How To Buy A Home With A Reverse Mortgage

A reverse mortgage loan is very much like a home equity loan. First we’ll look at the similarities between the two and then let’s discuss how to buy a home with a reverse mortgage.

First a reverse mortgage is a lump sum payment or annuity that is paid from a lender or insurance company to supplement or provide income. As the homeowner you repay the mortgage obligation when you sell or vacate the residence. When you die your estate is responsible to pay back the loan. The amount owed will never exceed the value of your home. If the home is sold and the proceeds exceed the amount owed, the excess money goes back to you or in the case of your death, your estate.



Further, when you buy a home with a reverse mortgage it is not considered taxable income and does not affect Social Security or Medicare benefits.



A home equity loan on the other hand, is a mortgage loan that is secured by the residual equity in your home. To calculate equity, you subtract mortgage debt from your home value. Home equity loans allow a homeowner to make repairs or other home improvements, refinance other debt, or use for miscellaneous purposes. Unlike a home equity line of credit, a home equity loan is an amortizing loan.



When you buy a home with a reverse mortgage you are paid either a lump sum amount or annuity based on the amount of equity in your home. For example, a monthly payment of $1,000 for the next 120 months would be a 10 year monthly annuity.

Aside from programs which help you buy a home with a reverse mortgage there are various other types of reverse mortgages. One type is for homeowners who want to tap into their equity but not draw out the entire amount. Here an annuity or lump sum would be paid out. Another reverse mortgage program is a home equity conversion mortgage. Affiliated with FHA (the Federal Housing Administration) this program combines the features of a home equity loan and a line of credit. Here you receive a fixed payment and can also draw on a credit line for additional cash.

The buy a home with a reverse mortgage program uses the new home as a source of repayment. You make a down payment and use the reverse mortgage loan for the rest of the home’s purchase price. You repay the loan with interest and other financing costs, when you sell the home, no longer use it as a primary residence, or in the case of your death, your estate would cover the outstanding loan. Most types of homes are eligible.

Tremendous growth in the housing market over the last few years has given many homeowners a considerable boast in equity. As a result, some of these homeowners are now looking to buy a home with a reverse mortgage.

Take for instance, the homeowners who purchased their homes in the early 1960’s for a modest price and now in their retirement years find their home has doubled or even tripled in value.

With this kind of equity to play with many homeowners are looking to buy a home with a reverse mortgage. This could be a country home or a cottage property. Or, the funds could even be used for luxury vacations, recreational vehicles, boats – you name it!

If you were to buy a home with a reverse mortgage you would be able to pay cash for the second ‘vacation’ home while continuing to live in your primary residence for as long as you wish or are able. Once you die, your primary residence would be sold to pay back your reverse mortgage loan, while the second home would become part of your estate.

To participate in these reverse mortgage programs, you and any co-borrowers must be at least age 62. In order to buy a home with a reverse mortgage you also must have no mortgage debt on your home. Further there are usually no income requirements to participate in the above mentioned programs.

According to Fannie Mae, a positive feature of reverse mortgage programs is that you’re never obligated for more than the loan balance or the value of the property, whichever is less; no assets other than the home are used to repay the debt. A reverse mortgage has neither a fixed maturity date nor a fixed mortgage amount.

If you’re seriously looking to buy a home with a reverse mortgage it’s important that you do your homework. Take the time to comparison shop between lenders. Seeking the advice of at least three reverse mortgage lenders is always wise.

The Advantages And Disadvantages Of Online Mortgage Lending

Online mortgage lending appears to be the way of the future. However, there are some important things to consider when dealing with online mortgage lenders.
Let’s start with the advantages of online mortgage lending.

Online mortgage lending is a growing field that is starting to seriously compete with traditional ‘in person’ lenders. The process is relatively easy. The important thing to remember is to make sure your know the ins and outs of any and all online home mortgage loans prior to submitting your personal information.

In some cases, you’ll find online mortgage lending fees can be much cheaper than traditional ‘in person’ lenders.

