What to Know Before Getting a Reverse Mortgage

After living in a home for years and years, many people consider using the equity in the home as a resource for financing other expenses, such as tuition or to pay down debt. A reverse mortgage is one option for those who have owned their home for a long time. Senior citizens primarily utilize them. The process is not more difficult than a traditional home mortgage, but there are many differences that the applicant must know about before moving forward.

Definition

This is a special loan that provides homeowners with the opportunity to use part of their home equity as a liquid asset. This essentially turns part of the home's value into tangible cash that can be used for other expenses. The accrued equity can be paid out to the homeowner to use as they see fit. While this sounds much like a home equity loan, there are some substantial differences. This type of arrangement does not require repayment until or unless the homeowner is no longer using the house as his or her primary residence.

Significant Differences in Home Equity Loans

There are some additional differences between a reverse mortgage and a home equity loan. Standard equity loans require a regular monthly repayment on the principal and interest on the loan. The reverse mortgage pays the homeowner rather than making payments to the bank. Utility payments, insurance, and any taxes will have to be paid, however.

Home Loans That Are Eligible

Not all housing situations are eligible for this type of specialized loan. The home must be a single-family house with the owner living in it. Any house that meets FHA standards is also approved for these loans, including condos and manufactured dwellings.

Questions About Inheritance

A common question that comes up when someone inquires about a reverse mortgage is how the house will be dealt with after they pass away. Many homeowners want to leave a home behind as an asset for family members to utilize. These specialized loans do not cause debt to be passed to the estate. Instead, any money paid to the owner, along with finance charges and interest, will have to be repaid to the bank. If it is sold and the profit is greater than the selling price, the extra money will be provided to the estate to be distributed among heirs.

Cancelling the Loan

While some find this arrangement appealing, others may decide to change their mind and cancel the loan. The owner has three calendar days to cancel the process. Different lenders will have varied approaches with how they handle this process, which is referred to as a three-day right of rescission.

Before jumping into a reverse mortgage, be sure to fully review the information provided by the lender in order to fully understand the process. If there are any questions, it is best to ask them well in advance of moving forward with the lending process.

When looking for a reverse mortgage, homeowners visit FirstBank Mortgage. Learn more at http://firstbankreversemortgage.com/.

Article Source: http://EzineArticles.com/expert/Andrew_Stratton/83489

Your Paying 161% Interest For Your Mortgage!

You read the title correctly and you're not in a deep sleep having a nightmare. I am sorry that you had to find this out from some stranger but this is a Truth. I am in the mortgage business and when I discovered this I almost fell of my chair. For example if you have a 200,000.00 for a thirty year term at 6% and pay it to full maturity the effective interest rate will be 161%. Now do you understand why 95% of all Americans will never own their own home and if you are reading this, odds are you are one of them! It blows my mind to think that Americans will make mortgage payments for 20, 30, and 40 and 50 years and still will never achieve home ownership, why!

What I discovered is there are two factors why we will never own our home. The first is a banking instrument called amortization and the second is to continually refinance your current Mortgage. Let's first take a look amortization and explain the origins of it and how it works. After the great depression the president of the United States, FDR realized the government needed something to stimulate the economy what they decided to do is to focus on new home construction. His advisors discovered that home construction was a viable way to jump start the economy. The benefits of new home construction are that it creates jobs and affects numerous sectors of the economy.

One of the obstacles in their plan was how to finance homeowners. Before the great depression homeowners would put down 80% and finance 20%. After the depression potential buyers didn't have the resources to make large down payment. What they proposed was to increase the term of the loan, great idea but now the lenders were taking on greater risk with longer term loans. Whenever the banks liability or risk increases the lending institute will then pass it on to the consumer in the form of compound interest or cost. To solve that problem and reduce the risk to the lender they created the bank instrument called amortization. A definition of amortization in its simplest form, the bulk of the interest on the mortgage will to be paid in the first 7 to 10years of the loan.

On a 200,000.00 mortgage for a thirty year term at 6% interest it is not until the 21st year of the loan does principal overtake interest? Let me give you an example for the above scenario. On this loan the payment would be approximately $1,199.00 per month, in your first month $1,000.00 would go to interest and $199.00 would be applied to principal. Don't take my word for it look at your Truth and Lending Statement and you will see that you'll pay two and a half times for your home. Albert Einstein said "Compound interest is the 8th wonder of the world. He who understands it earns it! He who doesn't pays it!" He could have said it about Relativity, Physic's or Electricity but he did not. He understood the power of compound interest and so do the banks.

