Mortgage leads loans Rates

If you were to ask the average consumer to define the reverse mortgage concept, you would find very few able to do so. Many consumers, especially those who aren’t up on their mortgage products and their availability will never have heard of a reverse mortgage, much less able to explain the concept. But it may just be one of the best financial planning tools available to many seniors and those reaching retirement age.

As many individuals reach retirement age, their fixed incomes simply aren’t adequate. They aren’t receiving enough through social security or a pension fund to take care of the rising costs of living and the medical attention many older citizens must have. So what is the solution? Many of these retirement age citizens have children. Why can’t their children supplement their incomes, or simply take care of their elder care needs? The simple fact is that many of their children aren’t in a position to care for their elderly parents. Their incomes aren’t enough to have money left over, and if both spouses work, there is no one to take care of an aging parent.

It is at this juncture that many people have begun to turn to the reverse mortgage in seeking the increase in monthly income that is so desperately needed. The reverse mortgage offers older citizens a way to benefit from the equity in their home, because the reverse mortgage turns that equity into a monthly income. Quite frankly, unless you live with your parents, or you intend to move into your parents home when your parents pass, you aren’t going to retain the home; statistics attest to the fact that the vast majority of children sell their parents home, once their parents are no longer in need. Why not cash in on that equity when your parents are alive, and need the monthly income?

The popularity of the reverse mortgage has been steadily increasing, and many reverse mortgage companies expect 2005 to be a banner year. As the idea begins to catch, and spread among the elderly, there are more mortgage companies that offer a reverse mortgage product. The key here is that most of these elderly did plan for retirement; they did try to make the necessary adjustments so that there monthly incomes would be enough to see them through their retirement years. Thanks, however, to the rising cost of medical care, prescription medicine, and heating fuel, many older citizens have found that their planned retirement income each month is simply not enough.

There are those reaching the retirement years, for which the reverse mortgage is not an option, simply because they have no equity in their homes, or they don’t own a home; but for the remaining seniors, it’s an option that I would exercise, especially if I were certain my home would be sold during an estate or inheritance sale. The money that the reverse mortgage generates, can add so much to the few years we have during our retirement in the areas of travel, entertainment, and sheer enjoyment of life.

Since we can never be sure that we’ve properly prepared for retirement, or that some unexpected emergency won’t knock us off our feet, or that we simply do not have enough thanks to the stock market losses of recent years, the reverse mortgage is one of the best ways for older citizens to access the equity in their homes and turn it into ready cash.

We have saved the best part, however for last: any proceeds from the reverse mortgage are tax-exempt proceeds. In other words, you will not have to pay tax on the money. There are other, tax-exempt options, but the reverse mortgage remains one of the most conducive to the senior citizens needs, as well as those of their families. The interest payments on a reverse mortgage are deferred until death, therefore, seniors do not have to be concerned with making interest payments or tax payments on the proceeds.

If you’re not familiar with the reverse mortgage, and you think you might benefit, or that your parents might benefit, take a moment to seek the advice of a financial officer, and then quite possibly your attorney. Never make any decision before you fully understand what the consequences of your decision might be, legal or otherwise.

In case you haven’t noticed the mortgage market and the real estate market have been blazing a trail into the record books. Never before has there been such explosive, sustained growth of these two markets. The key factor here is that one seems to feed off the other. Is this a good thing, or are the two markets headed for a collapse?

You have analysts that will argue for either side. But, you need to have a better understanding of how this process works, and what elements have come together to allow this kind of growth, before you can accept or disprove either argument. What has happened to spur this kind of growth? Well, there are several key factors that managed to come together at precisely the right time, some of them attributable to natural disaster that has generated a booming market.

The first contributor was the falling interest rate that has leveled out around 6 – 7%; the second great contributor has been the increase in mortgage loan options. There are mortgage products out there to fit every type of buyer. The third contributor, (and this one is purely from nature) was the horrific hurricane seasons of the past couple of years, including the season we had this year.

How have all these elements come together to generate growth? Here’s exactly how: lower interest rates meant cheaper monthly payments, refinancing options were open, and people could afford to buy bigger homes for less. Add to that mix a more varied loan market, and you have an increase in buying, selling, and building. If you also throw in the fact that hurricanes destroyed massive quantities of homes along the coast, and most will rebuild, you have a burgeoning real estate and housing growth market.

We have also managed to create an environment very conducive to investment, construction, and resort development. Now, if you factor in a booming market for investors, you have a prime situation for increases in real estate value, increases in construction, and increases in mortgage loans.

