Reverse mortgages are a specialized type of mortgage which appeals to seniors. They are unique loans for people aged 62 and older that find themselves house rich and cash poor in their retirement years. Instead of retirees being forced to sell their home or add yet another monthly bill with a traditional second mortgage, reverse mortgages allow homeowners to tap into their home equity while they still live in the home. With a reverse mortgage Boca Raton, the bank actually cuts homeowners a monthly check from the equity in their home; money that they won’t need to pay back, unlike a home equity loan – although you are trading your home in return.

Types of reverse mortgages
There are three types of reverse mortgages, with slight differences. The three types are:
a. Single-purpose b. Federally-insured c. Proprietary
a. Single purpose
Single purpose reverse mortgages are offered by some state and local government agencies and nonprofit organizations. These generally have very low processing costs associated with them and are available in many, but not all, areas in the US. Because these are government funded, there are more restrictions than proprietary reverse mortgages.
One of the major drawbacks of this type of mortgage is that the funds are usually limited to particular uses such as paying taxes or making repairs. Single purpose reverse mortgages will be a good solution for low to moderate income homeowners that need assistance to cover tax and repair costs, but not for those who are looking to increase cash flow or tap into cash for vacations or other purposes of their choice.
b. Federally-insured
Also called Home Equity Conversion Mortgages (HECMs), these reverse mortgages are backed by the U. S. Department of Housing and Urban Development (HUD). Unlike a private sector loan, these government-backed reverse mortgages are federally insured.
However, like single purpose reverse mortgages, because HECM reverse mortgages are government backed, there is more red tape to cut through to acquire the loan and more requirements to be met than with a proprietary reverse mortgage. These types of mortgages are great for those who qualify and who plan to stay in their homes for some time. The fees associated with HECM reverse mortgages are less than proprietary, and higher than with single purpose loans. However, along with the higher fees comes more flexibility in how home owners can spend their money.
c. Proprietary (private sector)
These reverse mortgage Boca Raton are private loans that are backed by individual companies. Because these are private sector loans and governed by healthy competition, these reverse mortgages often offer homeowners more options than the government backed mortgages. Additionally, owners of higher value homes can tap into more of their home equity through proprietary reverse mortgages than with government mortgages.
The fees associated with propriety are higher than other types of reverse mortgages and can be costly for those who plan on relocating shortly after acquiring a mortgage of this type. Unlike government backed ones, proprietary reverse mortgages do not impose restrictions on income level, meaning that just about anyone qualified, regardless of income or home value, can enjoy their hard-earned equity.
Reverse mortgages are one of the most creative and beneficial mortgage products today. Their benefit to homeowners is exceptional, allowing homeowners to access their own investment during the years when it’s most needed rather than have to borrow against it. Your reasons for choosing one type of mortgage Boca Raton over another are as unique as your particular situation. Before signing for any of these mortgage types, make sure to do your research and talk with professionals to find the right reverse mortgage option for you.

The banking system is very fragmented and there are literally thousands of banks and Savings & Loans to choose from.  Despite the fact that the average mortgage Boca Raton loan-life is only five years, a high percentage of loans are fixed rate for 15, 20 or 30 years.
However there is a wide range of alternatives, variable rate, interest only, convertible (variable to fixed). Most variable rate loans have specified limits (capped at a certain interest rate) – in addition they may also limit the adjustment (e.g. only increase 1% every six months). Here are a few examples:
3/1 ARM — A 3/1 ARM is an adjustable-rate mortgage, or ARM, that has an initial interest rate for the first three years, and thereafter adjusts each year. Each annual rate adjustment is based on (or “indexed to”) another rate — often the yield on a Treasury note. The rate can only change within limits — by a specified amount each year, and a specified amount over the life of the loan.

30-year jumbo — A 30-year jumbo mortgage is a home loan that exceeds the limits set by federal mortgage institutions Fannie Mae and Freddie Mac (the 2005 limit is $359,650). Jumbo mortgages generally have a slightly higher interest rate than smaller (sometimes called “conventional” or “conforming”) mortgages.

30-year fixed — A 30-year fixed mortgage is a loan that has an interest rate that stays the same for the 30-year term of the loan.
If the downpayment for a mortgage Boca Raton on a property is less than 20%, then typically lenders set up an escrow account. This is a non-interest (for the lender) bearing account where the lender collects additional money each month to pay for real estate taxes and insurance policies, which are paid on the borrower’s behalf. Where you as a borrower lose out, is that the bank collects the escrow amounts in advance, which are held in a non-interest bearing account for up to a year.

Low downpayments are considered higher risk, and the lender may require that a borrower take out an additional insurance policy (called Private Mortgage Insurance PMI) until the required 80% equity has been reached. Some lenders do not insist on the PMI for low downpayments, but compensate with a higher interest rate payable.

With U.S. interest rates at 40 year lows, high interest rates are not a worry. But real estate moves in cycles, and anybody who remembers paying 16% remembers it well. In times where interest rates are higher than today, in the U.S. sellers often use ‘creative financing’ to sell their property. There are many options including the owner offering a mortgage, even avoiding banks. Just something to keep in your back pocket.

If you’re buying a home, like most of us, you’ll probably need a Boca Raton mortgage, but where do you go to get one? There are two main alternatives – mortgage brokers and mortgage bankers. Similar names, but very different operations.

Done right, mortgages make a lot of money for the companies that provide or find mortgages for home buyers, not only on the interest, but also on spreads, closing costs and other fees. So it is worth your time to understand where you can find the best deal. What seems like a small difference in interest rates can add up to many thousands of dollars over the lifetime of a loan.
Most people start out with what is most familiar – their local bank branch.  At your local bank, credit union or other lending institution you will find a loan officer or mortgage banker. These are employees who work to sell and process mortgages and other loans which are originated by their own bank only. They often have a wide variety of loans types to draw from, but all loans originate from one lending institution.

The mortgage banker will take your application and try and find the best fit of home loan that suits your needs. They will only choose from their own lender’s alternatives, so you need to speak with several lenders to do comparative shopping. You can look at the real estate section of your local newspaper or do some online research to get an overview of lenders in your area and their rates.

On the other hand are Mortgage Brokers. These brokers are professionals who are paid a fee to bring together lenders and borrowers, i.e. work as a middleman to put together a loan package. They usually work with many lenders, not as employees, but as freelance agents. A mortgage broker acts as a matchmaker between the home buyer and the lender, and has access to the products of hundreds of lenders, not just one bank.

An experienced mortgage Boca Raton broker is a great benefit to someone who is self-employed, or who doesn’t have perfect credit, as they know how the lenders view different types of applicants. The broker can identify what lender might fit a borrower’s special needs, such as the first-time home buyer and will select  a mortgage lender that will most likely accept your application based on your financial data and personal information. In some offices, the mortgage brokers also are lenders.  Even if the broker is experienced,  it is wise to ensure you are given different options. Ask the broker to present several options that meet your needs from different lenders.

Whether you choose banker or broker, you can check them out in several additional ways.  As money-lending institutions, all mortgage bankers are subject to regulation, so you can check with your state’s department of banking.  You can check for any licensing requirements, and check if the particular lender is in good professional standing.  Similarly Boca Raton brokers have to be licensed. Your local Better Business Bureau and Chamber of Commerce is another place to check whether there have been any complaints about the mortgage banker or broker.

Whether you choose a mortgage banker or broker, it is always a good idea to ask friends, work colleagues, and relatives about their experiences. If any have recently obtained a mortgage Boca Raton, they should be able to give a good recommendation.