Reverse Mortgage Types

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.

Dennis Estrada is a webmaster of mortgage calculators, reverse mortgage, and jumbo mortgage loan website.

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Reverse Mortgage Calculator: Essential Tools For Future Borrowers

A reverse mortgage calculator is an online tool used to determine the payout one can expect to receive from a reverse mortgage. In addition to payouts, many calculators will also compute a borrower’s expected closing costs, interest rate, and mortgage insurance premiums. These tools are typically used to help borrowers determine whether they would be eligible for a loan, as well as how much they would qualify for should they choose to apply.

How to Use a Reverse Mortgage Calculator

To use a reverse mortgage calculator, borrowers will input their age, the estimated value of their home, zip code, and the remaining balance of their mortgage loan if applicable. The calculator will use this information to determine whether the borrower would qualify for a reverse mortgage loan based on his or her age and amount of equity.

Borrowers who would qualify for a reverse mortgage will be shown a few different options. In many cases, consumers will be shown how much they would qualify for through a fixed-rate HECM Standard, an adjustable-rate HECM Standard, and an HECM Saver. Consumers will also be shown how much they can expect to receive if they choose to accept their money in a lump sum, line of credit, or receive monthly payments.

Many calculators also calculate payouts based on a combination of payment options. For example, a person may want to receive a portion of their cash as a lump sum and the remaining portion as monthly payments. This is a popular option with borrowers who will be repaying their mortgage loan with a portion of their payout.

Consumers might also be able to calculate their expected interest rate, mortgage insurance premiums, closing costs, and loan origination fee. This is done to help consumers compare their estimated payout with the amount of money they can expect to pay for a loan. While fees can be rolled into a reverse mortgage loan, they are still important to consider. Any fees rolled into a loan must be repaid, plus interest, once the home is sold.

What to Remember When Using a Reverse Mortgage Calculator

While using a reverse mortgage calculator, consumers must understand that the calculations they receive are estimates. A reverse mortgage calculator will not be able to tell a consumer whether he or she would definitely qualify for a loan. These calculators are simply offered to give consumers an idea of what they might be able to qualify for.

Mortgage calculators are great tools for potential borrowers to use prior to applying for a loan. At first, reverse mortgages may seem overwhelming. There are not only several different loan and payment types, but borrowers are required to pay certain fees, closing costs, and mortgage insurance premiums. reverse mortgage calculators lay out a consumer’s different options, making them much easier to understand.

The goal of using a calculator is to understand how a reverse mortgage might benefit an individual. After using a reverse mortgage calculator, a borrower should come away with a better understanding of these loans, as well as their possible eligibility.

13 Reasons Why Reverse Mortgages Just May Be The Perfect Marketing Niche

For most of us, our mortgage pipelines are in dire need of some good solid loan business. If you fall in this category, it may be time to evaluate the business opportunities that await you in the Reverse Mortgage marketplace.

If you've been paying attention at all, you probably know that the projected potential of the Reverse Mortgage market is absolutely staggering. As you probably know...The Department of Housing and Urban Development (HUD) refers to a Reverse Mortgage as a HECM, which stands for Home Equity Conversion Mortgage.

When you do your review and evaluation of this growing niche, be sure to take into account these thirteen (13) facts and how they can impact your mortgage future:

1. It is estimated that between 9,500 to 12,000 people a day turn 62 years of age and if they are home owners, eligible for a Reverse Mortgage.

2. Seniors that are 62 years of age and older (our definition of a senior for this discussion), control more than three quarters of our nation's wealth.

3. They are living longer and continue to be more active than any generation before them. They, like many of us...continue to have goals, aspirations, desires and even problems...that they would love to solve.

4. They have equity in their homes but don,t have a clue how to convert their equity (non-liquid asset) into spendable and useable cash (a liquid asset).

5. Originations of Reverse Mortgages have increased 109% for the past few years. In fact, each year for the past 5 years the number of loans has doubled each year.

6. FHA endorsed 10,026 reverse mortgages in June alone, bringing the year-to-date total to 83,871. By comparison, FHA insured 8,925 loans in June 2007 totaling 80,425.

7. Its estimated that there are now 75 million prospects that would benefit from this type of program and that number continues to grow every day.

8. Less than one quarter of all Mortgage Companies currently offer the Reverse Mortgage product. Now is the time to market Reverse Mortgages while competition is minimal.

9. Recognizing our current credit crisis and the problems we have funding our normal forward based mortgages...credit and credit scoring models are not used with the Reverse Mortgage product. The benefits received are based on age and equity.

10. The Reverse Mortgage product is a Federal Housing Authority (FHA) insured non-recourse loan and subject to FHA loan limits.

11. Recent surveys of Reverse Mortgage holders indicate more than a 95% satisfaction rate of the product.

12. There have been drastic improvements since the first Reverse Mortgage was written in 1989 and, the number of Lenders has increased.

