If I Have an Existing Mortgage, Can I Get a Reverse Mortgage?
Yes, even if you have an existing mortgage, you are still qualified to get reverse mortgage but your age must be 62 years or above. Reverse credit facility is available only for senior citizens.
Facts:
You can make use of the reverse mortgage to pay off the existing one. The condition is the reverse financial loan should be the first priority while paying off the present loan. You can even pay off these existing debts with the help of family members, friends or from your savings.
Examples:
If you have an existing mortgage of $75,000, even then you are eligible to get reverse loan taking in to consideration your age, interest rate and home value. Suppose you are qualified to get $125000 as reverse mortgage, take $75000 from it and close the existing loan. You still will have an amount of $50, 000 for your use.
When considered in detail, these reverse mortgage facilities have a lot more options. The following example can help you understand them in detail. Suppose you have a loan of $56,000 which is yet to be paid and also you are eligible for reverse financial loans up to $56,000, after payment of existing debt nothing will be left with you. But the major benefit is, after the payment of all your existing debts you have no more loans to pay. That means your capability to reside in your house for the extent is not dependent on existing mortgage as the reverse financial loan doesn’t demand repayments as long as the lender resides in the house.
There are advantages for reverse mortgage and to apply for such a loan no employment certificate or salary slip is needed.
For these reasons, the law emphasizes counseling for those applying for reverse mortgage from a mortgage officer and also from an independent counselor.
Monday, June 14, 2010
Are there out Of Pocket Costs for a Reverse mortgage
Generally the only out of pocket costs for a reverse mortgage is the cost of verification and evaluation. But some of the lenders would also agree to pay an appraisal fee on request and then finance that cost into the loan.
As there are no out of pocket costs for a reverse mortgage, several costs and interest rates are applied while getting one from private sector lenders. But the cost of getting a mortgage loan depends on the particular program opted by the borrower.
Costs incurred on purchasing a reverse mortgage:
1) Mortgage Insurance: The mortgage insurance is about two percent of the appraised value.
2) Origination Fee: The cap is about 2% of the first 200,000 dollars and about 1% thereafter. The mortgage is subjected to an overall cap of 6000 dollars.
3) Title Insurance fee.
4) Attorney, County recording and Title fees.
5) Real estate appraisal fee.
6) Survey fees.
7) Relocation and closing cost.
In addition to the above mentioned fee, an individual will have to bear minimum monthly service charge that ranges between 25 dollars to 35 dollars. Usually the monthly service charge will be added to the monthly balance of the mortgage loan.
Interest rates on reverse mortgage:
The interest rate on a reverse mortgage is higher than conventional mortgage. But the mortgage has lower rate when compared to current fixed rate of mortgage. Some of the insured mortgage lenders offer cost limit on closing the loan. Through this mortgage services one can avail numerous payment options like: upfront one time payment, line of credit, monthly fixed payment and combination of line of credit, lump sum and monthly income payment.
Once after knowing why the costs involved in purchasing a reverse finance is higher than that of the traditional mortgage loan, one will appreciate a mortgage loan which will remain worthwhile.
As there are no out of pocket costs for a reverse mortgage, several costs and interest rates are applied while getting one from private sector lenders. But the cost of getting a mortgage loan depends on the particular program opted by the borrower.
Costs incurred on purchasing a reverse mortgage:
1) Mortgage Insurance: The mortgage insurance is about two percent of the appraised value.
2) Origination Fee: The cap is about 2% of the first 200,000 dollars and about 1% thereafter. The mortgage is subjected to an overall cap of 6000 dollars.
3) Title Insurance fee.
4) Attorney, County recording and Title fees.
5) Real estate appraisal fee.
6) Survey fees.
7) Relocation and closing cost.
In addition to the above mentioned fee, an individual will have to bear minimum monthly service charge that ranges between 25 dollars to 35 dollars. Usually the monthly service charge will be added to the monthly balance of the mortgage loan.
Interest rates on reverse mortgage:
The interest rate on a reverse mortgage is higher than conventional mortgage. But the mortgage has lower rate when compared to current fixed rate of mortgage. Some of the insured mortgage lenders offer cost limit on closing the loan. Through this mortgage services one can avail numerous payment options like: upfront one time payment, line of credit, monthly fixed payment and combination of line of credit, lump sum and monthly income payment.
Once after knowing why the costs involved in purchasing a reverse finance is higher than that of the traditional mortgage loan, one will appreciate a mortgage loan which will remain worthwhile.
Are There Early Repayment Penalties on a Reverse mortgage?
