One of the biggest factors in determining whether or not a reverse mortgage is right for you is factoring in the costs. We need to figure out if the benefits outweigh the cost. A reverse mortgage is looked at as a final loan, so it can be expensive. Here are the breakdown of the costs for the mortgage reverse.

1. FHA MIP: A reverse mortgage is guaranteed by the government. If you were ever to get into a situation where you owed more money on your home than it was worth, then the bank would take a loss. This loss would then be reimbursed by the government. The government charges every reverse mortgage holder FHA MIP or Federal Housing Agency Mortgage Insurance Premium. This pool of insurance helps the government repay the banks losses. The FHA MIP is usually 3% of the new principal loan amount.

2. Servicing Fee: The bank charges a monthly servicing fee of $25.00. If you have a greedy loan officer, that servicing fee can be as high as $35.00 as the bank will pay the loan officer a commission for selling you the higher servicing fee. Because the reverse mortgage does not require any monthly repayment, the banks base the total servicing fee off of your life expectancy. So $25.00 times 12 months times 20 years would be $9000.00 Rarely do we ever see such a high servicing fee. This is just to give you an idea of how it works.

3. Origination Fee: The bank will also charge an origination fee to originate the loan. This fee is usually 3.0% of the new principal loan amount. It is used as a means of compensating the bank for taking the risk of loaning you the funds for the reverse mortgage.

4. Title Insurance: The bank requires that you get title insurance every time you take out a new mortgage. This title insurance protects the bank from any future claims to your title. It protects the fact that you are the owner and will remain the owner. Title insurance is $2.75 per thousand of the loan amount.

5. Appraisal Fee: You will need to have an independent FHA appraisal done on your home. This fee is usually $350- $400 and is the only fee that is required to be paid out of pocket. The appraiser will do an analysis of your home and determine it’s market value by comparing it to similar homes that have sold in the last 6 months.

As you can see, it is not common for a reverse mortgage to cost an upwards of $15,000.00 to $20,000.00. Those fees are rolled into the loan with the exception of the appraisal fee as it is considered a final loan. It is not right for you if you plan on using it as a temporary bridge. If you do plan on living in your home for the rest of your life you can use it a means for a better life. For some it makes a lot of sense. For others, it does not. Analyzing the cost versus benefit should allow you to make an unclouded decision.

Tough times call for smarter action to survive. No doubt, economic recession has shaken the pillars of financial stability. Though people of all age groups are facing the heat of this devastating slow down, the worst sufferers are the senior citizens with their limited pension and savings are finding it hard to maintain regularity in debt repayment. They are also facing in maintaining a balanced monthly budget. To help senior citizens in this regard, reverse mortgage loans are provided by both government and private financial agencies. In this article we will discuss about these loan plans in detail.

There are 5 types of reverse mortgages. I will explain them here:

1. The Simple Hecm:

This is one of the most popular reverse mortgage products on the market. It is what is considered a monthly adjustable rate. Every month the rate on the simple hecm can go up or down based on the financial index that it is tied to plus the banks profit margin. This reverse mortgage is tied to a financial market called the 1 month libor index which at this time is only .25%. One insider secret is that banks actually get paid more money by giving you a higher margin. The base margin on this product is 2.75%. We have the ability to charge you a margin as high as 3.75% which would make us more money. I tell you this as a insight into how this product works. Our company will never charge you a margin higher than 2.75% on this product. So, to recap this to calculate your interest rate on this product you take the index + the margin. So on this product, it is a final interest rate of 3.0%. This low rate sounds great, but it can increase as the libor index does increase. The bank knows that the index will increase, so they have and internal calculation that they use to figure out the highest loan amount that they will give you on this product. You are probably asking yourself, Why is this product so popular? Well, it’s simple. This product will give you a line of credit which you can tap into at any time and you only pay interest on the money that you take out of this line of credit. Any money that you keep in your line of credit earns interest at 4.0%.

2. Monthly Adjustable Treasury Hecm

This program is identical to the simple hecm except it is tied to a different financial index. The index that this is tied to is the one month treasury index. Treasury’s historically have lower rates, so the banks have higher margins on this product. The base margin on this product is 3.25% and they will allow us to charge as high as a 4.25% margin. At this point in history, the treasury index is actually higher than the Libor Index. That would mean that if you chose this product, it would give you a lower principal limit than the simple hecm.

3. Hecm Fixed (closed end)

This product is relatively new. It offers a fixed rate which can not go up or down like the other 2 programs. The base rate on this product is at 5.56% and can go as high as 7.0%. Because of the low base rate, it offers a higher principal limit than any other reverse mortgage product. The problem with this product is that it is a GNMA product. What that means is that the banks offer pools of these loans to investors on the secondary market. If one of the investors do not like just one of the loan files, then they will choose not to purchase the entire pool of loans and the bank is stuck with the loan on their books. Because of this, banks are very cautious about approving loans under this program. They will scrutinize the appraisal. The appraiser must have used comparable sales which are no more than 1.5 miles apart from each other to qualify for this product. In this housing market, those are few and far between. The other downside of this product is that the bank requires you to withdraw all of your loan proceeds at once as a lump sump. There is no opportunity for future interest earnings.

