Real Estate Today! 710 KNUS AM - In the News

This week the Real Estate Today radio broadcast recieved media exposure in the following:

Rocky Mountatin News http://www.rockymountainnews.com/drmn/other_business/article/0,2777,DRMN_23916_5239112,00.html,

Denver Post
http://search.denverpost.com/sp?aff=3&keywords=James+Holmes+KNUS+

Denver Business Journal (12-29-2006 Edition)

We appreciate the exposure as we continue to grow our radio community. Please tune into our show heard in Colorado on 710AM KNUS or on the internet at www.710knus.com Saturday afternoons at 2:30 PM MST .

Private College Loan – An Easy Student Loan to Acquire

What is the easiest and most hassle free way to obtain a student loan? If you want to acquire a loan without having to go through so much trouble, then there are many appropriate private college loan programs which you can avail with very minimum requirements.

Why does a student acquire a private student loan in the first place?

Everyone knows how hard it is to finance your way to college. What with all the forms and shapes of expenses – on top of it are the exorbitantly priced tuition and college fees, aside from the other common expenses such as books and school materials and instruments, board and lodgings and accommodation expenses. If you are hard for cash, then definitely a private college loan should be acquired to finance such expenses.

But why a private student loan? And why not consider a federal or government loan? As mentioned earlier, a private college loan is very easy to acquire. The application process for it is very convenient and approval is always given in less than a day. On the other hand, federal loan require more requirements in their application.

Private College Loan and APR

Nowadays, the private college loan business is very competitive. Most lending companies are doing their best to acquire a profitable share of the private loan pie.

It is now up to the student to know how to wisely choose the most reliable lending company that can offer the private student loan that is most appropriate for him.

How does the student go about making the right choice? The best way is to compare the interest rates of the different private student loans offered by many lending companies such as banks and other financial institutions.

Where do we get this interest rate information? Request the lending company of its annual percentage rate statement or the APR. The APR contains all the important information on the student loans’ interest rates.

No two loans are alike when it comes to the repayment of private college loan. Therefore, it is best to really study and scrutinize the terms of repayment of every lender that you encounter. For example, check for the leniency of the lending companies you are considering. It is a standard for them to offer a grace period which ranges from a few months to a year at most. Of course, it will be beneficial if you would choose the loan program with the longest duration of grace period.

Private Loans: Students' Last Resort

Many students tend to shun the private college loan and would rather insist on getting a federal loan. Of course, who wants to pay for a higher interest? For definitely, the private student loan have a much higher interest than the private student loan.

Still there are some students who, despite trying hard to acquire a federal loan, is unfortunate not to be able to get one for his education. It is sad that because of the deficiency in some of the requirements, students are not granted the financial aid by the government. The student has no choice but to turn to private loan companies in order to obtain a private college loan.

Sometimes called the alternative loans, the private student loan is just about any other types of loan except the federal type. It could be the money that you borrowed from your parents or a family member. Or it can also be the loan that you obtained from a commercial bank, a private lender or other financial institution.

As it is, even with a high interest rate, students obtain private loans for college, if there is no other choice, if only to pursue his education.

Notes and Comment from our Radio Broadcast 12-23-2006

We had a great radio show today. I was joined in the studio by Bruce Deffler, Certified Relocation Specialist and Broker for Benchmark Property Advisors a Keller Williams affiliate. Here is an overview of the topics discussed and a few added comments.

2006 Housing Slump Dampens Economy

Homebuilding declined by a rate of 18.7% in the third quarter, which translates to the largest cut in 15 years. This contributed to a 1.2% reduction on third quarter growth, the sharpest cut in 25 years. Economic growth slowed to an annual pace of 2% in the July – September quarter according to the commerce department. Although not a positive sign, not quite the 2.2% annual rate estimated a month ago.

Economist estimate that the Gross Domestic Product (GDP = The value of goods and services produced within the United States) for the October – December timeframe with fall in the range of 1.7% – 2.5%, or slightly higher. Looking ahead the estimates are in the same range for the first quarter of 2007.

