Mortgage Talk

Risks in Taking out a 40 + Year Mortgage

As you probably know, taking out a mortgage of any kind carries some risks. No matter what the terms or the length of a mortgage, there’s always some possibility of disaster involved, however, many analysts will have you believe that a mortgage with a length of 40 years or more carries even more risk. The argument against 40+ year mortgages may make sense to some people, but longer mortgages can definitely be used to your advantage if you have a financial plan for the future. Here’s a quick look at why some mortgage experts believe 40+ year mortgages are more risky:

1. The total interest charges over 40 years will be greater than that of a 30 year mortgage
2. The loan principal will not be paid down fast enough
3. By the time the home market changes and values decrease, the homeowner will still be paying a high rate and is unable to sell the home.
4. Some people believe 40+ year mortgages are only taken out by people who cannot afford a normal term and probably shouldn’t be buying home.

Why You Should Consider a 40 Year Mortgage

Ironically, taking out the longest possible mortgage term could actually provide you with a short term solution if you can’t get the mortgage rate or terms that you really want. By taking out a 40 or even 50 year mortgage, you’ll likely have to pay a high interest rate, but you’ll also get a lower monthly payment. Many new homeowners are taking advantage of this - they are taking out mortgages with these longer terms and using the ARM to leverage the equity from their homes. With this and a smaller, easier to make payment, home owners are able to pay off debt and eventually improve their credit score. Once they’ve increased their credit score, they simply refinance the mortgage and get a better rate. As you can see, there are definitely some risks with taking out a 40+ year mortgage and keeping it for those 40+ years. However, there are some great benefits in maintaining one for a while and paying off debt before refinancing to a more suitable rate.

Reverse Mortgage Basics

Bob Andress Wells Fargo Home Mortgage

History….first reverse mortgage was issued in 1969 in US, but not until 1989 did HUD issue lending guidelines standardizing some basic safeguards for a reverse mortgage.

Today, approximately 95% of all reverse mortgages issued are insured buy HUD (federal Government), and it has become the standard for other products.

What is a reverse mortgage?

With a regular mortgage you repay principal and interest typically over 30 yrs and your equity in the home increases. With a reverse mortgage you receive monthly payments, you’re not required to make payments, principal and interest accrue and your equity in the home decreases. It’s really that simple….reverse of a regular mortgage.

Safeguards of a reverse mortgage

Never give up title to the home

Never owe more that the home’s value

Never have to move from the property

Never have to make a payment.

Basics of a reverse mortgage

Youngest homeowner must be 62 years of age

Must be primary residence

No income, employment, medical or credit scoring to qualify.

Receive payments instead of making them.

No repayment required as long as one of the homeowners continues to live in the home.

SSI & Medicare benefits are not affected.

Income is non taxable since they are loan proceeds.

Most reverse mortgages are Government insured (HUD)

Payment Plans

Lump Sum to cover large expenses

Fixed monthly payments to supplement your income

A line of credit to draw on as necessary

Or any combination of cash, monthly income and credit line

Can change payment plans as many times as you want

Frequently asked Questions

Can I be forced to sell my home if the money I owe on the loan exceeds the value of my home?

NO, as long as you continue to occupy the home as your primary residences, pay the appropriate taxes and insurance, and maintain upkeep of your home.

Are there restrictions on how I can use the Reverse Mortgage proceeds?

Absolutely not! It’s your money to use as you see fit.

What if the value of my home increases during the mortgage term?

No matter if, or how much, your property has appreciated in value, you or your estate are only required to pay back the outstanding balance due on your Reverse Mortgage at the time the home is sold. Any excess proceeds from the sale of your home belong to you or

your estate.

Will receiving my Reverse Mortgage proceeds in monthly payments affect my Social Security, Medicare supplemental security income, or Medicaid benefits?

If you opt to receive monthly payments, they will not affect your Social Security or Medicare benefits. However, your eligibility for need-based programs such as Medicaid or state assistance programs may be impacted. We recommend that you consult a tax or legal advisor and your local Area Agency on Aging for advice.

 Comments or Questions?   Bob Andress    Reverse Mortgage Specialist    Wells Fargo Home Mortgage    302-345-8795

Here is an article that was written by Edward Jamison of CreditCRM.  He is a national credit repair attorney.  Now it seems that our Health Care Costs will be judged by our credit files.  

FICO ALERT!

It looks like lenders, landlords, insurance companies and employers aren’t the only ones interested in credit scores these days - now the health industry is getting in on the act.

Credit industry giant Fair Isaac is working with Healthcare Analytics and Tenet Healthcare to create a new MedFICO score. This new credit score is intended to judge a person’s likelihood of paying their medical bills and could debut as early as this summer.

Understandably, the new score is already raising concerns from consumer advocacy groups that fear it will be checked before patients are treated. They are afraid that people with low medical credit scores could receive lower-quality care than those with a higher MedFICO.

According to Stephen Farber, chairman and chief executive of Healthcare Analytics, that will not happen. Hospitals will check the score, which will be based on the patient’s medical bill payment history, only after the patient is discharged.

And under the Fair Credit Reporting Act, hospitals and doctors may report health care debts to credit reporting agencies but cannot indicate what they were for. Hospitals generally do not report delinquent accounts, but they do turn them over to collection agencies. In such cases, only the medical provider’s name and the amount owed should be listed. And even then great care must be taken so as not to reveal the type of care given, as would be the case with the Betty Ford Clinic, which is widely known for treating drug and alcohol addiction.

But, can they be trusted?

Given the problems with our credit system - such as identity theft and inaccurate scoring data - consumer advocates question whether or not this information should be used as the basis for a new medical version. In an analysis of more than 500,000 individuals’ credit scores, the Consumer Federation of America says 29 percent were 50 points lower than they should have been.

They ask, “What’s going to happen if there’s a mis-scoring due to clerical error or when there are two people with names like Bob Jones who have similiar numbers?”

Insurance companies are already using a person’s credit score to determine their premiums now. What’s going to stop health insurance providers from doing the same thing once the new MedFICO score is available?

If you ever doubted the importance or legitimacy of the ability to repair a person’s credit score, this should be your wake up call!

Welcome to “Mortgage Talk!”  I have started this Blog to give you the opportunity to express your thoughts about the Local, National and World Mortgage Industry.  I hope that this Blog will become a wealth of information for all of you.  Let’s Blog!