Will the New fixed-rate Reverse Mortgage work for you?

I have been doing reverse mortgages since the early nineties and almost from the start I have heard the question "Are they going to come out with a fixed rate reverse mortgage"?. Well the day is finally here, the fixed-rate has arrived and a new question is.

Will it work for you?

There are a few things you should know about the fixed-rate reverse mortgage Let me explain.

With a fixed rate reverse mortgage you have to do something that I've never recommend when a reverse mortgage is being considered and that is to take all the funds out at closing. I normally recommend the credit line because of its growth rate and when the funds are in the credit line they are not affecting the home equity. With the credit line the money is available when needed and safe.

With considerations for the fixed-rate reverse mortgage all of the funds have to be taken out at closing in order to get the lowest fixed-rate.

This now puts a senior in charge of finding a safe place to put the money so there's little or no chance of losing it. You can see at this point that this can be a problem because there's always someone out there wanting to invest your money. The fixed-rate mortgage works best when there's an existing forward mortgage to be paid off that is close to the entitlement derived from the reverse mortgage

Let me give you an example

If the customer is 66 years of age and the home is worth $200,000 with an existing forward mortgage of $90,000 the estimated entitlement would be approximately $100,000 the reverse mortgage would pay off the $90,000 forward mortgage and the senior would only have to contend with investing the $10,000. This could be done with a CD or some other secured instrument. At that point there would be no more payments to be made on the forward mortgage and the interest rate on the reverse mortgage is fixed.

In contrast, if the same 66-year-old were to do a HECM100 reverse mortgage the forward mortgage would be paid off and there would be a surplus or a credit line available of approximately $25,000. If this was left in the credit line the availability would grow each year. So not only is the interest rate lower on the adjustable reverse mortgage at this time the money available is increased also.

With reverse mortgage interest rates at an all-time low and the new LIBOR based reverse mortgages now available, unless there is an existing forward mortgage to be paid off or other large debt that needs to be handled, the fixed-rate in my opinion does not appear to be a good choice.

By Jim Saeger Reverse Mortgage Specialist MyFloridaReverse.com

About Author

I have been helping Seniors with Reverse Mortgages since the earily 90's and I am presently with Financial Freedom the leading Reverse Mortgage company in the United States.

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Home Equity Loans-How To Zero Out Credit Card Debt

Millions of Americans are up to their ears in debt. They struggle every month just to meet the minimum payment which just prolongs the debt. Credit cards have high finance fees. Hence, it is difficult to pay down balances. In most cases, the minimum payment barely covers the finance charges. This makes it difficult to reduce the credit card balance.

One approach for eliminating or reducing debts involves acquiring a debt consolidation loan. Although debt consolidation loans will not miraculously eliminate your debts, these loans make is possible to reduce your debts faster.

In 2005 the value of home equity across the US was $11.3 trillion. The percentage of home ownership in 2005 was 69% down slightly from the record 69.2 % in 2004. Almost 124 million Americans own their own home. There is plenty of money available to lend.

If you obtain a debt consolidation loan, all your credit balances are lumped into one loan. Furthermore, debt consolidation loans have reasonable interest rates. This enables you to become debt free within a few years.

There are various ways to obtain a debt consolidation loan. Individuals with good credit may qualify for a personal debt consolidation loan. If you own a home, it may be possible to get approved for a home equity loan. Home equity loans are ideal because the rates are low and the terms fixed. Usually, homeowners are able to repay the money in five to seven years – sometimes less.

Just beware that home equity does not automatically go up every month like some would have you believe. Several factors far beyond your control determine the value of your home. Just within the last six months or so the value of homes in some parts of the country dropped by 10% in a month.

Before you get a home equity loan you should know these facts.

• They are secured by a second deed of trust on your house.

• If your financial situation changes your home could be at risk of foreclosure.

• Having to make two payments on your home can be a lot of financial strain.

• A lot of unscrupulous lenders could care less.

• Keep your eyes open to what the local housing market is doing. Just recently many areas experienced a 10% decline in values in one month causing many homeowners to owe more than their home was worth.

It is essential to use the funds wisely and borrow only what you can afford to payback. Most Americans who use their home equity to pay off their credit card debt refuse to change their habits and lifestyles, and actually see their zero-balance cards as an invitation to go shopping - perpetuating the cycle.

Before you put your home at risk with a second mortgage understand the risks. Explore all the possibilities. Just because a home equity loan for debt consolidation seems so easy to do and easy to get, doesn't make it the right choice for you. Don't press the EASY button.

Article Source: http://www.articlesnatch.com

About the Author:
Jack Krohn is a leading free lance writer on Home Equity and Mortgage issues with over 35 articles to his credit. He is also the #1 author of Home Security Articles in the country. Get FREE home mortgage info and FREE Home Equity Loan Information Take a bite out of crime. Get some non lethal self defense weapons and defend yourself

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