Welcome to Intel Mixx Blog ..
In the aftermath of the housing market crash, people began finding that stringent qualification requirements are making it much harder to refinance, receive a home equity loan, or secure the financing they need to purchase their own property. There are some type of mortgages, however, that do not follow the same rules as the other more common types of home loans. These types of loans are called a reverse mortgages.
What is a reverse mortgage?
A reverse mortgage is a way for homeowners to liquidate some of the equity in their home without the hassle of making a monthly mortgage payment. The way that a reverse mortgage works is that the lender actually makes payments to the homeowner in a lump sum, with a line of credit, or in monthly payments. It is similar to the way a homeowner would make payments on their traditional mortgage, only in reverse. Credit score does not play a role in determining interest rates for these mortgages. For example, a homeowner looking to refinance in New Jersey with a medium credit score would pay higher New Jersey mortgage rates
To qualify for a reverse mortgage, a homeowner must be a certain age. The Federal Housing Administration (FHA) has currently set the guideline of a minimum age of 62. The homeowner must own their home outright and not have any other lien holders on the property. The homeowner must be current on all taxes and insurance premiums and remain so during the duration of the loan.
A reverse mortgage does not require the borrower to repay any part of the loan as long as at least one of the owners makes the property their primary residence. Payment does not become due unless the owners move from the home, sell the home, or die, at which time the estate is responsible for repaying the loan. Upon the homeowners death, if the home sells for less than the amount of the balance due, the estate is not responsible for the remaining balance and the mortgage lender absorbs the loss.
Types of Reverse Mortgages
There are two kinds of reverse mortgages that the FHA issues. They first one is the Home Equity Conversion Standard Loan and it requires a higher upfront fee for the first insurance premium causing more initial out-of-pocket expense. This type of loan is for those who need to borrow a higher amount of equity in their home. The second is the Home Equity Conversion Saver Loan. This type of loan has a much lower up front insurance cost and is for home owners who need to borrow a small amount from the equity in their home.
What are the differences between reverse mortgages and home-equity loans?
Reverse mortgages can be a good solution to those who need to supplement their retirement income as the payments they receive do not affect social security or retirement benefits. These types of loans do not detract from their monthly income like home equity loans, since repayment does not occur until they no longer need the home. Home equity loans require repayment immediately, decreasing the amount of the borrower’s monthly disposable income.
Image Credit: 401(K) 2013
March 25, 2014
March 6, 2014
February 27, 2014
February 10, 2014
January 24, 2014
January 22, 2014
January 21, 2014
December 31, 2013