By their very nature, reverse mortgages are designed to remain outstanding until the death of the last remaining borrower. This raises a couple important questions: how is this debt repaid, and what obligations, if any, are assumed by the borrowers’ heirs?
Reverse mortgage lenders certainly don’t make this issue easy to understand, since some claim that the debt is transferred to the borrowers’ heirs upon death, but others advertise that the slate is wiped clean and hence, there is no risk that the heirs would be on the hook for any unpaid debt. As it turns out, they are both right.
Since a reverse mortgage is a loan agreement, of course it must be repaid. In most cases, the property that serves as collateral for the reverse mortgage is simply sold upon the death of the borrower, and the proceeds from the sale are used to repay the loan. Any leftover cash reverts to the borrower’s estate and will be distributed accordingly. If the sale of the property does not generate enough proceeds to repay the loan, the FHA – assuming the reverse mortgage was a Home Equity Conversion Mortgage (HECM) – is on the hook for the difference – not the borrower and certainly not his estate. It is because of this FHA insurance, that neither the borrower nor his heirs bear an risk from property depreciation (unlike with a conventional mortgage) when obtaining a reverse mortgage. [If the reverse mortgage was an insured private loan, the above doesn't apply].
The problem of repaying the loan naturally becomes more complex if the borrower’s heirs (or the borrower himself, if the reverse mortgage was called while he was still alive) wish to keep the property, rather than selling it to repay the loan. In this case, it is incumbent upon them to generate cash from other sources (savings, investments, or conventional mortgage). Typically, there is a 12-month grace period afforded by the lender during which time the borrower and his heirs must sort out the repayment of the loan. During this time, the reverse mortgage remains outstanding and will continue to accrue interest.
When viewed from this perspective, it’s easy to see how the borrowers’ heirs could become responsible for repaying the reverse mortgage. Still, I think the distinction between voluntarily repaying the loan (due to a desire to keep the property) and assuming a legal obligation to do so.
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Wednesday, September 29, 2010
Consider These Tips When You Go For Mortgage.
For finance investors or people who want to buy a property, a house or a shop, there are plenty of opportunities these days. There are many mortgage companies and many of us or rather most of the people are warming up to credit, mortgage, and loan for buying anything or everything. From buying a dream home, to renovating the existing house or even to make a holiday trip people are making their way towards the leading mortgage companies for their requirements. Today the credit fever is raising high with no signs of reducing.
The borrower can be at ease with their suitable dealings and fixed mortgage rates. One has to be very wise while selecting the mortgage products or Lowest Mortgage Rates because this deal is done not only for a year or two, but it is done for a phase of about 10-12 years or even more than that depending upon the mortgage product. There are several beneficial mortgage products with the Mortgage Rates Canada and each has its own advantages but again if they are chosen wisely accordingly to personal requirements and demands then the benefits are double.
For more help in selecting the best mortgage product or the best mortgage rate one can intelligently understand the entire procedure through the leading mortgage websites and can even follow the advice of the financial professionals or agents. They are highly qualified and guide the borrower towards the right path in picking up the advantageous mortgage product according to the fundamental requirement.
One can start with a monthly analysis of the household profit and expenditure because it is very important for a person to know the cash flows every month. One can include the entire sources like the salary, dividends, interests, children educational costs and other rental income. Important or daily expenditures like living, groceries, electricity, medical, telephone expenses have to be given a priority. If all these tips are measured, then taking or signing up for a mortgage becomes easy.
If all these tips are measured, then taking or signing up for a mortgage becomes easy. My father had followed the procedures of the Mortgage Refinancing Toronto when he wanted to take the home loan. Their Affordable Mortgage Rates are calculated perfectly and suited my father’s existing budget easily. My father found that their Mortgage Rates were the Fixed Home Mortgage Rates. My father suggested me that if ever I would like to go in for the Home mortgage rates, I should assist myself from the Mortgage refinancing Calgary.
If you are looking for the best mortgage rates, do visit Jim Scott’s site for all your Canada Mortgage Rates, and get the ideal Compare Mortgage Rates now. Free reprint avaialable from: Consider These Tips When You Go For Mortgage.
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The borrower can be at ease with their suitable dealings and fixed mortgage rates. One has to be very wise while selecting the mortgage products or Lowest Mortgage Rates because this deal is done not only for a year or two, but it is done for a phase of about 10-12 years or even more than that depending upon the mortgage product. There are several beneficial mortgage products with the Mortgage Rates Canada and each has its own advantages but again if they are chosen wisely accordingly to personal requirements and demands then the benefits are double.
For more help in selecting the best mortgage product or the best mortgage rate one can intelligently understand the entire procedure through the leading mortgage websites and can even follow the advice of the financial professionals or agents. They are highly qualified and guide the borrower towards the right path in picking up the advantageous mortgage product according to the fundamental requirement.
