The reverse mortgage helps the seniors over sixty two years old to use the equity of the home to supplement an existing income. Reverse mortgage is loan advance to the home without repayment unless the owner moves, dies, or sells the home.
In the United Kingdom, reverse mortgage is more common as lifetime mortgage. Hence, the owner never needs to repay as long as the owner lives in the home. The reverse mortgage lenders distribute the cash as lump sum, regular payment, credit line, or combinations.
In the United States, the basic types of reverse mortgage are single purpose reverse mortgage, federally insured reverse mortgage, and proprietary reverse mortgage. There may be more types in different countries, but the main idea is very similar.
Single Purpose Reverse Mortgage
The government agencies and non profit organizations offer this type of reverse mortgage. It is generally low costs. Although the government agencies may be local or state, the mortgage is available in a few locations only. The purpose of reverse mortgage is specific such as home repair, home improvements, and property taxes. And, the owner earns low or moderate income.
Federally Insured Reverse Mortgage
The U.S. Department of Housing and Urban Development (HUD) backs this type of reverse mortgage. This type is more commonly known as Home Equity Conversion Mortgages (HECM). The upfront costs are high especially if the owner stays in short period of time. So, this reverse mortgage is costlier than Single Purpose Reverse Mortgage.
It is the opposite of Single Purpose Reverse Mortgage in which the reverse mortgage loan can be used in any purpose. And, the mortgage are widely available anywhere. There are also no income or medical requirements.
Proprietary Reverse Mortgage
The private companies backed or owned this type of reverse mortgage. It is generally the most expensive type of reverse mortgage. However, the owner may get more than other types of reverse mortgage. Generally, it works the same way as the Federally Insured Reverse Mortgage.
Saturday, September 15, 2007
Mortgage Refinance Closing Cost
Mortgage refinance closing cost is cost at the end of the mortgage application. When the borrower refinances a mortgage, the borrower also pays the same closing cost to start a mortgage.Some mortgage lenders offer low or no cost mortgage. It means the mortgage lenders pay for all or most of the non-recurring closing cost. Non-recurring closing cost means the borrower only pay one time. Non-recurring closing cost excludes interest, insurance, and property taxes.The closing costs may include escrow fee, underwriter, document preparation, origination fee, appraisal, administrative fee, processing fee, wire transfer, mortgage broker fee, tax service fee, and flood certification.Mortgage lenders charge a slightly higher interest rate. Then, the mortgage lenders get a mortgage rebate. Mortgage rebate is a certain percentage of the mortgage that goes to the borrower, or mortgage lenders. In return, the mortgage lenders use the mortgage rebate to pay off the closing cost. The interest rate may be 0.25%, 0.50%, or 1.00% higher than the regular mortgage.In a no closing cost mortgage refinance, there are no discount points. Discount points are upfront fee to lower the mortgage. With a regular mortgage, the borrower has the option to lower the mortgage with the purchase of discount points. Each points represents one percent of the principal.It takes time for mortgage lender to get the money back on mortgage rebate. The mortgage might take as long as 40 months to fully recover the mortgage rebate. So, the mortgage lenders are banking on the borrower to stay more than 40 months.
Mortgage Life Insurance
Mortgage life insurance repays the entire or most part of the mortgage, when the borrower becomes critically ill from disease or accident, or suffers from death. So, the mortgage life insurance protects the family, co-borrowers, or co-guarantors from repaying the entire mortgage.
Depending on the insurance policy, the insurance company pays for the entire mortgage or maximum amount. For example, the insurance company pays up to maximum of $600,000. If the mortgage went over the maximum amount, the insurance company repays the portion of the mortgage up to the maximum amount.
The borrower usually purchases home thru mortgage. It takes a huge amount income to pay off the mortgage. In case of critical illness, debilitating accident, or depressing death of the borrower, the family needs to replace the loss of income to pay off the mortgage. With mortgage life insurance, the family does not need to worry about repaying the mortgage.
Mortgage life insurance differs from private mortgage insurance also known as PMI. The PMI protects the mortgage lenders in case of default of mortgage payment. The mortgage lenders risk the inability to re-sell the property high enough to pay off the mortgage. When the borrower lacks enough money for twenty percent down payment, the mortgage lenders requires PMI. As soon as borrower pays off or the home equity reaches twenty percent, the mortgage lenders automatically cancel the PMI premiums.
Mortgage life insurance is voluntarily. It is the decision of the borrower to sign up for the mortgage life insurance. In order to see the need, the borrower must sit with a certified insurance agent. The insurance agent will analyze the overall financial picture of the borrower.
The insurance policy starts at the same day of the approval on mortgage. Even though the borrower has not paid the first mortgage payment, the borrower still gets the benefit.
