Reverse Mortgages: A Simple Explanation

Reverse mortgages have been around for some 20 years.  They were created when the American Association of Retired Persons lobbied the US Congress to come up with a financial way for seniors to be able stay in their homes as long as possible.  It took awhile for the product to catch the attention of the public, but reverse mortgages have been gaining popularity over the last two or three years.

Simply explained, a reserve mortgage is a loan a homeowner takes out on his house.  American laws dictate that the homeowner must be 62 years and older, own his house and live there for the majority of the time.  When applying for a reverse mortgage, the amount you will receive will depend on your age, the interest rates in effect at the time of your application, and the value of your house.  You have the choice of receiving the loan in one lump sum, in monthly instalments, in the form of a line of credit or as a combination of the first three options.

Unlike a regular or traditional mortgage, a reverse mortgage does not require you to make monthly payments.  The loan must be paid in full once you sell your house or no longer use it as a principal residence.  This makes owning your house longer a feasible alternative - you never run the risk of losing your home provided you pay the appropriate property taxes and insurance.

A reverse mortgage resembles a traditional or regular mortgage only insofar as closing costs are concerned, including any fees that apply for servicing the loan and other such upfront costs.

If you're thinking of a reverse mortgage, and you qualify (age-wise), talk to a professional financial advisor to see if it's the best thing for your situation.

Housing Slump Gets Longer and Longer

The slump in home sales and prices will be deeper and last longer than previously expected, according to the latest forecast by the National Association of Realtors.

The trade group is now looking for flat prices for existing homes in the first quarter of 2008 compared to the first quarter of 2007, and a more year-over-year declines for new home.

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Homebuilder Confidence Slides to 16-Year Low

U.S. homebuilder sentiment slid in July to its lowest since January 1991 as fallout from the housing slump and subprime mortgage crisis caused a glut of new homes, the National Association of Home Builders said recently.

Homebuilders are struggling to unload excess inventories left to them as speculators abandon contracts and buyers find it harder to obtain mortgages. Soaring delinquencies on the riskiest loans have forced lenders to boost requirements for many borrowers, locking out customers who might previously have qualified.

"The bottom line is that the single-family housing market is still in a correction process following the historic and unsustainable highs of the 2003-2005 period," NAHB Chief Economist David Seiders said in the statement.

Rent-to-Own Real Estate Deals - Beware!

Rent-to-own contracts that substitute for mortgages and conventional home loans are enjoying a surge in popularity in several regions of the country. The slumping real estate markets in parts of the U.S. fuels these deals, where homes can sit on the selling block for months at a time.

Add to this the recent tightening of rules and regulations for bad credit loans and a near perfect storm has been created for rent-to-own scenarios. It sounds like a great way for home sellers to speed up the sale of their home.

While the benefits of rent-to-own arrangements may seem strong, both the buyer and seller need to be aware of problems that can result from poor planning.  Get the complete story here:

Housing Slump Could Last Til Year's End

The U.S. housing market will continue to slump for the remainder of 2007, with home sales falling further and price growth continuing to slow.  This word from a leading industry economist, David Berson, vice-president and chief economist at Fannie Mae, said 2006 and 2007 combined will show the biggest drop in sales since the housing downturn of 1989-91.

An increase in mortgage rates over the past few months, particularly in the past month, will soon have an additional negative impact on housing demand, according to Berson.

He expects new and existing home sales to decline by 10.2 percent in 2007 to the lowest level since 2002. Single-family starts are expected to fall 21.7 percent.

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