4. Hecm Fixed-Open End

In my opinion, this is the worse reverse mortgage product available. The base interest rate on this is at 14.0% and offers the lowest principal benefit to you. STAY AWAY FROM THIS PRODUCT!

5. Annual Adjustable Treasury Hecm

This is also an adjustable rate reverse mortgage. It has a higher margin than any of the other adjustables at 4.0%. This product is also tied to the treasury index. This product offers the lowest principal benefit to you among the adjustables. I would stay away from this product as well.

Homeowners enjoy the benefits of investing in their property year after year. For some, there comes a time when that investment can come in handy. Refinancing with an FHA loan can prove to be an effective way to put that equity to work.

Sending a child to college, consolidating bills, taking a much needed vacation, or making home improvements are some of the ways homeowners tap into the equity they have accumulated in their home to help with these expenses. Keep in mind that FHA refinancing is only available to homeowners who are currently using their home as their principal residence.

FHA offers several different options to homeowners who are considering an FHA refinance mortgage:
FHA REFINANCE: CASH OUT REFINANCING

This refinancing option is especially beneficial to homeowners whose property has increased in market value since the home was purchased. A Cash Out refinance allows homeowners to refinance their existing mortgage by taking out another mortgage for more than they currently owe, therefore repaying their current mortgage and using the equity they have built up in their home to take out another larger mortgage. This allows the homeowner to access the equity they have built up in their home and put it to good use where needed.
FHA REFINANCE: STREAMLINED REFINANCING

This refinancing option is considered streamlined because it allows you to reduce the interest rate on your current home loan quickly and oftentimes without an appraisal. FHA Streamlined Refinance also cuts down on the amount of paperwork that must be completed by your lender saving you valuable time and money.

In order to qualify for a Streamlined Refinance your original home loan must be an FHA loan in good standing and the refinance must lower your monthly interest payments. This type of refinancing option reduces your monthly expenses by lowering your payments but there is no option to receive cash back. This works well for people who are in good financial standing with no significant debt because it allows you a little extra money each month that can be put to good use elsewhere.

Genius Mortgage Solutions is your source for an fha refinance and a debt consolidation refinance. An an fha refinance might be your pathway to a low interest rate home loan. One of the benefits of this program is that it provides flexible underwriting guidelines so that you can get a competitive interest rate on a home loan with as low as a 620 credit score. The an fha refinance will also allow you to borrow up to 96.5% of your homes value. Please visit us today to see if an an fha refinance is right for you. Genius Mortgage Solutions is also your source for a debt consolidation refinance. We work with Fannie Mae, Freddie Mac and the FHA to deliver the most competitive rates and programs. We can lend up to 85% of your home’s value with a debt consolidation refinance. By consolidating all of your high interest credit cards into the debt consolidation refinance, you can usually save between $300.00 to $800.00 per month off of your current monthly expenses. Please visit us today to see if a debt consolidation refinance is right for you.

History repeats itself. In 1929, while millions of Americans were loosing their homes under the disastrous effects of great depression, Federal Housing Administration (FHA) was formed to help them. The current depression’s wave is more devastating than the last one. And, to help senior citizens from it, FHA has introduced reverse mortgage plans. It is now offering fresh loan plans under the schemes of home equity conversion mortgage plans. It is approved by the government and helps elderly people from falling prey to exorbitant rate of interest charged by unscrupulous lenders. In this article, we will discuss various aspects of FHA reverse mortgage.

FHA reverse mortgage helps the borrower to unleash the equity present in his home. The loan amount is paid back only when the borrower dies, moves into old home or sells the property. During his life span, the borrower is free to live in his home and he can not be removed from. When the borrower dies there is a fresh evaluation done regarding the value of the home. If the value of home falls short of loan amount and interest, FHA pays the remaining amount.

To avail FHA reverse mortgage, the borrower needs to be over 62 years’ age. The property to be pledged as security should be his primary residence. There should not be any loan against that property. If there are loans on the property, the equity is calculated by subtracting debt amount from the market value of the property. After calculating the equity and average value appreciation, loan amount is fixed. Age also pays a vital role in determining the limit of loan amount. Older borrowers are offered more loan amount. The property you are going to pledge needs to be free from litigations. There should not be any tax or insurance premium over due on the property. No credit check or income verification is required for approval of FHA reverse mortgage.

FHA reverse mortgage is the one loan for remaining life time. It means you can not refinance the property under reverse mortgage. Along with, the property under reverse mortgage can not be claimed under laws of inheritance. The loan amount is paid either in the line of credit, lump sum or monthly basis. Out of the above three, line of credit offers highest loan amount. Lump sum reverse mortgage plans are acquired faster but their rate of interest is highest. If you look for a fixed monthly income for rest of your life monthly reverse mortgage is the tailor made plan for you.

As told earlier, FHA reverse mortgage are the last resort of lending for a senior citizen owning a home. Before applying for these loans you are advised to go through the pros and cons. All information related to this financing option can be available through internet. Hence, have a proper homework before you apply for these loans and live happily without debt burden for the rest of your life.