13. Effective January 1st, 2009, the HECM Purchase Program is now operational, allowing Seniors to purchase a primary resident.

On the surface you may feel that a Reverse Mortgage could be the easiest type of loan you could ever originate. After all...there is no Credit Qualification, no Income Verification, and best of all...your commission is generally based on the value of the home...not the loan amount.

But please remember...a marketing niche is only as good as the dedication, knowledge, expertise, and professionalism you are willing to bring to bear on the marketplace.

Yes...working with Seniors can and will prove to be extremely profitable. Plus...You will also get personal satisfaction and gratification as a result of your efforts.

If your current organization or situation does not allow you to originate Reverse Mortgages, you need to either be the catalyst to change that...or, find a home that does allow you to market to Seniors.

You can become very successful by dedicating yourself to Reverse Mortgages and the Senior market. If you prepare yourself and your marketing program well, you can get ready to explode your Mortgage Business.

About the Author

Tom Domin is a contributing author to The Reverse Mortgage Mentor membership training site. Put your mortgage production back-on-track with the very best Reverse Mortgage marketing training. Sign-up for our $1.00 ten (10) day trial membership at http://www.TheReverseMortgageMentor.com/

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Reverse Mortgage: Who is Eligible?

If you have ever taken out a loan, you probably know that it can be a stressful undertaking. First, you have to find out if you even qualify to take out a loan. Then you have to decide how much money you want to borrow and if you are eligible to borrow the amount that you need. This process does not have to be so stressful however, especially if you do a little research before you dive into the process of taking out a loan.

If you are looking into your options for borrowing money, you may have heard of a reverse mortgage and are probably wondering not only what this type of mortgage is, but who is eligible to apply for it. If you are a home owner, you have met the first criteria in qualifying for this type of mortgage. The second criterion is a little trickier and involves figuring out how much of the value of your home you own.

Basically, in order to qualify for a reverse mortgage, you must own a portion or all of the value of your home. So, if the majority of the value of your home is still tied up in your traditional mortgage, this reverse type of mortgage may not be the right option for you. However, if you have paid off most or all of your traditional mortgage and own a large portion of the value of your home, you may be a perfect candidate for this reverse type of mortgage.

If you meet the criteria of being a home owner and owning the majority of the value of your home, it is probably a good idea to make your next step to speak with reverse mortgage lenders. These professionals will be able to not only find out if you truly qualify to take out a reverse mortgage, but they can also figure out how much your qualify to borrow on the value of your home.

When you meet with reverse mortgage lenders, it can help to have a list of questions prepared to bring with you to the meeting. Taking out this type of loan is a big decision, so be sure to have all of your questions and concerns addressed before moving forward with your decision. The other good thing about meeting with these lenders is that they will discuss the terms of your reverse mortgage with you. These terms can include such things as when you will be required to begin repaying the money that you borrow and any other special conditions to your loan.

There are many things to take into consideration when you are thinking about borrowing money. You will first need to decide which type of loan is right for you and then make the important decision of how much money you need to borrow. It is also very important to take into consideratio

About the Author

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Types Of Mortgages Available In Canada

In Canada there are two types of mortgages available to residential borrowers, one being a conventional mortgage and the other is a high-ratio mortgage. Within both types of mortgages there are two sub-types, which are either open or closed mortgages.

To clarify the various options one can be presented with when shopping for a mortgage this article is divided into two parts;

Part one deals with the difference between a conventional mortgage and a high-ratio mortgage and part two deals with the different sub-types of mortgages available within the two types. However, these are fairly generic explanations - just as there are many different lending institutions, so there are almost as many different varieties of mortgages available. This is another good reason to consult a mortgage broker. Depending on your situation, one type of mortgage may be better for your circumstance than another.

CONVENTIONAL MORTGAGE:

If you have at least 20% of the purchase price (or appraised value if this is lower than the purchase price) as a down payment, you can apply for a conventional mortgage.
Some lenders may require either CMHC, Genworth or AIG insurance as well because of the property's location or type, even though you have 20% or more equity.

LOAN TO LENDING:

to 65% 0.50%

65.1 to 75% 0.65%

75.1 to 80% 1.00%

80.1 to 85% 1.75%

85.1 to 90% 2.00%

90.1 to 95% 2.90%

95.1 to 100% 3.10%

Please note: Insurance premiums are higher when the amortization is greater than 25 years or if there is more than one advance. This usually happens if you are building your house or having it built for you. Check with your Mortgage Broker to learn what the applicable premiums will be.

The insurance premium is calculated by multiplying the mortgage amount needed by the applicable percentage.

For example:

If the purchase price is $112,000 and the required mortgage is $100,000. You divide 100,000 by 112,000. This equals 89.29%.