The answer to this question would be a no. There are no early repayments or prepayment penalties on a reverse mortgage. But there are both hard and soft pre payments or early payment penalties that apply on a conventional mortgage.
In order to discourage the mortgage holders from paying off or refinancing their loans early, most of the lenders include a prepayment or early repayment clause in contracts.
Why do lenders add early repayment penalty clause in agreements?
Interest income is one the main revenue source for mortgage lenders. Majority of the mortgage lenders don’t mind extra payments. When a borrower pays over 20% of the balance amount in less then twelve months, obviously the future income of the lender is threatened. But by including an early repayment penalty clause, the borrower won’t opt for prepayment as it would be more expensive. Majority of the companies or lender prepayments disappear or decrease over a period of time, as the clause will be limited to a particular time period.
Why the repayment or prepayment penalties aren’t applied on reverse mortgage?
Generally the repayment penalty would defeat the purpose of reverse mortgage. As reverse mortgage grants the house owners to access the equity without repayment. Most of the borrowers would gain nothing from pre payment or early payments. The home owners would have applied for reverse mortgage to earn monthly payment from lenders without selling their house.
There are numerous types of reverse mortgages loans offered by lenders like fixed rate and variable rate loans. Fixed rate mortgage loans have fixed interest rate and rate remains constant throughout the tenure of the loan. But the payment option is limited to a lump sum payment. Variable rate loans have adjustable interest rate tied to major financial index, which adjusts through the life of the loan. There are various payment options like tenure, lump sum or term based payments.
In order to discourage the mortgage holders from paying off or refinancing their loans early, most of the lenders include a prepayment or early repayment clause in contracts.
Why do lenders add early repayment penalty clause in agreements?
Interest income is one the main revenue source for mortgage lenders. Majority of the mortgage lenders don’t mind extra payments. When a borrower pays over 20% of the balance amount in less then twelve months, obviously the future income of the lender is threatened. But by including an early repayment penalty clause, the borrower won’t opt for prepayment as it would be more expensive. Majority of the companies or lender prepayments disappear or decrease over a period of time, as the clause will be limited to a particular time period.
Why the repayment or prepayment penalties aren’t applied on reverse mortgage?
Generally the repayment penalty would defeat the purpose of reverse mortgage. As reverse mortgage grants the house owners to access the equity without repayment. Most of the borrowers would gain nothing from pre payment or early payments. The home owners would have applied for reverse mortgage to earn monthly payment from lenders without selling their house.
There are numerous types of reverse mortgages loans offered by lenders like fixed rate and variable rate loans. Fixed rate mortgage loans have fixed interest rate and rate remains constant throughout the tenure of the loan. But the payment option is limited to a lump sum payment. Variable rate loans have adjustable interest rate tied to major financial index, which adjusts through the life of the loan. There are various payment options like tenure, lump sum or term based payments.
Is a Reverse Mortgage Taxable?
No, the proceeds from a reverse mortgage are free from tax deductions, as the received funds are classified under equity.
The reverse mortgages are dedicated to senior citizens aged at least 62 years or more. In order to get steady income during their retirement period, the senior citizen must hold the title of his house. By qualifying to the above mentioned conditions, the senior citizen will easily get a reverse mortgage on his house. In addition, this type of loan will be beneficial for senior citizens to lead a normal life without any financial burdens.
Is there any chance that the house owner might owe income tax on the house in future?
Yes, there is a possibility that an individual would owe income tax on his house in future. This happens in the case when the house owner decides to pay off his reverse mortgage at an earlier time period by selling his property for huge profit in the market. In the event of profit being more than the stipulated government guidelines then he should pay income tax for it. As a result of this most senior citizens or house owners won’t opt to sell their house.
Additionally the house owner’s security payments will not be affected by opting for reverse mortgage. As the obtained amount from lender on equity of home, is not categorized under earned income so the amount is excluded from tax deductions. But the benefits like SSI would be considered as the program depends on existing assets of the house.
If a house owner feels that a reverse mortgage is not for him, then he can cancel the same within three operational days after closing without any fine. In order to cancel the house owner must notify the lender or the bank in writing. Send the letter through a certified mail and prefer return receipt for the letter. After canceling the reverse mortgage deal, the lender will pay back the amount or fees that the house owner paid for financing.
The reverse mortgages are dedicated to senior citizens aged at least 62 years or more. In order to get steady income during their retirement period, the senior citizen must hold the title of his house. By qualifying to the above mentioned conditions, the senior citizen will easily get a reverse mortgage on his house. In addition, this type of loan will be beneficial for senior citizens to lead a normal life without any financial burdens.