Home Prices the Number One Business Story in 2006 among Business Editors

I am a big fan of Rob Reuteman, Business Editor for the Rocky Mountain News. Although I do not know him well, we are members of a business leadership group that meets quarterly – I know his work very well and he excellent at his craft. Reuteman was among a group of business editors asked to chose from a list of 35 business stories from 2006 and choose the top 10 where shared in Reuteman’s Saturday 12-23 column in the Rocky Mountain News.

The number one story both at Reuteman’s judgment and that of his colleagues was the decline in home prices. The editor is exactly right when he characterizes the use of home equity by many homeowners as “the nation’s piggy bank.” Equally, his interpretation of our soft landing is also correct, Denver experienced double digit appreciation in the period between 1999 and 2000. He also reports that the expected drop in appreciation Is expected to be an additional 3.6% in 2007.

Job Creation Continues in 2007

Given the announcement of new job creation in Colorado for Lockheed and the announcement this week that Rio Tinto Minerals will locate their division headquarters in Greenwood Village bodes well for the continuation of job creation in the year ahead. The division of London based Rio Tinto PLC, signed a lease for 104,500 square feet valued at 25 million dollars.

Bottom Line: Both of these stories underscore my belief that we are in a tremendous buyer’s market and anyone thinking of buying a home or acquiring investment real estate will benefit from doing so in 2007. The conditions are perfect for the buyer: 1.) Rates are low. We are offering several programs with rates below 6.000%. 2.) Inventories are high both in the resale and new build market segments. 3.) Savvy investors recognize that very few people buy at the bottom of an investment market and the best place to buy is on the way down. The one caveat is that there are concrete reasons to believe that we are near the bottom and there is a recovery on the horizon. They then ride the wave back to the top.

Should a non-selling or non-refinancing homeowner invest in an appraisal?

We welcomed a caller into our conversation today with a question concerning engaging an appraiser to determine property value. The caller does not plan to sell or refinance and was simply interested in knowing the value of their home. We have been advocating over the past few weeks that homeowners obtain a Comparative Market Analysis (CMA) from an experienced Realtor knowledgeable in their market. A real estate appraisal will cost $300 - $350 in most markets and the report carries a “use by date,” as the market data is subject to Uniform Appraisal Standard to be used for underwriting a mortgage loan – typically six months.

The caller also asked about the value of obtaining a property inspection. Bruce advocated that a seller obtain a pre-sale inspection and address major items prior to placing a home on the market. In addition, we recommend that a seller look at their property in the same manner as a fix and flip investor. Seek advice from a Realtor when considering high return investments when improving a property prior to sale.

Bottom Line: If you are a property owner interested in knowing the value of you property, contact Bruce Deffler or Bob Speaker by accessing our website at http://www.realestatetodayshow.com/ and click on the “Ask James” button request our free CMA at no obligation. Also feel free to visit http://www.colo2home.com/ to reach Bruce and Bob directly.

Tune into our radio broadcast "Real Estate Today" on KNUS radio 710 AM in Colorado, or via live audio streamby logging onto www.710knus.com and clicking "listen live."

Still on Private College Loan and Bad Credit Report

Is a private college loan still an option for student borrowers who have a bad credit report but wanting to pursue this college education thru the help of private lenders? Definitely so.

In fact, a student with a not so good credit report in his name can still have many opportunities of acquiring different kinds of available loans, whether it be a federal or government loans or a private student loan.

There are many lending companies who can assist a student in acquiring a private college loan. He just have to be intelligent enough to know the honest and legitimate lending companies who are really willing to help you acquire a private student loan despite your bad credit, and be able to stay away from those fly by night lending companies who are out to perform a scam on you.

Going personally to the lender of your choice will help you learn more about it, and discern whether the company is really legitimate or not.

Nonetheless, going online is also a good idea as there actually are lots of legitimate lending companies that you can find in the internet.

Private College Loan - Despite Bad Credit

When you have done all there is to obtain federal financial assistance and still it is not enough, you have no choice but to turn to a private college loan provider such as a bank, a lending company or other financial institution.

However, getting a private college loan is a walk in the park. Nothing about private loans is easy. The most important of all is a good credit report to back up for private student loan application.

A bad credit history will surely see your loan application treading into some difficult roads ahead.

