Are You Looking For A Home Loans Providing Company Mortgage Tips Pros And Cons Of Refinance Loans For People With Bad Credit Reverse Mortgages A Tax Free Income For Senior Citizens Buying To Let Is It For You
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If you’re stuck under some high credit card bills and your credit rating is slipping, one of the best ways to immediately improve your credit is a home equity loan. When the loan closes, home owners have cash-on-hand to pay off bills. The result: their credit rating starts to improve immediately.
Banking executive Dan Ambrose refers to those as the “band-aid loan”, also known as the 2/28 in mortgage lingo.
“Most sub-time loans are short term loans, not A paper market, which means a fixed rate for two years then the loan adjusts.”
He’s talking about 30 year refinancing mortgages for people with less than stellar credit. Lenders offer a home-equity loan at a set interest rate for two years, and then the loan converts to a variable rate loan, where the interest rate fluctuates with the prime rate at the time.
That’s the down-side to the “band-aid loan.” Lenders usually charge higher interest rates for people with lower credit scores. Dan warns consumers to prepare themselves for when the loan converts. Home owners could face a higher interest rate than the original home loan, and their monthly payments could hit them harder.
If consumers take the cash from their equity loan and pay-off their bills in full, after 18 months of perfect mortgage payments, Dan says the consumer’s credit improves to the point that “now every bank will deal with them.”
If you think a home-equity loan could save you form your creditors, watch out for the current housing market in your area. “Watching the marketplace, I saw the writing on the wall”, says Dan. “The real estate values are going down. They’re starting to slow down drastically.”
And there’s the other potential roadblock for homeowners in this situation. Lower home values means less equity and possibly not enough equity to satisfy their payment needs. If the equity isn’t enough to pay all of your bills, and after two years your payments are even higher than before, you could possibly put yourself in a worse situation.
“People with marginal credit or no equity do have some options such as the 125% loan to get ahead.”
A 125% loan offers you a loan for more than your home is actually worth. Talk to a mortgage professional to make certain the credit risk is worth the return. Dan says most importantly; use the equity cash to pay-off those bills before you splurge on your dream vacation.
I fully realize if it sounds too good to be true, it probably is and There Ain’t No Such Thing As A Free Lunch (TANSTAAFL) immediately jumped into your head when you read the title of this article. However, if you are 62 or over, you may have just found the goose that laid the golden egg.
A reverse mortgage is exactly what the name implies. Rather than you paying a monthly sum of money to a mortgage company, a mortgage company pays you. There are three types of reverse mortgages and all have the same eligibility requirements.
You must be at least 62, live in, and own, your home and sign a contract. You must also have equity in your home and the inherent interest rate is based on what the lender is currently charging (more about this later) on non-reverse mortgages. The lender, by the way, will also have your property appraised for which you may or may not be charged.
There are no income restrictions such as those imposed by Social Security and most are tax free since they do not involve additional features such as an attached annuity. They also do not affect your social security benefits nor your Medicare entitlements.
This article discusses only those mortgages without additional features. Should you wish to know more about reverse mortgages with additional features, consult with a competent tax professional to reduce the chances of running afoul of tax laws.
The FTC’s website, https://www.coolwebtips.com has an excellent article on reverse mortgages but it also does not discuss mortgages with additional features. Another reason to consult with a tax professional.
This tool called reverse mortgage is actually a loan, hence an interest rate, which allows senior citizens, or as some say, the elderly, to convert part of their equity into cash without having to sell their home. Because it is a loan “in reverse” you are receiving a monthly sum and not paying a monthly amount while you live in your home.
However, this loan must be repaid and repaid with interest should you sell, die, no longer live their as your principal residence or reach the end of the pre-selected loan period. You remain responsible to pay real estate taxes, insurance and all attendant maintenance expenses which, of course, you would have to pay with, or without, a reverse mortgage.
With this explanation, the picture becomes more focused, right? You enjoy a monthly sum, tax free and non-repayable until a date sometime in the future, while remaining in your home. As close to a win-win situation as one can get in this day and age.
It doesn’t take a rocket scientist to realize anyone who is cash poor but house rich should at least investigate this tool. However, like any other instrument involving your signature on the dotted line involving financial obligation, you must have some preliminary information.
I mentioned there are three types of reverse mortgages. The first is the single purpose reverse mortgage. These are offered by some sate and local government agencies and nonprofit organizations.
They may not be available in your area. Call your county’s Department of Senior Services. Their phone number is in the white pages under the listing for your county.
Single purpose means exactly that. The proceeds may be used for only the purpose specified by the lender and generally are only made to people with low or moderate incomes. If you call your county, be sure to ask if their reverse mortgage is a single purpose and what are the limits.
The second type of reverse mortgage is called a Home Equity Conversion Mortgage (HECM). The federal government insures these mortgages and they are backed by the Department of Housing and Urban Development (HUD). The up front costs are generally high especially if you plan on staying in your home for a short period of time but they carry no income or medical restrictions and can be used for any purpose.
HECMs also require all applicants to meet with a counselor from an independent government approved housing counseling agency. The FTC says, “The counselor must explain the loan’s costs, financial implications, and alternatives. For example, counselors should tell you about government or nonprofit programs for which you may qualify, and any single-purpose or proprietary reverse mortgages available in your area.”
An additional benefit of an HECM mortgage is the nursing home clause. Should a borrower have to move out of her home and into a nursing home or other medical facility, she has up to 12 months before the loan becomes due. This enhances financial planning.