One can start with a monthly analysis of the household profit and expenditure because it is very important for a person to know the cash flows every month. One can include the entire sources like the salary, dividends, interests, children educational costs and other rental income. Important or daily expenditures like living, groceries, electricity, medical, telephone expenses have to be given a priority. If all these tips are measured, then taking or signing up for a mortgage becomes easy.
If all these tips are measured, then taking or signing up for a mortgage becomes easy. My father had followed the procedures of the Mortgage Refinancing Toronto when he wanted to take the home loan. Their Affordable Mortgage Rates are calculated perfectly and suited my father’s existing budget easily. My father found that their Mortgage Rates were the Fixed Home Mortgage Rates. My father suggested me that if ever I would like to go in for the Home mortgage rates, I should assist myself from the Mortgage refinancing Calgary.
If you are looking for the best mortgage rates, do visit Jim Scott’s site for all your Canada Mortgage Rates, and get the ideal Compare Mortgage Rates now. Free reprint avaialable from: Consider These Tips When You Go For Mortgage.
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Variable Rate Mortgages: This Home Mortgage Loan Can Not Be For The Weak At Heart
I heard the news about another interest rate hike and thought it was about time to glance into refinancing my mortgage. I contacted my mortgage company first.
“I am interested in a fixed mortgage rate.” I said.
“May I ask why that is?” The broker asked politely.
“I don’t fancy to deal with the risk of Looking at your last ten years of account, you have done pretty well with the adjustable rate. Actually, you had paid less in interest than most people with a fixed loan. May I propose that we look at several adjustable rates, which are even less than the rate you’re paying and with caps you don’t have to bother about the interest rate hikes. I think we can save you a few hundred dollars off your monthly payment.”
At this instant the broker took a rest so that I can say, “No thank you. I am only interested in a fixed rate mortgages.” “I don’t understand. Are you not interested in saving money?” He asked before introducing into a sermon that had a mix of economy 101, budgeting 1, a dash of fortune telling and a healthy and totally unrealistic optimism of future trend in interest rates.
When he was finished I explained to him that I recall the 18%-19% interest on mortgage loans in the early 1980′s that he appeared too young to remember. I pointed out that on a $100,000 loan, the 18% interest is $1,500 per month on the mortgage interest alone. If you have a $200,000 loan the interest alone would be a back-breaking payment of $3,000 per month.
I understood he thought I am out of my mind thinking about an 18% mortgage interest rate in today’s environment. At the end we finished the phone conversation without any solution. The gap in understanding wasn’t about fixed rate mortgages vs adjustable rate mortgages (ARM). The gap was in age, experience, expectation, hopes and fears; a gap too wide to bridge.
To understand this gap, let’s look at the adjustable rate mortgages. This type of mortgage loan is normally lower than the fixed rate and the lower rate means lower payment that in turn means simpler qualification.
When loaners are considering your mortgage loan application, they look at what percentage of your income is available for repaying their loan. With an income of $5,000 per month, a $2,000 loan payment is 40% of your income and a $1,000 payment is 20% of your income. The earlier you get to $1,000 or 20% of your income, the easier it is to be eligible for the loan. This easier qualification attractcs to younger people who are just commencing and those with income limitation.
Adjustable mortgage rates suit to young people with an innate optimism, hopes of increased income and the high opportunity of moving to a different home in a short period of time. In search of advice from mortgage professionals like Edmonton Mortgage they require to look at what they can afford to pay and cannot worry too much about the distant future. To them something is better than leasing which is an absolute waste of money.
There are also those older persons who have suffered from some set back in life and do not enjoy a high credit score or do not have a very high income. Since a poor credit score surges the interest rate a bank offers to potential borrowers, a fixed rate may be too high for these individuals to think over.
Let’s take a look at a number terms that help you understand ARM better. Other alternative is to seek an advise from experts like Edmonton Mortgage.
Margin – This is the loaner’s markup and where they make their proceeds. The margin is supplemented to the index rate to find out your total interest rate.
ARM Indexes – These are benchmarks that loaners use to verify how much the mortgage should be adjusted. The more stable the index is the more stable your adjustable loan remains. Think overboth the index and the margin when you are shopping around.
Adjustment Period – Refers to the holding period in which your interest rate will not vary. You will come across ARM figures like 5-1 that means your mortgage interest remains the same for five years and then it will adjust every year.
Interest Rate Caps – This is the greatest interest a lender can charge you.
Periodic caps – The loaners may limit how much they can raise your loan within an adjustment period. Not all ARMs have periodic rate caps.