Make sure you have a good credit report – this makes things easier, and you will get your desired loan without any hitch.

Okay, let us say you do have a bad credit report. What do you do now? Backing out is not an option, definitely. Even with a bad credit report, you are given the opportunity to acquire a private student loan, albeit it is not going to be that easy.

First of all, try going for credit repair. Repairing your credit is a job of lending companies wanting to make sure your credit report is fixed and ready for a loan application. Try getting a reliable credit repair expert when you wish to have your credit report fixed.

But if you can get a loan that is not based on credit, then that would help you get a private student loan. For example, there are some private loans for college that are intended for students wanting to become nurses or midwifes. This is the central requirement to be eligible for the private loan, and the credit is given less weight. Some students with bad credit history might like to apply for this type of private college loan.

In order not to encounter any problem when applying for credit based private college loans, try to establish a good credit report early on. Good credit history is the key to many things, financial loans and aid among them. Do this by making it a habit to be a good and conscientious creditor. Pay loans on time. Do not miss payments. Never borrow loans that you will have difficulty to pay.

LandAmerica Title Guilty of Poor Judgement

Ok, let me see if I have this correct. LandAmerica Financial Group, Inc. known as LandAmerica Title Insurance Company among other entities in Colorado is under investigation by the Colorado Insurance Commission in part resulting in a Cease and Desist Order on March 4, 2005 and a Stipulation for Entry of Final Agency Order on August 23, 2006. Rather than looking inward at business practices present in violation of RESPA Section 8, the company endeavors to pursue a smear campaign against Erin Toll who at the time served as Colorado Deputy Insurance Commissioner. Ms. Toll presently serves as Colorado Real Estate Division Director.

See the Documents: LandAmerica Title (Commonwealth Land Title Insurance Company, Lawyers Title Insurance Company, and Transnation Title Insurance Company)
Cease & Desist Order
Stipulation for Entry of Final Agency Order
You may contact LandAmerica at 866-526-3264 for more details on eligibility in relation to captive reinsurance.
(Sources: http://www.dora.state.co.us/insurance/enforcement/2005/O05-155.pdf and http://www.dora.state.co.us/insurance/enforcement/2007/O07-017.pdf )

This is troubling and calls in to question the integrity of a company who is entrusted with the funds of property owners and home buyers across Colorado. According to a story published in the December 20, 2006 edition of the Rocky Mountain News, the House Committee on Financial Services concluded in its 37 page report that LandAmerica Financial executives threatened to get “real stinky real quick” in referenced to an effort to discredit Toll and members of her family. The allegations were investigated and found to have no merit according to David Rivera, Colorado Insurance Commissioner.

Read the full Report: http://financialservices.house.gov/media/pdf/12-18-06%20Land%20America.pdf

Our firm (Private Mortgage Banking Branch of Cherry Creek Mortgage, Inc.) had been approached numerous times during the period August 2004 and January 2005 by companies seeking a title reinsurance controlled business arrangement. I investigated one such offer carefully concluding that such an arrangement would be a violation of RESPA Section 8 and declined to participate.

Bottom Line: I applaud the efforts of Erin Toll with support of the Colorado Division of Regulatory Agencies. She did an outstanding job in cleaning up illegal practices in the title industry and she aims to do the same in the appraisal industry. Rather than attack her personally, the collective real estate and mortgage industries should band together with our support.

Interest Rates of Private College loan

College students couldn’t be thankful enough to the federal government because of the numerous loans made available to them.

Unfortunately, many of these students can only acquire so much of this government loans. When all federal financial means have been exhausted and yet there are still more college expenses that are needed to be covered, the students can always depend on a private college loan.

Indeed, when the federal government cannot anymore provide the financial assistance and aid, students can turn to private student loan to cover the rest of the school expenses.

Interest rate of private college loan compared to the federal type

Since the government does not have anything to do with private college loan and does not provide guarantee against any case of default, the private lenders such as banks and loan companies charge higher rates compared to federal loans.

Still, with the many existing private lending companies and institution existing today, competing for the huge market of college students in need of loans, the interest rate of private student loan is very much competitive, to the advantage of the student borrowers.

