Mortgages: The Age Problem
Pensioners should be sitting pretty regarding mortgages shouldn't they? After all, they should by now have completed their payments and be the sole owners of their homes. Sadly, for some 600,000 pensioners this is not true - they are still paying off their mortgages, and not just for a couple of years after retirement. For example, over 20,000 who still have to reach the final payment are in their 80's.
Couple this with the research from the Prudential which reveals that almost 25% have insufficient funds to finance their retirement, and it becomes obvious that some serious problems exist. Having to find the necessary funds to cover the mortgage payments when on a fixed income inevitably means that some other parts of the living costs are not covered.
However, many pensioners would be pleased to be on a fixed income, provided that it was fixed at a point on the cost of living scale! When looking at the reality of an income which is usually increased annually, but by a niggardly amount which bears no relationship to the increases in costs generally (especially council tax), then the true effect is of a reducing income.
Inflation also takes its toll. True it is low at present, but even at 2.5% a year, the spending power of a fixed sum is down by virtually
Dangers Of Reverse Mortgages
A reverse mortgage offers retired persons a way to stay living in their homes and afford to live comfortably. The reverse mortgage pays you with equity you have built up in your home. You can spend your money now instead of leaving it to relatives after you pass. There are different ways to receive the monies from a reverse mortgage. You can have a lump sum payout, monthly payments or a line of credit to use whenever you need it.
If you have a small loan payment on your home when you do a reverse mortgage, this is figured into the final distribution and paid off. The property taxes are figured as well as insurance. All you have to think about is keeping your property in good condition and doing needed repairs. The money is yours to spend any way you wish.
Are you wondering how the reverse mortgage affects your heirs? It does not affect them at all. If you pass, your heirs will receive any monies left over after the sale of the house and the repayment of interest due to the lender. This type of mortgage allows retired persons to keep their homes and not worry about having enough money after retirement.
There are requirements for obtaining a reverse mortgage. You have to continue to live in the home the entire time. If you move out of the home, the home must be sold. This type of mortgage is good until the last person on the loan leaves the home. If a husband and wife live together in the home and the husband dies, the wife can keep living in the home. When she leaves or dies, the home is then sold.
Pitfalls Of Reverse Mortgages
The radio and TV commercials are full with wonderful
sounding pitches for reverse mortgages. It almost makes any
home owner want to buy one.
In case you are not familiar with the reverse mortgage
here is a quick review.
The home owner can get immediate cash for his house
based upon the amount of equity that has accumulated. If
there is little equity he will no qualify. 50% or more is a good
starting place. The age requirement is 62 or older and he
must own the house outright. No other financial requirements
are necessary. This is the difference from it and a home equity
line of credit.
It must be a single family home or 2 to 4 unit
non-commercial unit.
The amount the home owner may receive will depend
on his age and the value of the property, the current rate of
interest as well as the paid-for equity.
Home owners don't need any third party to find a lender
to give them a reverse mortgage. That is some rip-off artist.
He is not necessary. The local bank will do it, but shop around.
The borrower (that is what the home owner is) can go directly to
HUD which will make a federally insured reverse mortgage.
The borrower can choose from several options with
the most popular being a monthly payment for life for himself
and his spouse. As long as one of them remains in the house
they can live forever and receive that payment which is
computed on an actuarial life expectancy table.
Before signing there is an important clause that should
be added to protect the borrower.
This is the pitfall in the contract. If inflation continues
that payment will buy less and less groceries or other services.
There is only one way to protect the borrower and that is to
include a yearly Cost of Living adjustment. So far this option is
not included by any lender.
It means the borrower must learn to live on a lower
life standard as the years go by. Will he be able to buy a
comparable amount of groceries and medications 10 years
from now with today's check. He must pay his taxes and
insurance. Will they be the same in 10 years? Hardly.
These old folks (that's what they are now) better have
some extra cash or they could lose the house. The lenders
could see these units fall into the subprime category as
they would not have the upkeep necessary (because of the
declining purchasing power of the dollar) to maintain the local
real estate property values
The smart lenders will bundle these contracts and
sell them as the subprime lenders have done.
When taking a long term look at reverse mortgages it
is not good for either the borrower or the lender.
Assumable Mortgages – Is an Assumable Mortgage Your Savior Or the Wolf in Sheep’s Clothing
If you are in the process of purchasing a new property and want to know what options you have, you need to be made aware of assumable mortgages. This type of mortgage has many benefits but it can also have its drawbacks.
What is an assumable mortgage?
An assumable mortgage is a type of refinance where the buyer takes over the terms of the mortgage from the seller with the client's bank. It used to be that the buyer in the past never had to qualify for mortgage. Banks quickly found out that this was not good as the buyers sometimes could not actually afford the property and would walk away from the mortgage.
There are several advantages to this refinance so let's take a look at why this refinance is so attractive.
One huge advantage of taking over someone's terms is the interest rate. Economists have advised that interest rates could go as high as 7 percent next year, with rates so high now would be a great time to get an assumable mortgage.
If you are a seller and are not sure if you can sell your house by way of an assumable mortgage then you should contact your bank or lender. Mortgages previous to 1989 can still be assumed and the buyer does not have to qualify. The downside for the seller though is that should the buyer default the loan is still their responsibility unless you get a letter of release.
Assumable mortgages used to be unheard of as the mortgage rates were already so low that a buyer could get a low mortgage rate refinance on their own. Since the housing market debacle though the interest rates have been on a steady climb and qualifying for a new mortgage can be extremely difficult.
Assumption mortgages used to be a great deal for the buyers because of the lower interest rates and the fact that they did not have to qualify. Seeing that this has changed it can be extremely difficult for a person to qualify for an assumable mortgage as they now have to apply with the seller's bank to take over the mortgage terms.
Another disadvantage is when the property value of the house has decreased below the actual mortgage amount. What can happen here is the buyer will need to come up with the difference between the sale price and the current mortgage balance. If you were going to apply a down payment then this should not affect you at all if not then it could put a strain on your refinance.
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Mortgages: New levels antiwear
Yesterday, 29 September 2008, were published in the Official Gazette No 228 so-called "average rates of charge" to be applied by banks and brokers from 1 October to 31 December 2008 to combat wear.
The new levels, according to which the thresholds are calculated usurious rates, were established by Decree 23 September 2008.
Among the main changes compared to previous quarter (1/30 September) are: the increase in average rates for the lease (from 12.57 to 13.33%), the decline in the average rate on the sale of the fifth salary (from 15.13 to 13.96%), the slight increase in the maximum commission found (from 0.66 to 0.67%).
As regards the average rates of loans with collateral was an alignment of the fixed rate and variable rate to 6.30%. The usurious rates are equal to 9.45%.
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