The Payment Options – Part 3 of Reverse Mortgages

Every person in life has unique needs, so it goes with the different payment options available with a reverse mortgage. Some individuals prefer getting their entire dispurement up front, while others prefer the option of receiving a steady monthly payment to supplement their retirement income. Regardless of which distribution plan you pick, you are able to adjust your plan as often as you wish to accommodate changing needs.

Outlined below are the different reverse distribution plans to fit your needs and desires.

Term – Equal monthly dispursement that is fixed for a predetermined period of months.
Lump Sum  – Cash immediately available in a lump sum (often to payoff an existing mortgage)
Tenure – Equal monthly payments as long as at least one homeowner lives and continues to occupy the property as a principal residence.
Combination – An immediate cash advance in addition to monthly allotments.
Line of Credit – A credit line which the customer can draw upon as he or she wishes.
Interest Rate

Most are adjustable rate mortgages. The following options and factors apply:

Choose between a monthly or annually adjusting rate.
Rates are tied to the one-year U.S. Treasury Security Rate.
Interest rate adjustments has no effect on the amount of or number of loan advances you can receive, it however causes the loan balance to grow at a faster or slower rate.
Loan Repayment

The loan is due and payable when you no longer occupy the property as your principal residence or fail to comply with the loan agreement.

The only requirement is that the loan be repaid in one payment. There is no requirement that the property be sold, only that the loan is repaid. This may occur either through the sale of the home or through other resources (such as savings or possibly applying for a new mortgage).

Effect on Public Benefits

Loan proceeds are not considered income and will not affect Social Security or Medicare benefits because these programs are not based on need.

However, your monthly reverse mortgage advances may affect eligibility for some programs. Consult your local program offices to determine how, or if, monthly reverse mortgage payments might affect your specific situation.

Previous posts in this “Reverse Mortgage” series:

The Specifics – Part 2 of Reverse Mortgages

What The Heck Is A Reverse Mortgage? – Part 1 of Reverse Mortgages

Help Your Home Emotionally Connect To Buyers

The end of the Super Bowl kicks off the Real Estate Spring Buying Season. 

As home sellers should prepare for the season’s upcoming homebuyers, they could do worse than to watch this four-minute home staging video from Barbara Corcoran. 

Barbara offer simple steps that “won’t cost you a lot of money but could make a 10-20 percent difference in the selling price of your home”.

Then, to watch home staging in action, tune in to well-known Home Staging professional Barb Schwarz as she takes the 20/20 news crew into Bothell, WA for a before-and-after.

With so much housing supply relative to recent years, home staging could be the difference-maker to home sellers.  And it’s usually less expensive than a price reduction.

Looking Back And Looking Ahead : February 4, 2008

We entered the New Year uncertain of the country’s economic future. With January over, it’s a little more clear. 

Last week’s data and events helped firm expectations. 

In the near-term, we can expect weakness:

• The economy is shedding jobs
• Consumer sentiment is low
• Home sales continue to slump nationally

In the intermediate-term, however, the picture gets fuzzy. 

The Federal Reserve has lopped 1.250% from the Fed Funds Rate in the last two weeks and those changes will work their way through the economy between now and the summer. 

If the economy reverses course and begins expanding at a steady pace, the Federal Reserve will be applauded for its moves this past month.

If the economy expands too quickly, however, inflation will set in and that will erode the value of the U.S. dollar.  The Fed will be derided for doing too much, too soon.

Inflation also causes mortgage rates to increase so it’s possible that the short-term weakness put homebuyers and homeowners wanting new home loans in terrific positions.

There is no new data hitting the wires this week.  Therefore, expect mortgage markets to take their cues from external forces such as politics, oil, and the public speeches of six members of the Federal Reserve.

(Image courtesy: Wall Street Journal Online)

Finding the Right Home – Should I Buy or Build?

One of the first decisions you will have to make in your home search is whether to purchase an existing home or build a new one. Each approach offers unique advantages, and your individual lifestyle, financial goals, and schedule will determine which is best for you.

Common reasons for moving up to a newly built home include:

• New homes are built with new materials and appliances, so they typically require less maintenance than resale homes.
• They often must offer more safety features and fewer health hazards in order to conform to today’s building codes.
• New homes are usually well-insulated due to better windows, more efficient heating and cooling equipment, and greater use of insulation.
• They can be easier to customize than resale homes because you choose many details ranging from floor plans and paint colors to faucets and light fixtures.
• New homes are more likely to be wired with new technologies in mind, such as multiple phone lines, high-speed Internet connections and extra cable outlets.

Existing homes, on the other hand, are attractive to many buyers for the following reasons:

• Older houses and neighborhoods may have more character and charm.
• They typically have more land than newer properties due to changes in land-use patterns.
• The homes are often in older, more convenient metro areas rather than in outlying suburbs.
• They tend to be less expensive than new properties and more likely to include items that may cost extra with a new home, such as blinds, landscaping, built-ins, etc.

Depending on the state, resale homes may have lower property tax rates. If you do decide that a newly built home is best for you, remember that a construction project requires careful planning. To make sure yours goes smoothly, keep a few basic tips in mind:

• Decide which features you want in advance. Consider whether you want to customize the floor plan or even order particular home appliances through the builder.
• Check the builder’s reputation. Your local Better Business Bureau, builders association, and newspaper all provide listings for builders. You can check out prospective builders by visiting their construction sites, getting references from previous clients, talking to real estate agents, or even hiring a general contractor for an assessment.
• Consider signing a written contract. Many homebuyers sign contracts with builders that detail the house model, building options, materials, payment schedules, timing for completion of construction and how to resolve disputes. Consult with your real estate professional and lawyer to help you through the contract and negotiation process.

Once you decide to build a home, we can sit down with a mortgage professional and develop a personalized financing program to match your needs.

How Prepaid Items Can Make Your “Closing Costs” Look Inflated

 

When buying a home, you pay for more than just physical property at the closing table.  You also pay a series of charges.  Commonly, homebuyers lump all of these charges under the heading of “closing costs”. 

That’s a miscategorization.

Many changes on a HUD-1 Settlement Statement are specifically not  closing costs. They are more appropriately designated as “reserves” or monies “paid in advance”.

These “prepaid items” include:

• Advance mortgage interest paid from the closing date to month-end
• Real estate taxes paid into an escrow account
• Homeowners insurance paid into an escrow account

Prepaid items are payments related to the home itself, and not payable to any third-parties faciliating the transaction. 

This is different from ”closing costs” which are charges stemming from the transaction itself.  Closing costs can include lender fees, title fees, and government fees.

One way to gauge the difference between prepaid items and closing costs is to ask the question:

“Would these dollars be due even if I didn’t buy this home today?”

If the answer is “yes”, the charge in question is likely a prepaid item.