A lease purchase can also be defined as a plan which allows you to lease a home, with the ability to purchase it with-in a set period of time. The time frame will usually be in the first three years and the price will be agreed upon in the agreement signing in the commencement. There is a down payment which will be required in the commencement, which is usually in between 1% and 5%. The buyer will be paying a rent and a rent premium to control the purchase. This type of a deal can be made so that the buyer/seller will profit.

Should I Rent or Buy?

As you know reverse mortgage is something that is only available to seniors who are over the age of 62 and are eligible. There are two main types of mortgages that are categorized under reverse mortgages. These are called Home Equity Conversion Mortgage (HECM) and Non - Home Equity Conversion Mortgage (Non-HECM). Firstly, we will talk about the HECM plan, and how it works.

Basically, the HECM allows an eligible senior to pull out money from the existing equity in their home in the following modes; monthly payments for life or a term, one bulk payment, or in a LOC. The main reasons why elders would take upon this opportunity is to be able to purchase a home. As most other loans, you have to be eligible. To be eligible you would need to own your home, or atleast have a low remaining balance on the existing mortgage, this way you can pay it off at closing. You must be at this location for your lifetime, if you sell it or default, the lender has has the obligation to request a repayment of the money taken out. In the recent years, mortgage brokers/advisers have noticed that seniors have been victims of some fraudulent schemes carried out by some institutions. Due to this problem, some reputable institutions would send their clients to certain education courses, where they will be taught about some very useful information.

The following factors are taken into account when calculating the total amount given; the age of the client, the home’s present value and the interest rate. The borrowers have certain options which will allow them to pick how they want payments made.

1. The borrower will get payments every month until the end of his lifetime as long as he will abide all regulations.
2. The borrower will get payments every month for a fixed time period set at the beginning.
3. The borrower will get a line of credit, which will enable him/her to make unlimited withdrawals.
4. Option 1 + Option 3
5. Option 2 + Option 3

The fee’s for a HECM reverse mortgage range anywhere between $2500 and $6000. It usually depends on the homes value and the loan lender will take a certain percentage of that value.

Now onto Non-HECM loans, they are very similar to HECM type loans. However, there are certain differences. The good thing about this type of loan is that the limit is much higher when compared to a HECM loan. Now, every good thing comes with a tag attached that reads “Disadvantage”. The disadvantage is that they aren’t covered federally, which means they will cost more.

A reverse mortgage is a type of loan which is available for seniors. This type of loan is used to take the home equity value out of a property in one bulk payment or in multiple payments. In simple words, you are turning the equity in your home into solid cash. This allows you to take out a loan against the equity in your home and you don’t have to repay the loan for the entire lifetime until you reside in the home and do not sell it. This is the best solution if you would like to increase the money for your retirement and don’t want to make monthly mortgage payments. In a reverse mortgage, the loan lender will be making monthly payments according to a percentage of the value in the property/home. Eventually, the lender will sell the home to recollect the money spent, once you do not occupy the home. There are different types of reverse mortgages available and some of them have a common theme. The following are common features found in these types of reverse mortgages.

• If you are a senior, the chances of acquiring a higher loan amount would be very high.
• You must pay off all other debts you may have. The only debt you should have must be the reverse mortgage.
• The cost of financing will be included in the total value of loan.
• The lender has the right to ask for a repayment in the case you do not occupy the home, or if you do not pay taxes or perform bankruptcy. You can not add another person in the home owner title of the home.

Certain types of home apply, such as a single family home, 2 to 4 unit properties, a home built after 1976, condominiums and townhouses. What you need to qualify for a reverse mortgage; be of 62 years of age, own a home and have enough equity in the home. Learn how you can increase equity in your home while young. Types of reverse mortgages available; HECM Loans, Non-HECM Loans, CHIP Loans. We will be discussing about these types of loans in another article entitled “Types of Reverse Mortgages”.

That’s right! How would you like to have your tenants pay your monthly mortgage payments? This would mean; not a single penny from your pocket would be going towards paying off the mortgage. As you may know now, we are talking about a rental property. Here are some tips you should follow before approaching the official purchase of a rental property.

1. Look for a good/reputable real estate agent.
2. Look for a good/reputable mortgage broker.
3. Look for a good/reputable mortgage insurance broker.
4. Try to find a property that would not be vacant most of the time.
5. Try to find a property without major work that has to be done.
6. Make sure the property was not built too long ago (inspection will take care of these aspects).

Usually, when you purchase a four unit property, it will be classified as a residential property. If its is over, it will be put under as a commercial property. The issue with a commercial property is that it requires a higher ratio of an initial mortgage down payment compared to a residential property. This is where your mortgage broker/advisor would help, they will be able to provide information which will outline exactly what is what and the cost as well. You also would not have to worry about having a large sum of money saved up, to qualify for a large property. The reason is that; the rental income would help qualify for the loan. The lender will do some calculations to get an approximate value for the rental income and take that into consideration in the process of giving out the loan. You can read more about this in one of our articles here; “Would Rental Income Help Qualify For A Loan?”. This type of property is a great revenue puller, get in this market while you can! You would also need some insurance for your property other than the mortgage insurance. This insurance would cover anything caused to your building by tenants, IE: a fire.

Useful Links & Tools
Information On Private Mortgage Insurance (PMI)
How To Cancel Private Mortgage Insurance
Would Rental Income Help Qualify For A Loan
Save Time & Money From Your Mortgage
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