Best Mortgage

Many a borrower has gotten hung up on mortgage lingo and financial jargon. When brokers and lenders take the time to explain one can only be more confused.

Adding to the confusion is the fact that one mortgage is not like the other. Exactly what do home mortgages purport to be? Is a mortgage a loan? Is it a contract? Is it the deed? What parties are involved and how is actual property ownership defined? As home loan borrower, are you the actual owner of the property being financed? We need only look closer at the definitions for each party involved in the process.

Mortgages by definition are devices used to create a lien on real estate properties by contract. Such device is used as a method by which individuals or businesses can buy residential or commercial property without paying the full value upfront.

Mortgagor Defined

The mortgagor (borrower) is the borrower of money for a mortgage. The party of a mortgage agreement who receives financing for real estate property. The person who gives a mortgage in return for money to be repaid. Sometimes spelled mortgager.

Mortgagee Defined

The mortgagee (Lender) is the party lending the money and receiving the mortgage. The creditor or lender in a mortgage agreement.

Therefore the borrower uses a mortgage to pledge real property to the lender (also called the mortgagee) as security against the debt for the rest of the value of the property.

Defining Other Types of Mortgages Defined

Conventional Mortgage: With a conventional mortgage, the lender obtains a lien or defeasible legal title to the property in return for the payment of the amount of money lent.

FHA Mortgage: An FHA mortgage is a conventional mortgage which is insured in whole or in part by the Federal Housing Authority.

Purchase Money Mortgage: A purchase money mortgage is one given to secure a loan used to buy the property.

Senior Mortgage

The first mortgage. A first (senior) mortgage on the property has priority over any second or subsequent (junior) mortgages on the property; the senior lender has a more secure interest in the event of a default since the senior obligations are paid first in the event of foreclosure and sale.

Adjustable Rate Mortgages: An adjustable rate mortgage (also called “ARM”) offers a fixed initial interest rate and a fixed initial monthly payment. After the initial period is over, the rate and term of the mortgage can be modified at predetermined times under the agreement to reflect the current market mortgage rates.

For more help defining mortgage and loan terms I recommend the following sites.

Google.com has implemented a number of dictionaries in its search results. Simply begin each search with the term “define” followed by the financial keyword you are seeking a definition to. Example: “Define Mortgages”.

The Blogger mortgage glossary dictionary at http://mortgages-glossary.blogspot.com has basic mortgage terms defined. Take time to do research on financial terms your not familiar with. Notice updated or clarified definitions by using more than one online dictionary or mortgage glossary. When trying to understand the mortgage process remember that it’s all in the word.

Author: Mark A. Askew
Article Source: EzineArticles.com
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The total bill to repay a $200,000.00 Mortgage at 5.0% interest is at least $700,000.00 to use rounded numbers. You earn the $200,000.00 to pay off the loan. Another $280,000.00 is the interest paid on the mortgage loan. Then you must pay government taxes on your earnings of another $220,000.00, assuming you are in the 40% tax bracket. This is not a math class. But, these figures are calculations rounded for quick and easy retention. They reflect the past mortgage repayment reality for most Mortgage Holders.

Now, an expanding group of Financial Advisors are quietly advising their Clients to turn those mortgage payment numbers around to create their own wealth. The new techniques are based in the published works of authors like Albert Lowry, Alan Silverstein, David Voth among others. When these ideas are applied practically, they unlock real profits that lay hidden in your mortgage payments. The Advisors’ Plans work something like this. Since you must earn the $700,000.00 to pay the Mortgage, Why not keep Interest and Taxes to a low of $200,000.00 total. Then you the Home Owner could pocket the difference –$500,000.00. Two Hundred Thousand Dollars ($200,000.00) pay the mortgage loan on the home and $300,000.00 you keep from Tax savings and interest savings because you followed the fast mortgage early repayment plan or SMERP.

This new approach to Household Budgetting and Home Finance involves a series of fancy financial footwork that effectively pays off the mortgage principal faster. Now you could be free of a mortgage in one half to one third the time it previously took. If a 30-Year mortgage gets paid off in 15 or 20 years in the United States…. Or, if in Canada, a 25- year mortgage gets paid in 15 or even 10 years, then the fortunate Consumer just freed her Home Budget from 10 or 15 YEARS of Mortgage Payments. That simple maneuver accounts for the core savings in these new techniques. In our example, the Monthly Payments are $1163.03. By saving 10 years of payments alone, the mortgaged Home Owner would create almost $140,000.00 of cash savings. Fifteen years without these monthly payments would produce raw savings above $209,000.00. When we add other realities such as a positive return on those dollars over 10 to 15 years, then these mortgage payment savings begin to be counted seriously in fractions of a million dollar range.

Ten years ago, those in the know would keep this a closely guarded secret. Now the secret is out. This is still not common knowledge even among Financial Advisors. Mortgage Holders still think you had one too much to drink when you first begin to discuss the subject. And of course, Lenders, such as the Mortgage Banks, Insurance Companies and other financial institutions do not want this secret out too fast. For the individual Borrower or Consumer, this is a half a million dollars of savings over 10 to 15 years. To the Lending Institutions, 100 of these fast pay mortgage loans could create a significant drop in the Company’s profit margins.