Is there any chance that the house owner might owe income tax on the house in future?
Yes, there is a possibility that an individual would owe income tax on his house in future. This happens in the case when the house owner decides to pay off his reverse mortgage at an earlier time period by selling his property for huge profit in the market. In the event of profit being more than the stipulated government guidelines then he should pay income tax for it. As a result of this most senior citizens or house owners won’t opt to sell their house.
Additionally the house owner’s security payments will not be affected by opting for reverse mortgage. As the obtained amount from lender on equity of home, is not categorized under earned income so the amount is excluded from tax deductions. But the benefits like SSI would be considered as the program depends on existing assets of the house.
If a house owner feels that a reverse mortgage is not for him, then he can cancel the same within three operational days after closing without any fine. In order to cancel the house owner must notify the lender or the bank in writing. Send the letter through a certified mail and prefer return receipt for the letter. After canceling the reverse mortgage deal, the lender will pay back the amount or fees that the house owner paid for financing.
If I Default On a Reverse Mortgage, What Happens?
If an individual or house owner defaults on the reverse mortgage then it would lead to a financial disaster.
Generally the reverse mortgage is a loan which is specially designed for senior citizens aged at least 62 years or more. In this kind of mortgage the house owner will earn a steady income earned on equity of his own house. Here one the house owner can opt for any kind of payment like bulk amount or monthly payments. But in some of the countries reverse mortgage should be the only mortgage on house or property.
Is there any possibility of defaulting on reverse mortgage?
Yes, it is possible to default on reverse mortgage. Declaring bankruptcy, abandoning house or committing fraud would account for default. Reverse mortgage can lead to default, if the house owner doesn’t pay tax or insurances related to house or property. In addition the mortgage loan could be terminated for numerous reasons like government take over or government condemnation.
What happens if a senior citizen defaults on his reverse mortgage?
In case the senior citizen defaults on reverse mortgage then his monthly payments will stop being issued from the lender. Here the lender would stop giving the payments to save himself or the company from further loss. There is a possibility of legal action being taken against a senior citizen. After the judgment that is approved by the jurisdiction court, the house will be sold to clear the debt. In some regions the house owner should also reimburse the expenses borne by the lender other than paying off the outstanding loan amount.
In addition the credit score of the house owner will have a noteworthy impact after defaults on reverse mortgage. Bad credit score will make it difficult for a house owner to avail other types of loans from a lender or banks.
Generally the reverse mortgage is a loan which is specially designed for senior citizens aged at least 62 years or more. In this kind of mortgage the house owner will earn a steady income earned on equity of his own house. Here one the house owner can opt for any kind of payment like bulk amount or monthly payments. But in some of the countries reverse mortgage should be the only mortgage on house or property.
Is there any possibility of defaulting on reverse mortgage?
Yes, it is possible to default on reverse mortgage. Declaring bankruptcy, abandoning house or committing fraud would account for default. Reverse mortgage can lead to default, if the house owner doesn’t pay tax or insurances related to house or property. In addition the mortgage loan could be terminated for numerous reasons like government take over or government condemnation.
What happens if a senior citizen defaults on his reverse mortgage?
In case the senior citizen defaults on reverse mortgage then his monthly payments will stop being issued from the lender. Here the lender would stop giving the payments to save himself or the company from further loss. There is a possibility of legal action being taken against a senior citizen. After the judgment that is approved by the jurisdiction court, the house will be sold to clear the debt. In some regions the house owner should also reimburse the expenses borne by the lender other than paying off the outstanding loan amount.
In addition the credit score of the house owner will have a noteworthy impact after defaults on reverse mortgage. Bad credit score will make it difficult for a house owner to avail other types of loans from a lender or banks.
Can I Get a Reverse mortgage on a newly purchased Home?
Yes, one can get a reverse mortgage on a newly purchased home through lenders or financial institutions, but one has to fulfill certain basic requirements for the same.
Qualifying for newly purchased home reverse mortgage:
Qualifying for the reverse mortgage is not that difficult, this type of loan is best suited for senior citizens to earn a steady income. Majority of the senior house owners would opt to sell their large residence to purchase a smaller one. The qualifying criterion is calculated depending on whether enough equity and down payment is accumulated so that you can enter into reverse mortgage agreement. Here the lender would assist interested claimants with requirements that should be met in order to take advantage of the mortgage. There is no set or limited time period that the owner must live or number of years it is paid for, to achieve the equity amount that is based on value of property.
Who can qualify for the reverse mortgage?