Mortgage Insurance Premiums Tax Deductable for 2007

The 109th Congress has granted an early holiday gift for new home buyers who purchase a home or take out a mortgage utilizing Mortgage Insurance in 2007. For transactions that fund between January 1, 2007 and December 31, 2007, borrowers will be able to deduct mortgage insurance premiums paid on their 2008 Federal Tax Return.

Once signed by President Bush, this new law will have a dramatic effect on piggy back mortgages and may cause borrowers to delay closings scheduled for December 2006 in order to benefit from the law.

A borrower taking out a $175,500 loan amount in the 25% tax bracket would pay an estimated premium of $86.50 per month or $1,038 per year. The estimated tax deduction would be $260.00 for 2007. (This is not intended to be tax advice, dollar amounts rounded up and assumes premium payments made 12 months in 2007).

Bottom Line for Buyers: The full text of this Bill has not been released pending signature by the President. It appears that you will benefit from this law when purchasing or refinancing a home. Buyers would benefit by delaying the closing of a mortgage loan with mortgage insurance until January 1, 2007 or later. I would caution against delaying a closing prior to considering the full impact of this action, such as your contractual obligations, expiration dates for interest rate locks, moving schedules for both buyer and seller, cost savings from the deduction vs. expenses created by delaying your closing date, etc. Consumers should consult their lender or other real estate professional prior to altering a closing date. Borrowers should also consider that private mortgage insurance can be removed at the point when the property value and loan balance achieve an equity position of 20% or more. Higher rates on piggyback loans remain until they are paid in full.

Bottom Line for Sellers: If your sale is scheduled to close in December 2006, be prepared for the buyer of your home to request an extension of the closing date. Based on the terms of your purchase agreement, you may not be required to grant such an extension.

Bottom Line for Builders: If your sale is scheduled to close in December 2006, be prepared for the buyer of your home to request an extension of the closing date. Based on the terms of your purchase agreement, you may not be required to grant such an extension. The challenge for builders will be weighing your desire to add another transaction to the books for 2006 and making the best customer service gesture for your buyers. One strategy I recommend would be to calculate actual tax savings for the buyer and offer to credit an equal amount at closing in exchange for a closing in 2006. There is the possibility that the deduction could be extended by Congress beyond 2007 and the buyer would need to consider this possibility and the resulting loss of future deductions.

Bottom Line for Lenders: Research all of the available information concerning this law and become knowledgeable on the impact on your borrowers and real estate agents. Be prepared to receive calls from your clients and be proactive by contacting any client that could be affected by the new law. I recommend that you develop tools that will allow you to accurately compare the use of loans with mortgage insurance as compared to combo (piggyback) loans. It is likely that many borrowers will benefit from refinancing to maximize the benefit of converting their adjustable rate mortgage to a fixed rate. I strongly caution that you do not provide specific tax advice and refer your clients to their tax advisor for clarification of how the law relates to their situation.

Bottom Line for Mortgage Insurance Providers: Congratulations, the playing field has been temporarily leveled and you should see an increase in transactions utilizing mortgage insurance in 2007.

According to an analysis conducted by Bankrate, there are four caveats to consider.

Caveat No. 1: The tax deduction applies only to mortgages that are closed in 2007. If you have a loan with mortgage insurance in 2006, you won't be able to deduct the premiums in the 2007 tax year unless you refinance in 2007.

Caveat No. 2: There are income limits. You get the full deduction if your adjusted gross income is $100,000 or less. The amount you can deduct phases out rapidly after that, and no mortgage insurance deduction is available if you make more than $110,000.

Caveat No. 3: This is a one-year deal, and Congress would have to renew the deduction to make it apply for the 2008 tax year and beyond. Congress probably will extend the deduction, but you can't know for sure.

Caveat No. 4: If you take the standard deduction instead of itemizing deductions, the new law makes no difference to you. "You need to have a mortgage of about $130,000 or so to even pay enough interest to hurdle the standard deduction," says Bob Walters, chief economist for Quicken Loans. In practice, he says, this means that the deduction is available to households with incomes between $50,000 and $100,000.