Overall caps- Mortgage lenders may also limit how much the interest rate can raise over the life of the loan. Overall caps have been neededby law since 1987. Payment Caps – The maximum amount your monthly payment can add to at each adjustment.
Negative Amortization – In most cases a fraction of your payment goes toward paying down the principal and reducing your total debt. But when the payment is not enough to even cover the interest due, the unpaid amount is added back to the loan and your total mortgage loan obligation is greater than before. In short, if this carries on you may owe more than you started with.
Negative amortization is the probable downside of the payment cap that sets aside monthly payments from covering the cost of interest.
As you compare lenders, loans and rates remember Henry Moore who said, “What’s important is finding out what works for you.”
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“I am interested in a fixed mortgage rate.” I said.
“May I ask why that is?” The broker asked politely.
“I don’t fancy to deal with the risk of Looking at your last ten years of account, you have done pretty well with the adjustable rate. Actually, you had paid less in interest than most people with a fixed loan. May I propose that we look at several adjustable rates, which are even less than the rate you’re paying and with caps you don’t have to bother about the interest rate hikes. I think we can save you a few hundred dollars off your monthly payment.”
At this instant the broker took a rest so that I can say, “No thank you. I am only interested in a fixed rate mortgages.” “I don’t understand. Are you not interested in saving money?” He asked before introducing into a sermon that had a mix of economy 101, budgeting 1, a dash of fortune telling and a healthy and totally unrealistic optimism of future trend in interest rates.
When he was finished I explained to him that I recall the 18%-19% interest on mortgage loans in the early 1980′s that he appeared too young to remember. I pointed out that on a $100,000 loan, the 18% interest is $1,500 per month on the mortgage interest alone. If you have a $200,000 loan the interest alone would be a back-breaking payment of $3,000 per month.
I understood he thought I am out of my mind thinking about an 18% mortgage interest rate in today’s environment. At the end we finished the phone conversation without any solution. The gap in understanding wasn’t about fixed rate mortgages vs adjustable rate mortgages (ARM). The gap was in age, experience, expectation, hopes and fears; a gap too wide to bridge.
To understand this gap, let’s look at the adjustable rate mortgages. This type of mortgage loan is normally lower than the fixed rate and the lower rate means lower payment that in turn means simpler qualification.
When loaners are considering your mortgage loan application, they look at what percentage of your income is available for repaying their loan. With an income of $5,000 per month, a $2,000 loan payment is 40% of your income and a $1,000 payment is 20% of your income. The earlier you get to $1,000 or 20% of your income, the easier it is to be eligible for the loan. This easier qualification attractcs to younger people who are just commencing and those with income limitation.
Adjustable mortgage rates suit to young people with an innate optimism, hopes of increased income and the high opportunity of moving to a different home in a short period of time. In search of advice from mortgage professionals like Edmonton Mortgage they require to look at what they can afford to pay and cannot worry too much about the distant future. To them something is better than leasing which is an absolute waste of money.
There are also those older persons who have suffered from some set back in life and do not enjoy a high credit score or do not have a very high income. Since a poor credit score surges the interest rate a bank offers to potential borrowers, a fixed rate may be too high for these individuals to think over.
Let’s take a look at a number terms that help you understand ARM better. Other alternative is to seek an advise from experts like Edmonton Mortgage.
Margin – This is the loaner’s markup and where they make their proceeds. The margin is supplemented to the index rate to find out your total interest rate.
ARM Indexes – These are benchmarks that loaners use to verify how much the mortgage should be adjusted. The more stable the index is the more stable your adjustable loan remains. Think overboth the index and the margin when you are shopping around.
Adjustment Period – Refers to the holding period in which your interest rate will not vary. You will come across ARM figures like 5-1 that means your mortgage interest remains the same for five years and then it will adjust every year.
Interest Rate Caps – This is the greatest interest a lender can charge you.
Periodic caps – The loaners may limit how much they can raise your loan within an adjustment period. Not all ARMs have periodic rate caps.
Overall caps- Mortgage lenders may also limit how much the interest rate can raise over the life of the loan. Overall caps have been neededby law since 1987. Payment Caps – The maximum amount your monthly payment can add to at each adjustment.
Negative Amortization – In most cases a fraction of your payment goes toward paying down the principal and reducing your total debt. But when the payment is not enough to even cover the interest due, the unpaid amount is added back to the loan and your total mortgage loan obligation is greater than before. In short, if this carries on you may owe more than you started with.
Negative amortization is the probable downside of the payment cap that sets aside monthly payments from covering the cost of interest.
As you compare lenders, loans and rates remember Henry Moore who said, “What’s important is finding out what works for you.”
Bloggers who are want to get info about the sphere of forex trading online, then check out the site which was mentioned in this line.
http://heromorph.com/heromorph2/userinfo.php?uid=30297
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