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When Should I Refinance?

Generally speaking, if you can earn the refinancing costs (normally 1%-3% of the loan value) back within two to three years, and it’s a home you’re prepared to stay in for much longer than that,it’s usually a good option to refinance your mortgage. From a risk perspective if you have an adjustable rate mortgage, refinancing to a low 30 year fixed rate may also be a good idea because it will ensure your repayments never skyrocket and place you under financial duress.

Also, never blindly trust mortgage brokers who will give you life-of-loan refinance savings calculations that may not factor in the taxation implications (mortgage interest is tax deductible). Also, consider the opportunity cost of refinancing.

Refinancing Home Loans

Could you make more by putting that money into other investments? You can search on-line for a number of refinancing calculators and do the numbers based on your own personal situation. So do your homework before looking to refinance and like any financial product or service always shop around to get the lowest fees and best rates. Should I Refinance My Home?

Refinancing dangers according to Sen. Charles Schumer

Sen. Charles Schumer is warning homeowners who are taking advantage of low mortgage rates by home mortgage refinancing that they should beware of predators.The senator says they’re the same predators who pushed subprime loans that contributed to the economic crisis.With mortgage rates at historic lows, hundreds of thousands of homeowners are eligible for refinancing in New York state alone.

The senator says misleading offers include lures such as no down payments or closing costs, limited documentation or low credit scores. But such offers, Schumer says, can come with hidden fees and clauses and floating interest rates that can wipe out any savings from the refinancing and even cost the homeowner more.

What lenders will look for when taking a second mortgage

A second mortgage typically refers to a secured loan (or mortgage) that is subordinate to another loan against the same property.

In real estate, a property can have multiple loans or liens against it. The loan which is registered with county or city registry first is called the first mortgage or first position trust deed. The lien registered second is called the second mortgage. A property can have a third or even fourth mortgage, but those are rarer.
Continue reading What lenders will look for when taking a second mortgage

Federal Reverse Mortgages

FEDERAL REVERSE MORTGAGE:

1. What is a reverse mortgage?

A reverse mortgage is a special type of home loan that lets you convert a portion of the equity in your home into cash. The equity that built up over years of home mortgage payments can be paid to you. But unlike a traditional home equity loan or second mortgage, no repayment is required until the borrower(s) no longer use the home as their principal residence. FHA’s HECM provides these benefits. You can also use a HECM to purchase a primary residence if you are able to use cash on hand to pay the difference between the HECM proceeds and the sales price plus closing costs for the property you are purchasing.

Refinance Home Loan

2. Can I qualify for FHA’s HECM reverse mortgage?

To be eligible for a FHA HECM, the FHA requires that you be a homeowner 62 years of age or older, own your home outright, or have a low mortgage balance that can be paid off at closing with proceeds from the reverse loan, and you must live in the home. You are further required to receive consumer information from an approved HECM counselor prior to obtaining the loan. You can contact the Housing Counseling Clearinghouse on (800) 569-4287 for the name and telephone number of a HUD-approved counseling agency and a list of FHA-approved lenders within your area.

3. Can I apply if I didn’t buy my present house with FHA mortgage insurance?

Yes. It doesn’t matter if you didn’t buy it with an FHA-insured mortgage. Your new FHA HECM will be FHA-insured.

4. What types of homes are eligible?

To be eligible for the FHA HECM, your home must be a single family home or a 1-4 unit home with one unit occupied by the borrower. HUD-approved condominiums and manufactured homes that meet FHA requirements are also eligible. Should I Refinance My Home?

5.

What’s the difference between a reverse mortgage and a bank home equity loan?

With a traditional second mortgage, or a home equity line of credit, you must have sufficient income versus debt ratio to qualify for the loan, and you are required to make monthly mortgage payments. The reverse mortgage is different in that it pays you, and is available regardless of your current income. The amount you can borrow depends on your age, the current interest rate, and the appraised value of your home or FHA’s mortgage limits for your area, whichever is less. Generally, the more valuable your home is, the older you are, the lower the interest, the more you can borrow. You don’t make payments, because the loan is not due as long as the house is your principal residence. Like all homeowners, you still are required to pay your real estate taxes, insurance and other conventional payments like utilities. With an FHA HECM you cannot be foreclosed or forced to vacate your house because you “missed your mortgage payment.”

6.

Can the lender take my home away if I outlive the loan?

No. You do not need to repay the loan as long as you or one of the borrowers continues to live in the house and keeps the taxes and insurance current. You can never owe more than the value of your home at the time you or your heirs sell the home.

7. Will I still have an estate that I can leave to my heirs?

When you sell your home, you or your estate will repay the cash you received from the reverse mortgage plus interest and other fees, to the lender. The remaining equity in your home, if any, belongs to you or to your heirs.

8. How much money can I get from my home?

The amount you can borrow depends on your age, the current interest rate, and the appraised value of your home or FHA’s mortgage limits for your area, whichever is less. Generally, the more valuable your home is, the older you are, the lower the interest, the more you can borrow.

9. Should I use an estate planning service to find a reverse mortgage?

FHA does NOT recommend using any service that charges a fee for referring a borrower to an FHA lender. FHA provides this information free, and HUD-approved housing counseling agencies are available for free or at very low cost, to provide information, counseling, and a free referral to a list of FHA-approved lenders.

10. How do I receive my payments?

You have five options:

  • Tenure – equal monthly payments as long as at least one borrower lives and continues to occupy the property as a principal residence.
  • Term – equal monthly payments for a fixed period of months selected.
  • Line of Credit – unscheduled payments or installments, at times and in amounts of your choosing until the line of credit is exhausted.
  • Modified Tenure – combination of line of credit with monthly payments for as long as you remain in the home.
  • Modified Term – combination of line of credit plus monthly payments for a fixed period of months selected by the borrower.

What is a reverse mortgage?

Reverse mortgages as its name indicates operates in a manner opposite to that of the typical mortgage such as a home loan. In a typical mortgage, you borrow money in lump-sum right at the beginning and then pay it back over a period of time.


Reverse Mortgage

In your payback — the EMI — a portion goes towards paying the interest and the remaining goes towards paying back principal. All along, you pledge the asset — namely the home you have bought with the loan — to the bank. This asset is the security against which the bank is lending to you. In reverse mortgage, you pledge a property you already own (with no existing loan outstanding against it). The bank in turn gives you a series of cash-flows for a fixed tenure. These can be thought of as reverse EMIs.

NHA Housing Loan

There are various forms of reverse mortgage available in the developed countries. The specific format National Housing Board (the facilitator for housing finance in India) is promoting is one in which the tenure is 15 years and the owner of the house and his/her spouse continue to live in the house till their death — which can occur later than the tenure of the reverse mortgage. Should I Refinance Home

The IMPORTANT POINT is — how much of an annuity income can my house generate using reverse mortgage? The banks have so far not indicated which interest rates they will use to determine the EMI — however, we can safely assume that it will not exceed the interest rates used for loan against property — which is currently in the region of 12-14%.REVERSE MORTGAGE: Reverse mortgage as its na…

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Read the news carefully today. You never know what you're gonna get. For recommended reading materials on mortgages and refinance aspects and how to fix your deeds or just plain news on real estate, check out the new york times online. It's a very good source of information.