The third type is called a proprietary reverse mortgage. These are private loans backed by the companies offering them. In other words, they are NOT government insured. Like HECMs, the upfront cost could be high for a proprietary reverse mortgage.
A reverse mortgage, cost wise, is like a non-reverse mortgage. The lender usually charges loan origination fees, closing costs, insurance premiums (for insured loans) and service fees which are all set by the lender.
Fortunately, like non-reverse mortgages, the federal Truth In Lending Act (TILA) applies to reverse mortgages. This means the lender MUST disclose the costs and terms of the reverse mortgage you are considering.
The annual percentage rate (APR) and payment terms must be prominently displayed and not in the fine print. If you choose a credit line as your loan, lenders must tell you the charges related to not only opening but using this credit account.
Another word about the interest rate since it too mirrors the non-reverse mortgage. Just as with a non-reverse mortgage, an interest rate can be fixed or variable with variable rates tied to a financial index. This means the rate will change as the index changes.
TILA forces the lender to disclose this information. TILA does not force the lender to tell you the reverse mortgage may, or may not, use up all of your equity. If a “non-recourse” clause is included in the contract, and most have them, you must be told you will not owe more than the value of your home when the loan is repaid. This is a good thing.
Of the three, the HECM is the most flexible. It lets you select the way you receive your money. For example, you can receive fixed monthly cash advances for a specified period or for as long as you live in your home. Or, if you choose, you can receive a line of credit.
A line of credit allows you to draw on the loan proceeds when you want and how much you want. The HECM allows a combination of the two choices. You can receive a monthly payment plus a line of credit.
The key is to read and understand every clause in the contract before signing and do not be afraid to ask questions about what you don’t understand. Don’t let a huge monthly payment cloud your judgment and decision making ability.
Both HUD and the FTC have toll free numbers and websites to help you in making an informed decision. HUD can be called at 1-888-466-3487 with their web address at:
https://www.coolwebtips.com while the FTC can be called at 1-877-382-4357 with their web address at: https://www.coolwebtips.com reading the above information you may have decided the goose with the golden eggs is really a vulture waiting to pounce on your carcass. Or, you may have decided the goose’s eggs are worth your time and attention. Either way, you are now a more informed consumer.
If you read the title of this article and thought to yourself, “Let what? What am I letting happen buy buying? And what am I buying?”, than this article is definitely for you. First let me establish that the “buy” refers to a house and second, the “let” part, that refers to renting that house out to someone else. Basically it means that you buy a house and let someone else pay the mortgage and live in it. There are, as with everything, some really good aspects of this kind of arrangement, and some really bad ones as well. This is not an agreement to enter into frivolously for if you do, you very well may regret it for the duration of your mortgage.
Basics of the Buy To Let Agreement
Buying to let, or buying to rent, simply involves a person finding a house, signing for a loan, and then immediately renting it out to someone else. The house is in the buyer’s name, but then it is contractually signed over in a rental or lease agreement to a tenant.
Why Would I Want To Do This?
This is a great way to generate some extra cash flow, buy a house to later sell for profit, or buy a house to later dwell in yourself.
Extra Cash Flow
When you make the purchase of a house in order to rent it out to someone you go through the loan process just like with any other house. Once you have established the mortgage payments that you will owe every month you then can set the rent price. The rent price is set by you and can be whatever you want it to be. If you are paying $500 per month and want to rent for $800, you are making $300 profit every month. You can set the price of rent to whatever you think that the market will bear.
Buying For Selling
You can get an interest only loan, the kind of loan that typically has the lowest payments for the first few years, and buy yourself a house to rent. Assuming that instead of those $500 payments per month, and now your mortgage is only $400, but you are still charging $800, you will have a lot of money to put back into the house each month. You can, instead of spending or saving the profit from the renters for personal use, put it right back into the house in the form of repairs and upgrades. The renters think that they are getting a good deal because you are constantly doing good things to the house that they live in. You will be thankful and grateful to the renters because they will be paying for your mortgage and for the repairs that you are doing. After a few years you can sell the house at an inflated price cue to all the things you have done to it and you can make a lot of money on the deal.
Buying For Living
If you don’t have the money just yet to make the mortgage payments than perhaps you could consider renting your property out for a while until you can get to point where you can afford to live in it. Or, perhaps you want to buy a summer home but don’t have the means to do so. You can buy now and rent it out until you have the resources available to take on the extra mortgage payments yourself.
If it sounds too good to be true…..
Renting isn’t the wonderful, astonishingly simple way to make hordes of extra cash and become the next big real estate mogul. There are some negatives to it as well.
Landlords and other bad things
If you buy and rent out a house, you are the landlord. You have to make sure that the tenants are paying rent on time, you have to fix things that break or, if you can’t fix them, you have to pay to get someone to come out and fix them. You have to make sure that you have tenants that are not going to tear up the house and leave it is shambles when they leave, especially if you are renting in order to later sell for a profit. Any landlord will tell you that renting to good tenants is a great experience, but renting to bad tenants, nothing could be worse. If you don’t get tenants that will treat the property just as good or better than you will, than you will probably end up losing money on the deal.
If you feel like the role, or should I say, job, of a landlord is for you, than go out and start looking for someplace to buy. Make sure that you have a clear idea of what it is that you want to do with that property and get the loan that is most appropriate for your situation. If you don’t think that you will do well getting called to fix the roof, seal the plumbing, spray for termites, or any of the many other things that have to be done for a house, than maybe you ought to stay away from being a landlord. Perhaps the only thing worse than renting to bad tenants is renting from a bad landlord..
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