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For the Fifth Week In A Row – Mortgage Rates Hit A New All Time Low

The 30 year rate fell from 4.42 to 4.36 this week. This is the 6th week in a row where rates have fallen. But more importantly this is the 5th week where we have hit a new all time low. In that time the 30 year rate has dropped from 4.57 to 4.36. Considering that 4.57 was an all time low this is a decent drop.

The 15 year dropped from 3.90 to 3.86. The 5 year arm stayed even at 3.56 and the 1 year arm dropped from 3.53 to 3.52. These were all time lows for the respective mortgage products. Below are rates from the weeks from Jul 29, 2010 to Aug 26, 2010

Aug 26, 2010
30-fixed 4.36 15-fixed 3.86 5 ARM 3.56 1 ARM 3.52

Aug 19, 2010
30-fixed 4.42 15-fixed 3.90 5 ARM 3.56 1 ARM 3.53

Aug 12, 2010
30-fixed 4.44 15-fixed 3.92 5 ARM 3.56 1 ARM 3.53

Aug 05, 2010
30-fixed 4.49 15-fixed 3.95 5 ARM 3.63 1 ARM 3.55

Jul 29, 2010
30-fixed 4.54 15-fixed 4.00 5 ARM 3.76 1 ARM 3.64

Feb 11, 2010
30-fixed 4.97 15-fixed 4.34 5 ARM 4.19 1 ARM 4.33

So while its interesting to look at mortgage rates at the end of the day mortgage payments is what really matters to most of us. We took today’s rates and translated them into a payment on a 200k loan. We also did the same thing with rates from August, 12 2010 and rates from February, 11 2010.

Aug 26
30-year $996.8
15-year $1465.38
5-year ARM $904.8
1-year ARM $900.32

Aug 12
30-year $1006.25
15-year $1471.37
5-year ARM $904.8
1-year ARM $901.44

Feb 11
30-year $1069.97
15-year $1513.68
5-year ARM $976.86
1-year ARM $993.26

Since we have been tracking these numbers this is the first time a 30 year loan for a 200k house has dropped below $1000. It almost reminds me of those misleading ads from shady mortgage brokers I used to see a few years back. So compared to February 11th (6 months ago) a month payment is down $72.17 a month for a drop of 6.83 percent a fairly substantial drop for 6 months.

So the question of course is where are mortgage rates going? Are they going to continue to plummet to even lower depths or return to normal levels? For now it looks like the government is going to do whatever it can to keep mortgage rates as low as possible, since the economy is being dragged down by a weak housing market. For the time being it’s doubtful that mortgage rates are going to rise. As long as the economy remains weak and the government remains interested we will see incredibly low mortgage rates and might see them fall a little further. It’s hard to know how much they could fall since we are in uncharted territory. But once the economy recovers we will see rates rise, perhaps rapidly, rates are at an unnaturally low level and they will not stay this low forever.

Ki is a realtor working in Austin Texas. His business offers a searchable database of Austin Texas real estate. His site also provides a mortgage rate widget and a graph showing historical mortgage rates as well statistics on Austin Texas real estate.

Affordable Federal Home Improvement Programs

Sometimes federal programs get a bum rap, because there is so much bureaucracy tied up in it. The cost to run the program and time consumed in applying for it can exceed the benefits. There are two federal programs, though, that deserve a closer look if your home is in need of repair, or you are considering buying a home in need of repair.

Like all government programs, however, there are specific requirements.

The “Rural Housing: Housing Repair Loans and Grants” and the “Section 203k Rehabilitation Mortgage Insurance” programs are poised to assist homeowners to obtain loans or grants to repair a current home or homebuyers to obtain a mortgage to cover the cost for the purchase and repair of a home.

Rural Housing: Housing Repair Loans and Grants program helps homeowners for the repair, improvement, modernization related to their rural dwellings. Funds are loaned at 1 percent interest for up to 20 years. Grants are available for homeowners to apply only for repair and improvements for the removal safety issues.

