Jan 28, 2020 | Mortgage
Anyone who has paid attention to the TV recently has likely seen a lot of commercials for something called a reverse mortgage. For those who might not know, a reverse mortgage is exactly that. In this option, people receive monthly payments from a lender in exchange for equity in their homes. In essence, this functions as an annuity.
One of the major benefits of a reverse mortgage is that it can be used to cover the costs associated with long-term care. Over the next few decades, the number of elderly individuals in the United States is projected to double. For this reason, long-term care is projected to become a major expense.
How Can A Reverse Mortgage Pay For Long-Term Care?
Long-term care is one of the biggest unexpected expenses encountered by the elderly. Often, coinsurance associated with a health insurance policy, combined with the lifetime caps on many policies, can shift significant medical costs to the individual. This leaves many elderly individuals looking for an immediate for some cash. Because many elderly individuals and families are on a fixed income, there are not a lot of options.
This is where a reverse mortgage can come in handy. Many elderly individuals have paid off their houses entirely. This can act as an immediate source of equity, providing seniors with a much-needed cash infusion to cover the costs associated with long-term care.
Improving On Reverse Mortgages And Long-Term Care
With long-term care expected to become a bigger issue as a larger percentage of the US population reaches retirement, suggestions have been offered to address these costs. One of these suggestions has been to marry long-term care and reverse mortgages with improved social services.
Many experts have been suggesting ways to tie the equity in someone’s home to Medicare and Social Security. This could be used to create a nice safety net that might support seniors by covering the costs of long-term care. Given the stress that an unexpected medical expense can create, this can offer a much-needed respite for seniors and caregivers alike.
Taking Advantage Of A Reverse Mortgage
In the meantime, it is important for seniors to note that a reverse mortgage can offer an immediate cash infusion. This can be used to cover an unexpected cost, such as a medical bill. It will be interesting to see how reverse mortgages evolve in the future.
If you are interested in purchasing a new home or listing your current property, be sure to set up an appointment with your trusted real estate professional.
Jan 27, 2020 | Financial Reports
Last week’s economic reporting was slim due to the observance of the Martin Luther King Jr. holiday. The National Association of Realtors® reported on sales of previously owned homes and the Veterans Administration announced changes to its home loan programs. Weekly reports on mortgage rates and initial unemployment claims were also released.
Sales Pace of Pre-owned Homes Rose 3.60 Percent in December
The sales pace of previously-owned homes jumped by 3.60 percent on a seasonally-adjusted annual basis. December’s sales pace rose to 5.54 million sales. 5.35 million homes were sold on a seasonally-adjusted annual basis in November. Sales of new and pre-owned homes rose 10.60 percent year-over-year.
The number of available homes for sale reached its lowest reading since the National Association of Realtors® started tracking sales in 1999. There was a three-month supply of homes for sale in December as compared to a 3.70 month supply of homes available in November. Real estate pros typically consider a six-month supply of homes to balance market conditions evenly between buyers and sellers.
December’s data indicates that housing markets are skewed in favor of sellers, which increases challenges for buyers relying on mortgage loans or moderate-income buyers seeking affordable homes.
High demand for homes encourages bidding wars and cash offers that grab sellers’ attention at the expense of traditional purchase offers contingent on mortgage financing. Moderate-income buyers may require additional approvals from mortgage insurance companies or programs geared toward first-time buyers.
Veterans Home Loans: No More Loan Limits in 2020
As of January 1, 2020, VA home loans are no longer subject to loan limits based on property location. Past regulations included home loan limits based on maximum loan amounts determined by the county where a veteran’s prospective home was located.
Removing loan limits streamlines VA loan approval and can avoid problems caused if a VA home loan limit is lower than a home’s appraised value. More veterans are expected to gain the advantage of no down payment required for VA loans. Veterans with less than full VA loan entitlement remain subject to loan limits.
Mortgage Rates, Fall as New Jobless Claims Rise
Freddie Mac reported the lowest average mortgage rates in three months last week. Rates for 30-year fixed-rate mortgages averaged 3.60 percent and were five basis points lower. The average rate for a 15-year fixed-rate mortgage averaged 3.04 percent and was five basis points lower.
5/1 adjustable rate mortgages had an average rate of 3.28 percent, which was 11 basis points lower than in the prior week.
First-time jobless claims rose by 4000 claims to 211,000 new claims filed. Analysts said that the rise in first-time claims did not indicate more layoffs.
What’s Ahead
This week’s scheduled economic reports include Case-Shiller Home Price Indices, new home sales and the Federal Open Market Committee of the Federal Reserve will issue its customary post-meeting statement. Weekly readings on mortgage rates and new jobless claims will also be released.
Jan 24, 2020 | Mortgage
When someone is looking to purchase a house, they need to think about how long they want their mortgage to last. While a bank can structure a mortgage to last for any number of years, the most common lengths are 15 and 30 years. While a 30-year mortgage is typically more affordable, a 15-year mortgage is cheaper overall.
When someone is trying to decide how long they want their mortgage to last, there are a few important tips to keep in mind.