As the borrower pays off the mortgage, the mortgage decreases. Naturally, the coverage decreases as well. When the borrower paid in full amount of mortgage, the coverage is gone. And, the borrower no longer needs to pay the premiums.
When the borrower engages in mortgage refinancing, the borrower needs to qualify to the new mortgage for mortgage life insurance again.
Depending on the insurance policy, the insurance company pays for the entire mortgage or maximum amount. For example, the insurance company pays up to maximum of $600,000. If the mortgage went over the maximum amount, the insurance company repays the portion of the mortgage up to the maximum amount.
The borrower usually purchases home thru mortgage. It takes a huge amount income to pay off the mortgage. In case of critical illness, debilitating accident, or depressing death of the borrower, the family needs to replace the loss of income to pay off the mortgage. With mortgage life insurance, the family does not need to worry about repaying the mortgage.
Mortgage life insurance differs from private mortgage insurance also known as PMI. The PMI protects the mortgage lenders in case of default of mortgage payment. The mortgage lenders risk the inability to re-sell the property high enough to pay off the mortgage. When the borrower lacks enough money for twenty percent down payment, the mortgage lenders requires PMI. As soon as borrower pays off or the home equity reaches twenty percent, the mortgage lenders automatically cancel the PMI premiums.
Mortgage life insurance is voluntarily. It is the decision of the borrower to sign up for the mortgage life insurance. In order to see the need, the borrower must sit with a certified insurance agent. The insurance agent will analyze the overall financial picture of the borrower.
The insurance policy starts at the same day of the approval on mortgage. Even though the borrower has not paid the first mortgage payment, the borrower still gets the benefit.
As the borrower pays off the mortgage, the mortgage decreases. Naturally, the coverage decreases as well. When the borrower paid in full amount of mortgage, the coverage is gone. And, the borrower no longer needs to pay the premiums.
When the borrower engages in mortgage refinancing, the borrower needs to qualify to the new mortgage for mortgage life insurance again.
Should You Use a Bi-Weekly Mortgage or Prepayment to Get Ahead?
So you have decided that you want to buy a house and perhaps have even found the house of your dreams -- now you just need to find the right mortgage to be able to finance it!
If you know how much you need to borrow from a mortgage lender, a mortgage calculator will give you some idea of what the payments are likely to be.
A bi-weekly mortgage allows you to pay your mortgage every two weeks rather than once a month. Check this on a mortgage calculator to see how quickly you will repay your mortgage and save on interest payments.
Although a bi-weekly mortgage may seem a great idea, and the advertisements may seem like you are getting a good deal -- check the figures carefully on a mortgage calculator and read the small print.
It could be that regular payments against your mortgage principal are more financially attractive.
You may have also wondered should I prepay my mortgage? Being in a position to prepay your mortgage is reassuring; however, the penalties and loss of tax breaks, may make it less attractive than opting to invest the money elsewhere.
A prepayment versus investment mortgage calculator can help you start to see where the best alternative may lie.
If you know how much you need to borrow from a mortgage lender, a mortgage calculator will give you some idea of what the payments are likely to be.
A bi-weekly mortgage allows you to pay your mortgage every two weeks rather than once a month. Check this on a mortgage calculator to see how quickly you will repay your mortgage and save on interest payments.
Although a bi-weekly mortgage may seem a great idea, and the advertisements may seem like you are getting a good deal -- check the figures carefully on a mortgage calculator and read the small print.
It could be that regular payments against your mortgage principal are more financially attractive.
You may have also wondered should I prepay my mortgage? Being in a position to prepay your mortgage is reassuring; however, the penalties and loss of tax breaks, may make it less attractive than opting to invest the money elsewhere.
A prepayment versus investment mortgage calculator can help you start to see where the best alternative may lie.
Bad Credit Mortgage Lenders
If you are a homeowner looking for a mortgage with a poor credit rating you will most likely need to borrow from a subprime mortgage lender. Subprime mortgage lenders are lenders that specialize in writing bad credit mortgages. You need to be careful when selecting a bad credit mortgage lender as some will take advantage of your situation and overcharge you for the loan. Here is what you need to know when selecting a subprime mortgage lender.
If you have a poor credit rating your options for mortgage lending are somewhat limited. Most traditional mortgage lenders do not have programs for individuals with poor credit ratings. There are however, many mortgage lenders that specialize in mortgages for people with poor credit ratings.
How to Get a Bad Credit Mortgage
Subprime mortgage lenders are easy to locate using the Internet. You may qualify for better financing using a mortgage broker if you have bad credit. Mortgage brokers have access to mortgage offers that you might not find shopping on your own. You need to be careful when shopping for a bad credit mortgage and compare offers from a variety of lenders and mortgage brokers; by carefully comparing loan offers you will be able to avoid mortgage lenders looking to take advantage of you.
