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Finding lenders online who will tell you the many advantages of a Reverse Mortgage is easy. But what are the potential disadvantages?

A Reverse Mortgage can provide emergency funds when you need it, but make sure to do your homework before applying for a one.  While there are literally hundreds of reverse mortgage websites outlining the many advantages of a reverse, it is important that seniors are just as aware of some potential disadvantages.

If your income from retirement no longer covers your expenses, current mortgage payment or you’d simply like to secure your retirement years a bit more, you can use the equity in your home to apply for a reverse mortgage if you meet the following criteria.

The youngest borrower must be age 62 or older, live in the home and either own your home outright or have a low enough mortgage balance that can be paid off at closing with proceeds from the reverse mortgage.

Also, one must receive consumer protection information from a HUD approved counselor before obtaining the loan.

What are the Disadvantages of a Reverse Mortgage?

Closing costs are substantial. While the fees are similar to a traditional FHA mortgages, Reverse mortgage fees include mandatory FHA insurance of 2% of your home’s value plus origination fees that range between $2,500 and $6,000. Fees are most often rolled into the loan and not paid upfront. Because HUD is the program administrator, all fees are fixed.

Unfortunately, you may be approached by financial advisors who want to charge you for advice about reverse mortgages or sell you a reverse mortgage. Most of the information you need about reverse mortgages can be found online from HUD. Do not apply for a reverse mortgage from any company that is not approved by HUD.

It’s important to calculate the cost of a reverse mortgage against what you would gain, because once you enter a reverse mortgage agreement, the lender holds title to your home.

Get sound advice. Discuss your reverse mortgage plans with legal and financial advisors, and trusted  family members, before making a decision. If possible, only work with a large reputable bank that will meet with you and family members face to face.

Because home ownership is often a person’s most valuable asset and since your equity is now depreciating, obtaining a reverse mortgage is akin to spending money you’d expect to leave to your heirs.

Be sure that the older homeowner is thinking clearly when making this decision (no dementia or symptoms of Alzheimer’s) because having a sudden influx of cash can be a heady experience and it would be a shame to waste it or become the victim of a scam.  BEWARE of any lender or adviser that suggests an annuity in any way!

Although Social Security and Medicare are not affected, Medicaid and other need based gov’t assistance may be affected if too much funds are withdrawn and not spent in any one month.

Since your equity is declining, obtaining a reverse mortgage may prove to be a hindrance to moving to a new home in the future.

If you are considering a reverse mortgage, it’s important to get as much information as you can, and to consider all of your options. There’s a wealth of free information to help you decide.

http://www.reversemortgagetoday.org/Rev_Mortgage_Disadvantages.html

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The reverse mortgages pros and cons are not that difficult to go through, but you still need a taylor made information and recommendations, which fit to your special circumstances. The basic requirement is, that you are an American, age 62 or over, own a home and you will qualify.

1. The Reverse Home Mortgage Is A Way To Get More Cash.

When you think the reverse mortgages pros and cons, the most important benefit is, that you will get cash money and you do not have to pay back anything on a monthly basis.

This is the biggest benefit, which persuades many seniors to take it and they just do not want to think about the alternatives or the consequencies You can decide, whether you take the money as a lump sum, as a monthly payments, as a credit line or as a combination of all these.

The upfront costs, the interests, the capital and other expensive will be paid, when the whole loan is paid off after you or the last owner has moved away from the home.

2. The Reverse Mortgages Pros And Cons, It Is Expensive.

The system of the reverse home mortgage works like with the usual mortgage but in the opposite way. You will use the equity of your home, or you convert it into cash money. If you pick the variable interest rate alternative, your costs will vary according to the market interest rates.

Other costs are the upfront costs, compulsory mortgage insurance, servicing fees, origination fees and other closing costs. The borrower will remain as the home owner, and he has to pay property taxes, home insurance, maintenance costs and other expenses. If he does not pay, the loan may become due.

The reverse home mortgage is risk free for a borrower and for a lender. This means, that you will never have to pay this loan from your other assets. The only source, that will be used to pay this loan back is the equity of your home.

If it does not cover all the costs, then the insurance will do it. When you think the reverse mortgages pros and cons, you have to go through the compulsory counseling. That is a very useful meeting.

You have to think for instance, how you will handle your heirs, what are the tax influences and are there any alternatives to the reverse loan. The reverse mortgage can influence on your Medicare. The loan advances are not taxable and you can deduct the paid interests, when the loan will be paid of.