For eligible recipients who are able to repay a portion of the expenses, a combined loan and grant package may be arranged. The requirements are that you must live in a rural area and be a legal United States citizen.

For eligible homeowners, loans may be approved to 20k. Grants are available for up to 7.5k. A current home mortgage, along with full title services, is required for loans that exceed 7.5k

If you are interested in applying for this program, you’ll need to start by submitting an online application or contact the following for more information:

* Contact the Rural Development field office in your state – find the field office.

* For information about rural development loans, visit the USDA Rural Development website

* For information on Rural Development Housing visit their website

Section 203c Rehabilitation Mortgage Insurance –

Typically, if you want to buy a home in need of repair, you’re not able to build the cost of repairs into the home loan. You have to obtain a loan to pay for the home, acquire additional financing for repairs and then finance a permanent combined mortgage to cover both. You may be charged a high interest rate for the interim loan, along with a short amortization period.

With the Section 203 Rehab program, however, eligible participants may be approved for one loan to address the purchase and rehab of a home in need of repair. The loan considers the cost of the home in addition to the cost of projected repairs, and involves a long-term loan with a fixed or adjustable rate.

Program requirements are minimal. The property must meet local zoning requirements and building standards. The home must also be a one- to four-unit dwelling, and be completed for at least one year. Cooperative units are not eligible.

Ki serves the Austin area with his website and provides information on Austin real estate. Interested parties can search for homes in the Austin MLS. His site has statistics on Austin real estate and Round Rock real estate.

The Fed’s Role in Crisis and Recovery

Despite its apolitical mandate, the Federal Reserve remains one of the most politically sensitive institutions in the world, as evidenced by Fed Chairman Ben Bernanke’s opinion column on November 29th. In the piece, Bernanke criticized proposed legislation before the Senate that would seek to curtail powers given to the Fed over its near-century of existence. With approval of the Consumer Financial Protection Agency comes a new regulatory regime that may also threaten the dominant paradigm, changing the way business at the top is done for decades to come. What will the Federal Reserve’s role be in this new financial landscape, and how effective will they be in the face of continuing economic uncertainty?

The Fed’s mission is to balance between the twin specters of inflation and unemployment, which sets it apart from other central banks around the world, who usually focus primarily on inflation. This means that the Fed is seen as accountable for job growth and productivity in good times, as Alan Greenspan often did over his tenure as chairman. In tougher times, the US central bank assumes responsibility for propping up spending, as it did over the past two years of recession. By most measures, the unemployment target is far off, at a 20+ year high of 10.2 percent, when compared with short and medium-term inflation expectations. However, the Fed has remained somewhat quiet on the issue, likely fearing increasingly vocal calls for reform that have followed the heels of the financial crisis. By focusing on inflation, the Fed is acknowledging a tacit understanding that the recession has made clear: Central banks are responsible for banks, and the government is responsible for consumers.

Evidence for this strategy is everywhere, from the fiscal stimulus package to the continuing low borrowing costs for financial institutions. Many new tools created to address the credit crunch are now being unwound, with taxpayer leverage bearing the costs, most visibly through the TARP paybacks made recently. While the White House may browbeat bank CEOs to increase small business lending, the likely impact is minimal now that the finance industry is back on more sure footing. This leaves the Fed as the primary entity responsible for transparency for other banks. Yet legislation allows the Fed considerable leeway when it comes to publishing their decisions about interest rates and discount window offerings. An obvious need for oversight cannot result in further politicization of the central bank, but any choice for reform will necessitate political compromise, further complicating the issue. Some have called for Ben Bernanke’s resignation as a way to change direction, but even with new management the Fed’s hands have been made to seem tied. By exerting as little political involvement as possible, any movement on the Fed’s part to bring their expertise to financial regulation will result in political cost which they cannot bear. If they try to expand small-business lending through their balance sheet, they further run the risk of stoking inflation, another politically risky move. But little options seem available, now that the economy has begun to improve and banks have less impetus to reform themselves. But if one assumes that unemployment is a high priority now, imagine what next year’s congressional elections will look like. At least the Fed’s directors are appointed.