The exact mechanics of the fast payoff, Smart Mortgage Early Re-payment Plan, require the involvement of professionals in most cases. That is why as a Consumer you must get an analysis of your existing mortgage. Contact a knowledgeable Financial Advisor to see if these techniques can be applied to your specific home mortgage. You may be able to use your existing mortgage and avoid the early mortgage pay off penalty. Additional costs for an appraisal, legal and title registration costs could be reduced when the Banks compete against each other for your business. Try it. Success might be easier than you think…. Who wants to make an extra donation of $250,000.00, plus or minus a few dollars, in excess taxes or Bank Profits, needlessly?

The success of these techniques often lies in applying allowable tax deductions, and creating new ones you may not yet know about. For example, you use the home equity as an Investment. Your Accountant will confirm that such investments usually permit a tax deduction on the interest expense for Canadians. American home mortgage interests are already a tax deductible item. So, an increased Investment Loan would generate a bigger tax deduction. You need the help of knowledgeable Professionals for advice relevant to your specific circumstances. The numbers are usually bigger than those you are comfortable with in your Home Budget. Also, as a Consumer, you will only succeed by exercising strong discipline over your spending habits.

This is not a simple rehash of the old, tested Bi-weekly or even weekly Mortgage Payment scheme. The Bi-weekly Mortgage Payment, if applied rigorously, could repay a 30-year mortgage in about 25 years in the USA. In Canada, A Bi-weekly Mortgage re-payment strategy will pay off a 25-Year Mortgage in 22 years, or so. The savings that would result would be around $41,000.00 to $45,000.00. This is a far cry from the $250,000.00 to $500,000.00 figure in the Newer, Smart Mortgage Early Re-payment System. A decade or two ago, the bi-weekly mortgage payment technique was the hottest and smartest mortgage re-payment scheme we knew, At that time, Bankers fought with anyone who dared to contemplate such heresy. Wit this new mortgage re-payment phenomenon, these same Lenders are using more subtle psychology in steering Consumers away from the potential for a drastic reduction in their profit margins.

The key to success with the Early Mortgage Re-Payment technique is to have the Home Owner re-invest from the equity in the home. HELOC, or the Home Equity Line of Credit does not do the same job. HELOC carries more risks than the newer, smarter and faster, Early Mortgage Repayment System. Some Banks lead the trend by offering flexible and easy access to the home equity. Without the goal setting, and discipline, the confidence and mentoring role of a Financial Advisor, Consumers would do what Consumers do well. They would consume their new found wealth, by going on a cruise, paying down credit card debt, buying a second car, making renovations to the kitchen, the patio, the bathroom; payment on the Children’s college expenses…. Seldom would the Consumer set this as a goal to pay down the mortgage super fast. That is the role of a handful of Financial Advisors who make it their business to stay on top of the latest trends and to advance the interests of their Clients to the maximum.

Copyright 2006 AAA Consumer Credit Solutions

Author: Alfred Fraser
Article Source: EzineArticles.com
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An interest only mortgage is one in which you make only interest payments for a period of time. A third of all new mortgages are interest only mortgages.

Contrast this to traditional mortgage that pays back the mortgage balance you took out to purchase your home. Many traditional mortgages are “amortized” over 30 years; that is, the amount you pay every month pays both interest and helps reduce the balance of the loan; so at the end of 30 years the loan is completely paid off.

=== Why are Interest Only Mortgages Attractive? ===

Interest only mortgages allow you can buy a larger, more expensive home in a better neighborhood.

Consider a traditional $250,000 mortgage for 30 years at 6.35% interest. The principal and interest payment is $1,555.59. But, the interest only mortgage payment is only $1,322.92–a monthly savings of $232.67. This makes homes more affordable.

And, for nearly the same traditional monthly payment (of $1,555.59 for a principal and interest loan), an interest only mortgage payment (of $1,555.75) allows you to get a loan of $294,000. Adding $44,000 to the loan amount could easily let you afford a larger home in a better neighborhood.

The short term effects of the interest only mortgages are:

1) Homes are more affordable so more people can buy homes

2) People can buy more expensive homes

Another way of looking at interest only mortgages is from a real estate agent’s perspective. The interest only mortgage allows real estate agents to sell more homes because they are more affordable. And, interest only mortgages allow real estate agents make fatter commissions on more expensive homes.

=== What are the Downsides of Interest Only Mortgages? ===

Adjustable Rates: Most interest only mortgage loans are adjustable. That is, as key interest rates change, the interest payments on the loans change. Since interest rates have recently been climbing, eventually the monthly mortgage payments will also rise.

Those home owners with adjustable interest only mortgages will find their monthly payments higher than when they first purchased their home. If their income has not kept up, they will find it increasingly difficult to manage their mortgage payments.

Limited Term: Not only that, but depending on the terms of your interest only mortgage, your interest only payments may last only a few years. You could be expected to start making principal payments in five, seven or ten years. Once the interest only period ends, your monthly payment will go up because then you’ll be paying on both principal and interest.

