Mortgage Lowdown

If you are a senior person, then you probably need to know about reverse annuity mortgages (RAM). These mortgages were created to allow older Americans to tap into the equity of their paid for or nearly paid for home. Homeowners receive a tax-free payment each month, and the mortgage is paid when the home is sold. Bestsyndication.com reports:

One of the first RAM programs was developed by HUD and is still in existence. To qualify you must be 62 or older, live in the home, and have paid off your mortgage. The government will then insure your mortgage. You can also work directly with private lenders. You will want to review their terms carefully to be sure that you are getting the full value of your home and not paying thousands in fees.

Read more: Reverse Annuity Mortgage — Tapping Into Your Equity

Are you planning to refinance your home for a lower rate, or probably with cash out? You can either shop around for a refinance, or if you cannot or don’t know how to, you could get yourself a mortgage refinance advisor. Bestsyndication.com reports:

By allowing no more than four loan officers or mortgage brokers to assess your situation, you are putting yourself in a much more ideal situation. Especially if your credit is challenged or your situation is unique, not only will the mortgage refinance advisors’ expertise come into play, you will be in a position to compare rates and pricing.

Read more: Finding a Mortgage Refinance Advisor

Finding it difficult to pay off your bills and other loans? If you haven’t approached a debt consolidation company yet, here’s a viable alternative you could try out. Refinancing your mortgage loan. Firstly, you can reduce your monthly mortgage payments with a refinance. Secondly, it gives you some extra money to pay off other outstanding loans, credit card balances and bills. Another benefit of refinancing your mortgage is that you will get a single and lower monthly payment.

But these are not the only benefits of refinancing your home loan. The best thing about this loan is that you get a lower interest rate and thus a lower monthly payment. So, it becomes easier for you to pay this one loan instead of myriad loans with higher interest rates. Americanchronicle.com reports:

A refinance mortgage loan is basically a home loan that is requested with the sole purpose of paying off the outstanding mortgage loan in order to get more suitable terms to satisfy the borrower’s needs. However, it is possible to request a refinance mortgage loan with a loan amount higher than the remaining of the outstanding loan. With the extra money which is secured by the equity you’ve built on your home, you can do whatever you want.

Read more: Consolidate Your Debt With a Refinance Mortgage Loan

There are quite a few people who have taken ARMS and are now having second thoughts about this mode of finance. Problem is they are undecided on whether they should refinance the loan during the lock in period or ride it out and see how bad it can get. The solution boils down to whether you can afford the loan as it is. Orlandosentinel.com reports:

If you plan on staying put, then you need to consider refinancing while 30-year fixed rates are still below 7 percent.

Read more: Questions, answers reveal financing dilemmas today

There are many senior citizens who bought houses way back when the prices were quite low. Now the prices of these homes have doubled and in some cases, even trebled. Instead of sitting on so much idle money, many of these people want to use the equity in their homes. One way of doing this is by taking a reverse mortgage.

However, if you belong to this category of people and want to use your home’s idle equity, one of the first things you need to do is answer a few questions: "Are you in reasonably good health and do you plan to stay in your home at least five years?" If your answer is "yes," then a reverse mortgage could be ideal for your situation. There are also quite a few other things you need to take into consideration before you decide to cash in on your home’s equity. Mortgage101.com reports:

However, I do not recommend obtaining a reverse mortgage to use the cash for investments because chances of your earning at least as much as the money costs are very slim.

Read more: How to free up ‘dead money’ in home equity

Imagine refinancing your home mortgage to get a higher interest rate — this is supposed to be the newest rage with people willing and eager to pull out buckets of cash! Unlike in the good ol’ times, when you refinanced to a lower rate of interest, today almost nine of 10 homeowners who refinanced, cashed out additional money — often tens of thousands of dollars. And matching the trend are refinancers who are today opting for larger replacement first mortgages with rates averaging about one-half of a percentage point higher than on their old loans.

So, what is the reason for this change in trend? Quite a few: Firstly, short-term interest rates no longer hover near 4 percent. And the worst part is that home equity lines of credit no longer seem a good option. The adjustable rates, which were their strong point, are now racking up bigger monthly costs. Moreover, thirty-year fixed-rate first mortgages no longer are less than 6 percent. Now the prime rate is 8.25 percent and could move higher. Washingtonpost.com reports:

Say you also have lots more than $100,000 sitting untouched and frozen in home equity. Rather than signing up for a home-equity credit line tied to a jumpy and unpredictable prime rate plus 1 percent, you instead choose a fixed-rate cash-out refinancing.

Read more: Refinancing To Get Cash, Not Save It

One of the biggest benefits of refinancing is that if you have an adjustable rate mortgage, you can convert it to a fixed rate mortgage. However, there are many homeowners who don’t fully understand the refi process and as a result, they choose bad loans. Well, all you need to do is avoid some very common mistakes and your refi will be a cakewalk. Associatedcontent.com reports:

Before refinancing, research different loans. Finding the best loan with the most savings should be the primary goal. Homeowners must choose between an adjustable rate and fixed rate mortgage. Is a 15-year term, or a 30-year term best? Regrettably, some people rush the process and ultimately choose a bad loan.

Read more: Mortgage Refinance: Four Refinancing Loan Mistakes

I know of many people who harbored the belief that when they were badly in debt, or had a heavy mortgage to repay, they could just dip into their individual retirement accounts (IRA), withdraw the amount they needed and pay off their loans. This would mean a dent but only a small one.

If you are one such person, then this is for you. You’d be an extremely foolish person to use your IRA money to pay off mortgages and other loans. This choice actually should not exist on your list of options.

Imagine if you’ve deferred payment, then the taxes and penalties will be quite high. So, when you account for all these penalties and taxes, you may be forced to withdraw much more than you actually intended to.

And the biggest problem with trying to withdraw from your IRA is that you’ll lose your future tax-deferred returns. This means that if you withdraw something as paltry as $1,000, it could cost you over $10,000 in lost retirement income at a rate of 8% per annum or in other words, over 30-35 years, you would have lost nearly $1 million in future income! A better option would be to examine your accounts and find ways to trim unnecessary expenses.

You’ve been renting a house for far too long and now long to own a home of your own but don’t have the financial werewithal to consider such an option. Now, now, life ain’t so bad. If you don’t have the down payment to purchase a house but are able to afford a house payment as much as your monthly rent, an 80-20 (80% first mortgage - 20% second mortgage) no money down loan could get you out of the rent trap. Bestsyndication.com reports:

The 80-20 loans are also known as piggyback loans. The buyer takes out a loan for 80% of the cost of the home. Then takes out a second mortgage for 20% of the loan to use as a down payment. The homebuyer has three options for the 20% part of the loan. Most often the 20% loan is secured from a separate lender, but look up for the second loan to have a higher interest rate.

Read more: Using a Second Mortgage for an 80-20 No Money Down Home Purchase Loan

The housing bubble has burst and the market is finally cooling. And that has left many Americans with a problem that was easy to ignore during the boom — Inflated appraisals of home values. Contracostatimes.com reports:

Now, however, prices are leveling off in many places and falling in some. Some homeowners are finding that the market value is below what past appraisals led them to believe. For sellers, that can mean being forced to drop their asking prices.

Read more: Inflated appraisals bungle refinancing