Ki works in central Austin. Austin homes for sale are searchable on his website. He furnishes a free search on available Austin real estate. Ki has a blog covering Austin Texas real estate.

Mortgage Rates Hit A New All Time Low (For the Fourth Time This Month)

The 30 year rate fell from 4.49 to 4.44 this week. This is the 4th week in a row where rates have fallen. What’s interesting is not only is 4.44 an all time low. But we have been hitting new all time lows for the last 4 weeks in a row. What is even more interesting is no one cares. The market is hardly reacting to bizarrely low interest rates. It’s also gotten very little play in the press which might be a contributing factor.

The 15 year dropped from 3.95 to 3.92. The 5 and 1 year arms dropped from 3.63 to 3.56 (5 year arm) and 3.55 to 3.53 (1 year arm). These are all new all time low rates as well. Below are rates from the weeks from Jul 15, 2010 to Aug 12, 2010

Aug 12, 2010

30-fixed 4.44 15-fixed 3.92 5 ARM 3.56 1 ARM 3.53

Aug 05, 2010

30-fixed 4.49 15-fixed 3.95 5 ARM 3.63 1 ARM 3.55

Jul 29, 2010

30-fixed 4.54 15-fixed 4.00 5 ARM 3.76 1 ARM 3.64

Jul 22, 2010

30-fixed 4.56 15-fixed 4.03 5 ARM 3.79 1 ARM 3.70

Jul 15, 2010

30-fixed 4.57 15-fixed 4.06 5 ARM 3.85 1 ARM 3.74

Jan 28, 2010

30-fixed 4.98 15-fixed 4.39 5 ARM 4.25 1 ARM 4.29

So mortgage rates are one thing but what really matters is mortgage payments so lets look at that. We took today’s rates and translated them into a mortgage for a 200k house. We did the same thing with rates from July, 29 2010 and rates from January, 28 2010.

Aug 12

30-year $1006.25

15-year $1471.37

5-year ARM $904.8

1-year ARM $901.44

Jul 29

30-year $1018.12

15-year $1479.37

5-year ARM $927.36

1-year ARM $913.79

Jan 28

30-year $1071.19

15-year $1518.76

5-year ARM $983.87

1-year ARM $988.56

For a 200k loan the monthly payment is slightly above a thousand dollars at $1006.25. Which is similar to the “low low rates” that we saw on balloons which got the country into the mess we are currently into. Of course the current mortgages don’t have sudden balloons or repayment penalties. The trick now is that the mortgages are much tougher to qualify for. Compared to 6 months ago a mortgage payment today on a 200k loan is $64.94 less a month for a drop of 6.06 percent.

So what is going to happen moving forward? It’s hard to tell in the short term. The federal government is intent on keeping rates as low as possible as long as people are concerned about a double dip recession. Over the next few weeks I would be surprised to see rates rise. After that there are two possibilities. If we move into a double dip recession I would expect rates to stay at current levels. If the economy recovers its likely rates will increase perhaps drastically.

Ki’s Austin Texas real estate business is easily accessible in Central Austin and the web. He designed a website, which includes a free search for Austin Texas real estate. His site also has several mortgage rate widgets and information on historical interest rates.

Mortgage Rates Hit An All Time Low: Again

In what has become an almost weekly occurrence mortgage rates hit new all time lows. The 30 year rate fell from 4.56 to 4.54 this week. Rates have either reached new lows or matched old lows for 5 consecutive weeks.

