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Understanding the Reverse Mortgage and How to Best Use This Unique Financial Tool

October 22, 2015 by Kay Monigold

Understanding the Reverse Mortgage and How to Best Use This Unique Financial ToolIf you’ve studied the real estate market recently, you’ve probably heard about the reverse mortgage. This unique tool is a financial arrangement designed for senior citizens who have limited incomes and want to use the equity in their homes to meet their everyday expenses. And although it’s becoming increasingly popular, few homeowners truly understand it.

So how does a reverse mortgage work, and when is it appropriate for a homeowner to get one? Here’s what you need to know.

What is a Reverse Mortgage?

A reverse mortgage is a loan that uses your home equity as collateral – essentially, you borrow money against the value of your home. But unlike home equity loans, you don’t have to repay a reverse mortgage until you sell your home or are no longer able to meet the terms of the reverse mortgage. If you’ve paid off your home in full, a reverse mortgage can be a great source of income if you don’t have other income streams to rely on.

However, there are tight restrictions around who can quality for a reverse mortgage. To receive a reverse mortgage, you must be at least 62 years old and you must use the property in question as your primary residence. You also need to have equity in your home – you can’t owe more on the property than it’s worth.

The Benefits and Risks of This Arrangement

A reverse mortgage is a fast and easy way to access funds. The most popular kind – a Home Equity Conversion Mortgage – is a federally insured reverse mortgage that offers strong borrower protection. Most reverse mortgages don’t have any income requirements or monthly payments, and they can provide elderly seniors with a much-needed supplemental income.

Reverse mortgages can be risky. The processing fees can be high as 5% of your home’s value. If you spend the funds irresponsibly and miss property tax or homeowners insurance payments, your reverse mortgage may come due.

How to Make a Reverse Mortgage Work for You

The best way to use a reverse mortgage is to take it in the form of a variable-rate line of credit. And according to the AARP, longer loan terms are better – especially if you may need long-term care.

A reverse mortgage can be a great tool for meeting your expenses if you’re beyond your working years. But it also carries some risks, which is why you’ll want to make sure you have a thorough plan for how you’ll use the funds. Contact your trusted mortgage professional to learn more about reverse mortgages and if they will work for you.

Filed Under: Home Mortgage Tips Tagged With: Home Mortgage Tips, Mortgages, Reverse Mortgages

Locked in a Bidding War? 3 Tactics That Will Ensure That You Reign Supreme with a Winning Bid

October 21, 2015 by Kay Monigold

Locked in a Bidding War? 3 Tactics That Will Ensure That You Reign Supreme with a Winning BidBidding wars can be ugly, nasty things – but with the right tactics, you can come out a winner without having to double your offer. Welcome to basic training – today, you’ll learn how to navigate the obstacle course that is a real estate bidding war and come out on top. Put these three strategies to use and you’ll easily win the home of your dreams.

Offer To Pay The Deposit In Cash

It’s not usually wise to make a down payment in cash, but paying cash for the deposit is a brilliant strategy that will put you first in line for your new house. One major reason why homes don’t sell is because the buyer didn’t get approved for financing – and that inconveniences the seller. Paying your deposit it cash proves your reliability to the seller, and it means the seller gets paid faster.

Add A Personal Touch With A Letter

Want to get a completely unfair advantage over other buyers in your neighborhood? Make your offer personal by writing the sellers a heartfelt letter. Marketing professionals know that emotional experiences are highly persuasive, and a personalized hand-written letter shows that you care.

For maximum effect, do a quick Google search on the sellers and look for common threads. Do the sellers have a child in college? Talk to them about your college-aged son or daughter and what program they’re taking – it may sound cliché, but a little bit of bonding really does go a long way.

“Escalate” The Situation With An Escalation Clause

When most buyers write up their formal offer, they simply name a price and that’s it. But you can set yourself apart from other potential buyers by including an escalation clause in your offer.

An escalation clause is a piece of a real estate contract that increases your offer in the event that you get outbid. An escalation clause usually lists your original offer, the amount by which you’re willing to beat other bids if you get outbid, and the maximum amount you’re willing to offer in the event that there are multiple offers. Escalation clauses are usually best used when you know that there will be a one-day review of all offers or when you’re anticipating multiple offers – otherwise it may compromise later negotiations.

Bidding wars aren’t ideal, but they are a reality of the real estate market – especially in competitive areas where it’s the norm to see multiple offers on a house. But with these tactics, you can outgun competing bidders and come out with the house you’ve always wanted. Contact your real estate agent and or your Trusted Mortgage Professional to learn more about navigating a bidding war and making a winning offer.

Filed Under: Home Buyer Tips Tagged With: Buying a Home, Home Buyer Tips, Negotations

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Our Team

Kay MonigoldKay Monigold
Owner/Mortgage Broker/Residential Mortgage Loan Originator
NMLS#1086176

Steven LoweSteven P Lowe, Sr
Residential Mortgage Loan Originator
NMLS #1085638

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