Please visit http://www.privatemortgagebanking.netand click "Free Reports" to download a complete summary including the full text of the Act and Section when it becomes available.

The Tax Relief and Health Care Act of 2006 Section 419:

Section 6050H of the Internal Revenue Code of 1986 (relating to mortgage interest) is amended by adding at the end the following new subsection:

In general.--Premiums paid or accrued for qualified mortgage insurance by a taxpayer during the taxable year in connection with acquisition indebtedness with respect to a qualified residence of the taxpayer shall be treated for purposes of this section as interest which is qualified residence interest.

Can a Borrower Obtain a Mortgage While in Consumer Credit Counseling?

If your goal is to purchase a home in 2007 and you have credit issues needing to be addressed now is the time to structure a “game plan” to ensure that your goal can be accomplished. When consulting with credit challenged clients we often engage with individuals who either are considering or are presently working with a Consumer Counseling Agency such as CCCS. The decision to enter into a modified payment agreement should be carefully considered to ensure that all of your goals can be met.

How do mortgage loan underwriters view borrowers currently working with a credit counseling agency? This week I sought the opinions of two experts on the subject and here is an overview:

I spoke with the Sr. Underwriter for Cherry Creek Mortgage Company to gain perspective from the mortgage loan underwriter’s point of view.

FHA and VA Borrowers – If a borrower utilizes an FHA or VA loan product, the borrower is eligible to receive a mortgage if the following three requirements are met.

1. The borrower has been in an approved consumer credit plan for a period of at least 12 months.
2. The borrower has a satisfactory “paid as agreed” record with the agency as set forth in the agreement.
3. The borrower has obtained written approval from the counseling agency to enter into a mortgage loan agreement.

Conventional Borrowers – For borrowers seeking a Conventional loan such as a Fannie Mae or Freddie Mac program the situation is quite different. The guidelines for these programs require the underwriter to view a consumer credit plan the same as a Chapter 13 Bankruptcy plan, which must be fully paid prior to entering into a mortgage loan agreement.

I spoke with a program specialist with Consumer Credit Counseling Services which is a HUD approved counseling agency and ask the question, “what are the factors that effect the decision to allow a borrower to enter into a mortgage loan agreement?”

There are a number of consumer driven factors which include the following:

1. Is the agreement with the existing creditors for full or partial payment of the credit balances?
2. Can the borrower’s adjusted debt to income ratio support the addition of a mortgage payment?
3. Has the borrower made the consumer credit plan payments as agreed?

Additional factors to consider before entering into a consumer credit plan:

1. If the consumer budget results in a plan for partial payments to creditors, many report “payments not as agreed” on the consumer’s credit report.
2. The consumer’s present credit report will impact Alt A or Sub-Prime underwriting decisions.
3. After the payment plan has been paid as agreed, the reporting agencies will remove all references to consumer credit counseling, etc.

The Bottom Line: Whether you are currently enrolled in a consumer credit plan or considering doing so, your dream on purchasing a home is still a possibility. I recommend scheduling a private consultation with a knowledgeable mortgage professional in order to make an informed decision. I also recommend avoiding the tendency to be steered into a sub-prime mortgage, which usually calls for higher rates, pre-payment penalties, and less favorable terms overall than the options noted above.

Private College Loan From Parents, Banks or Financial Institutions

Private College Loan is financial aid package that is not only available from banks and financial institutions. You can actually acquire one from the people nearest to you, such as your parents, siblings or other relatives.

The parents are the most significant people who can help in the funding of your college education. Especially when they are willing, parents indeed act as the student’s primary source of funding. Terms of repayment depends entirely on both parties, with strict rules and requirements most likely to be non existent.

Apart from parents and relatives, the next source of private college loan that prospective student borrowers might first check out is the financial section of their chosen college or university. More often than not, the school of your choice may be able to offer you a private student loan that fits your needs and qualifications. A big advantage of private college loans from schools is that they have interest rates with a much lower rate than other sources of private funds.

What you should do is to gather more private loan information you’re the authorized financial officer of your college. Let out your cards. Tell exactly your present financial needs and status for him to know if you are eligible, and if so, assess which type of private student loan as best for you.