Looking at the above chart - the premium is 2.00% when the lending ratio is 89.29%.
The next step is to multiply the mortgage amount by the insurance premium. Using our example this means $100,000 X 2.00% = $2,000. Your actual mortgage loan will therefore be $102,000.

CMHC's 5% DOWNPAYMENT PROGRAM was originally for first-time homeowners, but was expanded in May 1998 and is now available to all purchasers (principal residence only) who meet the normal requirements. Furthermore, borrowers can now even borrow up to 100% of their purchase price under new CMHC's Flex Down Insurance Program.

CMHC may set maximum purchase prices under these programs depending on the city so check with your Mortgage Broker to learn what the price limits are in your area.

If the property is a duplex (and you are buying both sides), with one side being owner occupied, the minimum down payment is 5.0%.

Mortgage brokers and lenders must verify that the borrower has the 5% down payment and 1.5% of the purchase price to cover closing costs. The only exception to the 1.5% is when the purchaser qualifies for an exemption of the Land Transfer Tax (Ont.) or Property Transfer Tax (B.C.), or similar provincial tax exemption. In these cases the mortgage broker or lender must ensure that there are sufficient funds available to cover all remaining closing costs.

OPEN MORTGAGES:

An open mortgage allows you to pay off part or the entire mortgage at any time without penalties. Open mortgages usually have short terms of six months or one year. The interest rates are higher than those for closed mortgages with similar terms.

VARIABLE RATE MORTGAGES / ARM (ADJUSTABLE RATE MORTGAGES):

At the start of a variable rate mortgage, the lender will calculate a mortgage payment that includes principal & interest. For the term of the mortgage your payments usually do not change. However, as the prime rate changes so will your mortgage rate.

If interest rates are dropping, less of each payment will go toward interest and more will go toward principal. If interest rates rise, more of your payment will be interest and less money will be reducing your principal.

Some of these mortgages are completely open (you can pay off all or part of your mortgage at any time without penalties). Others that offer a 'prime minus' interest rate (e.g. prime - 0.375%) may charge a penalty.

The interest rate on most variable rate mortgages is compounded monthly.

CAPPED RATE MORTGAGES:

These are variable rate mortgages that the lending institution has rate 'capped'. In other words, the rate will fluctuate with prime, but the institution guarantees that you will not pay more than a certain interest rate, set by them.

These mortgages often have a penalty for early 'payment in full' and are often not portable.

CLOSED MORTGAGES / FIXED RATE MORTGAGES:

The expression 'closed mortgage' originates from the 1980's when this type of mortgage was literally 'closed'. You contracted to the lender to make your payments for the term chosen, you could not pay anything additional, nor could you pay off the entire amount for any reason except the sale of your property.

These days, there are many ways to pay down your mortgage principal quicker, though the name 'closed' mortgage still remains. See pre-payment options for ways to pay off your mortgage quicker.

Fixed rate mortgages are the most popular type of mortgage. You benefit from the security of locking in your mortgage interest rate, for lengths of time ranging from 3 months up to 25 years. The rates are slightly lower than for an open mortgage for the same term.

If you think interest rates could rise, you may want to choose a longer term, such as a 5 or 10 year term. If you think that rates are going lower, you may want to gamble on a shorter length of time. Discuss this with your Mortgage Broker.

The major lending institutions have different pre-payment options allowed under their contracts. These options allow you to pay off your mortgage faster. It is also possible to pay off most closed mortgages prior to the end of the term or pay down a portion of the balance owing. However, lenders charge penalties for doing so.

Please note that some lending institutions will not give any pre-payment options. It is wise to find out what options are available before entering into any mortgage contract.

CONVERTIBLE MORTGAGE:

These are fixed rate mortgages for terms of 6 months or 1 year. Not all lending institutions offer convertible mortgages. With a convertible rate mortgage you can lock into a longer term during the current term of your mortgage without penalty - but only with the same lender. For example, if after a couple of months you hear that interest rates are going to increase, you may change to a longer term mortgage such as the 5 year term.

REVERSE MORTGAGE:

CHIP - Canadian Home Income Plan is the name of the company providing reverse mortgages in Canada.

A reverse mortgage allows homeowners to convert equity in their homes into cash, without selling the property or having to make monthly payments.

To qualify, homeowners must be at least 62 years old, have significant equity in their property and live in B.C. or Ontario.

The amount that can be borrowed depends on the homeowner's age. Reverse mortgages are for between 10% and 40% of the appraised value of the home. The older the homeowners, the more they can borrow.

The homeowner retains ownership and possession of the house. The lending company registers a reverse mortgage against the property. At death, or when the house is sold, the loan and the accrued interest must be repaid.

