Mortgages come in various types.  If you want to know what is best for you, then you have to understand the basic facts about different mortgages.  This way, you will understand their benefits and disadvantages.

The Basics of Mortgages

So, what really is a mortgage?  This is a type of loan that you that you have to repay over an agreed time frame.  Normally, a mortgage is secured by a property such as your home.  If you have a mortgage, you are securing a promise that the amount you borrowed from the lender will be repaid in full.   For the majority of consumers, getting a mortgage is one of the biggest and most serious financial decisions that they have to make.

There are many lenders that can offer mortgage loans.  Banks, for example, are the number one originators of mortgages.  You can also get a mortgage from special mortgage lenders, building societies, or you can seek the intervention of a mortgage broker.  You can get a mortgage after finding the crucial information you need.  It is also possible to get the advice of a financial advisor who will give you recommendations on what type of mortgage would be best for your situation.

(more…)

Homeowners over age 62 who are having a hard time paying monthly bills may rely on reverse mortgages to stay in their homes. NY1′s Money Matters reporter Tara Lynn Wagner filed the following report.

Homeowners who have spent years paying for their houses may have their houses pay for them. That is the idea behind a reverse mortgage which enables struggling seniors to get equity out of their home in one lump sum, regular monthly payments or a revolving line of credit.

While the homeowner needs to demonstrate a level of need, Jason Levy, the chief executive officer of Guardian First Funding, says a reverse mortgage is not a sign of failure.

(more…)

Intent is to make information more fully available for home-loan applicants

The Federal Reserve on Monday issued a package of rules and proposals for mortgages, including a measure that would require lenders to disclose to borrowers how their mortgage payments can change over time.

The provision, which is an interim rule that would take effect on Jan. 30, 2011, seeks to make sure borrowers are alerted to the risks of payment increases before they take out mortgage loans with variable rates or payments, such as adjustable rate mortgages.

Based on the measure, lenders would need to provide details to borrowers about what the maximum interest rate and payment they would need to make during the first five years of their adjustable-rate mortgage, as well as a “worst case” example showing what the maximum rate and payment they could be required to pay.

Lenders also would need to explain to borrowers that they can’t avoid hikes in payments by refinancing their loans, according to the provision.

(more…)

Question: I’m behind in saving for retirement. Should I take more risk to catch up? –James Wilson, San Antonio

Answer: I can understand your concern — and the temptation to try to ramp up your nest egg by investing more aggressively in stocks. After all, in the wake of an abysmal 10-year span in the market, a return to equities’ historical annual gains of 10% may seem like a good bet.

Yet there’s no assurance that a subpar decade will be followed by a superior one. If anything, economists’ expectations of generally slow growth over the next few years suggest it may take a while for stocks to return to their glory days.

Besides, recent research shows that the market is actually more prone to gut-wrenching setbacks than many investors assume.

(more…)

What is a reverse mortgage?

It’s a home loan that lets you convert a portion of the equity in your home into cash. The equity that built up over years of home mortgage payments can be paid to you. But unlike a traditional home equity loan or second mortgage, no repayment is required until the borrower(s) no longer use the home as their main residence.

Age matters (income doesn’t)

If you are 62 or older and have paid off your mortgage (or owe only a small balance), you may be able to tap your home equity to generate extra cash. You can take the money as a lump sum, a line of credit, monthly payments or a combination of a credit line and regular payouts. Unlike a traditional mortgage or home equity loan, you don’t need to meet income or credit requirements to qualify, and you don’t have to repay the loan as long as you live in the house.

Lenders are motivated

Declining property values and stricter lending limits imposed by the Federal Housing Administration last year took a big bite out of the reverse-mortgage market. Now, lenders are looking to gin up new business, partly to satisfy investor demand for government-backed mortgage securities, known as Ginnie Maes, which include reverse mortgages. To attract new borrowers, some lenders are waiving loan-origination fees and other upfront charges, which could save you up to $10,000 and increase the amount you can borrow by the same amount.

(more…)

Reverse mortgages are one of those products that seem like a really good idea in theory, but then you have to spend inordinate amounts of time figuring out whether the benefits outweigh the costs.

With reverse mortgages, the up-front fees are substantial. Still, those fees have been coming down in recent months. Then again, so has the amount of home equity homeowners can tap with a reverse mortgage. Then there are the scams to watch for:  See this report [PDF] by the National Consumer Law Center for some scary stories.

Some 114,692 reverse mortgages were made in fiscal 2009, a huge increase from the 157 loans made in fiscal 1990 when the program — the government’s home-equity conversion mortgage or HECM program, which accounts for most reverse mortgages — first started, according to the National Reverse Mortgage Lenders Association.

Clearly, there is growing interest in these products. Not least because, as Amy Hoak writes in her Home Economics column, some homeowners are using these loans as a means to tap some much-needed cash during this economic downturn.

For older Americans with a lot of equity in their homes, pulling some cash out of their home, if they need to pay bills, would seem to make sense. The question is, at what cost?

Found here.

The Federal Housing Administration, also known as the FHA, may be toughening up their stance on seniors with a reverse mortgage who fail to pay their local property tax or hazard insurance premiums.

Fannie Mae has already started the process of contacting reverse mortgage lenders and servicing companies, asking them to keep an eye out for homeowners who are delinquent on their property taxes or insurance. If the senior homeowner fails to pay their dues for an extended period of time, it was reported that Fannie Mae instructed servicers to begin foreclosure proceedings.

A reverse mortgage is a loan, designed specifically for seniors who are 62 years or older. The loan allows seniors to tap into the equity of their home and use the cash for whatever they choose.

(more…)