The 15 year also reached an all time low dropping from 4.03 to 4.00. It will be interesting to see if the 15 year fixed will fall below 4.0 in the next few weeks. The 5 year arm dropped from 3.79 to 3.76 just .01 points above the all time low. The 1 year arm dropped from 3.70 to 3.64 which is also an all time low. Below are rates from the weeks from July 01, 2010 to July 29, 2010

Jul 29, 2010
30-fixed 4.54 15-fixed 4.00 5 ARM 3.76 1 ARM 3.64

Jul 22, 2010
30-fixed 4.56 15-fixed 4.03 5 ARM 3.79 1 ARM 3.70

Jul 15, 2010
30-fixed 4.57 15-fixed 4.06 5 ARM 3.85 1 ARM 3.74

Jul 08, 2010
30-fixed 4.57 15-fixed 4.07 5 ARM 3.75 1 ARM 3.75

Jul 01, 2010
30-fixed 4.58 15-fixed 4.04 5 ARM 3.79 1 ARM 3.80

Jan 14, 2010
30-fixed 5.06 15-fixed 4.45 5 ARM 4.32 1 ARM 4.39

Ok so mortgage rates are one thing but let’s look at mortgage payments. We took today’s rates and translated them into a mortgage payment on a 200k house. For the sake of comparison we did the same thing with rates from July 15th and January 14, 2010.

Jul 29
30-year $1018.12
15-year $1479.37
5-year ARM $927.36
1-year ARM $913.79

Jul 15
30-year $1021.7
15-year $1485.39
5-year ARM $937.61
1-year ARM $925.09

Jan 14
30-year $1080.98
15-year $1524.88
5-year ARM $992.09
1-year ARM $1000.34

So for a 200k loan the mortgage payment at 1018.12 is just a little above $1000 a month. Compared to January 14, 2010 a mortgage payment today is $62.86 less for a drop of 5.81 percent. That is pretty substantial considering that rates were already pretty low by historical standards on January 14th, 2010.

So what is going to happen moving forward. Although for some time I have felt that there was more of a danger of rates going up than down (and rates in that time have gone down), I am sticking with that same basic forecast. Rates are unnaturally low. They might fall a little bit in the next few weeks. I don’t the 30 year rate falling below 4.25. But overall there is more of a chance rates will rise drastically than fall drastically. And I would suspect rates will be higher in 6 months to a year from now. If rates did fall drastically there would have to be something substantially wrong with the economy like significant deflation.

But for now the current environment favors buyers. Rates are extremely low and since this is not leading to that much excitement in prospective home buyers there is not that much competition in the market. So we are seeing a lot of houses on the market, not many buyers and very low mortgage rates.

Ki works as a real estate broker in Texas. His site is a resource on Austin Tx real estate. It provides several free mortgage calculators along with a mortgage rate widget. His site also has a blog covering Austin Tx real estate.

Future of the Housing Market

Home prices increased from April to May of this year by 1.3 percent, according to the Standard & Poor’s/Case-Shiller 20-city home price index. The credit for this largely goes to the government’s home buyer tax credit, which expired at the end of April.

The general thought out there seems to be that the housing market has been bolstered by the tax credit–which was the point–and now will come tumbling down again. Maybe not, says University of Chicago economist Casey Mulligan. Even the home price index report points out that May is historically a strong month for home sales.

The Home Buyer Tax Credit was part of the American Recovery and Reinvestment Act of 2009, which passed in February of 2009. The tax credit was originally an incentive for first time home buyers, but later was extended to include qualifying home owners purchasing a new home. Reporting on the New York Times Economix blog, Mulligan suggests the math is faulty when it comes to crediting this tax credit for the latest rise in the housing market.

Mulligan cites Internal Revenue Service reports that show that the average home buyer’s tax credit was around $6,000, not much when compared to the price of a home. Also, only $19 billion in tax credits have been claimed so far, which Mulligan considers to be a drop in the housing bucket when compared to the $14 trillion worth of owner-occupied houses in the United States.

Mulligan contends that the impact of the credit isn’t big enough to bolster the housing market. Not as many people took advantage of it as could have and it needs to be evaluated in the context of the larger market. Yet, real estate agents, mortgage lenders and economists are fearing the worst now that the home buyer credit will expire.

It is reported that nationally home prices have risen 5.1 percent from the bottom of the housing bust in April 2009. However, overall house prices are 29 percent lower than the height of the housing bubble in July 2006. While the percentages are vastly different across the county–Las Vegas home prices are still dropping–the housing market seems to be one sector of the economy where steady progress has been made.