The biggest disadvantage to reverse mortgages, is that the interest keeps building on the amount of money borrowed (hence the maximum 40% loan). This means that if you borrow $50,000 this year and your interest bill is $5,000, next year your interest will be charged on $55,000 and so on. The longer the loan is in place, the greater the interest bill that has to be paid.

It is possible that when the house is sold, 100% of the proceeds from the sale may be required to pay off a loan.

If the homeowner dies the estate will have to pay off the loan and the accrued interest. This may wipe out any inheritance for the homeowner's heirs.

An alternative is to establish an equity credit line. This allows you to take funds only as you need them, thereby owing the least interest possible, with no surprises.

Consult with a financial advisor for more alternatives.

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Reverse Mortgage Loans - Are There Any Dangers?

Recently a large number of retired individuals have started opting for reverse mortgage loans. These loans help them get extra money to meet the increasing prices caused by the inflation. Due to the financial crisis in the country; the inflation has risen to a record high and during these hard times whatever investments these retired people made in the past are not providing enough income that can cover even their necessary expenses. In such conditions, reverse mortgage seem to be a blessing for them. Nevertheless, there are many dangers involved in this kind of loan program that everyone should be aware of.

Reverse mortgage loans are different from other loans. Here the lender doesn't demand monthly payments; instead they lend money to the borrowers on their approved terms so that they can cover up their monthly expenses or get the money in case of an emergency. The basic requirement of this loan program is that the borrower should own a house in which he or she resides and that property should have considerable value. This value can be used by the lender as collateral for the loan. When the owner of the house dies or moves away then the house can be sold to extract the money used by the borrower.

However, in recent years the laws of the reverse mortgage have been changed by the Housing and Urban Development (HUD) Department. Many banks like Bank of America and Wells Fargo have stopped offering reverse mortgage loan. Several banks have also changed their lending channels that used to offer these loans. They are doing so because many foreclosures have occurred due to the changed policy and now it has become unacceptable for them as they have to sustain the loss when the borrowers of this loan are unable to pay back the money. In many cases the value of houses has reduced and the owners have taken out more money than the approved value of their home. When they die, sale of their houses do not provide the lenders enough money and they have to cover up the leftover expenses from their accounts.

Therefore, it is professional's advice that the elderly people who want to apply for reverse mortgage must attend the counseling sessions that are offered or they should talk about this loan program with a financial advisor who will guide them appropriately what they should do. Many experts believe that this loan program should be kept as a last resort and other options that are available must be tried first to make lives less complicated.

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Economic Stimulus Help Seniors with Reverse Mortgages

Depending on your political persuasion, you may be expecting this Bill to be one of the best things to come along since sliced bread or one of the worst possible disasters since the dropping of the atomic bomb.

Americans are split deeply about this legislation and as one might expect, much of the split does run along party lines, but also along the lines of those who support big government spending and those who believe that unchecked government spending is exactly what got us to the deficit and mess in which we find ourselves today.

There is no doubt about the severity of the stake riding on the outcome of this Bill which passed the House of Representatives and now has a version in the Senate.

With one of the worst economic recessions since the Great Depression upon us, with unemployment rising weekly along with record home foreclosures, Congress has set about to make a plan which has been billed a "stimulus package", designed to stimulate the economy and create jobs. Proponents of the package claim that it is needed and needed now to start projects to put Americans to work.

Opponents are quick to point out that most of the projects don't have an immediate impact and question just how many will receive employment as a result of many of the provisions contained in the Bill, calling them "Pork" or pet projects. Critics say they will serve only one purpose, spending money or paying back political backers and contributors but will not create massive jobs.

The package was originally sold as infrastructure improvement (roads, bridges, energy, etc) putting millions of Americans to work on much needed projects which would not only stimulate the economy but also improve the nation.

But when reading over the Bills crafted at both the House and Senate, one can find tax dollars going to programs such as $50 Million for the promotion of the arts; $335 Million for education about sexually transmitted diseases; $600 Million for new "green friendly" cars for government workers (even though the infrastructure of gas pumps to run these cars is not currently in place);

$600 Million for grants for diesel emission reduction; $650 Million foralternative energy technologies, energy efficiency enhancements, and deferred maintenance at Federal Facilities; $1.5 Billion for construction of :Green Cars"; $800 Million to clean up Superfund sites; $400 Million for NASA scientists to study climate change; $1 Billion to the controversial union Community Oriented Policing Services Hiring Program;

$2.75 Billion in stem cell research; $83 Billion for an earned income credit for those who do not pay taxes; $4.19 Billion to groups like ACORN and other larger dollar amounts for plug in car stations, $246 Million for Hollywood, $75 Million for smoking cessation programs, bike and walking trails and even ATV trails (those All Terrain Vehicles that you see people enthusiastically riding with the three or four wheels).