Further, when it comes to online mortgage lending you may discover a greater range of mortgage loan programs available. Among the highlights of these programs may be lower rates of interest and flexible repayment terms.

Also, borrowers with a bad credit history may find online mortgage lending to be the answer to their prayers. In most cases, web-based lenders offer more alternatives to those with less than desirable credit ratings.

Finally, online mortgage lending can shave a ton of time off of the traditional ‘in person’ route and having to wait (what might be several days) to be approved. The bonus here is if you don’t get approved the first time, you can apply to another lender right away and like the first time, you’ll get your answer quick.

Now let’s explore the disadvantages of online mortgage lending.

It’s important to realize that not all online mortgage lenders have representation in each of the 50 states. Before taking the time to apply online, it’s in your best interest to make sure that the lender in question is represented in the state in which you reside.

A big negative with online mortgage lending is unfortunately accountability. It’s your job as the potential borrower to do your homework and keep on top of your application. It’s wise to check out the company to make sure they’re legit and will be able to fulfill any promises they make regarding terms and interest rates.

Unfortunately with both traditional and online mortgage lending, the mortgage loan programs offered may be more in lender’s best interest than in yours. Again, it’s so very important that you do some research and comparison shopping. Just like with traditional ‘in person’ lenders you want to make sure that any online mortgage lending is in your best interest not theirs.

Another possible negative is the fact that some online mortgage lenders will charge you a fee prior to you learning whether or not your application has been successful. Please note that some traditional lenders also ask for a fee upfront. Borrowers beware – there are many legitimate traditional and online lenders than don’t insist on such a fee.

Unlike any negative dealings you may have with traditional mortgage lenders, online mortgage lending isn’t regulated by a governing organization in which you can complain to.

The bottom line is that while online mortgage lending may be the way of the future, it’s also important to research the lender and ask the right questions. And, while applying for a mortgage loan online may seem like a great idea, don’t discount the value of getting a comparison quote from a traditional ‘in person’ lender.

Questions To Ask About Refinancing

It’s important to think of all the questions to ask about refinancing before actually signing anything as refinancing is not for everyone.

People refinance for many reasons – to lower monthly payments, to pay off a loan, build equity faster, convert a variable rate into a fixed rate mortgage etc.

When considering refinancing you not only need to know what questions to ask about refinancing but you also need to answer some questions yourself before you seek out the advice of a lender.

The questions you need to ask yourself include how long do you plan on residing in your home and how long have you held your current mortgage?

In order to make the costs of refinancing worth it, you need to be in your home long enough to reap the benefits. Experts recommend that anything more than five years is good. If you intend to move before that time you will have little to gain from refinancing. And if you plan on moving in three years or less, it makes virtually no sense at all to refinance.

That said, if you’re nearing the end of a fixed rate loan (in other words, you’ve already taken advantage of most of your tax deductible interest), a new loan could prove beneficial. The advantage here is you can deduct the interest and prorated points year by year.

Now as to the questions to ask about refinancing, you need to know what refinancing will cost you in the way of points, transaction fees and other closing costs.

Your refinancing lender will be able to provide you with an amortization chart showing the real expense of pre-paying interest points. You may want to also ask for a modified Annual Percentage Rate (APR) spreadsheet that combines costs over the years you plan to reside in your home. That said, if you’re considering a no-points refinancing, be careful to weigh the costs of any additional interest and other fees that may be hidden in higher mortgage rates.

Among your questions to ask about refinancing, you need to know if interest rates are higher for a cash-out refinance. The rate of interest you need to pay on a cash-out refinance loan is usually the same you would pay on a non-cash out loan. However, there may be an incremental fee associated with cash-out refinancing depending on the loan program you select and the loan to value ratio.



Refinancing can be a smart move. Using the equity in your home to pay off other bills can really make a difference to your bottom line. You may wish to pay off any and all debts that have interest that is not tax deductible. Chances are good you may be able to deduct the interest on refinancing money. To be sure check with your tax advisor.

