Advantages and Disadvantage of Mortgage

Carrie Reeder asked:

Mortgages for those with adverse credit have advantages that conventional mortgages don’t. The prime advantage is that they are easier to qualify for, even with a bad credit history. Sub-prime mortgages also allow you to build wealth with your home purchase. And they have fewer hurdles, such as not requiring PMI.

Start Building Wealth

Bad credit mortgages allow you to start building equity wealth even if you have a bankruptcy or foreclosure in your past. With rates only a couple of points above conventional rates, you can get into a home with no or little down. For about the cost of a rent payment, you can enjoy tax deductions and home ownership.

Without waiting for your credit score to improve, you can buy a home at today’s prices. Even though no one knows for certain what prices will be in the next couple of years, more than likely they will be higher. You can see that appreciation by buying a home now.

Forgo Private Mortgage Insurance And Other Hurdles

Unlike conventional loans, you don’t have to carry private mortgage insurance with a sub-prime loan. So even with a down payment of less than 20%, you don’t have to worry about premium costs.

Sup-prime lenders are also more flexible with their requirements. Your cash assets, income, and credit scores can be less than favorable, but you can still get a mortgage. You can also choose more flexible loan terms of interest-only, jumbo, or adjustable rates.

Finding An Adverse Credit Mortgage

With more and more financing companies offering sub-prime lending, it’s easier than ever to find an adverse credit mortgage. A quick search online will yield hundreds of opportunities. Sifting through those results can produce some very favorable financing offers.

If you are overwhelmed with the choices, start with a mortgage broker. They sort through the plans to present you with the best selections. In some cases they also offer special deals, not found elsewhere.

Don’t worry about getting approved or not. Focus on getting the best rates and terms. Ask for loan quotes that include closing cost estimates to make comparisons. Also be willing to negotiate more favorable terms, especially to lower caps or fees.

Advantages and Disadvantage of Mortgage

Brad Stroh asked:

If you’re in need of additional funds and you own a home, you may have the opportunity to borrow against your home through a second mortgage.

A second mortgage is another name for a home equity loan. The amount that can be borrowed on a second mortgage is typically based on the difference between your home’s current value and your original mortgage principal. This type of loan utilizes your home’s equity to provide you funds for home repairs, school tuition, debt consolidation and other financial needs. For example, if you have a child who’s about to go away to college and you need money for the tuition, a second mortgage can you help you afford your child’s education. If you want to make home repairs or renovate your home, a second mortgage can supply you the funds you need to get the job done. It’s a good way to tap the asset value of your home to meet your investment and budget needs, and helps you avoid incurring high interest unsecured debt like credit cards.

Second Mortgage Benefits

There are some innate benefits to a second mortgage. First of all, since a second mortgage is based on your home’s equity, as a home owner, you have the funds readily available. A second mortgage is a secured loan and is generally easier to obtain than other types of loans.

Also, the interest paid on a second mortgage is normally tax deductible. Not all loan interest can be deducted from your annual taxes. With a second mortgage you can easily deduct the interest you pay on your second mortgage from your taxes.

Second Mortgage Disadvantages

There are some disadvantages associated with a second mortgage that you need to be aware of. For starters, since the second mortgage is being based on your home’s equity, you are putting your home on the line. If you default on payments, the bank can take away your home. Also, interest rates can be higher than a first mortgage, especially if you have a low credit score. A low credit score always affects the interest rate of your loan and the amount that you can borrow.

How to Get a Second Mortgage

If you’ve determined that a second mortgage is the answer to your financial needs, you need to do a few things. You need to make certain that the reason why you’re getting a second mortgage is worth borrowing against your home. For example, if the only reason you’re getting a second mortgage is to purchase a new motorcycle, and you already have two, you need to think if the end result is worth taking out a second mortgage. Also, you need to get your home appraised. A home appraisal will establish the current market value of your home and be the value used to determine the details of your second mortgage. After the appraisal, you need to find a lender. Check with the lender who you used for your first mortgage to see if they’re a good source for a second mortgage. Also look online for second mortgage lenders and resources. You never know where you’ll find the best rate on a second mortgage. And finally, after you’ve compared lenders and made the decision that a second mortgage is the best choice, pick your lender and keep up with your payments. Remember, since you’re borrowing against your home with a second mortgage, you are putting your home on the line.