In fact, only a little over 3% appears to be going to tangible road and bridge construction. There are projects for many federal agencies. Billions of dollars are slated to go to federal programs overseen by the Office of Management and Budget or the Government Accountability Office ($54 Billion), repairs to the Smithsonian Institution Facilities; for agricultural research.

How about $1 Billion for the follow up to the 2010 Census (just try to figure how that will stimulate the January 2009 economy)? And then there is the ever-popular $227 Million for over-sight of pork barrel spending we have pork to over-see the pork!

When looking at all these billions of dollars, surely it will mean some jobs, but in the grand scheme of things, not many Americans will go to work based on the list above. So what are some of the things coming from this Bill that WILL help Americans? Right off the top is a proposed limit increase to the Home Equity Conversion Mortgage (Reverse Mortgage or Heck-um) to $625,500.

The limit was just increased to a national limit of $417,000 in 2008 which did help many areas where the old limits were considerably lower but didn't do much for the higher cost areas which already had a limit of $362,790. This proposed increase will help senior borrowers with higher valued homes, especially those who have mortgages to retire when the old limits just didn't get them enough cash to pay off their existing mortgage.

Realtors are currently urging congress to increase FHA funding. FHA's market share has increased from 2% in 2006 to what many believe will be 30% in 2009. Many are concerned that FHA does not become the new sub-prime, but FHA does play a vital role in serving customers such as first-time homebuyers, borrowers with little to put down and those with less than perfect credit. But FHA will really have to grow to accommodate the new demand.

As people still scratch their heads and wonder where the first $350 Billion of TARP funds were spent (since it seems that all the banks are still plagued by the troubled assets and there was no relief), we can only hope that this new stimulus bill actually does put American workers back to work and helps American Homeowners.

If the government is going to put the money into programs that don't really put people to work but will hopefully have an ancillary benefit to the economy, we would love to see it going to reduce Up Front Mortgage Insurance Premiums for Senior Reverse Mortgage borrowers and FHA borrowers alike;

release the Reverse Mortgage for purchase program as they announced in their 2008-33 Mortgagee Letter where they were going to determine eligibility based on appraised value (not the lower of appraised value or sales price which the latest indications from HUD are that they will soon issue the clarification to include); and that HUD would bring back the DPA (down Payment Assistance) programs.

There are good and bad things that can be said about each of these things as well but hey, by the time they include interest we're talking about a $1.1 Trillion Package so there has to be a little room for home owners and home purchasers!

About the Author

Michael G. Branson (CEO All Reverse Mortgage Company)is a Mortgage Broker who has over 31 years of mortgage banking experience. Toll Free (888) 801-2762 Reverse Mortgage Reverse Mortgage Calculator Reverse Mortgage Rates

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Florida Mortgage Leads

As a mortgage broker or lender, mortgage leads are a most desired commodity. With a blend of good customer relations, bargaining power and salesmanship, a mortgage lead is quickly converted into a mortgage client.

All mortgage leads are good, whether they are California mortgage leads, Michigan mortgage leads or Texas mortgage leads. Today we will delve into the wonders of Florida mortgage leads.

Florida is the fourth most populated state in America, but it’s long been regarded as an ideal place for retirement. The Sunshine State offers a warm climate year round, attractive to those in their golden years. With an influx of senior citizens living in Florida, and expenses always on the rise, the conditions are ideal for a reverse mortgage boom, making Florida Mortgage Leads more common than even higher populated States.

With many elderly citizens and the need for increased cash flow, Florida Mortgage Leads are often reverse mortgage leads, as this enables senior citizens to benefit from a mortgage that is only offered to those 62 years of age or over. These Florida mortgage leads are reverse mortgages, where the lender pays the homeowner money while the homeowner continues to live in the home.

So long as senior citizens retire in the lovely state of Florida, Florida mortgage leads will continue to increase. It’s the perfect storm of an ageing populous with increasing living costs. As a mortgage broker or lender, Florida mortgage leads will only swell, powered by reverse mortgages that are as juicy as an orange, the State’s second biggest industry.

Mark Carey is an Internet marketer and webmaster of http://www.juicyleads.com. JuicyLeads is a major provider of refinance mortgage leads. For mortgage leads and refinance leads, visit http://www.juicyleads.com

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Basic First Time Buyer Mortgage Transactions

In order to get a suitable first time buyer mortgage, you need to explore different mortgage options. But before that, you will need to know about how lenders review your application and decide whether or not to approve your request for a mortgage.

Before considering your application, the lenders will evaluate your ability to pay back a mortgage. This is done on the basis of your total monthly income and total monthly debt. In general, a monthly income to debt ratio of 36 to 40% is generally considered acceptable. You can also expect them to check your willingness to pay by checking your credit rating. It goes without saying that if your credit score is low or the higher your income to debt ratio, your chances of getting approved for a conventional mortgage is less. In such cases, if you are grated a loan the interest rates will be higher with less attractive terms and conditions to cover the higher risk perceived by the lender.