Many Americans are living on a financial cliff. They save little, spend most of what they earn, and are sinking deeper into debt every year. If you bought the largest interest only mortgage you could afford, you could find yourself in the difficult position of defaulting on your mortgage.

Real Estate Price Uncertainty: Also, the past decades have seen housing prices increase, seemingly without limits. As the selling price of your home increases, you essentially are building equity. When you sell your home for more than you paid for it, you’re making a profit on it’s increased value.

Money Magazine reports that many home prices have gone up five times as fast as personal income. They credit home price inflation to a large extent to the interest only mortgage loan.

But, Forbes magazine indicated that the housing prices on the coasts have peaked. Rising interest rates have increasingly made expensive homes less affordable. With fewer potential buyers, expensive homes are harder to sell and their prices could eventually drop.

The theory many home buyers have used in the past is that if home prices keep increasing, the profit you can make from selling your home can be enormous–even if you never pay down your mortgage loan. This positive outlook is merely one form of real estate speculation. It may be worth while applying Alan Greenspan’s comment about “irrational exuberance” to holders of interest only mortgages. He said, “But how do we know when irrational exuberance has unduly escalated asset values, which then become subject to unexpected and prolonged contractions as they have in Japan over the past decade?”

But, if rising interest rates make expensive housing less affordable, and if retiring baby bombers begin to seek smaller, less expensive housing, then the prices of real estate could stagnate or even decline. This could place the interest only mortgage holder in the position of being “upside down” on their loan, owing more than their property is worth.

=== Is an Interest Only Mortgage for You? ===

There are certainly situations in which an interest only mortgage can be a valuable option.

Interest only mortgages can be useful if you are a savvy investor looking for cash-flow from income producing real estate. You will likely have investment property in several markets and a decline in one market could be offset by an increase in another market.

If you can obtain an interest only loan at a rate significantly below your traditional mortgage, you can take advantage of it’s lower rate. Just because it is an “interest only mortgage” does not mean, however, that you must only make minimum payments for interest. You can add money to you payment to decrease the principal (loan amount). Because your interest charges are less, by making the same monthly payments as before you can more rapidly reduce the amount of your debt.

Or, you could use the money you would have paid in principal payments to build equity by making improvements in your home–just be sure the improvements really add value to your home. For example, kitchen and bathroom upgrades usually add value to your home, but adding a built-in pool often does nothing to improve your home’s resale value.

Refinancing a partially paid for home with an interest only mortgage can free up money for other investments. You will still have equity in your home even if your home’s selling price declines somewhat.

=== Summary ===

Overall, you need to understand both the advantages and disadvantages of an interest only loan.

If you are buying a home merely because you can afford the payments, you may be in for an unpleasant financial education. So, evaluate your situation carefully before you choose an interest only mortgage.

Author: Bob Sherman
Article Source: EzineArticles.com
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There are a number of affiliate programs available through many different types of merchants. One of the most common affiliate offers, though, is a mortgage affiliate program.

A mortgage affiliate program operates the same as most any other affiliate program with other merchants. The mortgage broker or mortgage lender offers to pay you an agreed dollar amount for either a click through from a link on your web site, a fixed dollar amount for a lead you’ve generated through your link, or a percentage of the amount financed through a lender by a new customer that visited their site as a result of your link.

While a mortgage affiliate program can be a beneficial way to earn added dollars, it’s still much the same as other affiliate programs out there. The similarity is due to the fact that a mortgage affiliate program is not a way to earn money fast, despite promises made by the mortgage affiliate program to simply place their banner on your web site and watch the money start rolling into your bank account.

If you’re serious about becoming involved in a mortgage affiliate program, there are literally hundreds out there from which to choose. Make your decision carefully, though, and consider the following items as you look at different mortgage affiliate programs.

1. Choose a mortgage affiliate program that offers excellent affiliate support and communication.
A good way to test the waters as to how good the mortgage broker or lender’s communication and support is with their affiliates is to simply email an inquiry. If they don’t respond within a day, send one more email. If you haven’t heard from the mortgage broker or lender you’ve chosen within two to three days, chances are it’s best to search elsewhere for a mortgage affiliate program. A mortgage affiliate program that doesn’t even bother to respond to a serious inquiry probably will not offer the support needed once you’ve put their program into action on your site.

2. Don’t pay money to enter into a mortgage affiliate program.
If a mortgage affiliate program asks for money in order for you to post their link on your web site, it could possibly be a Multi Level Marketing, or MLM, program, which are normally not successful in mortgage affiliate programs. Additionally, chances are good that such an offer could, plain and simply put, be a scam just out to take your money. A true mortgage affiliate program will be available to you at no charge.

3. Consider a mortgage affiliate program only with a broker or lender that is honest.
When you make your initial email contact with the company offering a mortgage affiliate program, don’t be afraid to ask for references of others currently involved in their mortgage affiliate program. If they won’t offer references to you, be wary. If they do offer a name or two for you to contact, ask the affiliates how successful the program has been for them, what level of support they receive from the broker or lender, and ask them to describe their experience working as an affiliate. If all of these questions are answered with a positive response, chances are you’re making a good decision with signing onto the mortgage affiliate program.

