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.

This topic can be divided into three different sub-categories. Cancellation, termination which takes place automatically and final termination. Firstly we will look at cancellation and how to proceed for this to occur. You may be aware of the Homeowners Protection Act of 1998. Under this legal act, it said that any homeowner can request the cancellation of their mortgage insurance if they have payed out the mortgage to a level at which it is equal to 80% of the total purchase price. Your payment history will also be looked at so it wise to keep good records. You should not have payed 30 days late within the last year of your request or 60 days for the past two years. The financial advisor or lender may request some documents from you which will serve as evidence that the home value has not decreased below the original value and that you do not hold a second mortgage or a HELOC on the home. Secondly, the automatic termination process will be discussed. As above stated, under the Homeowners Protection Act of 1998, it is stated that a loan lender should automatically terminate one’s private mortgage insurance once the homeowner has paid 78% of the total house purchase price. The loan lender has a 30 day period to terminate all coverages. They are not allowed to collect any mortgage insurance premiums after the termination date. If for any reason there are some unearned sums of money, it should be refunded to the homeowners with-in a 45 day period. However, you should have a good payment history as above stated for the cancellation process. For some loans which are considered to be higher risk, the percentage is set at 77. Thirdly, in the case of a final termination, if the private mortgage insurance has not yet been cancelled; when the amortization period comes to a 50% hault, the coverage should be removed. IE: In a 20 year loan with 240 monthly mortgage payments, the 50% hault date would be on the 120^thpayment. However, the homeowner should have a clear history of no late payments within a certain time frame. Let’s say the 50% hault date is on January 13^th 2009, the final termination should occur within 30 days of this date.

Useful Links
+ Mortgage Tools
+ Information On Private Mortgage Insurance (PMI)

This article will apply to you if this is a question you are asking yourself: I currently own a home, but I want to sell and buy another one. Should I buy first and then sell after, or should I sell first and buy after?

Someone home owners sell their home and in the end don’t end up buying a home and look for a place to put all their things and a place to live. This can be a terrible situation to be in. Even worse would be, if you buy a home and don’t end up selling the existing home. You would need to take care of both mortgage payments. So, this shows both steps are risky situations to be in. However, it depends on your situation.

Situation 1: You Have Good Income & Enough Savings

In this situation you would have enough money to payout two mortgages and make an initial down payment without taking any equity from your existing home. Once you buy your new home and have all the paper work done, you should put it on the market. It is wise to put a closing date on the existing home, after the closing for your new home because this allows you to stay at your current home till its sold.

Situation 2: You Have Good Income & Not Enough Savings

In this situation you have a good income which will allow you to pay up two mortgages, but you do not have enough money to pay that initial down payment. A solution is to take some equity from your current home. The best way to do this is to get a home equity line of credit, this way you have some time to look for a good house, and buy it. Once you sell your old home, you can use the money to pay off the mortgage/debts. If you are aware of your situation before hand, it is best to apply for a home equity line of credit. It will be extremely hard to get a home equity line of credit if your house is on the market.

Situation 3: Not Enough Income or Savings

In this case you don’t have enough income or savings. You can’t pay for two mortgages, nor can you buy the home. This is the case where you should sell your home before you buy. When you have the contract to sell your existing home, the loan lender will not look at the old mortgage and whether you can pay it. Now, this will start from scratch like a new home purchase. The sale of your home will pay for the new home. Although in the meantime, you would need to pay certain fee’s. For this you would be available to get a small loan from the bank which would be paid when your existing home is sold!

Some Tools
Home Equity Loans - The Basics - Part 3
Home Equity Loans - The Basics - Part 2
Home Equity Loans - The Basics - Part 1
All Types of Mortgage Loans
Mortgage Calculators & Tools

There are many people with bad credit. If you are one of them, it might be difficult to obtain a mortgage loan. However, the the ability to obtain a mortgage does not solely depend on your credit. Other key factors that play important roles include; your current income, your job status, your savings and your recent credit history. Now, how can a bad credit mortgage loan help you? This type of loan can help you in building your credit.

Before you start looking around, the best solution is to know if your able to buy a home. You may use our useful calculators to help you. This will also give you a general idea on where you stand, and what you can afford. The next step is to create a document with the following information; your current income, your current savings and your assets and your credit. The next step should be to go to a lender and talk about your situation, and learn more about what options you have. If you have some kind of credit, you should be ready to explain to lenders how it came about and what payment plans you have for them. Also, if you had not attended work for sickness, it is best to bring a doctors note and a letter from your employer.

Now, you may know, when you are looking forward to a bad credit mortgage loan, you will be expected to pay a higher interest rate and fee’s. However, there are some so-called benefits of this loan plan. When getting this mortgage, the interest that is paid on it can be tax deductible, and you have the ability to build equity to be more secure. For serious information on this matter, you may contact a tax advisor or financial advisor. This type of mortgage, like said before, can help you build back your credit score. It will take time, but it will happen. Every time you make a payment, it will add up to bring your score to a better stage. You must avoid paying payments after the due date and also avoid late fee’s, as this can bring your credit rating even lower.

Refinancing can help to improve your financial status. Bad credit refinancing can help reduce the high interest rate on your mortgage, it will help you avoid negative amortization and bundle your payments together as one. A simple option some home owners take is getting a home equity line of credit (HELOC). If you do qualify for a HELOC, you will have the ability to consolidate debt without refinancing. To learn how a HELOC works please consult the second paragraph this article: Home Equity Loans. A home equity line of credit is just like a mortgage, and your home can be seized if you default on monthly payments.

Free Mortgage Calculators