However, if the lender is satisfied with your financial credentials, you can confidently expect to get loan with various benefits such as lower rate of interest, smaller monthly installments, smaller monthly outgoings, longer repayment duration, flexible repayment options, lower fees and penalties, among others. In case of an adverse credit record you neednt worry much because there are many creditors who provide mortgage to bad credit borrowers. Bad credit mortgages are especially designed to help people having a poor credit record.

There are a number of popular first time buyer mortgage options available in the market. The first among them is fixed rate mortgage which has a fixed interest rate for a specific period of time for a period of up to one to five years and after this period the interest returns to the lenders standard rate. Fixed rate mortgages allow you to successfully plan your finances, as you know the mortgage repayment won't increase for the defined fixed rate period. However, when interest rates fall you do not benefit from reduced payments.

Another option is variable interest rate that goes up or down as per market flexibility in the rates. So, first time home buyers may prefer to keep away from this option because if they cannot adjust with an increase in rates they may end up having trouble making payments. Other common options are tracker mortgage, discounted mortgage, and capped rate mortgage. The tracker mortgage follows the interest base rates. In most cases your mortgage interest rates is set at a certain percentage above the base rates. The main advantage is that when the base rate falls then so do your repayments. And the reverse will also happen when the base rates rise.

Discounted mortgages work in a similar way to tracker mortgages in that they are variable loans. Unlike a tracker, a discounted mortgage doesn't follow the base rate. Instead, there is a reduction in the lender's standard variable rate for an agreed length of time. Your repayments will fall when the interest rate falls and they tend to be some of the cheapest first time mortgages available. Capped Rate Mortgage is guaranteed not to raise the interest rate above a certain percentage, normally for one to two years, after which the interest rate returns to a fixed or variable rate.

Other versions are repayment mortgage and interest only mortgages. In the former, you will see each monthly payment go towards paying off the underlying debt, as well as the interest on the loan. At the end of the term, the mortgage is cleared. The latter, on the other hand, expect you to pay off the loan's interest, not the loan itself. At the end of the mortgage term, however, you are expected to repay the capital.

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House Hunting and Reverse Mortgages: Where to Find Both

House hunting can be very time consuming. Prospective home owners often spend months searching for the right home and may even make several offers on home throughout the process. Many of these offers will end up not working out for various reasons such as if the owner will not come down on the listing price or if the inspector finds the home to be less than the asking price. However, before you can even begin the process of finding a home to purchase, you will have to know where to begin looking for those homes.

Searching for homes is much like searching for other things in life such as reverse mortgages. With the reverse types of mortgage, you will likely have to find reverse mortgage lenders to help you through the process and to find out if you are qualified for a loan. When you first begin house hunting, you will probably first want to find a bank where you can get pre approved for a loan to buy a house. There really is no use in taking the time to look at homes in the first place if you are not pre approved to take out a loan to buy the homes. It does not matter too much which bank you choose to do the paper work to get you pre approved because you can usually get your final loan through another bank if you wanted to.

Although the next step with reverse mortgages after meeting with reverse mortgage lenders to see if you qualify for the loan would usually be to complete the paper work and get the money, the process takes a little longer with house hunting. After you are pre approved to buy a home, you can then start looking at different homes in your area. You will normally want to choose a realtor to help you with this process because that way they can do all of the work in finding all of the homes in your area in your specific price range. One way to find a realtor that can help you with this is to ask the banker for any recommendations when you are working on getting pre approved.

Whether you are working on reverse mortgage or are house hunting, you will want to make sure you take your time so that you do not rush into a decision that you are not completely happy with. Buying a home is a very big decision that you will not want to take lightly because you will likely live there for several years and may even raise a family there. Although at some point in the search you might get tired and want to be done with the process, usually the best thing that you can do is take a few days off and then come back to begin the search again so that you do not just choose a house because you are tired of looking. Hopefully this will help you find the home that you have been dreaming of.

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The 1% Rule of Mortgage Refinance

Is the 1% Rule the best way to decide whether to refinance? In other words, if I can reduce my interest rate by 1% should I refinance?

Some people think so. Let's look at a few ideas and then you tell me if it is the best way for you to decide. What are you trying to accomplish? Are you trying to reduce your interest rate which will lower your monthly payment, or are you trying to reduce your total cost of the loan (current interest obligations vs. interest obligations of new loan plus refinancing costs)? Interest obligations of new loan don't only reflect the interest rate though. The length of the mortgage has a lot to do with it too. Are you going back to 30 years, or will you go to a lesser term (15, 20 or 25 years)? This impacts on your total cost too.

Maybe what you want or need is a lower monthly payment. You have to consider just reducing your monthly payment on the mortgage alone vs. reducing your total monthly payments by including your credit cards too. Are you afraid you won't be able to keep up your current payments and you stand to lose your good credit rating or even your home?