Private College Loan - Where to Apply

Private college loan is different from the federal type in that the later is more preferred when it comes to students looking for ways to finance their college education.

Still, private loans for students are no less important since it ably compliments the federal debts acquired by the student borrower, and fill in to whatever college expenses the government loans were not able to cover.

Where to apply for a private college loan

Private student loan can be obtained primarily from private lenders – these can either be individuals or a company, a group or institution. As a matter of fact, you can obtain your private student loan from your parents, friends or other family members.

Commercial banks and other private financial companies and institutions offer private loans to student borrowers. The leading banks in the United States have loan programs that are geared towards helping college students get badly needed loans.

Of course, many US colleges and universities also offer many financial program - some are the difficult types and other are easy students loans. Prospective student borrowers might wish to check on their college of choice whether or not they have their own loan program for students.

The Complimentary Private College Loan

When acquiring finances to pursue their college education, most students’ priority are federal student loans. The government is more than willing to provide financial assistance to underprivileged students willing to work their way thru college.

Private College Loan is a complimentary loan

Yet despite multiple federal loans, it seems that it is still enough. There are numerous expenses that students need to worry about, such as the tuition fees and other miscellaneous expenses, books, room among other. And there are many cases when the loans already acquired were not able to cover everything.

This is where the private college loan comes in. A private student loan is very much different than that of the federal type because these loans are not subsidized by the federal government or any other type of federal agency. Since such is the case, the private college loan naturally would have a much higher interest rate that the government type of loans.

It is however important that the student borrow would be able to provide a good credit report in order to easily obtain his private student loan. Other requirements needed are collaterals, gross income of the student’s family, and his ability to find and hold a job.

Private College Loan

A private college loan is a student loan that compliments the federal student loans that you already have. Or if you do not want the government as your financial source for your education, then it is worth acquiring private student loan from commercial banks and private organizations.

Why private college loan? Well, as a student dreams of pursuing higher studies, he will definitely face all sorts of expenses such as the tuition fees, accommodations such as the room and board, cost of use of school facilities and other incidental expenses and allowances. It would be great if the student has parents who are financially capable and only too willing to pay for their child’s education. Otherwise, the might have to look for funds elsewhere.

There are two types of loans that college students may avail to be avail to finance their studies.

The first is the government or federal student loan, which is offered and provided by the US Department of Education, which is available to student according to his needs and qualifications.

The second is the private student loan. This is a loan that a student borrower may apply and acquire from the banks and private institutions. Both the students and their parents may apply for this loan.

Missing Your Fortune?

I have consulted with hundreds of homeowners and real estate investors during my twenty years in the mortgage banking industry. It is disputable that a personal residence is the largest appreciating asset for the majority of Americans and as a result the foundation of their financial security. As such the appreciation in your homes value coupled with a “proactive” strategy for managing the associated debt may result in the accumulation of wealth and a hedge against volatility in the financial markets. The idea of securing a 30 year fixed interest rate mortgage at the time of purchase and simply making the monthly payments is no longer the best means of creating financial security – you may in effect be missing your fortune.

In recent years a number of new mortgage products have been introduced to the marketplace including interest only loans and loans tied to a variety of indexes with varied rates and repayment terms. In my practice, I routinely have more than one potential solution for addressing our client’s short and long term needs. So where should you begin? I encourage all of my clients to participate in an annual mortgage review, consider this an annual physical for your home mortgage. Through this process we are able to measure our clients’ current interest rate against the market, determine what life changes have occurred that might affect the type of loan presently in place and make recommendations to ensure that we remain on course.

Technology has greatly impacted the mortgage banking industry by providing a number of tools to better allow professional mortgage bankers to more effectively manage mortgages over time. I utilize a number of tools to monitor interest rates relative to my clients present rate, hedge interest trends for clients with adjustable rates, determine when to convert an adjustable rate to a fixed rate mortgage and to monitor appreciation in property value to identify opportunities to put their equity to work. This method of value added service is known as professional mortgage management, which I created elevate the entire process of financing your home to more meaningful level.