4. Choose a mortgage affiliate program that offers a variety of ways of reaching potential customers.
Some mortgage affiliate programs require a banner link on your web site. While this is the option of choice for many affiliates, consider a company that also offers text links for your site, or allows you to purchase mailing lists in order to promote the mortgage affiliate program through email. Even if these options are not immediately of interest to you, if the program takes off in your favor, it could be another way to generate additional funds. Text links can be an excellent choice, especially if you already have a couple of affiliate programs posted that you’re working with, or are considering working with others in the near or distant future. With too many affiliate banners, your site can start to appear littered, distracting from the content of your web site, loading slower, and frustrating visitors that might otherwise click on your affiliate links. Flexibility with the mortgage affiliate program on how you connect with individuals interested in the mortgage program can give you some great options on how to develop and increase your affiliate earnings.

There are numerous mortgage affiliate programs available. A simple search through your favorite search engine will verify this to be true. While we endorse none of these mortgage affiliate programs, a few that are readily available and are continuously looking for affiliates to sign on are as follows. Watch for two-tiered programs, where you’re paid for individuals that go to the company’s web site through your link and fill out a form, and then are also paid a commission if that customer also finances or refinances because of your link.

LendingAffiliates.com

Premier Mortgage Funding, Inc., pmtgf.com

FamilyBranching.com

1st-mortgages.com

Loanapp.com

AllOptions.com

ArgentMortgage.com

Loan.com

eLoan.com

HomeLoanCenter.com

Author: Rebecca Hubbard Game
Article Source: EzineArticles.com
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There seems to be an endless choice of mortgages and rates available to the home buyer consumer. It is always great to have options so you can specify a mortgage that is perfect for your financial situation. However, it can get tricky deciding between the many options.

I have attempted to put together in one place, information on the top 9 mortgages that are used for home buyers to finance their homes. Although these are common mortgages and terms that you will see from a financial lender, remember that these mortgages are almost always negotiable, especially if you have pulling power with good credit and a large down payment. Never agree to a mortgage or financial commitment, no matter how tempting, if it falls out of your range of financial comfort. Address all options and choose what is right for you.

1. Fixed Rate Mortgage

A fixed rate mortgage, like the name implies, maintains the same interest rate throughout the entire life of the loan. You can get this fixed rate mortgage usually in 10, 15, or 30 year terms. The time can be negotiable with your specific lender to fit your needs. This type of mortgage is good for the home buyer who wishes to know how much the house payment will be every month because it is fixed and if the home buyer is planning on living in the home for 10 years or more.

2. One Year Adjustable Rate Mortgage

Adjustable rate mortgages, or ARMS, have interest rates that change according to financial indexes often dictated by the current market. This means that your payment can increase or decrease according to the change in the index. This can sometimes offer instable payments so the home owner must be prepared for changes of either an increase or decrease in amount.

With the one year ARM, the interest rate changes every year according to the index for the entire life of the loan. This can be good for the home buyer who wants to risk getting the lowest rate possible at the expense of risking a higher rate and higher monthly payments if the index changes accordingly. The rates are usually offered on the lower end due to the risk that the buyer is carrying. If you enter into this type of fluctuating loan due to financial status, you can always re-negotiate terms or refinance later and get a better deal and more stable loan.

3. 10/1 Year ARM

With this mortgage, the interest rate remains the same for 10 years and then starting the 11th year changes every year according to the index the lender chooses to base the interest on. This mortgage is good for those who may move in 10 years and want to enjoy a stable payment plan while they are living in the home.

4. Balloon Mortgage

Balloon mortgages are considered a little higher risk because at the end of the life of the loan, there can be a large payment as the loan is due in full. The life of the loan is negotiable; however 3, 5, and 7 year balloons are common. The home owner will pay at a stable interest rate for the life of the loan, then at the end of the term, all the remainder of the loan must be paid in full. The home owner must be prepared for this final, possibly very large payment.

This mortgage is good for those who want to live in the property more than the life of the loan, who want to pay the mortgage of quickly, who like stable monthly payments, or who plan to move before the life of the loan, in which the loan can be assumable and passed to another buyer.

5. 7/1 Year ARM

Like the 10/1 ARM, this mortgage simply has a different life term. The interest rate remains steady for 7 years and then starting the 8th year the interest rate will change according to the index, causing the monthly payment to change every year after. This mortgage is good for the home owner who plans to live in the home for 7 years and likes stable payments. It is also good for the home owner who wants to move within 7 years and has options in case he or she chooses otherwise.

6. 30 Due in 7 Mortgage

This mortgage is like two fixed rate mortgages put together. It is also known as a 7/23 two-step mortgage. The interest rate and monthly payment remains stable for 7 years and then on the 8th year, the interest rate changes according to the current rates. This interest rate and payment will remain the same for the life of the loan. This mortgage is good for those who plan to live in the home for more than 10 years and wants to risk the interest rate going either higher or lower at the 8 year mark.

7. 30 Due in 5

Similar to the 30 due in 7, this mortgage is a two-step mortgage that has an interest rate and monthly payment that remains stable for 5 years and then changes according to the current market rates on the 6th year. This mortgage is good for those who wish to live in the home for longer than 5 years and want to risk having a change in a monthly payment, whether an increase or decrease.

