Mortgage Project

With reverse mortgages, everyday terms related to loans and loan amounts can mean very different things than what you might expect. It is important then to precisely define these terms as they are used for reverse mortgages.

Principal limit or maximum principal limit is the total aggregate amount of money that will ever be available over the life of the reverse mortgage. Whether the money is paid to the borrower monthly, in a lump sum, or from time to time, when you count every dollar paid from the loan it cannot add up to more than the principal limit.

Think of the principal limit as a can of flour. All the flour you are ever going to get goes into that can at the loan closing. However, you will only be charged for the flour that gets removed from the can.

The loan balance is the actual amount of money that is charged to the loan by cash advances to the borrower, plus accrued interest on the disbursed cash, plus fees. You can see right away that part of the principal limit is going to be eaten up in accrued interest and fees. The actual amount of cash that the borrower can get over the life of the reverse mortgage will always be something less than the principal limit.

The loan balance is the flour that gets scooped out of the can. There’s some for you, and always some for HUD, and some for the lender. You eventually have to pay for all the flour that gets scooped out of the can regardless of where it goes. The major criticism of HECM reverse mortgages is that more than 4% of the flour in your can gets scooped by HUD, the lender, and an assortment of service providers at the closing.

The maximum principal limit that you can get with a HECM reverse mortgage is based on a HUD formula that considers three primary factors.

The age of the youngest borrower.

The minimum age for any borrower is 62. This is a HUD eligibility requirement so the loan application cannot even go forward unless every person shown as an owner on the property deed is age 62 or older. Lenders will usually bump up the age of the youngest borrower by 1 year if he or she is less than 6 months from their next birthday at the time of the application.

Age is a primary consideration because the longer the life expectancy of the youngest borrower, the more servicing fees, mortgage insurance premiums, and interest will be charged to the loan balance over the life of the loan. Because these costs and fees are expected to take a bigger bite out of the principal limit there is going to less cash available to the borrower.

The maximum claim amount.

The maximum claim amount is a cap on the principal limit. This cap is set at the lesser of your home’s appraised value or the FHA max loan amount for houses in your geographic area. Think of this as the zip code cap.

Generally urban areas get higher caps than rural areas, and some urban areas get higher caps than others. These numbers change regularly and the lender will have the latest information. You can check for yourself at https://entp.hud.gov/idapp/html/hicostlook.cfm

The expected average mortgage interest rate.

This is a fancy term for the discount rate the lender uses to present value your loan. A dollar to be paid in 10 years is always worth less than a dollar paid today. The expected average mortgage interest rate calculation is based on the price of 10 year Treasury securities plus something called the sum of the margin. The lower this rate the higher the principal limit and vica versa. The expected average mortgage interest rate is not the interest rate you will pay on your loan balance. That rate is calculated in a different way. The expected average mortgage interest rate is used only to determine the principal limit.

These are the major factors used to determine how much money you can get from an HECM reverse mortgage. Any lender can do an accurate calculation based on the information you give them about your personal situation. The basic rule is the older the youngest borrower, the lower the prevailing interest rates, and the higher the cost of housing in your area, the higher the principal limit on a HECM reverse mortgage.

For a very rough estimate: subtract 6 from the age of the youngest borrower, use that number as a percentage of your home’s market value, subtract from that amount your current mortgage and any liens. E.g. 70 year old borrower, $200,000 market value, $25,000 existing mortgage. 70 - 6 = 64. $200,000 * .64 = $128,000 estimated principal limit. Subtract $25,000 from $128,000 to get $103,000 estimated money availability. If your house is worth a lot more than $200,000 you will probably be limited by the zip code cap.

(c) 2006 by Peter Boston. Peter is an attorney, writer, and the editor of the profacere.com website, a tips and resource site for reverse mortgages, credit cards, improved credit scores, and consumer credit information, updated daily on the Profacere Blog.

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You may have heard the buzz on the grapevine about toll free call number capture systems. It is not because they are new. They have been around for some time now. The news about this powerful lead generating technology is that it is not just for real estate agents anymore. Companies have responded to increased demand by those in the mortgage industry who want to take advantage of the benefits this technology has to offer too. Call capture companies have created a unique toll free call capture system that allows mortgage brokers and real estate agents to forge mutually beneficial relationships.