Here is an example of compound interest. If you would open a savings account at 3% and would deposit $ 1,000.00 and leave it there for 48 years or a working lifetime you would have a return of $ 4,000.00. The banks will take the same $ 1,000.00 and will get 18% on there money and at the end of 48 years will accumulate a return of $ 4,096,000.00. No you don't need glasses you read it correctly. This is why there is a bank on every corner and more banks than churches.

The second component is refinancing your existing mortgage. Every time you refinance, you're resetting the amortization schedule which puts the bulk of interest in the first 7 to 10 years. The national average says Americans will refinance their home every 3 to 5yrs. Mr. Einstein also made another profound statement "the definition of insanity is doing the same thing over again and expecting different results". We have been taught to refinance our homes every time we are able to save a percentage point or more. That's what the lenders and mortgage companies want you to believe. Presently there are few options available to homeowners to reduce mortgage debt, one is a bi-weekly and the other is adding extra money to your current mortgage. Both will eliminate a few years off your debt but most individuals are not disciplined enough to do so and that includes myself.

By now you are probably asking yourself how I can stop the insanity. Now there is an award winning product revolutionizing the way we pay our mortgage. It is reducing mortgage debt by one third the time. A similar concept is being used throughout Europe, Australia and New Zealand and is reducing mortgages by fifty percent. Are they smarter than we are, no but they have found a solution. You need stop this cycle and let me show you how to become debt free through mortgage cancellation. My passion is to see you financially free.

For more information contact me at jmridings@paidinfull.org or go to http://www.paidinfull.org and watch the 10 min video overview. It will change your financial future. I want to help you please call me at 708-983-3431 for a free copy of 101 Ways to Stop the Money Leak.

A successful restaurateur in Chicago, One day I woke up and all that I had labored for was taken away. Starting over at 49 is a journal of my journey back to the place of achieving my goals for my life. Also to help Americans achieve financial freedom.

Article Source: http://EzineArticles.com/expert/John_Mark_Ridings/211378

Creative Financing For Commercial Real Estate Investors

Commercial Real Estate Investing

There are many income producing commercial real estate properties that are being offered below market that are great investment opportunities. The problem or barrier for most real estate investors buying these properties is the down payment required to acquire them. As a rule general rule to purchase income generating apartment buildings and mixed use multifamily properties one should be prepared to spend 25% to 35% of the purchase price for the down payment. Plus the investor must have closing costs and reserves of 6 months or more. This is a substantial investment that eliminates many potential buyers. This can often be overcome by these creative financing strategies for commercial real estate investors.

Creative Financing

This is a highly misunderstood concept in real estate. My simple definition has two parts. Creative Financing requires a property with substantial equity and a willing and motivated seller. If the seller is motivated yet there is no equity there is no opportunity to utilize creative strategies to acquire the properties. By the same token if the property has enough equity and the seller is neither willing nor motivated no strategy will work.

3 Creative Strategies to Purchase Commercial Real Estate

1. Seller Financing and / or Carry Back: There are many ways to structure a deal  where the seller can finance the property or hold a second mortgage for a short time and then the buyer can refinance the loan. Many lenders requires the loan to be seasoned one or two years. Yet there are lenders that we work with that will refinance immediately requiring no seasoning. These deals close within 3 to 6 months from the initial seller financing contract.
2. Transaction Funding Programs: These are programs where a private lender will finance the loan from One to forty - five days. The key is to have a buyer ready to close immediately or to be able to refinance at once. This only works when the end lender is aware of the transactional financing and they require no seasoning. As in point #1 above most lenders require one to two years of ownership seasoning so having the proper end lender is important.
3. Down Payment Assistance Program: If the property has equity and the seller is willing to use it to help the buyer acquire the home, then a down payment assistance program similar to Ameri-Dream or Nehemiah (programs used to purchase residential properties financed by FHA loans) may be a great option for you. Ultimately the Down Payment Assistance Company (DPA) gives the down payment and the seller reimburses the company at closing. This can only happen if there is substantial equity in the building.

As previously stated creative financing requires substantial equity in the commercial income producing property that the seller is willing and motivated to use to strategically sell there property as soon as possible. Lower the price simply is not the answer because the main problem still exist. Commercial Real Estate Investors do not have 25% to 35% for down payment plus closing costs and reserves. Let a professional help you structure your deals to make them close.

Commercial Real Estate Investing is an opportunity whose time has come. Louis Jeffries has been a mortgage banker for over 20 years helping real estate investors achieve their real estate investing goals. Learn more about commercial real estate investing, down payment assistance for commercial properties, conventional and creative financing options. Go to http://fbcfunding.com for more information.

Article Source: http://EzineArticles.com/expert/Louis_Jeffries/190848