The Benefits Of A 15-Year Mortgage
There are a few important benefits that everyone should know about a 15-year mortgage. Some of the biggest benefits include:
- With a 15-year mortgage, people are going to pay off their home more quickly. This will free up cash to spend in other places. Those who are looking to retire without a mortgage may want to go with a 15-year mortgage.
- Next, a 15-year mortgage is going to come with a lower interest rate. Because the bank is going to get their money back more quickly, they are going to reward the borrower with a lower interest rate. Overall, the bank is taking on less risk.
- Finally, a 15-year mortgage is also going to be cheaper overall. With a lower interest rate and a loan that is paid off more quickly, the bank is going to take less of someone’s money over the life of the loan.
The Benefits Of A 30-Year Mortgage
A 30-year mortgage has some notable differences when compared to a 15-year mortgage. There are a few important benefits that people need to remember. These include:
- The monthly payments are going to lower. Those who are planning on paying for their children’s college education, or who envision a car payment in the near future, may want to have extra cash on hand to fund them.
- As someone pays off their mortgage the interest paid on the loan is tax-deductible. Since more interest is paid on a 30-year mortgage, there will be greater tax savings as well. This means that people will get some of their money back.
- Finally, a 30-year mortgage is also more flexible. During the loan, people may elect to make extra payments. This allows someone to pay off their home more quickly.
These are a few of the most important points people need to remember when trying to decide between a 15-year and 30-year mortgage.
If you are in the market for a new home or interested in listing your current property, be sure to consult with your trusted real estate professional.
Jan 23, 2020 | Real Estate
For many people, owning a home is seen as a rite of passage. At the same time, purchasing a home is expensive. As a result, many people end up renting for an extended period of time.
Here are a few signs that someone is ready to stop renting and purchase a home.
1. Rental Prices Keep Going Up
Year after year, rental prices are going to keep going up. While the rental company is going to claim that these increases are consistent with the industry, they tend to be exorbitant. As a result, those who are tired of their rent being increased should think about buying property instead.
2. The Credit Score Has Gone Up
Someone’s credit score is going to play a major role in the mortgage approval process. Anyone whose credit score has gone up recently should think about buying property.
3. Debt Management Is Second Nature
Before taking out a mortgage, someone is going to have to be good at managing debt. A mortgage is simply another form of debt. It needs to be managed properly.
4. There Is A Liquidity Fund In Place
The cost of owning a home extends far beyond the mortgage. Anyone who is thinking about owning property is going to have to have money set aside to cover additional costs. These include repairs, maintenance, and homeowners’ insurance.
5. There Is Money For A Down Payment
There is going to be a large check due upfront. A down payment is essential when it comes to buying a home. In addition, be sure to set aside money for closing costs as well.
6. You’re Going To Settle Down
When someone is thinking about buying a home, they need to stay in the same place for an extended period of time. When someone buys and sells homes quickly, they are likely to lose money to closing costs.
7. A Major Life Change Is Happening
Many people elect to buy a home after a major life change. This might come in the form of marriage. This might also come on the back of having kids. These major life changes can trigger someone to settle down and buy a home.
8. Your Vision Of The Future Is Clear
Those who know where their life is headed in the near future are in a great position to buy a home. If the future is clear, you are ready for the responsibilities of homeownership.
Call your trusted real estate professional today to discuss the options for homeownership in your local marketplace.
Jan 22, 2020 | Real Estate
Nobody enters into a mortgage assuming they are going to fall short on their payments; however, life happens and borrowers might need a way out. In serious situations, lenders may elect to foreclose on homeowners who are unable to make their mortgage payments. Fortunately, there might be another way out. This is called a short sale.
A short sale can be used to help homeowners who are struggling cater to those who are looking to buy a home. At the same time, there are risks to both parties. Therefore, there are a few important points to keep in mind.
What Is The Structure Of A Short Sale?
If someone owes more on their mortgage than the property would otherwise sell for, this is called a short sale. In this situation, the lender accepts the money coming from the sale of the home rather than that money going to the homeowner. This is because the homeowner still owes a significant amount of money on their mortgage.
Take, for example, someone who owes $300,000 on their mortgage. In a short sale situation, he or she would sell the home for $250,000 in a short sale. In this fashion, the lender agrees to accept a smaller amount of money for the home than he or she would get otherwise. In essence, the lender is then short $50,000. This is where the name comes from.
This is different from a foreclosure. A foreclosure happens when the borrower falls so far behind on payments that the lender reclaims the property.
The Benefits Of A Short Sale
The biggest benefit of a short sale is avoiding foreclosure. A foreclosure is a disastrous event for someone’s credit score. When someone agrees to a short sale process instead, he or she will often buy a more affordable home shortly thereafter.
Buying A Home In A Short Sale
On the buyer side, the biggest benefit of targeting a short sale home is that there is usually a great deal on the price. The lender is already not getting their money on a regular basis and is often motivated the sell the home quickly to recoup their money.
On the other hand, short sales often take longer to proceed. The lender has to approve the sale and price, which might lead to delays. The condition of the house may also not be in good shape. Therefore, be sure to get a home inspection.
Calling your trusted real estate agent and mortgage loan professional is the best thing to do if you have questions regarding your home and a possible short sale.
