HOW TO DETERMINE YOUR EQUITY

The easiest way to find out how much equity you have in your home is to subtract the amount of your mortgage balance (look on your mortgage statement for UPB, Unpaid Principle Balance, or just Principle Balance) from the current value of your home.  For example, if your home is worth $100,000 and you owe $40,000, then your equity is $60,000.  In other words, as you pay down the principle on your mortgage, your equity increases inversely.

HOW DOES EQUITY WORK FOR YOU?

What makes equity special?  Well, equity can actually work for you if you know how to do it.  Many people borrow against it and use the money they take out to pay for things such as home improvements, investments, or even paying for a child’s college tuition.  Other people use the money to purchase additional properties and, in turn, make even more money.  Nice.

Long story short, having a lot of equity in your property is a great thing, especially if you are all of a sudden in the need for cash.  But how do you actually get the money out to pay for things?  Well, that’s where the HELOC comes into play.

HOW DOES A HELOC WORK?

Opening a HELOC (which stands for Home Equity Line of Credit) allows you to access the built up equity in your house for when you need a quick influx of cash (without having to refinance your entire mortgage).  Let’s say you fall and break your arm, or your daughter needs braces.  Or maybe your car broke down and you need a few thousand dollars to pay for repairs.  A HELOC can give you the cash you want (your cash) to pay for the things that NEED to be paid.

The HELOC you take out functions basically like a second mortgage on your home.  Because of this, the interest rate you pay will be a little higher than that of your first mortgage.  This is common, being that second mortgages are traditionally more risky from the point of view of the lender.  Different factors can determine how much interest you pay, though.  Quite simply, the rate you get is also mostly determined by the amount of equity you are cashing out.  The more equity you take out, the higher your interest rate, and vice versa.

A LITTLE MORE INFO

Fortunately for you, there are quite a few different types of HELOCS available to you as a consumer and homeowner.  Just like a traditional first mortgage, you can get a HELOC with a fixed or an adjustable rate.  You can do it as a regular line of credit, or you can take out the entire amount in a lump sum.  You can also do a bit of both.  You can write checks from the HELOC (like a bank account) and some lenders will even grant you a debit or ATM card to use to make withdrawals too.  You’ve got lots of options is what I’m saying.

In conclusion, whatever your particular needs may be, there is more than likely a HELOC out there for you.  They can really help out in times of need, and the more people that are educated on their benefits the better.

If you would like to see if you qualify for a Home Equity Line of Credit, don’t hesitate to CONTACT US and we will get back to you as soon as possible.  You can also FILL OUT THIS FORM and one of our loan officers will review your situation to see if a HELOC is right for you.  Just tell us a little bit about yourself in the comments section

The truth is, a reverse mortgage can offer extremely beneficial assistance (monetarily) to a senior who may be out of options or who is just strapped for cash. But what exactly is a Reverse Mortgage?  How do they work?  What are the requirements for obtaining one?  All of these questions will be answered in the following guide.

In the most basic sense, a reverse mortgage is a special type of loan that lets you convert a portion of the equity in your home into cash. What this means is, the money you have built up over the years by making home mortgage payments can essentially be paid back to you. This is different than a traditional cash-out refinance or home equity loan because there is no repayment required until you no longer use the home as your primary residence. You can even choose whether to be paid all at once, in regular monthly advances, or in increments and amounts that you choose! Yippee!

To further explain, here are some of the most frequently asked questions and answers about Reverse Mortgages.

• Who can qualify for a reverse mortgage?

Seniors 62 years of age or older may qualify. There are virtually no income limits or qualifications you need to meet (even in regard to your credit).

• What kind of houses are eligible for a reverse mortgage?

The main establishing criteria for a reverse mortgage is making sure that the home in question is the borrowers primary residence (where you live most of the year). Primarily, reverse mortgages are taken on single family, one-unit homes. Some programs will also accept two-to-four unit buildings, as long as they are owner-occupied. Other programs even offer reverse mortgages on condominiums and manufactured homes, as long as they are built after June of 1976. Typically, mobile homes and cooperatives are not eligible for a reverse mortgage. Feel free to CONTACT US if you are interested in seeing if your home qualifies for a reverse mortgage.

• What fees will I run into if I decide to get a reverse mortgage?

Typically a reverse mortgage will have an origination fee, third party closing costs (such as an appraisal, escrow fees, and title insurance), and a monthly servicing fee. Whats good, though, is that these charges can be paid from the proceeds you receive from the reverse mortgage, which results in no immediate burden to you as a borrower (the costs are added to the principal and paid with interest when the loan becomes due).

• Is it true that if I got a reverse mortgage then the lender would end up owning my home?

This is definitely not true. Being as the borrower, you will still automatically retain the title to the property. The reverse mortgage lender is merely extending a loan to you. That being said, because you still retain title as a homeowner, you will remain responsible for paying such things as the hazard insurance, property taxes, and any maintenance required to keep the home in a livable condition.

• Does how much money I make (or don’t make) influence my ability to obtain a reverse mortgage?

No way! Since you won’t be required to make a monthly mortgage payment, there are (hence) no income qualifications!

• Can the bank take my home away if I outlive my reverse mortgage?

Absolutely not.  Your loan isn’t even due at that time either.  In fact, as long as you or another borrower (ie spouse) continue to live in the house as your primary residence (and you keep current on your taxes and insurance), you won’t need to repay the loan.

• Are there any stipulations or requirements in regard to how I use the money I receive from a reverse mortgage?

Nope.  You can you the money you receive for virtually anything under the sun (as long as you can afford it). This includes home improvements, health care expenses, vacations, groceries, etc, etc, etc. For many people, the funds received from a reverse mortgage are used to provide somewhat of a security blanket in case unexpected expenses arise.

• I still owe money on my existing mortgage.  Can I still get a reverse?

Of course.  You may be eligible to receive a reverse mortgage even if you still owe money on a first or second mortgage.  Actually, the funds you receive from the reverse can even be used to pay off whatever existing mortage you have!

• What are the main advantages of getting a reverse mortgage?

There are many actually, but here are some of the most significant:

1. A reverse mortgage lets you keep your independence by allowing you to remain in your home and retain home ownership.
2. There are NO monthly mortgage payments required. You are not required to pay back the loan or make any monthly mortgage payments until you permanently move out of the home.
3. Tax-free money. Because the money you receive from a reverse mortgage is not considered income, it is tax free and will not affect your Social Security or the benefits you receive from Medicare.
4. Freedom and flexibility. You are free to use the money from a reverse mortgage in any way you choose or deem necessary.

Do you have a question or comment for us about Reverse Mortgages?  Feel free to comment below or CONTACT US if you want to ask anything specific!

- Pate