All that you need to Know about FHA and Reverse Mortgage Loan
- Author Issac Gates
- Published February 10, 2011
- Word count 560
The benefits of FHA or what is otherwise known as federal Housing Administration are many. To name a few bells and whistles of this FHA loan would include this kind of loan could be assumable, this provides a possible liberty during financially difficult times, and provides means for funding for home improvement. Another big benefit of this FHA is the fact that you need not pay any penalty for prepayment. This is a huge advantage for sub prime borrowers. FHA loans promises to pay its lenders in case a borrower defaults on a particular loan of this kind. In order to be able to fund this sort of obligation, this kind of loan charges an amount as fee from its borrowers. Those home buyers who are using this sort of loan needs to pay an upfront mortgage insurance premium or MIP of 1%. Along with this, a nominal ongoing fee along with every monthly payment is also carried out buy the home buyers.
In case a borrower is found to be a defaulter on this kind of loan, then this policy uses what is referred to as collected insurance premiums in order to pay off the mortgage. Reverse mortgage is a kind of loan which is exclusively available for the senior citizens. As the name itself suggests, reverse mortgage is the opposite of what we understand by a typical mortgage. In case of a typical mortgage, you borrow a lump sum amount at the beginning, and then start paying it back spanning over a period of time. This pay back is done by the help of easy monthly instalments or EMIs. In case of reverse mortgage, what you do is, you pledge a piece of property which you already have and which does not have any loan outstanding against it at the moment. You use this property for getting a whole series of cash flows from the bank for a fixed period of time. This is the reverse of how EMIs work.
Those senior citizens who are going in for this kind of loan will get annuity, which is the reverse of EMI from the bank for a period of 15 years, after which the payment stops. The various features of this loan include the following. Any house owner above the age of 60 is eligible for this kind of mortgage. The maximum loan which can be availed would be 60% of the residential property’s value. The maximum period for this kind of property mortgage is 15 years. According to the discretion of the borrower, he can choose to get the payment meted out to him on a quarterly or monthly basis. The borrower can even go for an annual payment scheme or further still, a lump sum payment scheme.
The property on which the loan will be gotten for reverse mortgage has to be re evaluated by either the bank or the housing finance company once in every five years. The amount which you get by means of this kind of mortgage is not an income, but a loan. Hence, this is not taxable. The rates for this kind of mortgage can either be floating or even fixed. So, the rates would vary, depending on the current market trends and rates. On the other hand, if you are opting for FHA loans, you will get to buy a house with a 3.5% down payment.
Issac Gates is a financial advisor who have good information on reverse mortgage & FHA loans. For more information he recommends to visit [http://www.blueh2ofunding.com/](http://www.blueh2ofunding.com/)
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