Beware of Reverse Mortgage Pitfalls!

Wow, the time seems to be flying by this year, it’s almost 2011 and another calendar heading for the trash.

So what’s going to be the next big thing for the new year? Well with the phenomenal amount of Baby Boomers retiring, an educated guess would be Reverse Mortgages.

This market is hot at the moment, and with the recession biting many retirees are releasing the equity they have built up in their homes over a lifetime, so that they can comfortably enjoy their latter years.

Officially the Baby Boom started at the end of the Second World War and continued until 1964, so the retiring droves are showing no sign of a let up for the next decade or more, depending of course on the retirement age in their country of residence.

There were just short of 80 Million of us born in just 20 years, it’s quite phenomenal really. The Mortgage Industry has focussed it’s attention quite rightly on the needs and wants of this segment of the market, as for the last couple of decades inflation has rocketed the value of their homes out of all previous proportion.

Traditionally the Mortgage Lender gets the Homeowner to borrow a large sum to purchase a home, paying it back with smaller payments and interest over many years.

A Reverse Mortgage Lender gives the homeowner money, either as a Lump Sum payment, as a Regular Monthly Payment or as some combination of the two. This money is lent against the equity of the home, but no payments are required whilst the borrower is still living in the home. If the borrower is forced to leave the home, for residential care, or passes away, the home is sold to repay the debt, and their heirs and successors receive the balance left over.

The concept of the Reverse mortgage has been around since the late 1980’s, but it is more recently that it has become popular, probably due to the recession and the effect it is having on the elderly’s standard of living.

These Reverse Mortgage products have become ever more sophisticated, and are now considered a lot safer than the earlier ones. Each Lender seems to have put their own quirks into their products, but choosing the right product for your circumstances and needs can still be fraught with dangers and pitfalls for the uneducated.

The majority of IFA’s recommend using a Lender whose product is insured by the FHA, these products are called Home Equity Conversion Mortgages (HCEM). Choosing a Reverse mortgage that is not HCEM could expose the unwary to additional problems and extra costs if due diligence is not undertaken.

There are always pros and cons with any financial product, so being aware of them will prevent you from being surprised by anything nasty lurking in the small print at a later date.

Most Lenders will not expect any repayments whilst you are living. Check that this is included and that there are no grey areas.

Usually after the borrower passes away the family or heirs can have the opportunity to re-mortgage the property and repay the debt. Is this included? Do you want it to be?

Your family should receive all money left over after what is owed to the Lender once your estate is settled.

If the home is not valuable enough to repay the whole debt, your family should not be left with paying the shortfall. The FHA Insurance should cover this, however they will forfeit the right to re-mortgage the home.

Be very aware of what the “plus interest and other fees” and other such statements actually include, and factor them into your figures when deciding to go ahead with a Reverse mortgage or not.

Once you no longer reside in the home, it can be sold or the debt needs to be settled. Just keep this in mind.

Make a decision early in the application process if you wish to fix the costs and interest rates, or you are going to leave them variable The industry standard is to leave them variable, but there are always options open to you if your needs require them to be fixed.

You should keep in mind that no one ever knows what interest rates are going to do, it is a gamble, pure and simple. If we could predict them we would be very very rich.

One of the bigger obstacles that put many people off a Reverse Mortgage is the high up front costs.

The costs of a Reverse Mortgage are quite a bit higher that those of a traditional mortgage. These can be reduced substantially by doing a bit of research, shopping around and finding the “Best Fit” for your circumstances.

FHA insured reverse mortgages have closing cost limits that lenders need to adhere to.

It will also pay you not to just accept the first quote you are given. Get the Lenders to work for their money and get a couple of competitive quotes from different Lenders.

You will be under obligation to maintain the property so that its value and condition does not deteriorate, with older properties the costs of this could be significant and should be budgeted for.

As Reverse Mortgages are for Seniors this upkeep is going to most likely come from contractors, and they are not cheap! Ensure you check with the Lender exactly what is expected on the maintenance front. You don’t want to be obligated to renewing the roof 6 months after receiving your first payment. It would probably make sense to have a fund set aside for eventualities such as this.