8. 5/5 and 3/3 ARMs

These mortgages have a stable payment for the first listed number, 3, 5, or however negotiated, and then after that period the interest rate changes according to the market every 5 years for the 5/5 ARM and 3 years for the 3/3 ARM. This mortgage has fewer adjustments for the life of the loan and is good for those who which to live in the home for a period of 3-5 years and who are open to changes in the future.

9. 5/1 and 3/1 ARMs

This mortgage is not stable and the interest rate changes every year after the first listed number. So starting the 6th year for the 5/1 ARM and starting the 4th year for the 3/1 ARM. This is good for the home owner who wishes to live in the property for the stable payment length of the loan and who is willing to risk getting the lowest rate possible after a time of stability.

As you can tell, most of these mortgages can fall under three main categories: fixed, adjustable, two-step and balloon. The terms and length of the mortgages are negotiable, so ask your broker, lender or financial advisor for assistance in finding the best loan for your financial situation.

Author: John R. Blakefield
Article Source: EzineArticles.com
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Mortgage lead generation is the process of collecting and compiling information about consumers who are seeking a mortgage loan, or interested in mortgage refinancing. A lead generation system collects information about the type, purpose, and amount of the desired mortgage loan besides the contact information.

The Mortgage leads help us to get the required mortgage services like mortgage lead generation, mortgage lead generation management system, internet mortgage leads and more. The mortgage lead generation management system is a web based system for managing and distributing leads. The lead companies can save their great time and money through this system because it mechanizes many tasks that most lead companies do manually like matching leads and sending them. This system also automates many of the processes that normally involve a phone call from lead buyers for lead refunds and adding money to their accounts. This is a perfect system for both the mortgage brokers as well as lenders.

Mortgage lead generation endows people with mortgage real estate leads and information on existing deals and other services giving all the essential details on mortgage loan leads. A mortgage lead generation service might be suitable when there is someone in the real estate market with sound knowledge on the cost needs and other issues concerned to the clients. An individual mortgage lead has complete information and disseminates it to potential customers as per their requirement and wish. This is an excellent way for businesses to develop lists of potential clients with the desire to learn more about available services and companies. Some mortgage leads generation services offer lower interest rates to any potential client who needs a refinance for their existing mortgages.

A mortgage leads generation services covers many features and themes of mortgage and real estate. Mortgage leads generation is used mostly by groups or industries for generating a modified framework. The framework is done in an effective manner to catch the attention of all the potential clients whoever would like to utilize any specific services that are offered by the groups or industries. The mortgage group collects data about the potential clients by browsing through all the mortgage lead websites. A potential customer has to understand the process of working of a mortgage lead generation, before choosing a mortgage leads service or provider. The crucial point to consider regarding any mortgage leads generation system is about their leads production for mortgage leads loan.

Some of the main advantages of mortgage lead generation system are:

The mortgage lead generation system allows any body to upload any number of leads in to a single file and handles all lead matching and distribution itself. It sends abroad leads which do not match any lead buyers so that you can sell them through alternate means. Your lead files will be received by the brokers within minutes as soon as you upload your lead file in the internet. The ultimate advantage of this system is the convenience to track your lead source, brokers, profits and lead returns.
The mortgage lead generation system puts you in touch with your lead buyers through newsletter system. Lead brokers can sign up themselves and choose their own decisive factor. As per today’s trend mortgage is a method used by many business people to buy commercial or residential property instead of paying full value instantly. So discover today the benefits of mortgage lead generation online and select the mortgage loan that fits your exact needs.

Author: Jay Walker
Article Source: EzineArticles.com
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With the growing popularity of Reverse Mortgages across the country, more and more seniors are asking themselves, “Do I need a Reverse Mortgage?” This question can be answered by using several different means. This article will discuss several of the most common questions in discovering the usefulness of the Reverse Mortgage for different individual situations as well as some suggestions to beginning the process.

1) “I don’t have a mortgage! Why would I get a Reverse Mortgage?”

This is one of the most common disputes that arise when discussing Reverse Mortgages. A financial goal for many seniors is the removal of all mortgage debt to the home, but this methodology is becoming outdated with the creativity of home equity programs that have recently come about, including the Reverse Mortgage. One of the fears of taking out a loan on a mortgage-free home is the threat of default and foreclosure. The Reverse Mortgage is one product that removes this threat. There are never any payments required for a Reverse Mortgage as long as you live in the home. It allows you to utilize the equity available in the home without the threat of losing the home, and without the added burden of monthly payments.

2) “I don’t need anything.”

A Reverse Mortgage is commonly used to remove a current monthly mortgage payment, to help a senior out large medical or credit card debt, or to secure an investment or an insurance product. However, the phrase “I don’t need anything” is a statement that is frequently used without looking at all the safeties and possibilities of having a Reverse Mortgage. A Reverse Mortgage can work as an extremely effective “safety net.” It can establish a large, extremely liquid, and high interest earning account that can be counted on in the event of an emergency or an opportunity. Right now, Reverse Mortgage credit accounts, which function very similar to checking accounts, earn well over 6.7%. This extremely useful when a medical crisis occurs, or a timed financial opportunity presents itself, and the senior will not have to affect any of their savings, investments, or income.