Lowering your monthly payment on your mortgage alone while going back out to 30 years may or may not result in a total savings over the life of the loan. When you include your credit cards and their higher interest rates in the equation, your chances for saving on a mortgage refinance increases.

How long do you plan to live in your present home? It takes time to recoup the cost of refinancing. The longer you plan on staying put, the greater your chance of generating savings by refinancing your mortgage.

You can see how this is different than just lowering your interest rate. The 1% Rule doesn't always work so well. Decide what you need or want before moving on to whether you should refinance. Then, a mortgage professional can run some numbers and help you decide.

Tag : mortgage,mortgage refinance,mortgage rates,reverse mortgage,bad credit mortgage

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Quick Mortgage Tips for Home Loans, Equity Loans, Reverse Loans, Cash-Out Loans and Refinance Loans

by: Chris Robertson If you're considering a mortgage loan, you might be wondering what options are available. Today, there are many options besides the conventional methods of obtaining a mortgage. Whether you're applying for a home loan for a new home, a refinance loan, an equity loan, a HELOC, or a reverse loan, you should be aware of what each loan entails. Buying a New Home When buying a new home, you'll need to be approved for a new home loan through a lender, or ask the seller to finance the home for you. Before applying at a lending institution, research your options. Determine how much "house" you can afford. Use online mortgage payment calculators to figure what the payments would be for different home loan amounts. Then, you'll know what price range you can shop within, and whether or not you can afford the payments. Remember, your income/debt ratio must fit within the lender's guidelines to qualify for a conventional loan. Healthy and "Not-so-healthy" Credit Scores If you have an excellent credit score, then your income/debt ratio along with the investment capital you have available will be the main factors in determining home loan availability. However, if there are flaws in your credit history due to non-payment or repossession, you will be limited in the type of home loan you can obtain. But don't lose heart. Many homebuyers whose credit is "not-so-great" do qualify for non-prime loans. Non-prime loans can be a bit higher-priced than prime loans or have higher interest, but you might still be able to buy your dream home! Creative Financing Don't settle for conventional loans if you don't have to. There are many creative ways to finance a new home loan. If you do not have the needed investment capital or a down payment, some lenders will finance the down payment for you as well as the closing costs. If not, the seller might be willing to finance part of the loan to cover these costs. This can work even if the seller doesn't have extra "money to lend!" Explain to the seller that it could be advantageous to him because of income taxes. He might much rather claim an income of $100,000 than $120,000! Spreading out payments for $20,000 of the loan amount over a period of five or ten years could make a huge difference on his taxes due for that year. Consult with an accountant to find out if this could work in your situation. Unusual Types of Home Loans If you're worried about budgeting with a new home loan payment each month, try a FlexPay loan where several monthly payment options are available to you every month. These options include interest only payments, full-amortized payments, and minimum payments. There are also bi-weekly mortgages for paying more toward your premium each year through a bi-weekly payment schedule. Hard Money loans are also available when there is a large amount of equity built up in a home. The loan approval is based more on the home or property's value than the borrower's credit history or job/salary history. Refinance Loans If you plan to refinance your home, there are several options. A refinance means you are re-evaluating the terms, payments and interest of your loan. You might refinance to simply get the interest rate or payment lowered. Or, you might want to keep a little cash out for yourself as well. This is called "Cash-out" refinancing. Cash-out loans are made when you want to refinance your home for more than is owed on it. For instance, you owe $60,000, but want to refinance for $80,000. You'll pocket the additional $20,000 to use for home repairs, remodeling or whatever else! Reverse loans are available for those over 62 years of age who own their home free and clear or have much equity built into it. They can receive a monthly payment, a lump sum or a line of credit. This does not have to be repaid until the borrower moves or passes away. Then, the estate can be sold to pay the note. Another option for leveraging your home equity is to create a HELOC (home equity line of credit) that is secured by the equity in your home. HELOCs can be used to pay debts, make purchases, or anything else. Be aware, however, that the interest rate can fluctuate monthly. Now that you are armed with many options for obtaining a home loan or refinancing your mortgage, check with an online lender to find out what plan will work best for you. Use the available tools and calculators to do some budgeting on your own as well. You'll be moving in that new dream home in no time! To find out more about loans go to the best loan site on the web at http://www.loaninfocentral.blogspot.com/

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Adjustable Rate Mortgages and Its Features

An adjustable rate mortgage, or ARM as it is popularly known as, is a mortgage loan[1] in which the interest rate on the note[2] is periodically adjusted based on a variety of indices[3]. Different lenders use different indices to calculate their interest rates, or their adjustable rates. Some of the commonly used indices are the 1-year constant-maturity Treasury (CMT) securities, the Cost of Funds Index (COFI), and the London Interbank Offered Rate (LIBOR). However, a few lenders prefer to use their personal or own indices to determine the rates. Lenders may choose to do this to avail a steady margin from the borrower, and their own cost of funding is related to the index. As a result, the payments made by the borrower may also change over time in accordance to the fluctuations in the resultant interest rates. Typically, the adjustable rate mortgages are characterized by their index and their limitations on charges or caps[4]. In many countries, the adjustable rate mortgages are the standard means of availing finance by offering the homes as securities, and in such cases, the credit facility is simply referred to as a mortgage.

