Home Equity Loans – Research Your Lender CarefullyWritten by Charles Essmeier
Real estate prices are rising across country, and Americans are tapping into their home equity like never before. Americans took out $431 billion in home equity loans in 2004, and that amount may increase in 2005. The reasons vary; some are using money for home improvement, others are using money to buy real estate, and some are taking reverse mortgages in order to enjoy a better retirement. With interest rates still near historic lows and bull real estate market continuing, more and more predatory lenders are entering lending profession.
Most lenders are honest, and prospective borrowers will probably not have any problems resulting from taking out a loan with a national bank. On other hand, newer, smaller, and less honest lenders are advertising aggressively and may grab your attention by offering terms that seem more favorable than those offered by larger banks. Sometimes, these terms sound too good to be true, and they often are. Here are a few things to watch out for when taking out a home loan:
A promised low interest rate “disappears”, only to be replaced with a higher figure on contract at closing time. The borrowers, who expected to close right then and there, feel pressured to sign and often accept higher
| | Reverse Mortgage – Be Sure You Need It Before Applying For OneWritten by Charles Essmeier
Reverse mortgages used to be considered last resort of desperate retirees who needed to borrow against their home equity in order to pay for medical expenses. With home prices across country rising at astonishing rates, more and more retirees, aged 62 and over, are taking out reverse mortgages to fund better retirement living. A reverse mortgage works more or less opposite way from a conventional mortgage; borrower receives payments from lender in form of a lump sum, a line of credit, or monthly payments. The amount borrowed constitutes a lien against home must be repaid upon death of borrower, or when home is resold. There are costs associated with a reverse mortgage, however, and potential borrowers should be aware of these when considering taking out such a loan, particularly if borrower takes out a line of credit.
All loans have fees associated with them. There are home appraisals, paperwork fees, mortgage insurance fees, and additional “points” added to cost of loan. In general, costs of taking out a reverse mortgage are higher than those associated with a traditional mortgage. There are several reasons for this, including fact that time period for receiving repayment of loan is indefinite, typically depending on how long borrower lives. This uncertainty is added into loan in form of additional fees.
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