As long as the Borrower is knowledgeable about the pitfalls of Reverse Mortgages he should be able to make an informed decision on whether it is suitable for his needs. There is a lot of free information online that can ensure you are more informed when you first apply for a Reverse Mortgage. Be sure to use it. Knowledge is Power, as they say.

Check out my latest work on Reverse Mortgage Pitfalls, which is a Reverse Mortgage Information Blog at

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Credit Score Calculator And How It Can Help You

Do you remember going to school when all you had to figure your math problems with was a pencil and a slide rule? Maybe you are younger than that. Perhaps you remember having a calculator that was as big as your textbook and only being allowed to use it for homework and never on tests? If you are younger still, you may remember being thrilled to discover that when you took harder math classes in school – like Calculus, for example – your teacher actually expected you to have and use a calculator every day.

Well, now we have calculators that graph and make charts and require a huge manual to understand, but that is not the only kind of calculator anymore. Nowadays, we have a calculator for everything. You can find love life calculators, calculators that predict how likely someone is to be successful in a certain career, and even calculators that determine the precise amount of water to give your houseplants.

Even with all these different types of calculators, the one that is likely to have the biggest impact on your life is the credit score calculator. What exactly is a credit score calculator? Well, a credit score calculator is a graph or computer program that can determine your creditworthiness by combining a bunch of different data about you and your finances into a formula and spitting out a number that represents you as a credit consumer.

The credit score calculator is what determines your FICO credit score, and the credit score is what lenders use to decide whether or not they want to lend you money to buy a house, car, boat, or big screen TV. So, it is important to have an idea of what your credit score might be, and using an online version of a credit score calculator is one way to get a pretty good idea of what it may be.

What kinds of questions will a credit score calculator ask you? You will answer questions that are related to the main criteria for determining your credit score – the length of time you have had credit, how much debt you have, how often you have been late with payments (if at all), and the like. Some common questions are:

• How many credit cards do you have?

• How many different types of credit do you have?

• How many debts are currently thirty days late?

• Have you ever had a bankruptcy?

• What is the total amount of money you owe?

• What is your gross salary?

• Have you ever had a tax lien or judgment against you?

• How many cards do you have that are “maxed out?”

If you want to get a pretty good idea of what your credit score might be before you apply for a mortgage or car loan, using a credit score calculator might give you a pretty good idea.

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Credit Score Scale Revealed Just For You

What is the credit score scale and how do you know whether you have a good or bad credit rating?

Well, the credit score scale may seem dark and mysterious, but it really isn’t all that complicated. Here is what you need to know about your credit score and the credit score scale.

The credit score scale ranges from three hundred (300) to eight hundred and fifty (850).

That means that if you are alive and there are records of you, there is no way you can have a credit score less than 300.

If you have only a little bit of debt, you have had it for a long time (many years), and you have never missed a payment or been late with a payment, and you have an income, you might just have the perfect score of 850. Of course, very few people have either the lowest or the highest possible score; just about everyone falls somewhere between the two extremes.

If you want to fall at the very top level of the credit score scale, you should shoot for a rating of at least 720.

At one time in the not too distant past, you may have been considered at the top of the game is your score was above 680, but no more. Just about every lender gives the best terms and interest rates only to those whose credit score falls above 720 on the scale.

If you know you have only some minor issues in your background that will negatively impact your credit history, you may fall somewhere between 680 and 720. If that is where you land on the credit score scale, you can probably find a bank or other lender who is willing to give you a decent loan that won’t cost you an arm and a leg in interest.

If your score is between 630 and 679, you may find that you have to settle for loans that are not as flattering as those offered to the folks at the top of the credit score scale.

In fact, some lenders may not be willing to offer you a loan at all. Most likely, though, you will be able to secure a loan if you really need one, are diligent about finding a lender, and are willing to pay a higher interest rate.

If your ranking is below 630 on the credit score scale, you will probably have a very difficult time getting a home mortgage or loan for a new automobile.

Before you consider applying for these types of loans, you should definitely get a copy of your credit report and make sure that any mistakes are cleared up, and you should definitely make as many improvements to your credit score scale rating as possible.

In addition, remember that these are only guidelines, and that the policies of different lenders vary.

What one bank considers “too risky” may be within the acceptable limits of another lender. So it also pays to shop around for the best deal you can get, no matter where you fall on the credit score scale of life.

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