3) “Why would I give my house away?”

This is a common misconception that many seniors have when learning about Reverse Mortgages. First, a Reverse Mortgage Lender does not take your home or ownership of the home. There is no transfer of deed or title. The senior retains all rights of ownership they previously enjoyed and the only change is that the Reverse Mortgage becomes a lien on the property. The senior may sell the home and move at any time, and if the borrower should pass away, the home will be passed on to their heirs as designated in the will.

4) “I am on Social Security and Medicare. I don’t want to lose those benefits.”

The largest benefit of the Reverse Mortgage is its guarantees from the Federal government. The program is regulated and facilitated by the Department of Housing and Urban Development and due to this, all Federal benefits like social security and Medicare are not affected whatsoever by the additional income generated by the Reverse Mortgage. The government classifies the proceeds from Reverse Mortgage as equity, not income.
This also has the benefit of being 100% Tax-Free! You will not report any additional income on your tax return and the reserve of thousands of dollars of liquid funds will not alter your tax-bracket.

These are some of the more common questions regarding Reverse Mortgages that are presented in the early stages of acquiring the loan. Almost every applicant will ask themselves one or all of these at some point. Here are some actions that you can take to help in your decisions to move forward with a Reverse Mortgage.

1. Meet with a HUD Counselor – People looking for more information should meet with HUD-approved counselor. These meetings are free of charge an offer the senior the chance to speak with an impartial, third party expert who can answer questions and recommend a lender. They will also provide you with a mandatory certificate that will be required to start the process, which is valid for 6 months.

2. Use an online reverse mortgage calculator – These are sites that will allow you to enter in some basic information about your personal situation and get some preliminary numbers that will be standard with any lender around the country. These are extremely useful to get a basic idea of what you can receive so you know what to expect when you speak with a lender.

3. Speak to a Reverse Mortgage Lender – One benefit of the Reverse Mortgage program’s regulation by the government is that all lenders use the same interest rate, lending limits, and closing costs. There is very little discrepancy in the numbers involved in a Reverse Mortgage; so most decisions about lenders are based on the quality of service that is provided.

These are some of the issues that seniors deal with when they are evaluating whether or not to acquire a Reverse Mortgage. For many, the opportunity to increase income, fund a long-term-care insurance policy, get a head start on their loved one’s inheritance, or maximize the growth of their assets are reasons as well. Remember, the Reverse Mortgage works because it does not require payments to be made while the owner lives in the home, and a Reverse Mortgage does not affect the continued appreciation of the homes value. It will let a savvy senior have two assets working for them (the home’s value and the home’s equity) instead of one.

Author: Troy Shellhammer
Article Source: EzineArticles.com
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Throughout your home owning experience, you may run into unexpected events that cause you to use your options of increasing and decreasing both your debt and home equity in your property. Mortgages are really just that, a change in the amount of money you owe (debt) and the amount of ownership in your property (home equity).

The first time you buy a home, it is very common to put down a down payment towards the home price, and then borrow money from a lender to cover the rest of the price. You then make payments with either a fixed or adjustable rate mortgage, based on a predetermined interest rate and terms. This transaction with you and the lender is called a mortgage. And if it is the only mortgage on a property, it is called a first mortgage.

In the case of this first mortgage, you most likely have a larger amount of debt than the amount of home equity, unless of course you borrow less than you put down, then you would have a greater amount of home equity than debt. Every time you make a payment to the lender, your debt decreases and the property’s home equity increases. This occurs until the life of the loan has been fulfilled, and the mortgage is paid in full. At this point, the property is free and clear, and you own the property out right.

Anytime during the life of the first mortgage, home owners may choose to borrow against the home equity built in the home and take out a second mortgage. A second mortgage is a mortgage on a property which has already been pledged as collateral for an earlier mortgage.

The process of a second mortgage is much like the process of taking out the first. However, because you are borrowing against the equity already built up in the home, the second mortgage carries rights which are subordinate to those of the first. This means that the second mortgage is second to make a claim and the second to collect if the first mortgage is in default. For this reason, interest rates are often higher for a second mortgage than a first mortgage.

When considering a second mortgage, it is important to outweigh the costs against the benefits. You should shop for credit terms that best meet your borrowing needs without posing undue financial risk. After all, with the responsibilities of a second mortgage, a home owner is more likely to default and possibly lose his or her home. Be sure that you shopped your second mortgage just as diligently as you did the first, comparing annual percentage rates, points, fees and prepayment penalties. All these terms can make a huge difference in the amount of money you will be paying in turn for borrowing against your home equity.

As in the situation of the first mortgage, a second mortgage generally increases your debt and decreases your home equity. The opposite, however, is that of a reverse mortgage.

In a reverse mortgage, a homeowner borrows against the equity in his/her home and receives cash from the lender without having to sell the home or make monthly payments. This cash can be given to the homeowner as a monthly cash advance, in a single lump sum, as a credit account that allows you to decide when and how much of your cash is paid to you, or as a combination of these payments. The homeowner does not have to make any payments as long as he or she lives at the residence. If the homeowner should move, sell the property, or die, then the loan would have to be paid off.