A second mortgage is a sensible solution to acquiring funds for school tuition, home repairs and renovations, and even vacations and cars. But before you run out and get a second mortgage, you need to weigh the benefits and disadvantages of a second mortgage, and determine if the reason for getting one is worth borrowing against your home.

Advantages and Disadvantage of Mortgage

David Swanson asked:


On the surface, reverse mortgages seem like a great idea, but they are not right for everyone. It seems like everyone touts the advantages of a reverse mortgage, but the disadvantages are not always brought to the light. Here is a look at reverse mortgages and some things to look out for when considering this option.

What Is A Reverse Mortgage?

A reverse mortgage is a loan that uses the equity in your home to pay you cash. You are not required to pay back the money as long as you are using the home as your primary residence. There are some stipulations to a reverse mortgage. You must be 62 years or older. You must own your home free and clear or have a very low mortgage balance that can be paid off with the proceeds of the reverse mortgage. You must also use the home as your primary residence. The only homes that are eligible are single family homes, 2 or 4 units, and some townhouses and condos.

What Are The Disadvantages Of A Reverse Mortgage?

Reverse mortgages are more costly than other types of home loans. Because you are not making payments, the amount of interest applied to the loan continues to compound month after month. It adds up much more quickly and can end up eating away all of your hard earned equity. Reverse mortgage lenders also have to ability to charge exorbitant fees.

Because it uses some or all of the equity in your home, you will not have as much to leave to your heirs. This can be a source of contention in a family. Any equity that is remaining after the loan is repaid, however, becomes yours or the property of your estate.

You are responsible for all of the real estate taxes and home owners insurance on your home. If you fail to maintain them, your loan can be called and be due in full. You must also still take care of the expense of running the home such as electricity, water, gas, and maintenance.

Additionally, you cannot claim the interest you pay on your reverse mortgage on your taxes until the loan is paid. This differs from a traditional mortgage or home equity loan where you can deduct the interest you pay on your taxes.

Things To Consider If You Choose A Reverse Mortgage

Shop around before you choose a lender. There are many different lenders to choose from, so ask lots of questions before you commit. Do not use an estate planning service to obtain your reverse mortgage. They will charge you ridiculous fees to find you a lender. HUD offers this service to you for free.

Make sure you pay attention to the APR, or Annual Percentage Rate. It is also important to consider what points you will be required to pay and what other closing costs will be imposed. If these charges are rolled into the loan amount, it will decrease the amount of money that is paid to you and you will ultimately pay more interest.

Be sure that you pay attention to all aspects and details of the loan. Make sure you understand all of the costs and stipulations. Don’t be afraid to ask questions. If the lender seems impatient with your queries, perhaps you should choose a different lender who doesn’t have anything to hide. Make sure you are well informed before taking out a reverse mortgage.



Advantages and Disadvantage of Mortgage

david forer asked:


Reverse mortgages are a way for seniors aged 62 and above to take cash out of their house. The equity the senior has built up over the years can be used beneficially to aid in their retirement. Here are some thoughts and ramblings about reverse mortgages that you may find helpful.

Seniors can choose to take the cash from a reverse mortgage as a lump sum, in a line of credit or in monthly payments. If

they choose a lump sum, for example, Forer said that they could pay to retrofit their home to make kitchens and bathrooms

safer and more accessible? Especially important to those who are becoming frail and in danger of falling. As one grows older

all the appliances etc. can be fitted differently to help in everyday functioning. Seniors, in a very personal way, know that

staying in their home, close to their memories and in a familiar neighborhood, can be very important factor in enjoying

retirement. Securing a Reverse Mortgage enables a senior to do that, and many companies are designed specifically to assist

seniors with reverse mortgage needs. Senior home ownership and life expectancy rates are climbing steadily and therefore more

seniors are qualifying for reverse mortgages. Accordingly, now is the ideal time to establish consumer protections so that as

the reverse mortgage industry grows, current pitfalls and hazards for consumers do not expand as well. The national reverse

mortgage lenders association does that.