It used to be that real estate agents were the only professionals reaping the benefits of a toll free number call capture system. Savvy agents have been using toll free number call capture systems to get more listings, make more sales and get more leads for years now. The agents use their toll free numbers on sign riders for 24/7 information about their properties as well as offer 24/7 recorded information as an expert on buying and selling homes. Each call that comes in is a captured, qualified lead. These original systems are designed to work with one agent with one voicemail box. With the new call capture systems inspired by mortgage brokers, you can have virtually an unlimited number of users on one system. Now mortgage brokers are getting in on the game too and here are a couple of reasons why.

Mutually Beneficial Relationships
Relationships in business are powerful, some would say vital. For mortgage brokers, there are few relationships that can benefit their business more than the ones that they establish with real estate agents in their area. As we already know, real estate agents use toll free number call capture systems to generate leads and get more listings. Armed with this knowledge brokers are buying multiple user toll free number call capture systems and offering their use for real estate agents in their area. Mortgage professionals can forge strong, lasting relationships with real estate professionals by providing them with a system that is vital to their success, an effective, state-of-the-art lead generation solution. At the same time, it allows mortgage professionals and real estate professionals an easy, fast and inexpensive way to generate leads simultaneously.

Lead Generation
The number one challenge mortgage brokers face today is the continuous need to have someone waiting in line to do business with them. Coupled with the extremely competitive nature of the mortgage business, the Do Not Call List also makes it difficult for a mortgage broker to get new clients. Toll free number call capture systems allow brokers to capture quality leads 24/7. As a real estate agent uses the system provided by the broker, and encourages people to call in for information about property listings or free information about buying and selling homes, the leads are available to both the agent and the broker. After all, anyone buying or selling a home is often also in the market for a home mortgage. An added advantage to these newly designed toll free number call capture systems is complete administrative control by the owner. This allows the broker to be sure that they are getting all leads coming into the system, run reports on call usage and assign listing extensions as they choose.

The new spin on this old technology has created quite a buzz. Mortgage brokers and real estate agents are now able to work together like never before. With the ability for mortgage brokers to establish strong relationships with real estate agents and share leads it’s a win-win situation. Check it out for yourself and see what all the buzz is about.

Brandi Cummings, a leading telecommunications consultant specializing in 800 number call capture technology, recommends you check out RealtyOne800, an established 800 call capture provider: http://www.realtyone800.com

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Bad credit mortgage refinancing is used to solve two problems of investors. This option provides solutions to people faced with different circumstances.

The first use of bad credit mortgage refinancing is applicable for those who have bad credit standing, considerable high interest card debt and a home with equity. To pay off the debts, the owner refinances his property and cashes out all the equity. This process is called debt consolidation loan.

To qualify for a debt consolidation loan, the value of the property should have become bigger for the owner to qualify for a larger loan. Ideally, the value should be high enough to pay off the remaining costs of the loan and the high credit debts of the owner.

Among the advantages of debt consolidation is that the owner can be given a longer loan term. However, it should be remembered that the success of this type of bad credit mortgage refinancing still lies on the commitment of the owner to prevent the things that led him in such an unfavorable situation. If not, the owner can even go into bankruptcy.

The second type of bad credit mortgages is applicable for those who purchased homes when they are in bad credit standing and who, consequently, were led to a high interest mortgage loan. Years after, these owners were able to recover from their bad credit standing and are now more than qualified to avail of better rates in their mortgages.

However, this type of bad credit mortgage refinancing does not necessarily translate to lower interests loans. Other factors are also being considered by the lenders or refinancing companies such as current income and remaining debts of the owner.

Bad credit mortgage refinancing of this type should be considered when the new loan package will yield the owner interests that are lower by two percent when compared to his or her current loan. The owner should also be decided to stay for three years more or longer on the loaned home.

Bad Credit Mortgages provides detailed information on Bad Credit Mortgages, Bad Credit Mortgage Refinancing, Bad Credit Mortgage Lenders, Bad Credit Second Mortgages and more. Bad Credit Mortgages is affiliated with 30 Year Interest Only Mortgages.

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