In order to qualify for a reverse mortgage, you must be at least 62 years of age and own a home. This option for a reverse mortgage is perfect for older homeowners who are equity rich, and cash poor. In the case of a reverse mortgage, your debt increases and your home equity decreases.

Depending on what stage of the homeowners experience you are in, it is important to always know your options as a homeowner. With the option to borrow against your equity, you can have cash to improve your home, make improvements to increase the overall value of your home, or live comfortably when there is not any liquid cash readily available to you, but you have equity in your home.

Being a homeowner can be rewarding in many ways, and being able to utilize the money in your home is one of them. Always research terms and conditions of any mortgage, and always borrow from a qualified, trusted source.

Author: John R. Blakefield
Article Source: EzineArticles.com
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I was having considerable problems getting a mortgage to buy my first home about four years ago. If I was to believe everything I had heard, I was the ideal candidate for a mortgage – young, a first-time buyer and with an annual income of about £30k. Easy!

No, not easy, actually. Being young with a leaning towards enjoying myself, I had no savings – nothing to use as a deposit. But what about these 100% mortgages I had been hearing about? Surely I qualified? Oh, there was something else – I was also self employed with no accounts.

Self employed with no accounts and no savings.

Could I get a mortgage? It was virtually impossible. Not a single High Street lender would give me a mortgage. Even my bank who have had my services for ten years turned me down; even though my bank knew exactly how much I earned each year and how much I spent each week; even though my bank knew that making the monthly payments on a repayment mortgage would not be an big problem for me.

Then I heard about Self Certification Mortgages.

What is a Self Certification Mortgage? It’s essentially a mortgage whereby you decide whether or not you are capable of making the repayments. And that is when the penny dropped, because you see the entire process of applying for a mortgage is premised upon an institution (such as your bank) deciding whether or not you are able to make the monthly repayments.

And what is the formula for working this out? Well, if you are employed it is your salary – a bank will lend you, say, 3 or 4 times your annual salary. Normally they will ask you for a small deposit, say 5%, to demonstrate that your intentions are serious.

Obviously, if you are self employed, and particularly with no accounts, you often do not have an annual salary and you are unable to demonstrate regular monthly income. Many self employed people – notably me – live hand-to-mouth, regularly waiting for reluctant clients to settle outstanding invoices. So how can your ability to repay a mortgage be judged? I discovered that self certification was the answer – i.e. YOU. You make a judgement as to whether or not you are borrowing too much money and whether or not you will be able to afford the monthly repayments. After all, if you are bright enough to run your own business, manage your own tax affairs, handle purchasing and invoicing, surely you are bright enough to work out whether you can repay your mortgage!

Think about it – conventional, salary-based mortgages are judged on the basis of what a person has earned in the past, but a person could be made unemployed within hours of securing a mortgage. On the other hand, Self Certification puts the onus on you predicting what you will earn in the future. Sure, you could go out of business, but a salaried person could also lose their job.

So I thought, well this is good, but I bet that a Self Certification Mortgage is the stuff of loan sharks, with huge interest rates, crushing monthly repayments and Guantanemo-style penalties.

But there was something else I discovered about mortgages. Although the High Street is swamped by lenders, there are only actually a very small number of ‘actual’ lenders: the majority are intermediaries acting on their behalf, because the number of mortgage applications is so great that intermediaries are required to perform the process of judging each applicant and assessing risk.

So I discovered that whereas a High Street lender would turn me down, a smaller lender might accept me. But get this: the mortgage that I actually received from the small lender at the end of the day was exactly the same as the mortgage which had been refused me by the High Street lender! Only the forumla for judging my ability to repay the mortgage was different, not the mortgage itself!

So what’s the catch with Self Cerftification? There is always a catch in my experience, and in this instance it was a very big catch. Whereas a regular mortgage requires the borrower to contribute a deposit of, say, 5%, my Self Certification Mortgage required a deposit of 15%. Fifteen percent!! Of course I can see why they ask for this, why if you are not being judged using the conventional formula you are expected to show some serious committment. But I didn’t have any savings. I was young and self employed for crying out loud.

So what did I do? Okay, I would not recommend this to everybody, but I was desperate for my own home and I knew that I could afford the repayments. I took out a Personal Loan shortly before my mortgage application and, supplemented with a timely invoice payment, I was able to pay the deposit and afford the key refurbishment costs on the property (roof, re-wiring, plumbing etc).

On the High Street this would be called a Home Improvement Loan and acquired AFTER you have obtained a mortgage and purchased the property. I simply borrowed a little more in the form of a Personal Loan before I had acquired a mortgage. I was fortunate in that I could afford to carry the costs of these repayments for the forseeable future and I had bought on a rising market – the value of my property was already more than the mortgage and personal loan combined before I had even finished the refurbishment (ie. 4 months after buying the property). I would not recommend this to everyone, and you have to be very, very clear about how much you are borrowing and what the total repayments will be.

However, getting on the property ladder and having my own home was the most important thing to me, and it just goes to show that if you look beyond the High Street you can actually find the same or similar financial products but with less of the hassle. The High Street had always made me feel inadequate, a financial failure.