3. The Lender Does Not Ask Your Credit Rating Nor Your Income Information.

This means that, if you are age 62 or over and own a home, which has equity left, you will qualify. This offers a good opportunity for people, who has a bad credit information or the income has fallen.

With the reverse mortgages they can get extra cash for monthly use and an opportunity to improve their standard of living.

Juhani Tontti, B.Sc., Marketing. The Reverse Home MortgageIs A Good Way To Get Extra Cash, But You Have To Understand How Does A Reverse Mortgage Work. Visit: Reverse Mortgages Pros And Cons

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Do not skip the idea of refinancing your home mortgage. Time is now to take action or you may miss the bus. Going by the trends of the recent years, every time Federal Reserve Board Chairman Alan Greenspan opens his vocal shutter, the interest rates go up. If not by a substantial margin, then at least by 25 basis points.

A quarter of a percentage point may not seem a hefty jump given the fact that current federal funds rate is pegged at 2 ¾ per cent. But this conclusion is erroneous. For when did you pay an interest rate of 2 ¾ per cent on anything? When did your credit card company ask you to pay an interest rate of over 2 per cent? You must answer these questions and then look at your home mortgage possibilities to get a complete picture of credit scenario. It’s a well-established fact that the federal funds rate and home mortgage rates have a co-relation and right now federal fund rates are moving northwards.

You may feel that you have missed the opportunity of subscribing to the lowest rates instruments of near future. But all is not lost. There is still some time to opt for better refinancing scheme. But if you want them, give up your laid back attitude.

Refinancing: Basic Premise

A small rate cut can be adjusted through monthly mortgage payments in smaller installments. This, in turn, will bring down your tax deduction levels. This point must be taken in consideration because nobody needs to tell you what your savings mean to you. You can further bring down your cost by asking for complete waiver or reduction in fees charged on application fees, origination fees, appraisal fees, legal fees, etc. If you are not in a position to make cash down payments, you can get it added to the mortgage figure.

A short mortgage term, say of 15 years instead of 30 years, may entail paying a higher interest on monthly payment. But in the process, the payment burden will get off your head sooner and your ownership rights will be transferred in a shorter period.

Standard mortgage terms are normally in the range of 15 years to 30 years. If your preference is a term which is shorter than the maximum limit and longer than the shortest limit, you can ask opt for a custom loan. This instrument facilitates you to designate a new term that suits you. You need to ask for a term that could create a right balance between a term less than 30 years and monthly payments on a lower side than those given out in a 15-year mortgage.

If for some reason, custom term is denied to you, opt for a 30-year mortgage and you could pay more than the monthly payment to clear your debts as soon as possible. Of course, it will depend upon your own monthly income and expenses equations. You should also not forget to negotiate in the beginning itself that no pre-payment penalty is imposed on you in the future.

Where and how to begin

You need to get your credit record reviewed with each of the three credit bureaus: Equifax, Trans Union and Explain. Often they may furnish reports littered with shocking mistakes like credit charges of accounts that are not yours, an identity mistake or even the balance details which are not in sync with your statements. Get them corrected.

Compare mortgage rates and fees online offered by several finance companies. Depending upon your analysis, subscribe to the services of a good mortgage calculator. It will tell you in precise terms as which loan instrument is the best for you in the given circumstances.

So now is the time for you to wake up to the refinancing possibilities. The hard negotiator in you needs to emerge to strike a best possible deal with the refinancing companies. Remember, it’s a two way game out there: these companies need you as badly as you need them.

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Mortgage Broker Refinancing – You Mortgage Broker’s Dirty Little Secret

Nearly everyone overpays when taking out a mortgage loan. http://first-mortgage-quote.blogspot.com

Unless you can recognize how retail mortgage brokers mark up your interest rate for a profit, you will overpay and probably never even know it. Here are several advanced strategies for recognizing retail mortgage broker markup and how to avoid paying it with your new mortgage loan.

Everyone that takes on a mortgage loan pays fees and closing costs to secure that loan. You will be required to pay the mortgage broker origination fees for finding you a loan, possibly pay points to the lender, and closing costs to secure the mortgage loan. It is important to note that the mortgage broker keeps the origination points as compensation for their services. After all, it’s only fair the mortgage broker be compensated for their services, right? Origination points typically run 1-3% of your loan amount. This is a lot of money you’re required to pay and more than ample compensation for any mortgage broker.