When deciding what options to pursue with a reverse mortgage make sure you check the NRMLA site which forbids fraudulent

activities. Here is a direct quote from them “National Reverse Mortgage Lenders Association (NRMLA) is the national voice of

the reverse mortgage industry, serving as an educational resource, policy advocate and public affairs center for lenders and

related professionals. NRMLA was established in 1997 to enhance the professionalism of the reverse mortgage business. Our

mission is to educate consumers about the pros and cons of reverse mortgages, to train lenders to be sensitive to clients’

needs, to enforce our Code of Conduct and Best Practices, and to promote reverse mortgages in the news media.”

Seniors actively considering a reverse mortgage could certainly find value in comparing their personal expectations with the

experiences of actual borrowers. Most HECM (Home Equity Conversion Mortgage) borrowers are estimating their future ability

(or desire) to “age in place”. No one knows exactly how long you will be able to stay in your house but it is better to be

prepared for a lengthy stay. Seniors who live on a fixed income may be concerned that their retirement savings and Social

Security income may not be enough to keep up with the rate of inflation. Catastrophes and other unexpected events create

unexpected expenses that weren’t saved for. It is for these reasons that a reverse mortgage might be beneficial. Seniors are

encouraged to talk with their children about reverse mortgages and why it might be the best course of action. The reverse

mortgage has an immediate impact on many children by easing any financial burdens of helping their parents.

Carefully review the reverse mortgage to determine the type of compensation the homeowner is to receive, frequency, schedule

of receipt, amounts, etc. If the money from the mortgage establishes a line of credit, consider the entire amount of the line

of credit as a countable resource effective the month the line of credit becomes available. Carefully weigh the pros and cons

of all cash flow options. Folks in early retirement should remember that the younger they are, the less money they are

eligible to receive because of the life expectancy factor in the loan payment formula. If you wait till later in retirement

your benefits will go up because they don’t expect to pay them as long. The disadvantage of waiting is the benefits could

change because the value of the house could be less and a senior may not qualify for as much based on the equity.

When deciding make sure you talk with a counselor as early in the process as possible. They are non partial and can answer any questions you may have about a reverse mortgage. It is mandatory so why not take advantage of this formality to make sure this is the best option for you. If there are lender specific questions feel free to call me 414-531-4035 and ask for David. You may also go to David’s website for more information at http://wisconsinreversemortgages.net/



mortgage disadvantage

Josh Spaulding asked:


Reverse mortgages may also be known as a conversion mortgage. Basically, the homeowner receives money for the equity they have in their home and after they sell the home or pass away, they owe the money back, plus interest, most of the time. The homeowner must be 62 years of age. One advantage of these loans seems to be that some older people are in a financial bind. They may own they’re home but, they don’t have enough income to support themselves. So if they take out a reverse loan, they can live in the home. Government agencies and independent financial institutions provide reverse mortgages.

If you are thinking about a reverse mortgage, then it is important to know and understand the rights and responsibilities of the loan and how it works. Your home is very important and you, most likely, have worked most of your lives to have it, your home could be at stake.

Many options are available for reverse mortgages and all of these options can be very confusing. It would be best to be counseled on the right move to make. Another down fall to obtaining a home loan is that it can be an expensive process; you have loan fees, closing costs, appraisal fees, insurance, etc. With a reverse mortgage the home owner is still responsible for all property taxes, repairs, and insurance on the home. These loans can also be revoked for various reasons and then the whole amount you borrowed could be due at that time.

A few other disadvantages of the reverse loan are that the loan could affect your eligibility for federal or state assistance, like Medicaid or Medicare and maybe even social security benefits. It is important to understand that with this kind of loan you may not have anything to leave your heirs when you pass away, and they could even owe a bill in your name. So, the amount of money you are receiving for the loan, you could be leaving for your children. These mortgages would be ideal for someone without children or heirs. These loans can also be a lot less than what your home is really worth. It may even be a better idea to sell your home.