If you have a poor credit rating your options for mortgage lending are somewhat limited. Most traditional mortgage lenders do not have programs for individuals with poor credit ratings. There are however, many mortgage lenders that specialize in mortgages for people with poor credit ratings.
How to Get a Bad Credit Mortgage
Subprime mortgage lenders are easy to locate using the Internet. You may qualify for better financing using a mortgage broker if you have bad credit. Mortgage brokers have access to mortgage offers that you might not find shopping on your own. You need to be careful when shopping for a bad credit mortgage and compare offers from a variety of lenders and mortgage brokers; by carefully comparing loan offers you will be able to avoid mortgage lenders looking to take advantage of you.
Friday, September 14, 2007
Balloon Payment Mortgage
A balloon payment mortgage is a fixed-rate non amortized mortgage with a large final payment. Typically, the mortgage matures from five to seven year term. At the end of the term, the borrower pays final payment which is much larger than the regular mortgage payment. Hence, the final payment represents the balloon.Most balloon payment mortgages are interest only mortgage. The borrower only pays the interest on periodically. So, the principal remains the same. At the end, the borrower pays the substantial principal.For example, the monthly mortgage payment comes to $3,333.333 on a $200,000 mortgage with 20% annual percentage rate. First, you calculate the total interest which comes to $40,000 ($200,000 x 20%). Then, you divide the total interest with the number of payments on a year. Thus, the monthly mortgage payment comes to $3,333.33 ($40,000 / 12 monthly payments).The mortgage payments on balloon payment mortgage are commonly based on a thirty year mortgage with a term of five to seven years. It is also easier to qualify for this mortgage. And, the interest rates are much lower than traditional mortgage.The borrower usually sells the property before the mortgage matures to avoid the final payment. At the end of the term, the borrower needs to pay the final payment. The borrower must sell the property, refinance the mortgage, or convert the mortgage before the end of term.The borrower can convert balloon payment mortgage into traditional amortized mortgage. In an amortized mortgage, the mortgage payment pays off the principal on each periodic payment.
What Is Capped Mortgage
The capped mortgage is basically an adjustable rate mortgage in which the maximum interest rate is set. Any spike of interest rate over the maximum interest rate will not affect the mortgage repayment. The borrower knows the maximum mortgage payment.When the interest rate takes a dive, the borrower pays a lower monthly mortgage payment or bi-weekly mortgage payment. Using the capped mortgage, the borrower is protected from a spike in interest rate.
This protection on interest rate spike comes with a price. The mortgage lenders will charge a slightly higher interest rate. For example, the current interest rate is 4.5%. The borrower pays 5.0% interest rate.
The main benefit of capped mortgage is peace of mind. The borrower knows exactly how much is the highest mortgage payment. And, the borrower knows that the mortgage payment will not exceed the maximum mortgage payment.
Recently, the mortgage lenders suffered from mortgage meltdown. The interest rate went up high enough that the borrower could not repay the mortgage. There were so many foreclosures. In this instance, the capped mortgage could have been advantageous for the borrower.
The interest rate for capped mortgage is a compromise between the fixed rate and adjustable rate. So, the interest rate will be slightly over the fixed rate.
Annually, the mortgage lenders allow a certain level to pay additional or lump sum amount without paying mortgage penalty. When the borrower pays additional amount or lump sum amount over the certain level to pay off mortgage early, the mortgage lenders charge the mortgage penalty as well.
In most mortgage lenders, the capped mortgage is available mortgage options for buy to let mortgages. The buy to let mortgage is a mortgage in which the borrower purchase the property to rent. The borrower can purchase several property with buy to let mortgages.
This protection on interest rate spike comes with a price. The mortgage lenders will charge a slightly higher interest rate. For example, the current interest rate is 4.5%. The borrower pays 5.0% interest rate.
The main benefit of capped mortgage is peace of mind. The borrower knows exactly how much is the highest mortgage payment. And, the borrower knows that the mortgage payment will not exceed the maximum mortgage payment.
Recently, the mortgage lenders suffered from mortgage meltdown. The interest rate went up high enough that the borrower could not repay the mortgage. There were so many foreclosures. In this instance, the capped mortgage could have been advantageous for the borrower.
The interest rate for capped mortgage is a compromise between the fixed rate and adjustable rate. So, the interest rate will be slightly over the fixed rate.
Annually, the mortgage lenders allow a certain level to pay additional or lump sum amount without paying mortgage penalty. When the borrower pays additional amount or lump sum amount over the certain level to pay off mortgage early, the mortgage lenders charge the mortgage penalty as well.
In most mortgage lenders, the capped mortgage is available mortgage options for buy to let mortgages. The buy to let mortgage is a mortgage in which the borrower purchase the property to rent. The borrower can purchase several property with buy to let mortgages.
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