Mortgage Brokers and Greedy Wholesale Lenders

In order to understand how mortgage brokers overcharge their customers it is important to first understand how the retail mortgage market works. Mortgage brokers are basically retail vendors that sell mortgage loans for a profit. Just like the kitchen appliance store that sold you a refrigerator, a mortgage broker is simply selling you a product. In this case the product is a mortgage loan; however, if you treat it like your refrigerator purchase you will save yourself a lot of money.

When you shop for a loan using a mortgage broker, the wholesale lender that the mortgage broker is selling products for qualifies you for an interest rate. How the wholesale lender does this is the subject of our mortgage guidebook, but for the purposes of this discussion you just need to know the wholesale lender qualified you for a very specific interest rate and provided your mortgage broker with a written guarantee of that specific interest rate. What your mortgage broker does at this point is type you out another guarantee on their company’s fancy letterhead and gives it to you. Think the interest rate from the wholesale lender and the one you got from the mortgage broker are the same? Think again.

The mortgage broker marks up the interest rate on the written guarantee you receive by the amount that mortgage broker thinks they can scam you based on the interactions the two of you had. That’s right, just like the stereotypical car salesman, mortgage brokers read their customers to try and determine how savvy they are what their doing. The more the mortgage broker thinks they have an advantage, the higher your interest rate on the written guarantee will be. You got it, the average mortgage broker is no better than a used car salesman.

Why do mortgage brokers do this? The more your mortgage broker scams you, the higher that mortgage broker’s bonus will be from the lender they represent. For every .25% the mortgage broker marks up your interest rate, that person will receive an additional point, or 1% of the loan amount as a bonus for overcharging your. This retail markup of your interest rate by the mortgage broker is called Yield Spread Premium and will cost you thousands of dollars. Do you think this bonus is an incentive for giving you a fair deal and honest service from your mortgage broker? Think again!

So how do you avoid paying Yield Spread Premium when taking out a mortgage loan? You might answer “Avoid Mortgage Brokers Altogether;” however, every retail mortgage company charges Yield Spread Premium just like mortgage brokers. Homeowners that learn to recognize Yield Spread Premium when shopping for a mortgage loan can avoid paying it. It’s really that easy. To learn how you can recognize Yield Spread Premium and avoid overpaying for your mortgage loan, register for a free mortgage guidebook.http://first-mortgage-quote.blogspot.com

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Are you considering purchasing a new home? If you are, you should know that this may very well be a very good time to buy a house. The housing market is sluggish, which means that prices tend to be lower and so do interest rates. Also, there are more houses from which to choose. This surplus of houses on the market is good for the buyer; basic laws of supply and demand dictate that the more there is of something (in this case houses), the less it tends to cost.

If you are going to purchase soon, however, it is important that you understand the terminology used regularly in the real estate world. Common mortgage terms include interest rates, length or term of loan, closing costs, variable rate loans, origination fees, document taxes, home equity, acceleration, amortization, conventional financing, down payment, FHA loans, fixed rate loans, points, and private mortgage insurance (PMI).

The interest rate is the amount of money the lender is charging you in order to borrow the loan. This is expressed in terms of percent. Of course, the lower the interest rate, the less the cost of the loan.

The term of the loan is also referred to as the length of the loan. This is how long you will be expected to make payments on the mortgage. In years past, most mortgages were twenty years. Now, thirty years is most common.

Closing costs are any fees associated with the actual transaction of buying and selling a home. These include realtor’s fees, title insurance fees, document stamp taxes, the cost of necessary repairs to the home (if the repair company has agreed to be paid at closing), points, and other miscellaneous costs.

Variable rate loans are the “opposite” of fixed rate loans. With a variable rate loan, the percent you pay in interest can go up and down according to the prime interest rate. With fixed rate loans, the interest percent remains the same throughout the life of the loan.

Points, also called loan discount points, are fees that are charged to the buyer from the lender. These fees are prepaid interest and can add quite a bit of cost to your closing. One point is equal to one percent of the loan amount. If you are borrowing $100,000 and are assessed one point by the lender, you will have to pay $1000 of prepaid interest when all the paperwork is done at your closing.

Private mortgage insurance (PMI) is a type of insurance that allows the buyer to put down a smaller down payment on the home. Many lenders will require that you purchase PMI if you are putting less than twenty percent down.

A down payment is the amount of money you are paying out of your own pocket toward the purchase of your new home. The selling price of the home (plus all fees and other costs) minus the amount of the mortgage is equal to your down payment. Most lenders require you to have a down payment of twenty percent or carry PMI.

Marcilio David is a Cardiologist and Internet Entrepreneur. Learn more tips and tricks about choosing the best mortgage, and a FREE Mortgage Ebook download at The Mortgage Guide

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