How does the average citizen ready to buy or build a home interpret all this information? Well, it creates a wonderful situation for the homeowner looking to sell a home, simply because the value of the home should show a tremendous increase over the purchase value, especially if you’ve owned the home for more than 10 years. However, if you’re buying or building, you’re not going to like the situation. Why? Because home prices are up, thanks to the rising real estate prices, and so are is the price of building materials, needed to build a new home. We can attribute much of this to high gas prices and hurricanes. The good news, in all this, is the low interest rates. You can still borrow at an extremely affordable interest rate.

For the consumer shopping the market, you need to really educate yourself about the rising costs of real estate, the local values in your community, and what mortgage products would most benefit you, when you consider your individual objectives. If you’re like most, you aren’t buying your home for an investment, and you aren’t buying with the intent to sell in a few short years. In the market of today, it would be a wise choice to meet with a financial advisor; someone that has a background in finance, and can help you to clearly define your objects, and choose a mortgage that will reflect those objectives.

Many of the individuals, who are the doomsayers, seem to think that the market can’t sustain this type of growth. That is has occurred too quickly, and like the bubble of the stock market, will burst, leaving many homeowners and mortgage lenders “holding the bag” so to speak. But, you also have many of the intellectuals that say the real estate market was due a burst of growth; that it is normal, healthy, and we should have no trouble sustaining this type of growth. Whatever the end result, right now, the real estate market and the mortgage market are hot items; if you own real estate, you’ve hit the jackpot. If you’re looking to buy, get ready to pay.

Chances are unless you’re right in the throes of purchasing your home, you’ve never even heard of private mortgage insurance. But, if you intend to purchase a home and you don’t want put the 20% down that traditional lending institutions require, you’re going to become very familiar with private mortgage insurance. What is private mortgage insurance and who pays for private mortgage insurance? This article will take the opportunity to discuss private mortgage insurance and why you’re required to purchase it; we’ll also examine the latest federal regulations governing private mortgage insurance.

Let’s first define what private mortgage insurance actually is, and why you might be required to purchase the insurance. Private mortgage insurance is an insurance purchased to protect the lender, not the borrower. The borrower however pays for the mortgage insurance, and is provided to the lender instead of the 20% down payment normally required when purchasing real estate. The insurance provides the difference between the fair market value of the home and the actual price a lender may be able to sell the property for, in case of a default on the loan. Normally, the lender will require a 20% down payment and forgo the private mortgage insurance option. However, under certain circumstances if the buyer has an excellent credit card debt rating, is well known to the lender, and is deemed to be low risk, private mortgage insurance may be an option offered by the lender.

The current mortgage market seems to be flooded with such varied products as the interest only loan and the 125 loans that private mortgage insurance seems to be a thing of the past. You rarely encounter a situation when the buyer is required to purchase the private mortgage insurance; those situations most likely to continue to require the purchase of the private mortgage insurance are those where the lender is a traditional lending institution. Mortgage companies have long since ceased requiring borrowers to purchase private mortgage insurance.

Mortgage investors, such as the Fannie Mae and Freddie Mac programs, have recently come to the aid of the borrower by introducing an option to the primary mortgage market that allows borrowers to pay as little as 5% down and purchase only enough mortgage insurance to cover 25% of the loan; this creates a potential citing situation for the borrower. The borrower may pay a slightly higher interest rate in order to lower the cost of insurance that the advantage lays here: mortgage interest is fully tax deductible, private mortgage insurance is not.

There’s another option, also regulated by the federal government and passed into law in 1999, known as the homeowners protection act of 1998 established rules for regulation of private mortgage insurance requirements once a homeowner reaches a level of 20% equity. What the law requires, in layman’s terms, is that a lending institution must notify you once your equity levels reach 20% of the appraised value of the home. Once you the kind of 20% equity level, you must be given the option to drop private mortgage insurance. If this proposal had passed into law some 20 years ago, it would have been met with great resistance among the lending community; today, the interest only loan and loans that offer mortgages in excess of the appraised value of the home overshadow the effect of the 1998 homeowner’s act.

Many homeowners seem to mistake the private mortgage insurance purchased in order to secure the loan, with that of the homeowner’s liability insurance. Lenders are responsible for making clear the distinction between private mortgage insurance purchased to protect the lender versus the homeowner’s liability insurance purchased to protect the homeowner. Both forms of insurance will need to be purchased, and the borrower will be responsible for payment of both insurance premiums.

Quite often as we go through the mortgage process, we encounter many unexpected expenses; private mortgage insurance is normally one of those unexpected expenses. As a consumer if you’re contemplating the purchase of a home, contact your local lending institution, or a mortgage company in your area, and asked for information concerning the purchase of a home for first-time homeowners. The information you’re provided should contain all the terms, conditions and terminology explanations that you will need in order to make an educated decision when choosing lenders and homes.