Reverse mortgages have a long list of disadvantages but, there are also many advantages. It is just very important to look at both advantages and disadvantages to make a sound decision. This can be a very big decision, think it through.



mortgage disadvantage

Grant Eckert asked:


The equity release mortgage (also known as a lifetime mortgage or a reverse mortgage) is becoming an increasingly popular method by which seniors can tap into the equity in their homes, providing them with cash in the form of a lump sum or supplementary income.

Who can get an Equity Release Mortgage?

There are a few simple criteria you must meet to be eligible.

Be a UK Citizen

Own your own home

Be over a certain age (typically 55 to 62 depending on the individual scheme and the company offering it)

Own a property worth at least £40,000 to £70,000 (again, the exact amount depends on the company offering the scheme)

Some companies may allow you a small outstanding mortgage balance as long as you agree to pay it with funds from your equity release mortgage

How it Works

Most schemes allow you to borrow a cash amount that amounts to between 20% and 50% of the value of your property. The exact amount depends on your age (or your partner’s age-whichever is the lowest). In general, the younger you are, the lower the amount you can borrow.

You can receive the loan money as regular instalments, as one large lump sum, or in smaller lump sums at irregular intervals. Interest accrues on the amount you borrow, in the same way as with a conventional mortgage, meaning that interest will accrue more slowly if you choose to receive money via instalments rather than as one large lump sum.

The money you borrow via an equity release mortgage does not need to be repaid until the property is sold. At this point, the full balance of the loan is due, including interest.

There are four main types of equity release mortgage: home income plans, the interest-only mortgage, the lifetime mortgage, and the home reversion scheme.

Home Income Plan

The owner of the property takes out an equity release mortgage and uses the lump sum to purchase an annuity that provides income for life. Interest payments on the mortgage are deducted from the annuity. The mortgage does not have to be repaid until the home is sold.

Advantages

You are guaranteed an income for life, and don’t have to worry about interest accruing, as this is paid from the annuity.

The amount you owe on the mortgage remains constant-if the property increases in value over time, you or your heirs benefit

Disadvantages

Inflation may reduce the value of the annuity over time.

Interest-Only Equity Release Mortgage

The equity release mortgage is used to provide a lump sum, and the borrower must make monthly interest repayments. The principal balance must be repaid in full when the property is sold.

Advantages

The amount you owe on the mortgage remains constant, so any increase in property value benefits you or your heirs

You have fixed monthly repayments (if you choose a fixed-rate mortgage)

Disadvantages

You must be able to ensure that you can cover interest payments over the life of the loan

Choosing a mortgage with a variable interest rate is risky

Lifetime Equity Release Mortgage

The equity release mortgage is used to provide either a lump sum or monthly instalments of cash (the borrower can also choose to receive a combination of both types of payment). When the property is sold, the balance of the loan, including principal and interest, is paid in full.

Advantages

Provides a larger income than the home income plan or interest-only mortgage

Disadvantages

It will be difficult to estimate the amount of equity left in the property until it is sold

Home Reversion Equity Release Mortgage

The owner of the property sells their home (or a portion of the equity) to a lender, and receives a lump sum or monthly income. The lender takes a share of the proceeds when the property is sold, taking a share that is proportional to the amount of equity they purchased. For example, if you sell 50% of the equity, the lender will take 50% of the proceeds from the sale of the property.

Advantages

You will always know exactly how much equity you own

You or your heirs benefit from an increase in property value

No repayments-even interest-in your lifetime

Disadvantages

The lender will not pay market value for the equity

Look for a SHIP-approved Equity Release Mortgage

Plans that are approved by the Safe House Income Plan guarantee that you will never end up owing more than the home is worth, even if the property market changes, and no matter how much interest you accrue. You cannot build up negative equity in the property, and will not pass debt to your estate in the event of your death.



Advantages and Disadvantage of Mortgage