William A. Tuning

Semper Home Loans, Inc., Olympia, WA

The Happenings In A Reverse Mortgage

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The Happenings In A Reverse MortgageWhen you’re looking for ways to supplement your retirement income, there are a number of different options to consider. A reverse mortgage is becoming a more popular and more common way to provide income when your retirement savings don’t leave enough to live on.

But with all the information out there, how do you know what happens in a reverse mortgage and whether it’s a good option for you?

What Is A Reverse Mortgage?

A reverse mortgage essentially reverses the typical actions of a mortgage. Instead of making payments on your home, you receive payments against your home’s equity. The amount you are loaned is dependent on your age, your home’s value, the interest rate and any restrictions placed by state or local laws.

Then when your home ownership changes through sale, death or moves out permanently, the loan comes due and is paid for out of the sale of your home. If you borrow more than the value of your home, you or your heirs will not have to make up the difference.

If your home’s value increases and it sells for more than the total of the loan, you or your heirs receive the difference.

There are a number of requirements that must be met that were implemented in late 2013. These include a the home being your primary residence, reaching a minimum age of 62, an increasing progressive percentage of your home’s value that can be borrowed against based on your current age and limitations on exactly how much value you can borrow against in the first year of the loan.

Let’s Break It Down

As an example, a 62-year-old could borrow 52.6% of their home’s value and receive a disbursement of 60% of that percentage. So if their home had 500,000 in value, they could borrow $263,000 and take out $157,800 the first year. By comparison, a 90-year-old could borrow 66%, so the same home would let them borrow $330,000 and they could take out $198,000 the first year.

Disbursements typically are awarded in three ways: as a lump sum at closing, as periodic payments over the life of the loan or as a line of credit with a checkbook. It is also common for a combination of these three ways be used for disbursement.

Are Interest Rates On The Rise – What’s The Next Move?

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Interest Rates on the Rise What's the Next MoveAs the federal reserve continues to taper quantitative easing measures, financial experts project mortgage interest rates will climb in the next two years. Could this be the much awaited ray of light at the end of the proverbial tunnel for builders and investors or will it drive hesitant home buyers to dig in and shelter in place?

Homeowners who are vacillating between refinancing for a lower interest rate and staying the course may find the time has come to make a decision.

Shrinking unemployment numbers and rising retail sales figures signal that the economy is improving. Even if no one is ready to label the US economy as recovered, Fed Chairman Janet Yellen’s decision to follow through on tapering plans reinforces other market indicators that the economy is gaining strength.

What’s The Next Move

Bob Moulton, president of Americana Mortgage, told BankRate that people thinking of buying in the next year should move quickly if they find a property they like. Inventory is still fairly tight. Although there is no guarantee that rates will suddenly escalate, Moulton recommends locking in a property as soon as possible.

Harris Interactive reported that 39% of homeowners who planned to invest in renovations to increase property values in 2013 did not follow through with their plans. If upgrades and renovations are on the agenda, homeowners should evaluate how a 1% or 2% increase in interest rates will affect their budget.

Mortgage rates are still historically low based on the average over the past couple of decades. As the economy strengthens and mortgage lenders lose a steady stream of customers seeking home equity loans, less-stringent lending requirements emerge.

Forbes reported that as much as 80% of mortgage activity in late 2012 was refinancing applications. Consumers with lower credit scores and budgetary constraints have a better chance of securing a loan with a higher rate.

Refinance Or Pay Down The Mortgage

Deciding whether to refinance or pay down the mortgage quicker is tricky for some homeowners. Cost of financing isn’t the only consideration. It is essential to consider long-term goals and risks. If doubling up on the mortgage compromises retirement planning, it defeats the purpose.

Likewise, refinancing to gain a lower interest rate within one or two years of plans to sell the home would probably produce insignificant financial gains.

What’s Ahead For Mortgage Rates This Week: February 11th, 2013

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Homebuilder Confidence ImprovesMortgage rates worsened last week in response to more indications that the U.S. economy and global economic trends are improving. Global economic data was stronger than expected; which generally boosts investor confidence and leads to higher mortgage rates in Minnesota and across the country.

According to Freddie Mac, the average rate for a 30-year fixed rate mortgage was 3.53 percent with borrowers paying all of their closing costs and 0.8 percent in discount points along with a full complement of closing costs.

The U.S Department of Commerce reported that Factory Orders for December improved over November; they rose from 0.0 percent in November to 1.89 percent in December, but fell short of Wall Street’s expectation of 2.5 percent.

The ISM Services Index for January was released Tuesday and fell to 55.2 from December’s reading of 56.1 and was slightly higher than against investors’ expectations of 55.0. Readings above 50 indicate expansion of the service sector of the economy. The ISM Services Index is also an indicator of future inflationary pressure.

Homebuilders Say Markets Improve For 6th Consecutive Month

On Wednesday, the National Association of Home Builders (NAHB) released its NAHB/First American Improving Markets Index (IMI), which provided good news for housing markets in all 50 states and Washington, D. C. Metro housing markets surveyed showed expansion of improving markets for the sixth consecutive month.

259 of the 361 metro areas surveyed in the IMI showed improvement in February. By comparison, only 12 improving metro markets were reported for September of 2011.

Increasing home prices and mortgage rates suggest that now may be the time for buying a home.

The weekly Jobless Claims report released on Thursday indicated that 366,000 new claims were filed, which was higher than Wall Street’s estimate of 360,000 new jobless claims, but lower than the previous week’s 368,000 new jobless claims.

Falling U.S. Trade Deficit Signals Economic Uptick

The best economic news for last week came on Friday, when the U.S. trade deficit fell to its lowest level since January 2010. The Trade Balance Report for December shows the trade deficit at -$38.5 billion against expectations of -$46 billion and November’s deficit of -$48.7 billion. While a great boost for the economy, this is another indicator that recent low mortgage rates and home prices may soon become history.

Economic News scheduled for this upcoming week includes U.S. Treasury Auctions set for Tuesday, Wednesday and Thursday.

Retail Sales for January will be released on Wednesday and watched closely by investors. Retail sales account for approximately 70 percent of the U.S. economy and are viewed as a strong indicator of the economy’s direction.

Jobless Claims on Thursday, Industrial Production and Consumer Sentiment on Friday round out the week’s economic reports.

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Semper Home Loans, Inc.
1115 West Bay Drive NW, Third Floor #302
Olympia, WA 98502