Next, you should be asking if you can “lock in” an interest rate. Nobody can predict what interest rates will do but historically rates tend to go up faster than they come down. So if you’re thinking about refinancing your mortgage this is among one of the most important questions to ask about refinancing.



It’s important for you to get the best rate you can now. Remember you always have the option of refinancing later if the rates do drop again. However, you will also want to bear in mind that any future interest rates need to be substantial enough to impact your monthly loan payment.

Before sitting down with a lender take the time to make a list of the questions to ask about refinancing. Having all your questions answered will help you make an informed decision about whether refinancing is right for you.

Negotiate and Mortgage Rate Compare Says The Better Business Bureau

You should always mortgage rate compare to find the best mortgage to meet your needs before refinancing. Mortgage rate compare by contacting at least three different mortgage lenders. Despite your reason for refinancing – lower monthly payments or to build equity faster, three lenders are better than one.

Record numbers of homeowners are jumping on the refinancing bandwagon in an effort to lower their mortgage interest rates. According to the Better Business Bureau (BBB) refinancing is not for everyone and or those that decide that it is, it’s best to mortgage rate compare before signing on the dotted line.

Industry experts claim that homeowners are refinancing in record numbers. While this is all well and good for some it may not be for others. It’s true with a good refinancing package you can potentially shave hundreds of dollars off your existing mortgage but it isn’t for everyone.

The Better Business Bureau recommends homeowners mortgage rate compare and take the time to negotiate the best deal possible. The association however also suggests that homeowners should proceed with caution when it comes to dealing with some lenders.

In an effort to help homeowners determine if refinancing is in their best interest, the BBB suggests you take the following into consideration when doing a mortgage rate compare.

The long and short of it is that you are simply applying for a new mortgage at a lower rate which you then in turn use to pay off your old loan. The advantage for lenders is that they can profit once again by requiring you to pay for most of your original costs once again. Such costs may include loan application fees, a credit check, title search, lawyers fees and an appraisal. In many cases discount points and other more uncommon finance charges may also apply.

That said when you mortgage rate compare you will also find institutions that offer refinancing plans where most if not all of the above mentioned costs are folded into the loan thereby reducing your actual out of pocket fees to a minimum. A tax deduction on the interest may also be a possibility. Consult with you tax advisor to see if one would apply.

When considering refinancing it’s important to make sure that interest rates have dropped significantly to make your efforts to mortgage rate compare and refinance worth the effort. A good rule of thumb is to consider a two or three percent difference between your current mortgage rate and that of a new rate. In order to get the most value for your refinancing efforts you need to look at the new rate over a period of several years in order to offset the costs you’re required to pay upon closing.

There are many factors that come into play when you consider the ultimate amount you may be able to save by refinancing. Such factors include whether you will be selling your home in the near future and what if any effects there will be on your taxes.

All the more reason to mortgage rate compare and gather information from various lenders. Being a knowledgeable homeowner is vital. Just knowing your interest rate and your monthly payment costs is not enough to win at the refinancing game. A wise homeowner will always mortgage rate compare and gather information about the same loan amount, loan term and type of loan so comparisons are easily made.

Look out for your own best interests and don’t feel pressured to stay with the lender of your original mortgage if their terms aren’t in your best interest.

Also be wary of smooth-talking lenders that use high pressured tactics via telephone or door-to-door soliciting. Such lenders are sure to offer easy credit and guaranteed low-interest loans. They prey on homeowners who are in need of cash for home repairs or simply to pay bills. But if it sounds to good to be true chances are it is.

In reality these lenders are offering up little more than loans that have outrageous fees, high interest rates and fine print that makes it very expensive to get out of. A common red flag is when a lender asks for an upfront fee prior to you actually obtaining the loan. If this happens take your business elsewhere.

Mortgage rate compare and arm yourself with knowledge about the mortgage loan process. To protect yourself have the lender write down all costs associated with the loan. Then take the time to read through the loan documentation carefully. Never sign something you don’t fully understand.

Ask the right questions, mortgage rate compare between lenders and negotiate the best refinancing deal you can.