Basic features of ARM or adjustable mortgage
The main features of ARM are:

1. The initial interest rate
   It is the rate of interest associated with the ARM at the time of conception of the loan facility. The initial ARM rate is generally well below the existing current ARM market rates charged during subsequent years.
2. The adjustment period
   This is the actual length of time, of the total loan period of the ARM, which is scheduled to remain constant or unchanged. The interest rate is reset at the end of the adjustment period, and the monthly loan repayment options are recalculated.
3. Index rate
   Majority of the lenders prefer to associate the ARM mortgage interest rates changes with changes occurring in a particular index. As stated previously, lenders generally set the ARM rates on a variety of indices. The most common index rate used is one, three, or five years treasury securities index. Another commonly used index is the national or regional average cost of funds to savings and loan associations index.
4. The profit margin
   The profit is calculated by adding a certain percentage of the loan amount to the amount of the base index rate. The difference of the net payable loan amount minus the base index amount is the actual profit enjoyed by the lender in an ARM.
5. Adjustments and interest rates
   ARMs provide a unique adjustment period for borrowers during the inception of the loan facilities. The rate structure can change at the end of the adjustment period. However, several lenders provide more than one adjustment periods. It is possible for the borrowers to change certain aspects of the net payable interest rates with each new adjustment period. So there is an advantage to avail different interest rates with individual adjustment periods. If the borrower is market savvy, he or she can select different indices or interest rates and save money, provided the lender agrees to the rates and indices.
6. Initial discounts
   Initial discounts are interest rate concessions, and are very commonly used as promotional aids to attract customers for ARMs. Such discounts are only offered during the first year of the ARM loan. The discounts help to reduce the interest rate below the prevailing rate for a certain duration of time so the borrower can save some money through temporary reduced rates.
7. Negative amortization[5]
   Ideally, the net chargeable interest rate decreases with a regular payment of monthly dues against any credit borrowings. In case of mortgages the rates decrease over a period as loan pay offs occur. However, in case of ARMs, the reverse happens, and the mortgage balance actually increases whenever the ARM base index rates climb up. As the ARM base index increases in magnitude, its associated interest amount and repayment cap also increases, and the borrower ends up paying a greater amount to redeem the loan. This is a negative feature of ARMs and the borrower may suffer a certain loss over the loan tenure until redemption occurs.
8. Conversion to a different loan format
   ARMs have an agreement according to which the borrower can convert the ARM to a fixed-rate mortgage at designated times. This is often a fall back facility in case the ARM does not work in the borrowers favor and the buyer wants to revert to a safe option of a steady rate of interest.
9. Loan prepayment
   In majority of loans and credit facilities, lenders prefer the borrower redeem their dues as soon as possible, to recover the original lending amount. However, in case of ARMs a prepayment can result into a potential loss for the lender in the long run. So lenders generally include a clause in the ARM agreement which may force the buyer to pay special fees or penalties in case the borrower decides to pay off early. ARM prepayment terms are usually negotiated in the beginning before the credit facility is availed.

Summary
Even though ARMs have a low starting interest rate, there is no indication that the future cost of borrowings will be maintained at the same rate, since the base index rate is likely to change. If the indices rise, the net ARM cost will also be higher, and the borrower will have to pay a higher loan amount. So there is an inherent risk involved with ARMs. Certain studies indicate that on average, the majority of borrowers opting for adjustable rate mortgages save money in the long term.

Legend
[1] A mortgage loan is a specific type of loan, which is secured by some property or a fixed asset value having a certain financial value through a lien, or a legal written commitment empowering the creditor to sell the security offered in order to recover the outstanding dues, in case the creditor is unable to pay or redeem the borrowed amount. The word mortgage when used alone, in day-to-day life, is often used to convey a mortgage loan.

[2] A written promise to repay or redeem a specified borrowed sum of money, along with its interest at a predefined rate and length of time.

[3] An index rate is a widely used rate of interest generally used by lenders to set the interest rate on loans and credit cards.

[4] Loan capital or amount.

[5] Amortization is a gradual reduction in the value of an asset or liability by some predetermined process. In case of loans, it means a gradual or specific decrease in the magnitude of the net payable interest amount over a period, until the entire loan amount becomes void and is deemed as paid.

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