Any senior citizen aged sixty two or more with a house, would automatically quality for this mortgage program. Reverse mortgage is a repayment plan where in the house owners receive monthly payments and eliminates further mortgage payments that an owner is held liable for. Some of the senior citizens wait beyond least age for the requirement just to have the benefit of lower rate of interest, as the interest rate is dependent on the age of the house owner or resident.
There are numerous benefits of the reverse mortgage especially for senior citizens, who want to lead a normal life even after retirement by earning steady income from equity generated on house. This money can be used by the owner to pay utility bills, house maintenance and medical care. In addition the owner can receive payments from the lender through several options like monthly payments or one time lump sum payment.
Qualifying for newly purchased home reverse mortgage:
Qualifying for the reverse mortgage is not that difficult, this type of loan is best suited for senior citizens to earn a steady income. Majority of the senior house owners would opt to sell their large residence to purchase a smaller one. The qualifying criterion is calculated depending on whether enough equity and down payment is accumulated so that you can enter into reverse mortgage agreement. Here the lender would assist interested claimants with requirements that should be met in order to take advantage of the mortgage. There is no set or limited time period that the owner must live or number of years it is paid for, to achieve the equity amount that is based on value of property.
Who can qualify for the reverse mortgage?
Any senior citizen aged sixty two or more with a house, would automatically quality for this mortgage program. Reverse mortgage is a repayment plan where in the house owners receive monthly payments and eliminates further mortgage payments that an owner is held liable for. Some of the senior citizens wait beyond least age for the requirement just to have the benefit of lower rate of interest, as the interest rate is dependent on the age of the house owner or resident.
There are numerous benefits of the reverse mortgage especially for senior citizens, who want to lead a normal life even after retirement by earning steady income from equity generated on house. This money can be used by the owner to pay utility bills, house maintenance and medical care. In addition the owner can receive payments from the lender through several options like monthly payments or one time lump sum payment.
Can a Trust Protect a House If There Is a Reverse mortgage?
Can a Trust Protect a House If There Is a Reverse mortgage?
If reverse mortgages aren’t paid by the house owner or senior citizen then even a trust can’t protect his/her house.
Can a trust protect a house if three is a reverse mortgage? This is a common question posed by individuals who are not sure if they should opt for reverse mortgage programs or not. So it is very essential for a house owner to know more about the mortgage plans before signing the contract. Even the most experienced attorneys don’t have sufficient information to answer the queries asked by their clientele. After obtaining tax exemption on monthly payments made by the lender, the mortgage programs remain complicated for the house owners.
Generally it would take more time to clear the debt of reverse mortgages, as a result of complex structure and only blind trust can save house owners.
Purpose of the trust:
The main purpose of trust is about ensuring that he or she won’t pay higher property tax on the house that they buy. But the trust will have no effect on payments that are associated with reverse mortgage program. It would be better to read the terms and conditions of opted mortgage program carefully before signing on it. It is not just steady income that the house owners will earn from this. It is also necessary to take care of his family members.
Can I still get reverse mortgage if I were to put my house into living trust?
Normally, presence of living trust doesn’t decide if he or she will get reverse mortgage. But the bank or lender will focus only on reviewing trust and ensuring that everything is acceptable after verifying the qualifying factors. This will enable the house owner to get reverse mortgage on his own house.
If reverse mortgages aren’t paid by the house owner or senior citizen then even a trust can’t protect his/her house.
Can a trust protect a house if three is a reverse mortgage? This is a common question posed by individuals who are not sure if they should opt for reverse mortgage programs or not. So it is very essential for a house owner to know more about the mortgage plans before signing the contract. Even the most experienced attorneys don’t have sufficient information to answer the queries asked by their clientele. After obtaining tax exemption on monthly payments made by the lender, the mortgage programs remain complicated for the house owners.
Generally it would take more time to clear the debt of reverse mortgages, as a result of complex structure and only blind trust can save house owners.
Purpose of the trust:
The main purpose of trust is about ensuring that he or she won’t pay higher property tax on the house that they buy. But the trust will have no effect on payments that are associated with reverse mortgage program. It would be better to read the terms and conditions of opted mortgage program carefully before signing on it. It is not just steady income that the house owners will earn from this. It is also necessary to take care of his family members.
Can I still get reverse mortgage if I were to put my house into living trust?
Normally, presence of living trust doesn’t decide if he or she will get reverse mortgage. But the bank or lender will focus only on reviewing trust and ensuring that everything is acceptable after verifying the qualifying factors. This will enable the house owner to get reverse mortgage on his own house.
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