Recovery can be agonizingly slow and panic can be easier to feel than patience. But as Mulligan points out, housing is a long term investment. Pinning the hopes of the housing market on the one-time, nominal return of a tax credit may not be realistic. Maybe time will show it to be the tiny jolt the recovering housing market needed, not the sugar high of a falling market.

Ki owns a full service real estate user in central Texas. He developed and maintains a website on the Austin real estate market. It allows interested parties to search for properties in the Austin MLS. It also provides statistics on different areas like West Austin real estate.

Find a Good Deal on an East Coast Vacation Home

Whether you’re looking for a condominium, multi-family unit or a single-family home, you’ll find an abundance available in the housing market in almost every major city in the U.S.

Florida’s slumping home market has targeted this state for some sweet deals on real estate.  You’ll even find beach front property at astounding prices.  Check out Cutler Bay, Fisher Island or Homestead, all in Miami-Dade County.

Nassau County has some great offerings, too, on Amelia Island.  Right now you can get a beautiful condominium on Sea Marsh Road right next to Oak Marsh Golf Course listed at $100,000.  It’s in foreclosure, so you know the lender would be willing to negotiate the price.

Boca Raton hosts a steal-of-a-deal on Ocean Boulevard.  You’ll find a three-bedroom, three-bath, single-family home in foreclosure for only $43,200.  Beachfront property, baby, right there in Palm Beach County.

Jacksonville, North Carolina is host to a bevy of beauties when it comes to affordable, ocean-front homage.  There is currently a two-bedroom, one-bath, single-family home on Shoreline Drive up for sale for a mere $76,559, and it’s in foreclosure.  The lender now owns the property, so get cracking and make an offer.

North Carolina beaches are hot for retirees and those looking for a vacation home.  This real estate is pricier than some, but well worth the investment.  Lots of foreclosure to choose from, and there’s one on West Second Street that you won’t want to miss.  It’s a two-bedroom, one-bath, single-family residence with 800 square feet of living sitting serenely on beach-front property.  Submit an offer, prop your feet up, and bring on the drinks with those little umbrellas in them.

More great deals can be found on the beach in Brunswick, Georgia on London Street.  With lovely lochs nearby, and a white ocean beach just a stone’s throw away, you won’t be disappointed.  The $55,200 home is in foreclosure and will be auctioned off soon, so you won’t want to pass this one by.  You could also check out other homes for sale in the vicinity that are just as alluring.

If mountains are what do it for you, then you won’t want to miss the lovely homes nestled into the climbing elevation of the Appalachian Mountains.  Gatlinburg, Tennessee is a perfect place to lay your head with views to die for as 1,285 feet above sea level.  You can find a nice two-bedroom, two-bathroom, single-family home for $106,000 on Ski View Drive.  With the Great Smoky Mountains National Park out your front door, you won’t lack for things to do in your new vacation home.  Pigeon Forge of Dollywood fame is just a scoche away, too.

Asheville, North Carolina also has some great mountaintop villas at rock bottom prices.  Shadowlawn Drive is host to a foreclosure with three-bedrooms, two-bathrooms and 1,092 square feet; although, you can find a devil of a deal on other properties there, too.

A nice three-bedroom, two-bath home is located at 686 Ada Street for a steal at only $89,000.  This one is not in foreclosure.  It’s got a new roof and kitchen cabinets, along with all black appliances.  A steal for $89,000, this cabin won’t be on the market that long, folks.

Ki works, and lives, in central Austin real estate market. He built a website, which includes a free search of Austin homes for sale. Future homeowners can search available Austin real estate. He also has a mortgage widget to track current mortgage rates.

Interested in a Condominium? Get a FHA-Insured Loan

Mortgage Insurance for Condominium Units (Section 234(c)) program assists potential homeowners in purchasing a home in a condominium development. The prospective condominium must be the potential homeowner’s primary residence.