You might be interested to know that, because I was still looking for the catch in my Self Certification Mortgage, I went to a respected, independent financial advisor recently (on the High Street as it happens) and asked if I should change my mortgage to something better. His advice was that I had got a very good mortgage deal and that I should stick with it for the forseeable future. So I have.

Richard

Author: Richard Evans
Article Source: EzineArticles.com
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Buying a home is one of the biggest commitments you will ever undertake. So choosing your mortgage does take thought. Take some time to consider what mortgage is right for you? After all it’s your money you will be spending so, I would recommend utilizing it in the best way possible.

The kinds of mortgage available to you

There are thousands of different mortgages on the market at the moment, all offering something different, something similar but essentially offering one of two types:

o Repayment and Interest, with a repayment and interest mortgage you (the lender) you will have to payback the specified mortgage amount plus the interest in a specified time. For example if you borrowed £100,000 over 25 years, the total plus interest is £190,000 over 25 years, this is what you will repay. You will see the balance becoming increasingly smaller over the term of the loan.

o Interest only, with an interest only mortgage you only pay the interest on you mortgage, however when the term of your mortgage is over you are still left with the initial buying fee of your house. Using the above example this would be £100,000 still left to pay. When you take an interest only mortgage you will need to take out an alternate savings plan, in the form of a pension, I.S.A, or an endowment. These alternate plans run alongside your mortgage to accumulate the final sum to zero your balance after the term is over.

Advantages of a repayment and interest mortgage

o It is possible for you to pay off lump sums of your mortgage to minimize the balance and make term shorter. However do be careful as some lenders do charge for a early settlement. If you do decide to repay early it is better to do upon the changing period of your mortgage i.e. when you are eligible to start another discounted term with another lender.

o You do not always have to take out life insurance with a repayment mortgage. Some pension plans that are in place do cover for unfortunate events such as death.

o You know the full balance of your mortgage and also the term of the repayment, so you always know when your mortgage will be paid in full.

Disadvantages of a repayment and interest mortgage

o In the early years of a repaying your mortgage the majority of the monthly repayment is interest rather than capital. For lenders who move house regularly, this can mean that little of the capital is paid off.

o If no life insurance, pensions or assets are in place to cover the repayment of the house. In the unfortunate event of a death the house will still have to be repaid. If payments are not kept up to date then the house will be sold.

o There may be financial penalties for making additional payment into your mortgage account.

Interest only mortgage

With this type of mortgage, only the interest is paid off with each mortgage payment. After the term of the mortgage elapses e.g. 25 year period, the lender is left with the full balance for the initial purchase of the house. To combat this problem (if you do not have the money to repay after the term is over) you the lender can take out another policy to run along side the mortgage payment? These policies are an ISA, pension plan or endowment policy. When you find a policy to suit you? The policy will grow along with your mortgage to accumulate the balance of you initial payment over the same term as your current mortgage. So at the end of the specified lending term you have the correct amount of funds to pay your balance.

Pension Plan

Using a pension plan to accumulate the balance of your mortgage is a tax free saving scheme. The balance of your house will be saved over a period of time until you can pay your final balance. If you do intend to use a pension fund to save for the balance of your house, consideration should be taken into account to open another pension fund for retirement purposes too.

ISA Plan

With an ISA plan you invest in stocks and shares via an Individual Savings Account (ISA) – which is a tax-free method of saving. This method of saving may not be suitable for most borrowers. Before considering this option you should consult with an independent financial adviser.

Endowment

An endowment is still the most common type of interest only mortgage which also provides life assurance cover and a fixed payment for investment. The endowment policy along with the interest only mortgage should in effect end at the same time, leaving you with the ownership of your home and nothing to pay. Endowments have undergone much criticism; this is due to investors being promised high returns from their investments. However lately this has not been the case, borrowers have found their investments have been as good as expected and a shortfall in the end amount of invested cash will not match the amount owed on the current property.

Taking into account the recent problems that have arisen regarding endowment policies it is worth remembering that returns on endowment policies have been pretty good, however you do need to see the term out in full. Also endowments do provide life assurance as part of the actual policy, so in the unfortunate event of a death the mortgage balance is paid in full.

Advantages of an interest only mortgage

o Your investments and savings could accumulate more than the required amount to cover the final payment; this could leave you more cash for your own personal use.

o Some plans have good tax benefits and help reach the required amount it a quicker and cheaper rate.

Disadvantages of an interest only mortgage

o In the unfortunate event of your investments not acquiring the designated amount of cash to cover the loan repayment, the investor could face a shortfall which they will then need to pay. If you are worried about a shortfall on your investment, you should keep in touch with your investor and request regular updates on the situation of your endowment. If the worst comes to the worst, you can increase payments to compensate for the loss of investment.

o Cashing in your endowment, ISA or pension could have adverse effects on the amount of money you have saved over the past however many years. If you do decide to cash in any existing policies you may be subjected to a penalty, this could be a cash amount specified by the investment company/lender. Please seek professional advice if you are worried about the end results of your finances, don’t be too hasty as most policies accumulate more of the cash in the final year.

Author: Michael Aldridge
Article Source: EzineArticles.com
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