To ensure that you have the most cost effective mortgage program and one that maximizes your ability to create long-term wealth consult a professional mortgage banker; preferably one who carries the CML designation from the Colorado Association of Mortgage Bankers. Utilizing a CML designated banker will insure that you are dealing with someone who is committed to continuing education and who is held to the highest professional standards in the industry.

Reverse Mortgages: Financing the Golden Years

Until recently, seniors 62 years of age and older have not had the best choices when it came to getting cash from their homes. Traditional home loans only offered the option of either selling one’s house or borrowing against its equity.

With reverse mortgages coming on the scene, seniors now have some additional cash-flow alternatives. This type of loan allows mature borrowers to convert their home equity into tax-free income without leaving their current home or making mortgage payments - and they do not need an existing income to qualify.

How a Reverse Mortgage Works

Reverse mortgages are probably best understood when compared side-by-side with traditional home mortgages, otherwise known as "forward" mortgages. The following table shows the differences between the two:

FORWARD MORTGAGE

Uses income to pay debt
Monthly mortgage payments
Falling debt, rising equity

REVERSE MORTGAGE

Uses home equity to get cash or credit
No payments; debt is due when the borrower(s) pass away or relocate.
Rising debt, falling equity

Both loans incur debt against your home, and both affect equity, but they do so in different ways. Traditional home mortgages require making monthly payments to a lender. With a Reverse Mortgage, payments are made to you.

What a Reverse Mortgage Involves

Here are some important points to know when considering a reverse mortgage:

Eligibility: To qualify for a reverse mortgage, you must be at least 62 years of age. All owners who are on the title deed must meet this age requirement. You must also have paid off all, or most, of your home mortgage. Lastly, the home you reside in must remain your principal place of residence.

Mandatory Counsel: In order to ensure that homeowners are fully aware of the financial ramifications of obtaining a reverse mortgage, you must undergo counseling with an unbiased third party before completing a loan. HUD and AARP oversee a network of counselors who can provide this service, and it should be offered for either a nominal fee or at no charge.

Tax-Free Income: One of the advantages of a reverse mortgage is that the money you receive will not be taxed. The amount you’ll obtain depends on several factors including the plan you select, the type of cash advances you choose, your age, and the value of your home. Typically, the older you are the larger the loan, as you will have more equity in the house.

Cost: The cost of a reverse mortgage varies considerably from one type to the next. However, you can typically use the money you receive to offset the loan fees. The costs will be added to the loan balance and must be repaid with interest once the loan terminates.

Repayment: Reverse mortgages do not require any payment as long as the borrower(s) remain in the home. Should the borrower(s) pass away, sell the home, or permanently relocate, then the loan would be due in full, along with interest and additional costs. If two borrowers are on the loan and one dies, the loan would not be due since one of them still occupies the home.

Home Equity Conversion Mortgage - The Federally Insured Loan
The most common type of reverse mortgage is the Home Equity Conversion Mortgage, otherwise known as a HECM mortgage. This is the only reverse mortgage program that’s federally insured and backed by the U. S. Department of Housing and Urban Development (HUD). This type of reverse mortgage is popular for a few reasons:

• Ability to choose your own interest rate.
You can select one that changes annually or one that changes every month.

• You have several payment options.
You may receive monthly loan advances for a fixed term or for as long as you live in the home. You may also choose to receive a line of credit or combine monthly loan advances with a line of credit.

• The loan can be used for any purpose.
With a HECM, you don't have to designate the loan to a specific use; you can apply the funds to anything you choose.

• Protection.
This is one of the most attractive features of a HECM. This plan protects you by guaranteeing continued loan advances even if your lender defaults.

Sell or Stay?

The main reason people choose a reverse mortgage is to gain financial independence and maintain an adequate standard of living without leaving their current home. The best way to decide if a reverse mortgage is right for you is to compare it to the other option of selling your house. To do this, ask yourself these three questions:

1. How much cash can I get by selling my home?
2. How much will it cost to buy or rent a new place?
3. Is it worth my moving now, or do I prefer to do something else with the
money?

Perhaps you'll confirm what you knew all along, where you now live is the best place to be.

We have utilized Reverse Mortgages to address very specific goals of our clients. One such case