The intent of this federal program managed under the U.S. Department of Housing and Urban Development (HUD) is to insure the loan of a borrower who buys a unit in a condominium property. HUD does not directly provide loans to borrowers. Instead, HUD insures loans through FHA-approved lenders. Some of those who take advantage of the program are low- to moderate-income renters who want to buy their unit in order to avoid displacement when their apartment building is converted into condominiums.

Some aspects of the program are as follows:

* Program insures the loan up to 30 years.
* Condominium development must be separated into a minimum of four dwelling units – can be a walk-up, a rowhouse, semi-detached or an elevator structure.
* Loan is made by a certified HUD lender.
* To be eligible, you must prove creditworthiness and meet FHA underwriting criteria.
* Down payment may be as low as 3 percent or less – FHA insurance enables homeowners to finance around 97 percent of the home’s cost through the home loan.
* Some closing fees may be included in the loan, reducing up-front cost.
* FHA limits certain fees charged by lenders – e.g., loan origination fees.
* FHA limits the amount of the home loan based on the locale of the condominium and number of units being bought.

Some restrictions do apply to the program. FHA will not insure loans under this program for rental units converted to ownership except as follows:

* Units were converted over a year prior to loan application.
* Potential borrower or co-borrower was a tenant of one of the converted units.
* Property conversion is sponsored by a tenant’s group that represents the bulk of households in the development – 80 percent of FHA-insured home loans must be for owner-occupants.

In order to get started, you need to find a FHA-approved lender. You may do so by contacting lenders and asking them if they are FHA-approved or by conducting a search on the HUD website. Either way, you’ll want to shop around for a reputable lender with a good interest rate and low closing fees.

Compare rates and fees, and use the following as a checklist to compare lenders:

* How much is the lender charging for the interest rate and origination fees?
* Is the lender approved by FHA for your local area?
* Do you know the lender’s reputation?

Ask plenty of questions and keep the following in mind:

* Interest rate is not regulated and points are not set by the FHA.
* Before signing any agreement, understand that you are responsible for negotiating with your lender regarding the terms set for the loan, to include routine and reasonable closing costs required to close on the loan.

Property developers who intend to finance the construction or renovation of properties they intend to sell as units under this program may also obtain FHA-insured mortgages.

For more information, visit the HUD website or contact your local lender.

Ki created a website to help buyers interested in Austin real estate. This is a free service for buyers interested in homes in the Austin MLS. He has lived in Austin, Texas for over ten years. He also has a blog for people to keep up with the Austin Texas real estate market.

After Hitting Record Lows Mortgage Rates Fall Again

The 30 year rate dropped this week from 4.69 to 4.58. This is quite a large drop for a week. What makes it even more interesting is that 4.69 from last week was already an all time historic low. We are moving into territory for mortgage rates I would have never thought possible.

While the 30 year rate is the mortgage product that is the most widely used some of the other mortgage products made records as well. The three other mortgage products all hit all time lows last week. Two of the other three mortgage products fell further this week. The 15 year dropped from 4.13 to 4.04. The 5 year arm dropped from 3.84 to 3.79 and the 1 year arm rose from 3.77 to 3.80. Below are rates from the weeks from Jun 03, 2010 to Jul 01, 2010

Jul 01, 2010
30-fixed 4.58 15-fixed 4.04 5 ARM 3.79 1 ARM 3.80

Jun 24, 2010
30-fixed 4.69 15-fixed 4.13 5 ARM 3.84 1 ARM 3.77

Jun 17, 2010
30-fixed 4.75 15-fixed 4.20 5 ARM 3.89 1 ARM 3.82

Jun 10, 2010
30-fixed 4.72 15-fixed 4.17 5 ARM 3.92 1 ARM 3.91

Jun 03, 2010
30-fixed 4.79 15-fixed 4.20 5 ARM 3.94 1 ARM 3.95

Dec 17, 2009
30-fixed 4.94 15-fixed 4.38 5 ARM 4.37 1 ARM 4.34

So now that we have seen rates lets look at actual mortgage payments. We took today’s rates and used a mortgage calculator to translate them into a payment on a 200k loan. We also did the same thing with rates from June, 17 2010 (2 weeks ago) and rates from December, 17 2009 (6 months ago)

