mortgages and the consequences of various options are not always obvious up front. Reverse mortgages have been seen as a way to help seniors who are asset rich but cash poor remain in their homes and cover medical bills, home upkeep and daily living costs. Reverse mortgages differ from home equity loans in that most reverse mortgages do not require any repayment of principal, interest, or servicing fees as long as you live in the home.
What about the Interest Rate
I came across an article in several newspapers today referencing a report from the Center for Responsible Lending. The report, dated November 13, 2007, talks about the "spillover" effect from the subprime mortgage meltdown.
While the direct effects of the subprime mortgage crisis is that millions of homeowners will lose their homes to foreclosure, the indirect, or spillover, effect of the subprime crisis is what will happen to property values as a result of all of these foreclosures.
The key findings of the report were as follows:
a) 44.5 million neighboring homes will experience devaluation because of subprime foreclosures that take place nearby.
b) The total decline in house values and tax base from nearby foreclosures will be $223 billion.
c) Homeowners living near foreclosed properties will see their property values decrease $5,000 on average.
As predicted, it's another recording breaking year for reverse mortgage volume. Over 90,000 FHA insured reverse mortgages were done in FY 2007 which ended on Sept. 30. This breaks the previous year's number of 76,000 + for fiscal 2006. And compare that to 43,121 loans in FY 2005. These are significant numbers for a loan product that is still considered to be in its infancy, barely a blip on the radar screen to many loan officers.
If you haven't done so already, it's time to sit up and take notice of this innovative loan that can change the lives of your clients, and change your business in the process. Let's take a look at some recent data, and see if you will decide to get "ready in reverse".
The first of the 77 million baby boomers in our country (those born between 1946 and 1964,) turned 60 in 2006. As with just about everything they have touched, they're going to have a dramatic impact on our economy as they age and move toward retirement. This is the largest generation in our country's history and they will define retirement on their terms. Travel, purchasing vacation properties, and helping children and grandchildren are goals sited for their future. However, it is no secret that many are not financially prepared for the lifestyle they want in their retirement years, and may continue working well past their intended retirement age.
For those over the age of 62 and who own at least 75% of the equity in their home, a reverse mortgage allows them to cash out the equity through the receipt of a monthly term payment or access to a line of credit to draw upon. In other words, the lender provides cash to the homeowner on a recurring basis and the interest is simply accrued over the lifetime of the loan. The loan's principle and interest do not need to be repaid until the home is sold or the owner has passed away.
Reverse mortgages provide a method for an aging homeowner to supplement their monthly income via their equity. This type of loan is non-taxable and will not be used in the calculation of Social Security and Medicare benefits either. The primary obligations of the homeowner are to simply maintain the home's value, insurance and of course, do not default on property tax payments.
There are three types of reverse mortgages available, all with their own advantages and disadvantages. These are:
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