Jul 01
30-year $1022.89
15-year $1483.38
5-year ARM $930.77
1-year ARM $931.91

Jun 17
30-year $1043.29
15-year $1499.5
5-year ARM $942.19
1-year ARM $934.19

Dec 17
30-year $1066.32
15-year $1517.74
5-year ARM $997.98
1-year ARM $994.44

Compared to June 17th mortgage payments are 1.95 less today for a drop of $20.40 a month on a 200k loan. Compared to December 17th, 2009 mortgage payments are 4.07 percent less for a drop of $43.43 a month.

So what is going to happen moving forward? We are pretty much in uncharted territory. With rates now significantly below what we have seen before it will be interesting if they continue to fall. In the short term it’s hard to know where rates are going to go. I don’t see rates falling below 4.3. Once the economy improves rates will move up and perhaps drastically so. For awhile it seemed the economic recovery was rather strong. If we see a double dip recession we could see rates stay low for awhile.

Ki developed a website to serve Austin Texas real estate investors. It also has several mortgage rate widgets for people to keep up with the market along with a mortgage calculator widget.

Advantages and Disadvantages of Reverse Mortgages

Reverse mortgages are a relatively recent product on the lending scene. The approval process is somewhat abbreviated compared to a traditional home loan, but there are some conditions and requirements that make a reverse mortgage unique to other home loans.

What Is a Reverse Mortgage?

It is a home loan that enables the homeowner access to the equity built up in the home. Some borrowers prefer a lump sum when taking out equity. Others choose to receive monthly payments. No payment is required on the reverse mortgage until the homeowner dies, sells the home or vacates the home for more than 12 months – e.g., to go into an aged care facility. At that time, the reverse mortgage must be paid off, either through the sale of the home or reimbursement from loved ones who will be taking possession of the home.

Am I Qualified?

The primary prerequisites for a reverse mortgage are that borrowers be 62 years of age or older and have equity built up in their homes. The U.S. Department of housing and Urban Development (HUD) requires that the borrowers of these mortgages obtain financial counseling from a HUD-approved third party prior to finalizing the note. Upon release of funds, the previous mortgage must be paid off. In most cases, borrowers may use the funds leftover from the equity of the home in whatever way they wish.

What Are the Advantages?

The greatest advantage of is that the borrower has full access to the equity built up in the home. With medical costs at all-time highs and diminished medical for seniors, many take out a reverse mortgages to pay for ongoing medical bills that are not covered by Medicare or Medicaid. Others do not have extended family to leave their estate to, so they take out these mortgages for vacations and other recreational activities and products, so that they may enjoy their twilight years.

In the past, seniors often agreed to a reverse mortgage without understanding the consequences. The results were devastating to many when they realized they had little or nothing left to pass on to their children. HUD now requires all those considering a reverse mortgage to undergo financial counseling, so that seniors understand exactly what they are getting into prior to agreeing to a mortgage.

What are the Disadvantages?

There are many disadvantages of a reverse mortgage. Many seniors have worked hard all of their lives to achieve financial independence and provide a legacy and inheritance for their children. Although having access to the equity in the home will provide greater financial opportunities, the legacy and inheritance will be impeded upon and diminished.

Some homes are not qualified, and other homes must adhere to strict requirements – e.g., a mobile home must sit on a concrete base, among other constraints. Astonishingly, lenders can lawfully charge loan origination fees up to $6,000. Interest continues to accrue on the loan for the remainder of the homeowner’s life, or until the home is sold, and is added to the lien on the property through the reverse mortgage agreement.

If you are considering a reverse mortgage, talk to your family members first. Include your children in the discussion. There may be other options you can pursue without having to tie up your home in a loan that will reduce the equity you’ve worked so hard to build up in your home.

Ki graduated from college in Austin Texas, and never left. He created a website to provide information on the Austin real estate market to future buyers. Anyone can search homes in the Austin MLS on his site. He also writes a blog looking at trends for Austin Texas real estate.